What The Charts Say – Buckle In!

Via NorthmanTrader.com,

Despite the large February – April rally stocks are down year over year (May 6 2015- May 6 2016). $SPX is down over 1%, the Nasdaq is down over 4% and small caps are down over 8%. On May 6 stocks closed basically where they were in the third week of March which implies they haven’t really gone anywhere in the past 7 weeks.

And not going anywhere has really been the theme since QE3 ended. So this period of consolidation remains completely unresolved, literally stuck in the middle:

SPXD

As I’ve outlined recently ultimately this range will resolve itself into a big move once a directional breakout has confirmed itself.

We are closer to all time highs than any recent lows and with yet another OPEX period coming bulls likely have again the horn to make magic happen, after all, OPEX retains an almost perfect track record of pre-programmed buying:

OPEX

There are exceptions of course. Both Januarys in 2015 and 2016 were OPEX busts and so was August of 2015. If anything August showed how quickly the bid can disappear.

So here we are in May of 2016 and we can observe an almost perfect replay of last year. A rally into the upper Bollinger band, a retrace back toward the lower Bollinger band and 50MA just in front of OPEX. Will the program just replay itself? After all new time highs were made in May last year.

Still something happened on Friday that has happened only twice in over 20 years on the $SPX: The weekly 100MA has crossed over the weekly 50MA. Only by 1 handle mind you, but it has happened.

The last two times this happened carnage followed:

SPX W

Both of these crossovers happened in context of the following events:

  1. SPX had broken a multi-year ascending trend line
  2. GAAP earnings were declining

Both of these conditions are in place here as well.

However, given the consolidation of price over the past year and a half it is also relevant to point out that a similar consolidation occurred in the mid 1990’s which resulted in a massive price move toward the upside. The big difference to then: GAAP earnings were rising. They clearly aren’t now.

The conclusion to all this: Bulls can’t afford any further price decrease here because it would confirm the MA cross-over and likely set in motion a larger corrective move inviting new lows altogether. This is at least the track record.

So this next 2 weeks into OPEX may hold the golden key as to the ultimate directional move of this market.

Buckle in.

via http://ift.tt/1UK6pwT Tyler Durden

Homeland Security To Conduct Fake “Bioterrorism” Subway Terror Attack In New York City

Following 'Jade Helm' last summer, 2016 appears to have seen an escalation in social unrest and domestic terrorisim threat reaction among America's authorities. FEME undertaking domestic riot training in the south last month, battle-tanks rolling through Houston last week, and now the Department of Homeland Security plans a bioterrorism attack drill next in the NYC Subway.

Last summer the state of Texas was ablaze over concerns surrounding the Jade Helm military drills held across the state prompted some to speculate that the Federal government was preparing for either a local insurrection, secession planning contencies for the Lone Star state or even a "Texas takeover."

Similar confusion returned earlier this year when dozens of McLennan Community College students posed as unruly protesters as part of a Federal Emergency Management Agency training program. This "first of its kind" three day exercise in Waco, Texas was overseen by the Department of Homeland Security, during which police officers from fifteen different departments took part in drills on how to deal with riots and conduct mass arrests."

And now, as Intellihub reports, DHS prepares to undertake bioterrorism drills in NYC…

Next week the Department of Homeland Security will release “harmless particle materials” tunnels of the subway system in effort to understand how gas or particulates would travel through the air, in the event that a real bioterrorism incident were to actually occur at a later date.

 

The "non-toxic, safe gas mateial" will be released at Queens, Manhattan and Brooklyn stations while officials monitor the flow through the system. The information obtained from the drill could be key and may help authorities and official react quicker if a real event were to take place.

 

The drill is similar to another that was conducted in California last winter for Anthrax.

 

Although these type of drills raise suspicion of government and intelligence agency foreknowledge, they also simply just make since due to the nature of today’s world.

As of now officials say there is no current or credible threat of terror in the city.

What, exactly, are Americans not being told?

via http://ift.tt/1q7mVKs Tyler Durden

To BREXIT Or Not To BREXIT…

Submitted by by Erico Matias Tavares via Sinclair & Co.,

On 23 June the British will vote in a referendum to decide whether their country should remain in or leave (BREXIT) the European Union (EU). The importance of this event cannot be overstated, since it will impact the future of the UK – and very likely that of Europe – for decades to come.

The remain camp features an impressive membership. The poster boy is of course Prime Minister David Cameron, backed by his Tory government (which is ironic given that they had been the most euroskeptic party), joined by a great number of multinationals and captains of industry, as well as the main opposition party (also ironic, since their leader, Jeremy Corbyn, had historically been sympathetic to the idea of leaving the EU).

They also have the support of prominent international politicians, in particular US President Barack Obama. A few days ago he made a high profile visit to the UK to share his views on the matter, including a warning on what could happen to UK’s trade with the US – interpreted by some as a threat against leaving. Perhaps the special relationship between the two countries is not so special after all.

The BREXIT crowd is much more fragmented and colorful, consisting of a plethora of Tory “renegades” (the true conservatives in their mind), far left politicians, far right politicians, representatives of small businesses and a whole swath of euroskeptics. Not the most cohesive bunch really, but still able to put up a fight.

What is particularly interesting about this group is that many of its members would rather shoot themselves than share a stage with the others. And predictably there have been plenty of misfirings in recent weeks, including silly “part Kenyan” remarks.

The polls suggest that this will be a close contest. This means that a significant proportion of the population will be deeply unhappy with the outcome of the referendum, not really an encouraging sign given its profound implications.

 

But why on Earth are the Brits questioning their membership of the EU in the first place? Why can’t they just settle down like everyone else?

The Ashes of Empire

The historical context of the referendum is particularly important to understand its existence. British society has undergone a massive change over the last hundred years or so. And in a sense it is still trying to come to terms with it.

At the beginning of the 20th century Britain ruled over an empire where the Sun never set. They were really the top dog. Its navy controlled all the major sea lanes. British industry, located primarily at home, enjoyed preferential access to raw materials from its colonies overseas, in return supplying them with finished products under a virtual monopoly. The universities formed highly qualified professionals who would help run even the farthest outposts of the empire.

