Why Europe’s Doomsayers Are Right, In One Chart

To say that Europe is doomed is an understatament, so much so that every European politician, banker, bureaucrat, and bean-counter has, over the past 5 years, taken at least one opportunity to deny and thus validate the statement.

But while there is cornucopia of reasons which foretell the collapse of the artificial monetary and pseudo-political union, whether it is the relentless deterioration in European output:

or the collapse in private lending, something the ECB is supposedly trying to fix with its latest TLTRO/Private QE…

 

or the mountain of private debt created since the Great financial crisis.

 

Eclipsed only by the amount of public debt created in the same period…

 

… one thing is clear: Europe is finished, though not for any of the above reasons but for a far more simple one, a reason very well-known to the Japanese – there simply won’t be any Europeans left.

In retrospect perhaps it is time for Wolfi Schauble to take a stab at draft 2 of his famous FT scribe: “Ignore the doomsayers: Europe is being fixed,” because, we are sad to report, the doomsayers are right: Europe is finished.

Source: Geneva Reports on the World Economy




via Zero Hedge http://ift.tt/1rB6aUA Tyler Durden

Is the Stock Market Top In?

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The pool of greater fools willing and able to buy assets at higher prices with leveraged free money has been drained by six years of credit/risk expansion.

Is the top in U.S. stocks in? The consensus is “no”–corporate profits are rising, the U.S. economy is recovering and has reached “escape velocity,” i.e. it can continue expanding even as the Federal Reserve ends its monetary stimulus (QE) and plans the first increase in interest rates since the zero-interest rate policy (ZIRP) was launched in response to the Global Financial Meltdown.
 
Many observers have noted that global capital flows (from the risky periphery to the less-risky core) favor U.S. stocks and bonds–another reason to see the 5.5-year rally continue to new highs.
The case for the top being in rests on three pillars: extremes in monetary manipulation (oops, I mean policy), sentiment, leverage and liquidity, the rise of the U.S. dollar and the diminishing returns on monetary stimulus and the repression of interest rates.
 
A number of chart-oriented sites have made the technical case that extremes in sentiment, valuation and leverage will unwind as gravity reasserts itself. Various cyclical analyses also suggest that the current Bull rally is getting long in tooth and due for a reversal.
 
For an abundance of charts that call into question the consensus narrative of “onward and upward forever,” please click through the excellent websites of John Hampson and Lance Roberts.
 
While conventional pundits are falling over themselves in their haste to issue soothing claims that a stronger dollar is good for corporate profits and the stock market, these feel-good analyses ignore the one key dynamic of a stronger dollar: profits earned in other currencies will convert to fewer dollars as the dollar strengthens. I have covered this dynamic for many years.
 
This means corporate profits earned overseas will decline as soon as the effects of the stronger dollar filter through to profit statements–that is, by next quarter. Given that up to 50% of global corporate profits are earned overseas, this is not a trivial dynamic.
 
The fact that the global economy is stumbling into recession is also ignored by those who see corporate profits rising forever. With roughly half of profits of global companies coming from overseas markets, how can a global recession not impact U.S. corporate profits?
 
If the stock market is indeed a discounting mechanism that prices in developments six months’ out, then the hit to profits from the stronger dollar and flagging overseas sales should impact stock prices today, not in three months.
 
The most interesting case for the top being in is diminishing returns:
Total credit and GDP: rapidly increasing credit has a diminishing return as measured by GDP growth.
 
The Fed’s balance sheet and the S&P 500:
 
 
Money velocity: diminishing returns:
 
 
Small biz: fading at the margins:
 
 
Federal student loans: soaring costs, diminishing returns on the degrees being bought:
 
 
The return on a college degree? Diminishing faster than you can say “default”:
 
 
Labor participation and real median income: diminishing returns on all the outlandish money pumping and Federal deficit spending:
 
 
The “easy fixes”–unleashing a tsunami of cheap credit, dropping interest rates to near-zero–only work when creditworthy borrowers have productive uses for the new credit. If the cheap credit is used by marginal borrowers for speculation, the returns on those fixes are highly vulnerable to collapse once asset bubbles and risk-on carry trades pop.
 
