Tag: news

A kneejerk lower in Cable overnight (on Tory poll numbers dropping and weak confidence) started the fun in FX markets but (aside from Bitcoin), but Yuan is the big mover once more with a big figure spike to 6.85 – strongest since early Feb, extending the gains post-FOMC Minutes.

A new poll from Reuters shows the Tory lead fading fast in the UK election…

In a sign that the election could be more closely contested than has previously been thought, YouGov said on Thursday May’s party was on 43 percent, down 1 percentage point compared to a week ago, while Labour was up 3 points on 38 percent. The previous YouGov poll had given May a lead of nine points.

 

Then YouGov/CEBR consumer confidence tumbled to the weakest since weeks after Brexit vote…

• Consumers the least confident about their current financial situation since December 2014
• Expectations about their finances over the next 12 months also fell
• Perceptions of job security were at a four-year low

“It looks like this may be the point where the slowing GDP figures start to translate to people’s everyday lives,” Stephen Harmston, Head of YouGov Reports, said. “The figures indicate that they are starting to experience a downturn.”

And that prompted notable weakness in Cable…

 

But Yuan is now 4 handles higher since The Fed Minutes…snapping higher again tonight

 

Pushing Yuan to 3-month highs…

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While every investor wishes they had a crystal ball, there’s one thing, says David Rosenberg chief economist at Gluskin Sheff, that has predicted imminent recessions without fail. Speaking at the Strategic Investment Conference in Orlando, Florida, Rosenberg pointed out that since 1950, there have been 13 cycles where the Federal Reserve tightened interest rates… and 10 of them ended in recession. This is also something which BofA’s Michael Hartnett pointed out in early March, laying it out concisely on the following chart.

So should we be prepared for another US recession in the near future? That’s the question Jonathan Roth asked Rosenberg in the enclosed interview.

“I think what people should be focused on is the shape of the yield curve,” Rosenberg said. “[Every] single inversion of the yield curve, where short-term rates go above long-term interest rates, has presaged a recession—every single time.”

The three times where rate hikes did not lead to recessions, he noted, were due to the Fed stopping short of inverting the yield curve. At the moment, Rosenberg suggested, “the yield curve is flat enough that if the Fed raises rates four more times, that’s all it takes. We probably will have a recession next year.”

Looking at the dot plots shows that more than 50% of all FOMC officials are ready to raise rates four more times going into 2018, so “the risk isn’t necessarily high right now, but it is rising.”

Asked about the possible economic implications of the ongoing problems the Trump administration faces, Rosenberg shrugged off the question. “Here’s what I’m going to forecast with 100% guarantee: that no matter what happens with Donald Trump, the United States will still have a president.” He said that the Comey affair caused all of a one-day plunge in the stock market, “so politics, to me, unless it has a substantive impact on the earnings outlook or the economy, is just short-term noise.”

What’s much more important, Rosenberg said, is the supply side of the economy, an aspect that no one pays enough attention to. “What’s happening in terms of artificial, robotic intelligence and the shared economy… Right now, we’re going through the fourth Industrial Revolution, and it’s having a profound impact on worker anxiety.”

Corporate tax reform is necessary, he conceded, but there are other constraints we have to deal with. For example: “How is it that we have 23 million Americans between 25 and 54, in their prime working age, that are out of the labor force?”

He surmised that “there’s some real structural things happening here that really transcend the need to cut taxes or what’s happening in terms of immigration policy.”

So what are the implications for investors? There’s no doubt we are late cycle, Rosenberg said. “That means you really want to tuck it in.”

For his thoughts on what a late-cycle portfolio should look like and more, watch the full interview below.

Courtesy of Mauldin Economics

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Authored by Jim Rickards via The Daily Reckoning blog,

The key to bubble analysis is to look at what’s causing the bubble. If you get the hidden dynamics right, your ability to collect huge profits or avoid losses is greatly improved.

Based on data going back to the 1929 crash, this current bubble looks like a particular kind that can produce large, sudden losses for investors.

The market right now is especially susceptible to a sharp correction, or worse.

Before diving into the best way to play the current bubble dynamics to your advantage, let’s look at the evidence for whether a bubble exists in the first place…

My preferred metric is the Shiller Cyclically Adjusted PE Ratio or CAPE. This particular PE ratio was invented by Nobel Prize-winning economist Robert Shiller of Yale University.