Cecil Rhodes, the quintessential British imperialist of his time, famously stated: “Remember that you are an Englishman, and have consequently won first prize in the lottery of life”.

But all empires suffer from the illusion of permanence. And that rigged lottery of life was soon to be challenged by the ascendancy of two world powers, Germany in Europe and Japan in the Far East. This set in motion a chain of events that would wipe out Britain’s supremacy in less than half a century, as a result of two devastating world wars separated by a brutal economic depression.

The growing fragilities of the British Empire were painfully exposed during World War II. Notwithstanding the valor of its soldiers – from all corners of the world, Britain was losing badly in the first years of the war, not only in the home front but also in Africa and Asia.

The tide only started to turn after the US formally entered the war. But such support came with strings attached. Along with many other conditions, the Brits would have to share their lead in key military technologies, such as aircraft design and the radar, and eventually withdraw from their colonies. There wasn’t much else Winston Churchill, the British Prime Minister, could have done.

As a result, while Britain and its allies prevailed its empire did not. This became obvious at the Yalta Conference in February 1945, where Churchill was for all intents and purposes relegated to a side role in the discussions that were taking place between the two new superpowers, the US and the Soviet Union, on how the postwar world should look like.

In a sense this was the smoothest transition of global hegemonic power in recorded history, with the Brits merely passing the baton to the Americans. Pax Britannica gave way to Pax Americana. And this has been the model governing world affairs since then.

What went much less smoothly was the retrenchment of Britain back into its islands in Northern Europe. Despite a general climate of prosperity in postwar Europe, by the 1960s the UK economy was starting to lag in trade and industry. As a response, the country experimented with different economic models (in large part to try to emulate the impressive success of West Germany), including its own version of socialism. It even joined, albeit reluctantly, the European organization that eventually became the EU.

Unfortunately all these changes failed to deliver the prosperity they intended to create. After enduring years of economic malaise, paralyzing strikes, two oil shocks and industrial bankruptcies, by the mid-1970s Britain had to go through the humiliation of applying for an IMF bailout in order to avoid the collapse of its currency.

It took decades under the leadership of Margaret Thatcher and then Tony Blair for the country to regain its footing and international prestige. However, this was only achieved under an evolving political and economic configuration that promoted greater integration with Europe’s markets. While this process was essential for the UK’s reversal of fortunes, it also came with strings attached.

As a result, the UK is now one out of 28 member states of the EU (albeit a very important one), having relinquished much of its trade, industrial, judicial and foreign policies to Brussels. It did manage to retain its currency, some control of its borders and other exemptions, perhaps to appease its more euroskeptic proponents going back to the Thatcherite days.

Given all of this, just how influential is the UK today?

A Symbolic Corporate Dispute

There is a recent corporate event that in our view reveals the waning influence of the UK in world affairs: the battle for the control of PT Bumi Resources, a major coal mining company in Indonesia. While this was fundamentally a private matter, there is a high degree of symbolism given the parties involved.

On one side we had Nathan Rothschild, heir apparent of one of the branches of the most prominent banking dynasty in the world, involved in financing the British government and enterprise for centuries.

Rothschild astutely noted China’s insatiable demand for all kinds of commodities, and in particular coal to power its galloping growth. As such, in 2010 he envisaged the creation of a vehicle that would enable international investors to gain exposure to natural resource plays around the world, but governed by the well-established rules of UK capital markets.

Indonesia was highly attractive in this regard, given its proximity to China and leading position in coal mining.

This is when the opposing side entered the picture. The Bakries are one of the most powerful families in Indonesia, having established a business empire on the back of their deep political and business connections. At that time their family-run company had over 200 holdings in businesses ranging from media to mining.

The two sides came up with an innovative deal in 2011: the Bakries would inject their stake in PT Bumi Resources, a major coal business in Indonesia, into a cash shell company listed on the London Stock Exchange. Rothschild’s vision had become a reality.

However, the deal immediately attracted criticism, especially in Indonesia where the Bakries were accused of selling valuable national resources to foreign interests.

That turned out to be the least of their worries. Coal prices started a major correction largely as a result of slowing demand from China. Accordingly, the value of the shell company plummeted, and pressure was mounting on its backers.

It also became apparent that the two sides had very different views on how the company should be run. This dispute eventually turned acrimonious – and very public in 2012, after Rothschild made allegations of major financial irregularities at the Indonesian subsidiary, where the Bakries had retained significant influence. An independent probe into the matter revealed that not all was well with the company as Rothschild suspected, but some serious questions emerged on how he had obtained such information.

From then on the gloves were off. Rothschild, also feeling the pressure of his reputation being on the line, resigned from the board and later attempted to regain control of the company by replacing its directors through a shareholder vote. In the end, the shareholders rejected his proposal, and that was that. One of Asia’s most powerful families had prevailed over the blue blood of British (and Western) finance.

It really is a new world order, and one much less accommodating of British interests in its different forms. A hundred years ago there wouldn’t have been a contest; whatever court was in place would have likely ruled in favor of the British. And if it came to blows, the British Navy would have come to the rescue and typically enforce a blockade around a major port. And any of that would have carried the day, for better or worse.

Obviously we’re not advocating for gunship diplomacy here. And a shareholder vote is certainly an incomparably more civilized way to settle a dispute. But it opens the question of how the UK can regain any semblance of its former world influence – if at all possible.

Should the UK go for BREXIT and strike its own deals with its fast growing Commonwealth partners, its historical stomping ground? Or instead irrevocably commit to the EU project and hope that the sum ends up being greater than its parts?

Surely the answer would be pretty straightforward if the EU was performing as originally sold to its member states. But is it?

A New Roman Empire?

We all know the positives. The EU has brought together states which chronically had been at war for generations, with more severe consequences each time. European companies now have unfettered access to a market with 500 million consumers covering an entire continent. There are regulations in place that safeguard important labor and environmental rights. And it’s really wonderful to be able to live, study and work anywhere in the EU.