Extending credit to marginal borrowers does not magically transform the borrowers’ creditworthiness. All monetary easing and other stimulus does is expand the risk of a credit collapse by expanding the debt extended to risky borrowers. Marginal borrowers will still default as soon as making debt payments becomes painful/impossible; if you want evidence for this, consider how many subprime borrowers defaulted after getting lower rates on their mortgages.
 
Lowering interest rates does not magically make marginal borrowers creditworthy, or magically make speculative bets productive. In these two important ways, the “fixes” cannot fix what’s broken. What they have done is enable more of what has failed spectacularly: extend credit and leverage to speculators who have ramped risk-on assets to the moon because cheap credit and low interest rates have enabled lucrative leveraged betting.
 
The fantasy was that all this cheap credit would magically flow into productive expansion of the real economy; instead, it fueled carry trades and an expansion of incredibly risky credit to subprime borrowers buying vehicles, homes with 3% down payment, etc.
 
The “recovery” constructed on this expansion of risk has built-in limits: once speculative trades reverse or blow up, the process reverses, and assets must be liquidated to escape the tightening noose of leverage. Once all the marginal borrowers have purchased vehicles, taken on student loans and bought houses and stocks on speculation, the pool of greater fools dries up and the deleveraging of assets purchased on margin/credit unleashes a feedback loop: selling begets more selling.
 
Those who believe the stock market can continue rising despite the end of the Fed’s “free money for financiers” programs are implicitly claiming that the pool of greater fools is still filled to the brim. Simply put, speculating with leveraged free money and extending credit to marginal borrowers is not sustainable or productive, and the stock market seems poised to reflect three dynamics:
 
1. reversion to the mean and the unwinding of extremes

 

2. the decline in corporate profits resulting from a stronger U.S. dollar
 

3. the pool of greater fools willing and able to buy assets at higher prices with leveraged free money has been drained by six years of credit/risk expansion.




via Zero Hedge http://ift.tt/1uz08Yn Tyler Durden

The Decline of Cults and the Rise of Subcultures

Should we be worried about the
decline of cults in American life? In
The New York
Times
, Ross Douthat
notes
that both the media and the public have moved on,
and now 
the cult phenomenon feels increasingly
antique, like lava lamps and bell bottoms.
 But
the loss of cult fervor has come at a cost, he
suggests: 
The decline of cults, while good news
for anxious parents of potential devotees, might actually be a
worrying sign for Western culture, an indicator not only of
religious stagnation but of declining creativity writ
large.

It’s a provocative case, drawing from essays by Philip Jenkin
and Peter Thiel. Jenkins is focused on cults as a religious
indicator: “A wild fringe, he suggests, is often a sign of a
healthy, vital center, and a religious culture that lacks for
charismatic weirdos may lack ‘a solid core of spiritual activism
and inquiry’ as well.” Thiel, not surprisingly, is more focused on
productivity and invention: “Not only religious vitality but the
entirety of human innovation, he argues, depends on the belief that
there are major secrets left to be uncovered, insights that
existing institutions have failed to unlock (or perhaps forgotten),
better ways of living that a small group might successfully
embrace.”

There’s something to this, I think, but it also understates the
ways in which semi-cult-like behavior has come to infuse daily life
and mainstream culture: Yes, there are probably fewer cults in the
aliens-and-messiahs sense, but there are more subcultures, in a
wider variety, than ever before, more regimented lifestyle trends
and minority beliefs about how to improve personal productivity or
fitness, about how to become a better person and live a purer, more
interesting, more connected and compelling life.

Some of these subcultures remain distinctly fringe
(dumpster-diving freegans, gently
quirky
bronies
, furry fans), while
others are embraced, to varying degrees, by the mainstream: At its
height, Occupy Wall Street was as much an alternative lifestyle and
belief community as a political movement. What is Crossfit if not a
ritualized system that offers its highly dedicated, tightly-knit
cells of followers a better and more meaningful existence? None of
these are cults in the specific sense that Douthat describes, with
gated compounds and secret songs, but they are all experiments in
behavior, taste, and belief intended to help adherents find meaning
and connection in their lives.