CAPE has several design features that set it apart from the PE ratios touted on Wall Street.

The first is that it uses a rolling ten-year earnings period. This smooths out fluctuations based on temporary psychological, geopolitical, and commodity-linked factors that should not bear on fundamental valuation.

 

The second feature is that it is backward-looking only. This eliminates the rosy scenario forward-looking earnings projections favored by Wall Street.

 

The third feature is that that relevant data is available back to 1870, which allows for robust historical comparisons.

The chart below shows the CAPE from 1870 to 2017. Two conclusions emerge immediately. The CAPE today is at the same level as in 1929 just before the crash that started the Great Depression. The second is that the CAPE is higher today than it was just before the Panic of 2008.

Neither data point is definitive proof of a bubble. CAPE was much higher in 2000 when the dot.com bubble burst. Neither data point means that the market will crash tomorrow.

But today’s CAPE ratio is 182% of the median ratio of the past 137-years.

Given the mean-reverting nature of stock prices, the ratio is sending up storm warnings even if we cannot be sure exactly where and when the hurricane will come ashore.

With the likelihood of a bubble clear, we can now turn to bubble dynamics. The analysis begins with the fact that there are two distinct types of bubbles…Some bubbles are driven by narrative, and others by cheap credit.

Narrative bubbles and credit bubbles burst for different reasons at different times. The difference is critical in knowing what to look for when you time bubbles, and for understanding who gets hurt when they burst.

A narrative-driven bubble is based on a story, or new paradigm, that justifies abandoning traditional valuation metrics. The most famous case of a narrative bubble is the late 1960s, early 1970s “Nifty Fifty” list of fifty stocks that were considered high growth with nowhere to go but up.

The Nifty Fifty were often referred to as “one decision” stocks because you would just buy them and never sell. No further thought was required. Of course, the Nifty Fifty crashed with the overall market in 1974 and remained in an eight-year bear market until a new bull market began in 1982.

The dot.com bubble of the late 1990s is another famous example of a narrative bubble. Investors bid up stock prices without regard to earnings, PE ratios, profits, discounted cash flow or healthy balance sheets.

All that mattered were “eyeballs,” “clicks,” and other superficial internet metrics. The dot.com bubble crashed and burned in 2000. The NASDAQ fell from over 5,000 to around 2,000, then took sixteen years to regain that lost ground before recently making new highs. Of course, many dot.com companies did not recover their bubble valuations because they went bankrupt, never to be heard from again.

The credit-driven bubble has a different dynamic than a narrative-bubble. If professional investors and brokers can borrow money at 3%, invest in stocks earning 5%, and leverage 3-to-1, they can earn 6% returns on equity plus healthy capital gains that can boost the total return to 10% or higher. Even greater returns are possible using off-balance sheet derivatives.

Credit bubbles don’t need a narrative or a good story. They just need easy money.

A narrative bubble bursts when the story changes. It’s exactly like The Emperor’s New Clothes where loyal subjects go along with the pretense that the emperor is finely dressed until a little boy shouts out that the emperor is actually naked.

Psychology and behavior change in an instant.

When investors realized in 2000 that Pets.com was not the next Amazon but just a sock-puppet mascot with negative cash flow, the stock crashed 98% in 9 months from IPO to bankruptcy. The sock-puppet had no clothes.

A credit bubble bursts when the credit dries up. The Fed won’t raise interest rates just to pop a bubble — they would rather clean up the mess afterwards that try to guess when a bubble exists in the first place.

But the Fed will raise rates for other reasons, including the illusory Phillips Curve that assumes a tradeoff between low unemployment and high inflation, currency wars, inflation or to move away from the zero bound before the next recession. It doesn’t matter.

Higher rates are a case of “taking away the punch bowl” and can cause a credit bubble to burst.

The other leading cause of bursting credit bubbles is rising credit losses. Higher credit losses can emerge in junk bonds (1989), emerging markets (1998), or commercial real estate (2008).

Credit crack-ups in one sector lead to tightening credit conditions in all sectors and lead in turn to recessions and stock market corrections.

What type of bubble are we in now? What signs should investors look for to gauge when this bubble will burst?