Getting together also makes sense to better tackle the complexities of a globalized world, where emerging powers like India and China seek to regain the spotlight after centuries of underperformance. The negotiating leverage of the economic block is strengthened by becoming larger, not smaller. Moreover, the prevailing Pax Americana is showing signs of exhaustion, with unpredictable consequences if the world turns multipolar. Why not entertain the thought of merging all the armies in Europe?

These may all be very valid reasons to remain in the EU. But there is a flipside to this story, and potentially a very serious one.

We have recently written about the EU’s dire state of affairs, so there’s no point in regurgitating it here. But it’s worthwhile revisiting a number of important points.

Most of Western Europe has blown through the inheritance bequeathed by their forefathers, and is now foisting upon its descendants a huge amount of debt to fund its current standard of living. Several member states around the Mediterranean have already gone past the solvency point and can only obtain the liquidity to fund their daily commitments with some type of backing from the European Central Bank and other EU institutions.

Europeans no longer make enough babies to replace the elders who expire (which begs the question of who will actually be around to pay for all those newly minted debts). Changing culture plays a role, but so does record youth unemployment and massive increases in the cost of housing, taxes and so on. Much of that can be traced back to unsustainable electoral promises, Keynesian follies and the gigantic European welfare state, and it’s incredibly unfair that it’s the young ones picking up the tab for all that.

Facing a demographic cliff, European governments have opened their borders to mass immigration, at such a scale that the native populations are progressively being replaced. This is already apparent in most major European capitals. And that’s fine provided that everyone is singing from the same hymn sheet. But increasingly that’s not the case. There are growing pockets of disenfranchised communities, which in many cases end up becoming hostile towards their host nations.

As a result, social cohesion is breaking apart in many member states. Take France for instance. A big portion of its military has now been deployed *domestically* to protect its cities, nuclear power plants, schools and synagogues against the ever expanding and seemingly unsolvable threat of islamic terrorism. Even Brussels, the capital of the EU, is effectively under military lockdown today.

And what has been the EU’s response to all of this? The typical bureaucrat’s response: more central planning, more federalization and less member state democracy. Jean-Claude Juncker, the President of the European Commission, recently stated that “the EU always has problems with its member states and our lives would be much more comfortable without member states”. At least he seems to have more spunk than a damp rag.

Oh, and there are more planned expansions too, with countries like Serbia, Albania and Turkey on deck to join the EU at some point in the near future. And why stop there? Why not recreate the old borders of the Roman Empire? Except that this time there won’t be any Roman soldiers to ensure the propagation of Roman values; that may only be achieved through increasing monetary contributions from those childless ageing Europeans, and probably not for very long.

Seeing things from this vantage point, why would any Brit vote to remain in the EU? Why negotiate to get a better view in the Titanic rather than running for the life rafts?

Arguably many of these existential problems can be better solved by a smaller EU, not a bigger one (no Chancellor Merkel, dilution is not a solution). The Brits have enough domestic and foreign problems to deal with already, which is why they are having this referendum in the first place. And an enlarged EU will all but guarantee new waves of economic migrants rushing into the UK.

The idea of engaging with the Commonwealth on its own certainly has a lot of merit. The average Brit has more in common with an Indian, a Pakistani, a South African, a Canadian or an Australian than with a Greek, a Slovakian or even a German, hence the name of that organization (except that the participating emerging countries always argue that unfortunately the wealth is not common…). And those markets are growing much faster than the EU’s.

A BREXIT is not all smooth sailing though, not by a longshot. Breaking up is never easy and there is a lot of disentangling to do. What would happen to all the expats and migrant workers in the UK? The Scots might also decide to do another referendum to split from the UK and in all likelihood go back to the EU (whatever happened to Braveheart?)

This is why both sides must have the opportunity to clearly and fairly present their arguments to the British public. The stakes are way too high to make any decision based on just a hunch, emotion or political propaganda. It’s a pretty serious matter and any regrets will last for generations.

And that’s the world we live in today. There are no easy solutions to the problems we face. To BREXIT or not to BREXIT… that is indeed the thorny question.

 

via http://ift.tt/1rBjptk Tyler Durden

“The Death Of The Gold Market” – Why One Analyst Thinks A Run On London Gold Vaults Is Imminent

When it comes to tracking the nuances at the all important margin of the gold market, few are as observant as ADMISI’s Paul Mylchreest, whose December 2014 analysis showed the stunning role gold holds in the new normal as a funding “currency” for BOJ interventions in the form of a long Nikkei/short gold (and vice versa) pair trade, indicating that central banks directly intervene in gold pricing (by selling, of course) when seeking to push paper asset prices higher.

In his latest report he follows up with an even more disturbing analysis on the state of the gold market. Specifically, he looks at what historically has been the hub of gold trading, the London bullion market, and finds that it “is running into a problem and is facing the biggest challenge since it collapsed from an insufficient supply of physical gold in March 1968.

We suggest readers set aside at least an hour, and two coffees for this “must read” report. For those pressed for time, the executive summary is as follows: using data from the LBMA and Bank of England on gold stored in London vaults and net UK gold export data from HM Revenue & Customs, Mylchreest calculates that the “float” of physical gold in London (excluding gold owned by ETFs and central banks) has recently declined to +/- zero.

 Summarizing the data in the report.

 

The full details of how Mylchreest gets to this number are broken out in detail in the attached report; fast-forwarding to his troubling summary we read the following conclusion, one we have observed numerous times when analyzing the troubling trends within the gold vaults of none other than the Comex itself: “if we are correct, the London Bullion Market is running into a problem and is facing the biggest challenge since it collapsed from an insufficient supply of physical gold in March 1968.”

Some more of the report’s core findings, most of which should come as no surprise to regulatr readers:

* * *

Besides the growth in physical gold demand from existing sources, there is more than US$200 Billion of trading every day in unallocated (paper) gold. If buyers lose confidence in the market’s structure and ability to deliver actual bullion, the market could become disorderly (via an old fashioned “run” on the vaults) as it seeks to find the true price of physical gold.

 

Intuitively, we think that central banks might have lent/leased gold to maintain the status quo and mask what is technically a default. However, rather than being used to provide temporary liquidity, it is possible that loans/leases are being rolled. This is not sustainable and implies dual ownership claims.