So while we don’t, and generally shouldn’t, think of these sorts
of affinity groups and social movements and lifestyle choices as
cults, they can and do play a similar role in culture, allowing for
small-scale experiments in quasi-radicalism.

But the profusion of subcultures, and the way they have emerged
as everyday parts of so many lives, makes it easy to forget that
they have taken on this role. Part of the reason we don’t think of
subcultures like cults is because even though some of them still
have what might be described as mythologies, they lack the same
sort of mystical allure and apocalyptic tendencies.

But another part of the reason is that over the past two
decades, participation in niche culture has become ordinary and
even mainstream. Almost everyone—from Burning
Man-attendees to the steampunk hackers to the
scrapbooking-convention obsessives to the home brewing aficionados
and the toe-shoe-wearing obstacle-race junkies, many of whom also
maintain lives as lawyers and engineers and elementary school
administrators—is part of some subculture now, and it’s not
questioned or noticed because it’s not unusual.

Indeed, whether they know it or not, most people take part
in
multiple subcultures, or portions of them,
mixing and matching and discarding parts and pieces as they please.
The Internet, which, with its fragmented and unlimited information
flows, has hastened the transformation of all of culture into
subculture, has helped make this possible, by making niche
interests and identities both accessible and malleable to the
masses.

Which is probably another reason we take less notice of
subcultures than of cults: Many have communal aspects, but they are
individualized and custom-tailored, and while many have founders
who design and sometimes help maintain the systems, they lack the
sort of domineering cult-leader figures of decades past.
Subcultures now are atomized and personalized, crossbred and
constantly evolving.

Worries about the decline of cults are in some sense a form of
nostalgia for an older order, with more clearly delineated lines
between the mainstream and the fringe, with radicalism easy to
recognize and define and, if necessary, shun. That those days are
largely over (at least in the U.S.) isn’t a sign that our culture
has lost its capacity for lifestyle creativity, its desire for
secret knowledge and methods. It’s a sign that the creativity is
happening elsewhere now, in the blur between the boundaries, in the
scrambling of the systems, in the subculture collage.

from Hit & Run http://ift.tt/1rB1azl
via IFTTT

Poll: Majority of Troops Oppose 'Troops on the Ground' in ISIS War

You know who really doesn’t want troops
on the ground in America’s new war? Troops.

The Military Times yesterday
released a poll
of about 2,200 active-duty troops, just over 70
percent of whom don’t want the Obama administration to put American
soldiers in Iraq to fight the Islamic State (a.k.a. ISIS). Syria
wasn’t included, since the survey was conducted before military
action began there.

The Times suggests:

Opponents of an expanded mission fall into two camps. Some
troops think the U.S. should simply stay out of the conflagration
engulfing the Middle East. But others take a more nuanced view.

One Air Force lieutenant colonel said he supports taking the
fight to the Islamic State militants, even if that involves a large
number of U.S. combat troops. But he worries that the country’s
leadership will not completely see the mission through.

“If we do it halfheartedly, we shouldn’t do it at all,” he said,
adding that America should expand its military mission in Iraq
“only if we’re committed to complete victory.”

“I’m not hearing that now,” he said. “There’s political fear of
blowback for making such a declaration. War, as ugly as it is,
should be done in a very overwhelming and clear fashion.”

Wariness and weariness about war in the sandbox doesn’t seem to
be partisan. The survey also highlights the fact that “over the
past four years of the annual poll, the percentage of active-duty
troops who believe the first U.S. war in Iraq was a success has
declined significantly.” The number of those who believe it was
successful have more than halved to 25.5 percent. Meanwhile,
soldiers who say it “wasn’t successful at all” have more than
doubled to 31.2 percent. Another 28 percent say it “wasn’t very
successful.”

Although President Barack Obama has
assured
he “will not involve American combat troops fighting on
foreign soil,” he’s also
pumped up
his war rhetoric to Bush levels, saying that there’s
no room to “negotiate with this brand of evil.” That leaves few
options on how to deal with them.