My starting hypothesis is that we are in a credit bubble, not a narrative bubble. There is no dominant story similar to the Nifty Fifty or dot.com days. Investors do look at traditional valuation metrics rather than invented substitutes contained in corporate press releases and Wall Street research. But even traditional valuation metrics can turn on a dime when the credit spigot is turned off.

Milton Friedman famously said the monetary policy acts with a lag. The Fed has force-fed the economy easy money with zero rates from 2008 to 2015 and abnormally low rates ever since. Now the effects have emerged.

On top of zero or low rates, the Fed printed almost $4 trillion of new money under its QE programs. Inflation has not appeared in consumer prices, but it has appeared in asset prices. Stocks, bonds, commodities and real estate are all levitating above an ocean of margin loans, student loans, auto loans, credit cards, mortgages, and their derivatives.

Now the Fed is throwing the gears in reverse. They are taking away the punchbowl.

The Fed has raised rates three times in the past sixteen months and is on track to raise them three more times in the next seven months. In addition, the Fed is preparing to do QE in reverse by reducing its balance sheet and contracting the base money supply. This is called quantitative tightening or QT, which I’ve discussed recently.

Credit conditions are already starting to affect the real economy. Student loan losses are skyrocketing, which stands in the way of household formation and geographic mobility for recent graduates. Losses are also soaring on subprime auto loans, which has put a lid on new car sales. As these losses ripple through the economy, mortgages and credit cards will be the next to feel the pinch.

A recession will follow soon.

The stock market is going to correct in the face of rising credit losses and tightening credit conditions.

No one knows exactly when it’ll happen, but the time to prepare is now. Once the market corrects, it’ll be too late to act.

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Coalition-led airstrikes in Syria killed a total of 225 civilians between April 23 and May 23, the highest 30-day death toll for U.S.-led forces since the campaign began, Agence France-Presse reported. That's nearly double the number of intended targets: The U.S.-led strikes killed 122 ISIS fighters and eight fighters loyal to the Syrian government, the report said.

The rising tide of civilian deaths attributable to coalition forces suggest that May could be the fifth straight month that civilian deaths from coalition-led strikes outpace the civilian death toll from Russian forces, according to the AFP report and an analysis of data from Airwars.org.

Of the 225 civilian deaths, reported to AFP by the Syrian Observatory for Human Rights, 44 were children and 36 were women.

The civilian death toll from Russian strikes has declined since it peaked in January. Meanwhile, deaths from U.S.-led strikes have risen dramatically.

“There has been a very big escalation,” Observatory head Rami Abdel Rahman told AFP.

The previous deadliest 30-day period for U.S.-led forces was between February 23 and March 23 this year, when 220 civilians were killed, Abdel Rahman told AFP.

The past month's deaths brought the overall civilian toll from the coalition campaign to 1,481, among them 319 children, AFP reported.

The coalition launched operations against ISIS in Iraq in August 2014, then expanded them to Syria the following month. The Russian intervention began a year later.

However, the rising tide of casualties relative to intended targets could soon shift as the US Military implements a new strategy ordered by President Trump that's designed to annihilate ISIS in Syria in an effort to prevent foreign fighters from returning home. Defense Secretary Jim Mattis said Trump's order for the military to change up its plans for dealing with ISIS has led to a “tactical shift from shoving ISIS out of safe locations in an attrition fight to surrounding the enemy in their strongholds so we can annihilate ISIS.”

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Submitted by Jeff Thomas via SWPCayman.com,

"If your gold is outside the US, it gives you another degree of insulation should the United States decide that you shouldn’t own it — it's not a reportable asset." – Doug Casey, May 2017

I’ve been a holder of gold since the 1970’s. At that time, I was purchasing gold and silver for business reasons and found that, as the price was steadily increasing, I would be wise to buy more than I needed immediately, as I would most certainly profit from it in the near future.

At that time, I was buying most of my precious metals in Hatton Garden, the centre for metals in London and, in talking with my more experienced associates, I learned that gold doesn’t just make pretty jewellery, it has, for over 5000 years, served as man’s best economic insurance policy.

Since the creation of the first fiat currency in China, ca. 600 AD, governments have had the annoying habit of creating fiat currencies. It has taken many forms, including tobacco, shells, cattle, even tulips in 17^th Century Holland.

Over the centuries there have been countless fiat currencies. Most of them have been paper currencies and, with the exception of the present-day fiat currencies, all have eventually become worth exactly zero.