Going forward, the market is vulnerable to several trends in physical gold trading patterns:

  • Since 2009, central banks have switched from net sellers to net buyers ;
  • The extraordinary strength in Chinese gold demand as indicated by withdrawals of bul-lion on the Shanghai Gold Exchange, e.g. an astonishing 2,597 tonnes, or more than 80% of all of the gold mined worldwide, in 2015;
  • The rebound in gold held by London-based gold ETFs, which has been increasing since January 2016, as western investors dip their toes back into physical gold; and
  • Net gold exports by the UK – mainly to support strong Asian (especially Chinese) demand – which have been a feature of the market since 2013.

But the vulnerability is not confined to current trends in physical bullion.

If there is no gold float, there is nothing supporting more than US$200 Billion of trading every day in unallocated (paper) gold instruments which accounts for more than 95% of gold trading in London.

The convention of trading unallocated gold has been based on a fractional reserve system. It works as long as gold buyers retain confidence that the banks could deliver physical gold if demanded, but our analysis suggests that they could not.

For more than four years, selling of paper gold overwhelmed growing demand for physical gold from the likes of China and central banks (in aggregate). The “gold market” became a chimera as fundamentals were turned upside down. Banks added paper “gold supply” in almost elastic fashion on occasions when western investors increased net gold exposure via paper gold instruments.

We’ve argued for many years that a breakdown and bifurcation in the gold market between physical and paper gold substitutes would be necessary for accurate price discovery of physical gold bullion. The lead article in the January 2016 edition of the LBMA’s quarterly magazine was titled “Wholesale Physical Markets are Broken”, which might be confirmation that this process is reaching an advanced stage.

In the interim, we could move towards a two-tier gold market – where physical gold trades at a premium to paper gold instruments, such as unallocated gold in London and COMEX gold futures in the US.

It saddens us that London’s position and reputation as the hub of the world gold market is in jeopardy unless the LBMA, BoE and other stakeholders embrace rapid and far-reaching reform. The London Bullion Market is structurally flawed and overdue for reform – it is not an exchange, it is under-regulated and there is near zero transparency. More than anything, it is primarily a system of paper credits/debits which benefits the banks and undermines the investment case for gold and, consequently, interests of gold investors.

Seeing the Achilles Heel of London’s gold market, China’s Shanghai Gold Exchange (SGE) launched a Yuan-denominated physical gold benchmark gold contract on 19 April 2016. Examining the SGE’s white paper, it’s clear that China acknowledges that its introduction should lead to a more realistic price for physical gold and that its strategy is to shift price discovery in the gold market from London to Asia.

Unfortunately time is running out for London and meanwhile…

The vast pools of western capital are not underweight gold, they are almost zero–weighted. Ultimately, gold is a bet on financial system mismanagement in many guises – such as inflation, deflation, rising credit risk, declining confidence in policy makers, etc. The fact that mainstream investors and commentators have started to have doubts about central bank policies has been positive for gold.

For years, the typical pushback on investing in gold by western investors was that it had no yield. In a bizarre twist of investing, more than US$7 Trillion of bonds now have negative yields thanks to unconventional monetary policies like ZIRP/NIRP, and gold investing can be justified on a yield basis. Unlike every other financial asset, including sovereign bonds, physical gold has no counterparty risk.

We have been here before…

“Someone once said, ‘no one wants gold, that’s why the US$ price keeps falling.’ Many thinking ones laugh at such foolish chatter. They know that the price of gold is dropping precisely be-cause ‘too many people are buying it’! Think now, if you are a person of ‘great worth’ is it not better for you to acquire gold over years, at better prices? If you are one of ‘small worth’, can you not follow in the footsteps of giants? The real money is selling ALL FORMS of paper gold and buying physical! Why? Because any form of paper gold is losing value much, much faster than metal. Some paper will disappear all together in a fire of epic proportions! The massive trading continues at LBMA, but something is now missing”

Anonymous quote from many years ago (the 1990s!)

* * *

Mylchreest full must read report below (pdf):

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GOLD Smells Central Bank Fear!

is-any-job-better-than-no-job-283x300

Last Friday, the US Labor Department released the job numbers, and – big shocker – the American economy added fewer jobs than what everybody was expecting. Whereas most economists were expecting the country’s labor market to create 205,000 new jobs (which would have been a welcome boost), April’s job numbers saw an increase of just 160,000 jobs, or approximately 20% lower compared to the estimates.

Sure, an increase in the total amount of jobs added last month is very encouraging, and the fact the average wage also increased does indicate the ratio of higher-paying jobs did increase, but missing the estimates will be tough to explain. On top of that, the Labor Department also had to revise the job creation numbers for both February and March, as the total amount of new jobs in those months was approximately 10% lower than previously anticipated.

USA Gold 3

Source: Thecapitalist.com

And that’s of course something the market is very wary about; if both February and March had to be revised (in a negative way), it’s not impossible the weaker-than-expected April report could be subject to another negative revision. And that’s something the Federal Reserve will have to take into consideration.

Indeed, the central bank had been hinting about hiking the interest rates once again in June, but this weak job report in April might result in re-thinking that strategy, considering the previous months also saw a negative correction in the final job creation numbers. And why would the Fed hike the interest rate anyway, after seeing the weakest job creation numbers since September?

Was April just a bump in the road? Or is it a sign of a slowing momentum on the job creation market? One thing is for sure, despite all the positive news releases lately, it’s way too early to increase the interest rates again, especially when you realize the economy grew at a 30% lower pace than expected in the first quarter of the year, so no, the US economy isn’t back on track just yet.

Or why do you think the gold price moved sharply higher when the bad job results hit the wires?

USA Gold 1

Source: Kitco.com

Indeed, the gold traders didn’t waste a second and saw right through the positive headlines and immediately pushed the gold price higher by almost $15/oz. It took the gold market a few attempts to break through the resistance level at $1280, but that finally happened last week as we ended the month of April above this resistance level, just a few weeks after the gold price took a breather after a $200/oz run. Not only was this break-out confirmed last week as the $1280 (support) level was repeatedly tested but never broken and the closing price of roughly $1290/oz on Friday is the second week in a row the gold price did close above the $1280 level, and that’s quite a bullish signal!