Retired Gen. David Petraeus
stated
last week that troops would be necessary. He said they
could be Iraqi troops, but acknowledged it would take “months and
years” for them to “deal with” ISIS. Joint Chiefs of Staff Chairman
Gen. Martin Dempsey has
hinted
that American troops might be the only thing that’ll do
the trick. One veteran of the last Iraq war writes in
Politico that “boots on the ground” rhetoric is
deliberately fuzzy, but for all intents and purposes they’re

already there
.

It’s little wonder why, in spite of Obama’s promises, the
majority of America’s civilian population suspect
this will become a ground war. 

from Hit & Run http://ift.tt/1vtICnm
via IFTTT

Poll: Majority of Troops Oppose ‘Troops on the Ground’ in ISIS War

You know who really doesn’t want troops
on the ground in America’s new war? Troops.

The Military Times yesterday
released a poll
of about 2,200 active-duty troops, just over 70
percent of whom don’t want the Obama administration to put American
soldiers in Iraq to fight the Islamic State (a.k.a. ISIS). Syria
wasn’t included, since the survey was conducted before military
action began there.

The Times suggests:

Opponents of an expanded mission fall into two camps. Some
troops think the U.S. should simply stay out of the conflagration
engulfing the Middle East. But others take a more nuanced view.

One Air Force lieutenant colonel said he supports taking the
fight to the Islamic State militants, even if that involves a large
number of U.S. combat troops. But he worries that the country’s
leadership will not completely see the mission through.

“If we do it halfheartedly, we shouldn’t do it at all,” he said,
adding that America should expand its military mission in Iraq
“only if we’re committed to complete victory.”

“I’m not hearing that now,” he said. “There’s political fear of
blowback for making such a declaration. War, as ugly as it is,
should be done in a very overwhelming and clear fashion.”

Wariness and weariness about war in the sandbox doesn’t seem to
be partisan. The survey also highlights the fact that “over the
past four years of the annual poll, the percentage of active-duty
troops who believe the first U.S. war in Iraq was a success has
declined significantly.” The number of those who believe it was
successful have more than halved to 25.5 percent. Meanwhile,
soldiers who say it “wasn’t successful at all” have more than
doubled to 31.2 percent. Another 28 percent say it “wasn’t very
successful.”

Although President Barack Obama has
assured
he “will not involve American combat troops fighting on
foreign soil,” he’s also
pumped up
his war rhetoric to Bush levels, saying that there’s
no room to “negotiate with this brand of evil.” That leaves few
options on how to deal with them.

Retired Gen. David Petraeus
stated
last week that troops would be necessary. He said they
could be Iraqi troops, but acknowledged it would take “months and
years” for them to “deal with” ISIS. Joint Chiefs of Staff Chairman
Gen. Martin Dempsey has
hinted
that American troops might be the only thing that’ll do
the trick. One veteran of the last Iraq war writes in
Politico that “boots on the ground” rhetoric is
deliberately fuzzy, but for all intents and purposes they’re

already there
.

It’s little wonder why, in spite of Obama’s promises, the
majority of America’s civilian population suspect
this will become a ground war. 

from Hit & Run http://ift.tt/1vtICnm
via IFTTT

Hong Kong Protesters Give Wednesday Deadline For Reform As Chinese Army Watches From Above

The crowds of protesters in Hong Kong swelled overnight with some estimates that 3-400,000 “will join in a show of people’s power,” on the eve of the two-day National Day holiday. With neither side showing any signs of backing down, protestors remain calm and police keeping their distance – though monitoring from on high – as the Occupy Central group said it will announce plans for its next stage of civil disobedience on Wednesday if Hong Kong Chief Executive Leung Chun-ying does not meet their demands for democratic reform, including true universal elections by October 1 and Leung’s resignation. Leung has called for Occupy Central leaders to “fulfill the promise they made to society” and immediately stop the protests, which he said have gotten “out of control,” adding that, for now, they could keep control without the help of the People’s Liberation Army (PLA). The protest meme remains one heard around the world – in addition to their concerns about democracy and out of control local government, Hong Kong’s younger generation are worried about low-paying jobs.