Not a very good track record. But whenever this has happened, gold has regained its lustre and saved the day, providing a solid means to store wealth. Although governments and bankers have done all they can to discredit gold and discourage its use, gold invariably outlives them all. Whenever history has seen periods of dramatic overreach by banks and/or governments, gold once again re-establishes the very definition of money.

Today, we’re passing through one of these eras of overreach and, not surprisingly, those who are farsighted are quietly building up their store of gold, to protect them when the latest form of fiat currency joins the rest that have collapsed over the centuries.

But, having realized the need to own gold and then beginning to build up a portfolio, the holder asks himself, “Where should I keep it?” The obvious answer is at home, or somewhere very close, so that he may get to it if need be. During good economic times, this may well mean in a safe deposit box in a bank, but in times like the present, when governments (the EU, US and Canada, amongst others) have recently passed laws allowing banks to confiscate deposits and raid safe deposit boxes, the last choice for safe storage would be a bank.

This leads us to the “at home” option. This is actually a good one. If you have a yard where neither dogs nor gardeners tend to dig holes, “midnight gardening” can indeed be a good solution for small amounts of gold storage. Or, for a neater and more easily accessible solution, a home safe might work well. (You would, of course, want it to be well-concealed and you’d need to install it yourself, or the installers might get ideas.)

But, when turbulent times come, as they have recently, this only works well if you own a small amount of gold, say 10 ounces or less. If you hold more at home, you run into the problem of governments. In 1933, US President Franklin Roosevelt demanded that all gold be turned in to the government. He subsequently revalued it and, in doing so, robbed its rightful owners of a 69% increase in their wealth.

Unfortunately, since we know that the EU, US and Canada have all passed confiscation laws, those jurisdictions are no longer safe places to store wealth. Ten ounces of gold may be regarded as an emergency stash but, beyond that, another jurisdiction is needed – one that’s not threatened by confiscation laws.

What I recommend to investors is to first choose the best jurisdiction that’s relatively near to you, then pick the safest storage facility within that jurisdiction. In Europe, Austria is a good choice and Das Safe is an excellent depository. In Asia, Singapore is an excellent jurisdiction and The Safe House is an exceptional choice.

However, the Western Hemisphere is a different story. There are quite a few excellent depositories in the US and Canada, but, as stated above, these jurisdictions are no longer safe. In my travels elsewhere in the hemisphere, I’ve been disappointed to find that, whilst there are jurisdictions that are safer than North America, the depositories there leave a great deal to be desired. (On one occasion, in Uruguay, I looked at the outside of the building and never even went in. Although it was considered the premier facility there, it didn’t come close to my expectations.) Others, such as those in Panama, have been equally disappointing.

What the depositor should be after is a facility that’s heavily reinforced on all six sides (meaning that ceiling and foundation must be just as impenetrable as the walls). In addition, it would need a Class III bullion vault – the equal of the best bank vaults. Furthermore, it should have multiple security doors and man-traps, assuring that no one who enters can make a dash for the door, eliminating the temptation for theft.

Unfortunately, to my present knowledge, there’s only one depository in the Western Hemisphere that ticks all the boxes. Or perhaps I should put that another way: Fortunately, there is a depository in the Western Hemisphere that ticks all the boxes.

That depository is Strategic Wealth Preservation (SWP) in the Cayman Islands. Most importantly, it’s located in and exceptional jurisdiction as regards wealth safety. And, by this I mean:

• The is no direct taxation in the Cayman Islands. No taxes or duties that apply to the purchase, ownership, storage or sales of precious metals. No capital gains tax; no inheritance tax.
• World-class financial system to provide auxiliary services.
• Stable government with consistent history for economic stability that caters to international investors.
• Minimal wealth legislation and regulation, to assure a minimum of red tape in processing purchases, sales, transfers and shipment of metals.

Secondly, SWP ticks all the boxes as to being a top bullion storage facility. Further, the SWP storage contracts were designed to take the best from each of the world’s other depositories, having been vetted by one of the world’s most respected gold analysts (who, possibly not coincidentally, became the first depositor). Also, it’s only an hour by air from the US.

It’s also essential that your deposit is fully insured and that the storage be fully documented, allocated and segregated, as in the photo below of an incoming deposit:

For Americans, an offshore gold IRA is becoming an essential and SWP has an excellent relationship with US-based IRA administrator New Direction IRA allowing American citizens to hold gold in their self-directed IRAs and LLCs offshore in SWP’s vault.