USA Gold 2

Source: Stockcharts.com

And even though we do expect the gold price to remain quite volatile in the next few weeks, the Money Flow Index shows there’s definitely a potential to see the gold price running higher in the near future and even the RSI isn’t showing an overbought situation just yet.

We have been pounding the table for quite a while now, and our patience has been rewarded. Gold is now trading almost $250/oz higher than where it was trading at the last trading day of the previous year, so we are quite happy with this performance. And as the US government institutions are now releasing more negative results, gold is reconfirming its status as safe haven after breaking through its resistance level which now paves the way for a further run.

Protect yourself against a weaker US economy, read our Guide to Gold right now!

Secular Investor offers a fresh look at investing. We analyze long lasting cycles, coupled with a collection of strategic investments and concrete tips for different types of assets. The methods and strategies are transformed into the Gold & Silver Report and the Commodity Report.

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Ivy League Professor Suspected Of Terrorism For Doing Math On A Plane

Last week, American Airlines flight 3950 sat on the tarmac in Philadelphia waiting to take off for a quick flight to Syracuse. Seated together were two people who didn’t know each other; a 40 year-old man with dark, curly hair and foreign accent, and a blonde haired thirty-something woman.

The woman looked on as the man scribbled some foreign type symbols in a notepad with intense focus, and when the woman asked whether or not Syracuse was home for him, the man replied with a simple “no.” These two elements were enough to make the woman uncomfortable enough to pass a note to a crew-member that allegedly said she wasn’t feeling well. After a period of time went by, the crew-member asked the woman if she was still sick, to which the woman replied that she was OK to fly. However, the plane turned around anyway, making its way back to the gate, where the woman would eventually be taken off the plane.

As the plane continued to sit, a crew-member gave some intermittent excuses over the intercom as to why the plane hadn’t pushed back again. After another period of time with still no movement, the pilot made his way back to the man’s seat and ended up escorting him off the plane as well. The man was ultimately led to an agent, who started out the conversation by asking what the man knew about his seatmate on the flight. The man was under the impression that perhaps the agent was trying to figure out what was wrong with the woman, so he replied that she had acted a bit funny, but didn’t really seem visibly ill.

That’s where the story turns for the man, as the agent finally admitted to him the real reason he was escorted off the plane and was now answering the agent’s questions: he was suspected of terrorism.

All the man could do was laugh, as he pointed out the fact that those foreign symbols in his notepad were not part of any cryptic note, rather it was a differential equation. The man was literally suspected of terrorism for just doing math.

Had the airline bothered to do a quick check of its numbers prone passenger, it would have found that the man’s name is Guido Menzio, an Ivy League economist from the UPenn. Menzio was on his way to give a talk at Queen’s University on a working paper he co-authored about menu costs and price dispersion. The confused blonde who sat next to him on the plane was ultimately concerned with his tweaking of a price-setting model that he was about to present.

The professor showed the authorities his calculations and was allowed to return to his seat. The flight soon departed, without the blonde woman.

Menzio said that he was “treated respectfully throughout” the ordeal. Casey Norton, a spokesman for American Airlines said the woman did initially indicate that she was sick, but when she deplaned she disclosed the real reason she was getting off the plane.

Norton said that passengers raise similar suspicions that turn out to be unfounded “from time to time”, but wouldn’t elaborate any further.

Menzio said that he was troubled by the ignorance of the woman, and was frustrated by a “broken system that does not collect information efficiently”, and “a security protocol that is too rigid, in the sense that once the whistle is blown everything stops without checks, and relies on the input of people who may be completely clueless.”

“I thought they were trying to get clues about her illness,” he told The Associated Press in an email. “Instead, they tell me that the woman was concerned that I was a terrorist because I was writing strange things on a pad of paper.” 

We suspect that if the professor had just purchased a copy of ‘Us Weekly’ from Hudson News prior to boarding the plane, he and the woman would have ended up being great friends. And while we’re not sure Trump is to blame for people’s sheer stupidity, we are sure that landing on a terrorist list for working out mathematical formulas is a bad sign for the health of a nation.

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FDA Rules Could Cripple E-Cig Industry

As Jacob Sullum noted earlier, the FDA dropped a bomb on the e-cigarette industry this week in the name of public health. For customers, it may be time to stock up on supplies or move across the pond.

Of course this isn’t the first time e-cigarettes have come under fire. Reason was on hand in New York as the citiy’s 2014 ban on public use took effect

Read more from Reason on e-cigarettes here.

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Chinese Exports, Imports Slump, Miss Expectations As Debt-Fueled Growth Burst Is Over

Overnight China reported April exports and imports, both of which dropped after a strong pick up in March, and missed consensus expectations, confirming weak demand at home and abroad and cooling hopes of a recovery in the world’s second-largest economy.”

Exports fell 1.8% from a year earlier, following a strong 11.5% rebound in March (mostly due to last year’s base effect), the General Administration of Customs said on Sunday, supporting the government’s concerns that the foreign trade environment will be challenging in 2016. April imports tumbled 10.9% from a year earlier after a 7.6% drop last month and falling for the 18th consecutive month, driven by weaker processing trade, confirmg domestic demand remains weak despite a pickup in infrastructure spending and record credit growth in the first quarter.

The next effect meant China posted a trade surplus of $45.56 billion in April, versus forecasts of $40 billion, although with much of that “trade” the result of another record month of capital flight via Hong Kong “import remits”, nobody really has any idea what China’s true trade number is. In fact, looking at the chart below, Nomura concludes that capital outflows may have accelerated in April despite the USD6.4BN increase in FX reserves (largely due to valuation effect). Import growth from Hong Kong continued to surge, to 203.5% y-o-y in April from 116.5% in March, versus a drop in import growth from other markets, to -11.9% from -8.2% (see chart below). This implies continued capital outflows disguised as imports.

Perhaps it’s time for the PBOC to swallow its pride and admit that without a Yuan devaluation, as much as it hates to admit Soros, Bass (and this website since last summer) et al are right, it simply can’t stimulate its export-driven economy.