Over the past decades that I’ve been advising people on geographical economic diversification, I’ve often said that the coming events themselves are relatively easy to predict, but the timing is not. To me, the one clearest indicator of timeframe is that, the closer a crash gets, the more events will increase in both frequency and magnitude. Based upon that premise, we’re drawing quite close to the first of the crashes, as we’re now seeing significant events almost daily.

This tells us that our time is limited and that our long-term plans for wealth preservation need to be in place now. Whatever choice the reader makes to safeguard his wealth, he will need to do it very soon. Time is very clearly running out. SWP’s Cayman Islands vault represents a very good option for offshore wealth preservation in the Western Hemisphere.

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Gallup released a poll Thursday showing that overall stock ownership among US adults remains 8 percentage points below its pre-crisis level. But even as the crisis appears to have scared many Americans away from owning stocks, there are two demographic subgroups where ownership has held firm: Adults aged 65 and older and those with an annual household income of $100,000 or more.

The data is from Gallup’s annual “Economy and Personal Finance” survey, which asks US adults whether they personally or jointly have money invested in the stock market, including in individual stocks and stock-market funds such as 401(k)s and individual retirement accounts (IRAs).

Before the crisis, 62% of US adults said they owned stocks. As of April, that number has dropped to 54% – which is higher than last year’s reading, 52%.

That’s bad news for millennials and Gen Xers, because even though the main indexes halved in value during the aftermath of the crisis, they have since more than made up for those declines by rising to record highs. The S&P 500 is up more than 102% since the day Lehman Brothers declared bankruptcy.

The implications of the data are clear. Here’s Gallup:

“The stock market has performed well in 2017, but proportionately fewer Americans are benefiting from today's bull market than did so in bull markets before the financial crisis. The gains in stock values in recent years seem to have done little to persuade people who may have divested themselves of stocks to get back in the market."

 

“Nor has the recovery encouraged new investors to join the market. Although young adults are understandably less likely than their elders to own stocks, the percentage of 18- to 29-year-olds investing is down 11 points since before the financial crisis.”

While the poorest Americans have definitely borne the brunt of rising inequality, they aren’t driving the decline in stock ownership because equity ownership among low-income people has been low for years.

Instead it’s the middle- and upper-middle-income households that have largely driven the decline.

The aftermath of the crisis also appears to have had a lingering impact on Millennials and Gen Xers, who’ve had to grapple with tepid employment and a student debt load that ballooned to more than $1 trillion during their prime working years.

Rising equity valuations, which have been spurred on by the Federal Reserve and its unprecedented monetary stimulus, have certainly played a role in driving up income inequality in the U.S.

But Gallup noted that the aging of the baby boomer demographic may have also contributed to the disparity in ownership rates. Older workers were in their prime during the boom years of the 1980s and 1990s so it's more likely they had 401(k)s at work, leaving them with above average stock ownership. 

Here’s Gallup’s data.

 

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Authored by John Solomon and Sara Carter via Circa.com,

The National Security Agency under former President Barack Obama routinely violated American privacy protections while scouring through overseas intercepts and failed to disclose the extent of the problems until the final days before Donald Trump was elected president last fall, according to once top-secret documents that chronicle some of the most serious constitutional abuses to date by the U.S. intelligence community.

More than 5 percent, or one out of every 20 searches seeking upstream Internet data on Americans inside the NSA’s so-called Section 702 database violated the safeguards Obama and his intelligence chiefs vowed to follow in 2011, according to one classified internal report reviewed by Circa.

The Obama administration self-disclosed the problems at a closed-door hearing Oct. 26 before the Foreign Intelligence Surveillance Court that set off alarm. Trump was elected less than two weeks later.

Circa has reported that there was a three-fold increase in NSA data searches about Americans and a rise in the unmasking of U.S. person’s identities in intelligence reports after Obama loosened the privacy rules in 2011.

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FX is quite literally, a rigged game.  Not like the stock market, well not exactly.  FX has been, a game of ‘how many numbers am I holding behind my back?’ and the guess is always wrong!  As we explain in Splitting Pennies Understanding Forex – FX is rigged.  But that doesn’t mean there isn’t opportunity!  One just needs to understand it.

From Law 360:

French bank BNP Paribas was fined $350 million by the New York State Department of
Financial Services for lax oversight in its foreign-exchange business that
allowed “nearly unfettered misconduct” by more than a dozen employees involved
in exchange rate manipulation, officials announced Wednesday.



From 2007 through 2013, a trader on the bank’s New York desk, identified in the
consent order as Jason Katz, ran a number of schemes with more than a dozen
BNPP traders and salespeople on key foreign exchange trading desks to
manipulate prices and spreads in several currencies, including the South
African rand, Hungarian forint and Turkish lira, officials said.



He called his group of traders a “cartel” and they communicated in a
chat room called “ZAR Domination,” a reference to the rand’s trading
symbol, according to the consent order. The group would push up the price of
the illiquid rand during New York business hours when the South African market
was closed, moving the currency in whichever way they chose, and thus
depressing competition, officials said.



Katz also enlisted colleagues at other banks to widen spreads for orders in
rands, increasing bank profits and limiting competition at the customer’
expense, the order says. Some of the traders engaged in illegal coordination
and shared confidential customer information, officials said. As part of a
cooperation agreement with prosecutors, Katz pled guilty in Manhattan federal court in
January to one count of conspiracy to restrain trade in violation of the
Sherman Act.



“Participants in the foreign exchange market rely on a transparent and fair
market to ensure competitive prices for their trades for all participants,”
Financial Services Superintendent Maria T. Vullo said in a statement. “Here the
bank paid little or no attention to the supervision of its foreign exchange
trading business, allowing BNPP traders and others to violate New York state
law over the course of many years and repeatedly abused the trust of their
customers.”



BNP Paribas, which employs nearly 190,000 people and has total assets of more
than €2.1 trillion (approximately $2.36 trillion), said in a statement that the
$350 million fine will be covered by existing provisions. It said it had
implemented a group-wide remediation initiative and cooperated fully in the
investigation.



“The conduct which led to this settlement occurred during the period from 2007
to 2013. Since this time, BNP Paribas has proactively implemented extensive
measures to strengthen its systems of control and compliance,” the bank said in
its statement. “The group has increased resources and staff dedicated to these
functions, conducted extensive staff training and launched a new code of
conduct which applies to all staff.”



Three BNPP employees were fired, seven more resigned and several others were
disciplined for misconduct or supervisory shortcomings in relation to the
probe, the order says.



Katz’s attorney, Michael Tremonte of Sher Tremonte LLP, did not respond Wednesday to a call seeking
comment.

But really, what’s another $350 Million in the grand scheme of things for BNP?  Just another day’s profits in the FX market.

This probe isn’t new; regulators have been looking into FX rigging for years.  And practically, the fine won’t make any customers whole – it will just shore up the coffers for the NY State department of financial services.  With inflation out of control, they need the money.  

For a detailed breakdown of this virtual monopoly ‘they’ have on the global financial system, checkout Splitting Pennies Understanding Forex.

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By Chris at http://ift.tt/12YmHT5

Well done!

To the Donald…

Too true Donald. These guys are filthy rich. In fact, if Justin Bieber lived out there, they’d put him on income support.

Fighting words those. Bow wow, woof, woof. Grrrr!

Disgraceful… this bowing thing. Elect me, and I’ll show ’em.

Aaaand…. tamed!

POTUS caught curtseying.

Is that Trump or Hillary bowing? They use the same hair dye, and increasingly there seems little to distinguish them apart. The man is as steely, resolute, and determined as a bowl of yoghurt.

In his Saudi speech the Donald refused to utter the words “radical Islamic terrorism”. You’ll recall that this was a term he had endlessly berated President Obama for failing to use. He went as far as to call Islam “one of the world’s great faiths”. Trump supporters’ heads must have exploded.

For everyone else… the brilliance coming from Washington never ceases to disappoint.

Ramifications?

For the stock market… here’s the iShares US Aerospace & Defence ETF:

A $110 billion weapons deal worth over $350 billion over 10 years which Hillary Trump just signed will have that effect. The establishment rice bowls will be filled after all. Whew! Rumsfeld and Cheney must be relieved.

As for the electorates faith in the political system…

Well, let’s see… $350 billion in advanced weaponry to the barbaric, medieval regime that chops of more heads than ISIS.