Both exports and imports came in weaker than expected, in line with the soft trade performance across Asia, pointing to another challenging year for emerging markets,” said Zhou Hao, senior emerging market economist at Commerzbank in Singapore. China’s exports to the United States, the country’s top export market, fell 9.3% in April from a year earlier, while shipments to the European Union, the second biggest market, rose 3.2 percent, customs data showed.

A full breakdown of the details from Nomura:

Exports growth returned to negative territory as favourable base effects fade

 

Export growth in USD terms declined to -1.8% y-o-y in April after surging to 11.5% in March, below the market consensus of a flat change. On the one hand, we should not over-interpret this decline since the rebound in March was mainly due to a low base last year. On the other hand, this figure does reflect that external demand remains weak. Moreover, the number may have been helped by continued weakness in USD in April – both EUR and JPY appreciated further against USD, which should have increased the USD value of export contracts denominated in those currencies.

 

Export growth to all major destinations fell in April; those to the US to -9.3% y-o-y from 9.0% in March, to the EU to 3.2% from 17.9%, and to Japan to -11.8% from 9.3%.

 

Import growth disappointed on weaker processing trade, while the improvement in domestic demand may be losing steam

 

Import growth in USD terms surprised on the downside in April, falling further to -10.9% y-o-y from -7.6% in March, against market consensus and our forecast of an improvement to -4%. As such, the trade surplus widened to USD45.6bn from USD29.9bn in March.

 

Imports component data suggest that the improvement in domestic demand is likely losing steam. Growth of ordinary imports, which cater to domestic demand, fell to -8.6% y-o-y in April from -7.1% in March. Excluding key commodities (i.e., crude oil, iron ore and copper), it fell to -4.4% from -2.3% (Figure 2). The growth of imports value of key commodities improved slightly to -21.7% y-o-y from -23.0%, but largely on the recovery of commodity prices, while in volume terms, import growth of iron ore, crude oil and copper all declined in April from March.

 

Weakening processing trade was also a big contributor to the decline in imports growth. Growth of imports for processing and assembly fell to -20.1% y-o-y in April from -15.3% in March. We notice a declining trend for the share of processing trade in total – down to near 30% recently from almost 50% in 2006 – and processing trade growth (Figure 3). This could be due to the weaker global economy as well as rising costs (e.g. labour) in China and, in turn, a lower competitiveness in producing /assembling goods in China, which does not bode well for future growth.

China’s economic growth slowed to 6.7% in the first quarter – the weakest since the global financial crisis, but activity picked up in March as policy steps to boost the economy, including six interest rate cuts since late 2014, seemed to be taking effect.

After China’s economy grew at just 6.7% in Q1, the Chinese government injected a record $1 trillion in total loans in the economy, halting the rapid economic slowdown from the end of 2015, and easing concerns of a hard-landing in China after the strong March data, but analysts have warned the rebound may be short-lived.

“The market has to prepare a little bit for the downside risk in other Chinese data and some sort of market correction might be inevitable,” Zhou said. The official factory survey and Caixin’s private-sector gauge for April painted a mixed picture of the health of the manufacturing sector. The official purchasing managers’ index (PMI) showed factory activity expanded for the second month in a row in April but only marginally, while Caixin’s manufacturing PMI pointed to 14 straight months of sector contraction.

China’s central bank said on Friday that it will fine tune policy in a pre-emptive and timely way, as the economy still faces downward pressure despite signs of steadying. Amid shrinking global demand, China still managed to grow its share of world exports to 13.8 percent last year from 12.3 percent in 2014, indicating the country’s export sector remains competitive despite higher costs.

The bottom line, as Nomura puts it, “overall, these trade data reinforce our view that the debt-fuelled improvement in domestic demand and growth may be short-lived. We maintain our view that investment.”

In other words, it cost China $1 trillion in three months in debt “stimulus” just to slow down what is once again a downward sloping growth trajectory. We wonder what Beijing will do for an encore?

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Erdogan “Prince Of Europe” Rejects EU Demands To Reform Terrorist Law

Submitted by Mike Shedlock via MishTalk.com,

Pretending Period is Over

The refugee crisis in Europe got more interesting this week.

Within hours of Brussels giving the green light on Merkel’s ill-advised deal with Turkey, Turkish president Recep Tayyip Erdogan sacked sacked Ahmet Davutoglu, the prime minister who negotiated the deal with German chancellor Angela Merkel.

For details see EU Approves Deal With Turkey (Then All Hell Breaks Loose).

On Friday, Erdogan announced he would not fully implement the deal Davutoglu negotiated with Merkel.

The EU can no longer pretend that Erdogan has any intention of reforming Turkey.

Does the EU have a choice? The Financial Times says no. I say yes.

 

Erdogan Rejects EU Demands

Please consider Recep Tayyip Erdogan Rejects EU Demands to Reform Terror Law.

Recep Tayyip Erdogan, Turkey’s president, has rejected Brussels’ demands for an overhaul of an anti-terror law, suggesting he is prepared to abandon a deal EU leaders credit with curbing the flow of migrants.

 

Brussels has requested that Ankara make the change before the EU delivers visa-free travel for 80m Turks, one of the biggest concessions of the migration deal.

 

But Mr Erdogan insisted on Friday the legislation was necessary at a time when his country is being targeted by Islamist and Kurdish militants and said he was not prepared to change it.

Merkel Bows to Erdogan “Prince of Europe”

The anti-terror law in question gives Erdogan the ability to label anyone a terrorist for the flimsiest of reasons.

Erdogan has arrested journalists and academics, essentially anyone who publicly disagrees with him.

But Merkel does not care. She is even willing to kiss Erdogan’s feet in his newly commissioned golden throne.

price of Europe

The Spectator explains How Recep Erdogan Became the Most Powerful Man in Europe.

Erdogan is a patient Islamist. He used his power to tighten his grip and consolidate power behind one party — and one man. He even commissioned a new golden throne to sit on. The putative caliph set about taking Turkey in an all too predictable direction — consolidating power around himself by taking it away from the military and judiciary and stifling domestic dissent whenever he could.