You tell me.

Intricately Tied to It

Over in Manchester, a Libyan refugee Salman Abedi, after having read a poorly written medieval science fiction book and thus under the delusion of paradise and 40 virgins, blew himself to smithereens, taking with him 22 innocent people who were out enjoying a night’s music.

How is this intricately tied?

Last year, I explained the actions and consequences to this question:

“According to a group of human rights organisations, the body count from the wars in Pakistan, Afghanistan, and Iraq – all part of the ridiculously named “war on terror” – stands at over 2 million.

Let’s think about this for a minute. Consider how many close friends and family you have. Let’s put the number at an even 50. Remember also that culturally Muslims have an average of 4 children rather than the European 1.5 average and factor in that a good portion of this group practice polygamy – taking 4 wives and having 16 rather than 4 children – and this number is likely pretty conservative.

For every person killed (and this can be directly or simply as a result of Western intervention) we have therefore a further 50 friends and family. So now we have 2 million multiplied by 50 which is 100 million people. What percentage of those 100 million people blame the West for the death of a loved one? It’s higher than zero, that much I know.

Now some portion of those 100 million people have been invited with open arms into Europe, and we’re not even mentioning soldiers who’ve fought against any of the Western-led military campaigns. Many of them too have made their way into the homelands of the “infidels”.

Imagine for a minute being invited to a party at the home of someone who you believe had a hand in the slaughter of your family. That is unfortunately how many feel. We don’t need to imagine this, we know it because they have told us this.

I’m not making a judgement call here just pointing out the obvious.

European politicians seem to have a shockingly dim understanding of this dynamic, which on it’s own shows a naivety befitting a 5 year old schoolgirl.

You cannot directly, or indirectly, kill two million people, invite their relatives home and expect no blowback. That’s beyond stupid. It’s suicidal.”

And then only a month ago, I wrote about what the silent majority is really saying:

“While afraid to say so publicly how many in private think: is it not time to bring in the military, round them all up, put them on a ship with a jammed rudder and aim it at North Africa?”

This number grows each day, and today – just days after this Manchester attack – the number of people thinking these thoughts is exponentially higher than it was at the beginning of the week. This is how trends and consensus form. Ignore it at your peril!

And while I’ve been explaining behavioural economics and this social dynamic in my little corner of the web, I’ve been arguing that it will increasingly become mainstream with profound ramifications.

And here we have one such case. It doesn’t get much more mainstream than Morrissey himself. Read it carefully.

On a more positive note, I sure hope you’re following this.

The Belt and Road

A week before Chairman Trump and Salman bin Abdulaziz Al Saud sat down to lobster bisque, roast swan stuffed with oysters, and sautéed slave to discuss how many Yemenis could be wiped out with the brand spanking new US bombs, President Xi hosted leaders from around the world pushing ahead with China’s ambitious OBOR project.

One can conquer by force or by trade – a point worth remembering.

With trade comes influence – political, economic, and social.

Consider what’s happened in just 40 years.

Forty years ago, China was a backwater – nothing of a place inhabited by little brown people in straw hats rummaging around in garbage cans wearing clothing that looked like they’d been nicked from the film set of Schindler’s List.

If you were lucky, you’d spot a moped but it had probably run out of fuel because nobody could afford anything more than soup. And since nobody had invented a moped that ran on soup, it wasn’t going anywhere.

Today, not only does China produce an avalanche of goods but they are rapidly becoming a formidable consumer themselves. In terms of influence consider that they are now:

• Asia’s largest trading partner
• US largest trading partner
• Germany’s largest trading partner
• Australia’s largest trading partner
• Russia’s second largest trading partner (after Germany)
• Africas largest trading partner
• South America’s largest trading partner

China has, over this 40 odd years, built up some impressive things. Among them a credit bubble, which will need to be dealt with but also substantial foreign exchange reserves, most of them held in US government debt securities. Trading those securities for influence, and dare I say it inflation protection, will translate into revenues to the Middle Kingdom. This is the plan… and it isn’t a bad one.

They sure could do worse. They could sell bombs to the most hated family in the Middle East, and when the inevitable backlash takes place, then turn around and say with a straight face.

Question

Cast your vote here and also see what others think is going on

– Chris

“The supreme art of war is to subdue the enemy without fighting.” — Sun Tzu, Chinese

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