 

The extent to which Erdogan has been able to take Turkey backwards is a modern tragedy. When corruption allegations emerged around his immediate circle just over two years ago, he swiftly banned YouTube and Twitter, stuffed the ensuing investigatory-commission with members of his own party and dismissed the investigations as a ‘coup attempt’ by people serving ‘foreign powers’.

 

Didn’t Erdogan worry that his authoritarianism would disqualify him outright [from EU membership]?

 

He gambled that the EU, for all of its pious words, could be bought off later. In a single night in January 2014, he removed and replaced some 350 police officers. His party gave itself new powers permitting domestic espionage on banks and companies on matters relating to ‘foreign intelligence’.

 

By the end of 2013, Erdogan said he’d take no more lectures from Brussels and that he ‘sincerely expected the EU, which sharply criticises its member countries, should criticise itself and write its own progress report’. In March he seized control of Zaman, until then Turkey’s highest–circulation newspaper. And he has taken action against thousands of citizens for the offence of insulting the president. Last month, a Turkish man was arrested for insulting Erdogan by asking police for directions to the zoo.

 

When a late-night comedy show in Germany pointed to the absurdity of a German law forbidding insults against foreign leaders by attacking Erdogan, Turkey demanded that Berlin acted. Erdogan was calling Angela Merkel to heel. And successfully: she approved prosecution of the offending comedian.

 

Turkey is home to 2.7 million Syrian refugees — a fact which Erdogan is treating like being in possession of a loaded gun.

 

And so the EU has accepted Turkey’s abominable treatment of Kurds. It has ignored the ongoing illegal occupation of north Cyprus. And it has ignored every single one of its own putative ‘criteria’. In trying to avoid millions more migrants, the EU has opened the doors to 75 million Turks.

 

In private, Erdogan must be amazed at just how much he can wrangle. The worse his behaviour, the greater his clout in Europe. He can send German police to arrest German comedians whose jokes he dislikes. He can instruct the EU to delay its ‘progress reports’ on Turkey to a time that better suits his electoral purposes. A few weeks ago, a leaked transcript of a conversation showed Jean-Claude Juncker, president of the European Commission, pleading Erdogan to consider that ‘we have treated you like a prince in Brussels’.

Is There a Choice?

The Financial Times view is Europe has Limited Options Over the Turkey Visa Deal.

Two months ago, the EU agreed to pay Ankara €6bn to help meet the cost of sheltering tens of thousands of additional migrants on its soil. Now, Brussels is offering Turkey a substantial political prize in the form of visa-free travel to Europe for its 80m citizens. Given the growing authoritarianism of Turkish president Recep Tayyip Erdogan, this proposal, which the European Commission unveiled on Wednesday, is controversial. But Europe’s pressing need to settle the migrant crisis means it has little choice but to sign this unpalatable deal.

 

Europe should hold its nose and sign up to the pact it has struck with Ankara. Whatever its faults, Turkey is at least meeting its side of the bargain, managing the numbers coming across the Aegean. After committing so many mistakes in this crisis, the EU has little alternative but to press on as best it can with its difficult eastern neighbour.

Crazy Proposal

One does not grant visa access to 75-80 million Turkish citizens hoping to stop the flow of a million refugees.

The Financial Times says “the visas will be granted to Turks for three months and there is no reason to believe that large numbers will overstay their welcome.”

What? How the hell could the Financial Times possibly know?

Turn Back the Boats

The EU should thank its lucky stars that Erdogan will not uphold his end of the deal and gratefully cancel it.

Coupled with the cancellation (for which the EU can blame Erdogan), the EU should announce an Australia-type plan forcing back all boats, while arresting and prosecuting smugglers.

Call out the military to enforce the borders. That’s what Australia did.

Please consider Tony Abbott is Right about Immigration – and Turning Back Boats.

For many years, Australia has been turning away boats filled with migrants. From a remove, this looks cold–hearted — a nation built by immigrants showing no compassion for others who want a better life. But it is precisely because Australia is an immigrant nation that it understands the situation: if you let the boats land, more people come. People traffickers will be encouraged, migrants will be swindled, and their bodies will wash up on your shores. Any country serious about immigration needs a more effective and robust approach.

Sensible Approach

Turning back the boats may be harder for the EU than it is for Australia, but it can be done.

Making a deal with the devil then letting the devil renege on a critical piece of his end is not a viable option.

Accepting Erdogan’s new demands would do four things, all unsavory.

  1. Open up Europe to 80 million Turkish citizens, all with an axe to grind.
  2. Make Erdogan the prince of Europe.
  3. Accept Erdogan’s role as dictator of Turkey.
  4. Subject the EU to further demands as Turkey could unleash the refugees at any point in the future.

Please pay particular attention to point number 4.

On March 7 I noted Devil Demands and Receives More Concessions from Merkel: In Bed with a Dictator.

Here we are again. The devil wants still more concessions. This time, the devil demands the EU accept Erdogan as the price of Europe and dictator of Turkey.

This is a deal the EU would be crazy to accept.

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Mind Control as a method to support the US Dollar

There is a paradox of capitalism, we’ve reached a point where those at the top, have an unlimited budget to maintain the status quo, increase their wealth, and develop an ever increasing sophistocated toolbox to manage empire and maintain their dominance.  As we explain in Splitting Pennies – this is no where more obvious than Forex.  The last 100 years we’ve seen capitalism evolve brightly.  Industries that shouldn’t be industries, now employ millions of workers.  Paradigm shift, revolution, can now be artificially created by means of automated computer algorithm.  The political process, has been hacked by this technology.  And it’s all controlled by a central banking Elite – it’s all controlled by THEY (Them).  At the top of the pyramid of society, groups such as the CIA, MI6, KGB, Mossad, and others – are responsible for maintaining safety and security, that is, from change.  They cull the herd when necessary, whether it be a revolution in Libya, or bringing down the twin towers.  But these are all physical ops, their most important missions are the ones least talked about – that is, PsyOps, and most significantly, PsyOps that support the financial system.  I believe that if ZH readers can understand this matrix, it will help make better more objective investing decisions.  Because although the market is a free entropic environment, it is controlled by humans, by institutions, and well – it’s only free when it’s allowed to be free.  These PsyOps are what make such a state of hypocrisy possible – otherwise, people would ‘wake up’ and realize that we are programmed with oxi moron hypocrisy.  “We had to bomb the village to save it.”  The tools they use to implement mind control are very simple and have been around for 50 years – the most successful one is Television (TV).  According to testimony by CIA analyst who was involved in domestic PsyOps, he said when asked how can the average person avoid such programming, “Unplug your TV.”  In case you aren’t aware of modern mind control techniques, checkout this well compiled article by Activist Post about 10 methods commonly used. 

The connection between the global social control paradigm and the US Dollar runs deep.  In support of the US Dollar, it’s important that people are blindly hypnotised into submission by using US Dollars.  This is more important than any Fed operations to prop the markets.  Because ultimately, the only real threat to the US Dollar is if people start THINKING.  At the end of the day, the US Dollar, like any fiat currency, provides a basic accounting service for economic activity.  Never before in history has a single currency enjoyed such widespread global use.  And the marketing and propoganda campaigns in support of the USD support it more than the Petro Dollar system, more than CIA operations in Switzerland, and more than any financial algorithm employed by groups such as the Plunge Protection Team (PPT).  Understanding something, isn’t criticizing – maybe it’s a good thing, maybe not – it’s not for the teacher to make any conclusive opinion.  It is however something that all investors should be aware of, especially those who are subject to daily Neuro Linguistic Programming (NLP) in support of this financial system.  Why is Hollywood so successful?  Because they make magic – they make the artificial, seem real… if only for a few moments, it is enough to rewire your brain, already filled with advertising, chemicals in the food, air, and water, and various radio and radiation pumped into populated areas.  The Fed, controlled by a similar group of people like Hollywood is, also makes magic.  They make people believe in this paper they print numbers on called “Federal Reserve Notes” – even though it’s backed by nothing.  US Dollars are only backed by BELIEF and FAITH in them – which is why Mind Control – or in more plain language, aggressive advertising; is necessary to support the US Dollar.  

Maybe watching some of these lunatics that have coined phrases such as “King Dollar” are enough for the average busy businessman to be lulled into a sense of semi-consciousness, where rational, objective thought is impossible.  Buy buy buy.. drill drill drill.. Investors are whipped into a bullish frenzy easily with such programming.  They meet the first criteria – they are open to it.  Admitting you have a problem, is step number one.  The mind is like a parachute, you must open to use.  Not only that, they actually want to hear what TV personalities want to say, to help them make investing decisions!  I remember when I learned Bill OReilly wrote a book – I was shocked.  I didn’t think that someone with his mental disability could even read – let alone write!  (Still, I’m not sure he actually wrote any book, probably he hired someone to do it.)  Anyway, this guy is a great example of someone who fits the role needed to be played perfectly – slightly mentally retarded, aggressive abrasive personality, with a lot of opinions about meaningless issues that will guarantee that it is impossible to receive any valuable information by watching such a program.

So how does this all work?  Clearly, the Elite have decided that financial services – it’s not for the people.  People should work hard, obey, consume, watch sports, and watch TV, and eat, and drink.. So they embed advertising in subtle ways, when discussing financial issues.  For example, during the 911 commission reports and investigation, there’s no mention of the post 911 US Dollar, or transactions that took place short USD just before 911.  There’s a little talk about PUT options on UAL but they’ve tried confusing the issue by releasing snopes reports that its a myth, even though you can see what really happened here:

FTW, October 9, 2001 – Although uniformly ignored by the mainstream U.S. media, there is abundant and clear evidence that a number of transactions in financial markets indicated specific (criminal) foreknowledge of the September 11 attacks on the World Trade Center and the Pentagon. In the case of at least one of these trades — which has left a $2.5 million prize unclaimed — the firm used to place the “put options” on United Airlines stock was, until 1998, managed by the man who is now in the number three Executive Director position at the Central Intelligence Agency. Until 1997 A.B. “Buzzy” Krongard had been Chairman of the investment bank A.B. Brown. A.B. Brown was acquired by Banker’s Trust in 1997. Krongard then became, as part of the merger, Vice Chairman of Banker’s Trust-AB Brown, one of 20 major U.S. banks named by Senator Carl Levin this year as being connected to money laundering. Krongard’s last position at Banker’s Trust (BT) was to oversee “private client relations”. In this capacity he had direct hands-on relations with some of the wealthiest people in the world in a kind of specialized banking operation that has been identified by the U.S. Senate and other investigators as being closely connected to the laundering of drug money.

Krongard (re?) joined the CIA in 1998 as counsel to CIA Director George Tenet. He was promoted to CIA Executive Director by President Bush in March of this year. BT was acquired by Deutsche Bank in 1999. The combined firm is the single largest bank in Europe. And, as we shall see, Deutsche Bank played several key roles in events connected to the September 11 attacks.

No mention of Forex – no USD short.  No reports about the missing Gold from the Fed depository, which was at Ground Zero.  This type of subtle manipulation goes on today.  It’s not what they say, it’s what they don’t say.  As long as the American population is fat, happy, and stupid – they will be happy to use US Dollars, which continually decline in value.  Alternatives such as community currencies, gold, Bitcoin, and others – which are readily available for use – should be avoided at all costs.  Most Americans aren’t even aware that other currencies exist.  As we explain in our book Splitting Pennies – this brainwashing of the domestic population is critical to the global advertising campaign that supports the US Dollar.  The USD is the one world currency.  The Euro, backed by USD and run by CIA agent “Super Mario” – is simply the other side of the same coin.

The goal of this programming is simple – don’t question the US Dollar.  It’s not about convincing people to buy USD in a Forex account.  In fact, they’re betting that by not questioning the value of the USD or questioning the USD as an accounting functional currency, people aren’t going to want to trade Forex, where they can potentially hedge themselves from Forex exposure, or even make a fortune on Forex like Stan did.  What’s the point of this article?  Turn off your TV, or just obey.  

They are investing billions to control your mind.  All they want is your time.  Just a few moments of your time.  It’s all they need.  Who cares, whatever, nevermind.

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