 

As Bloomberg reports,

Pro-democracy protests swelled in Hong Kong on the eve of a two-day holiday that may bring record numbers to rallies spreading throughout the city as organizers pressed demands for free elections.

 

With the workday ended and temperatures dropping, thousands of people were returning to the three main demonstration points, blocking some of the city’s roadways. Hong Kong marks China’s National Day tomorrow, the 65th anniversary of the founding of the People’s Republic of China and Chung Yeung Festival on Thursday, when Hong Kong people honor their ancestors.

 

 

“It’s quite possible that at least more than 100,000, if not up to 300,000, 400,000 people, will join in the protest in a show of people’s power,” Willy Lam, adjunct professor at Chinese University of Hong Kong, said in an interview today. “They want to convince the Hong Kong government and Beijing that any use of force will be counter-productive. It will only galvanize more of the rest of Hong Kong’s 7 million people.”

And as VOA adds,

Neither side is showing any signs of backing down even as China prepares to mark its National Day on Wednesday.

 

In a short statement, the Occupy Central group said it will announce plans for its next stage of civil disobedience on Wednesday if Hong Kong Chief Executive Leung Chun-ying does not meet their demands for democratic reform, including true universal elections by October 1 and Leung’s resignation.

 

 

Leung said he would not give into the protesters’ demand for his resignation or for greater democratic reforms.

 

In a speech Tuesday, Leung called for Occupy Central leaders to “fulfill the promise they made to society” and immediately stop the protests, which he said have gotten “out of control.”

 

Leung said the central government decision on Hong Kong on August 31 shows that it will not comply to illegal threats made by certain people.

 

 

He also said on Tuesday Hong Kong police would be able to maintain security without help from People’s Liberation Army (PLA) troops from the mainland.

 

 

Hong Kong police have withdrawn now for more than a day and protesters are continuing their efforts to prepare for a longer, more drawn out confrontation.

But, as SCMP reports, Beijing may be keeping quiet about the Occupy Central protests, but the army appears to be keeping a keen eye on what’s going on.

This picture taken by an SCMP photographer today shows a man in the People’s Liberation Army using binoculars to survey the protest site in Admiralty.

 

 

A row of tripods can be seen in the windows, suggesting the occupiers have been under the watchful eye of China for some time.

 

Some protesters have voiced concern that authorities may return again in force later Tuesday in a bid to clear the streets before the Chinese holiday, when even more protesters are expected to join the rally.

 

 

The red star on Chinese military headquarters in Admiralty is flashing bright tonight. The star was included in renovations to the building months ago, and it was unveiled in January.

 

 

While it was unclear when it had been switched on since then, the last time the People’s Liberation Army’s HQ decided to stage a light show on the harbour (in June), it generated controversy and set tongues wagging on whether Beijing was emphasising its sovereignty over Hong Kong.

It’s a protest meme we have seen and heard around the world…

Of those who support Occupy Central, 47 percent were under the age of 24.

 

In addition to their concerns about democracy, Hong Kong’s younger generation are worried about low-paying jobs and increasing competition from mainland Chinese coming to the financial hub to work.

 

Hong Kong University of Science and Technology professor David Zweig said the controversy surrounding the 2017 elections and concerns that Leung is taking the port city down the wrong path are not the only issues driving the protests.

 

“I think the other issue is that there is a lot of anger. If you look at the data in general in Hong Kong, January this year, the anger at the central government, the anger at the local government, the concerns about future job prospects and all that and anxiety in general, this is worst than anytime since the major marches of 2003,” Zweig said.

“I think if we want something, sacrifices cannot be avoided. No pain, no gain, right? When I see the young people’s passion, I support them from deep within my heart. I hope there won’t be any bloodshed,” said Fung.




via Zero Hedge http://ift.tt/YHv4rL Tyler Durden

Stock-Bond Disconnect Deja Vu; Silver & Crude Crushed Into Europe's Close

Well it wouldn’t be the US trading session if bonds and stocks didn’t decouple from one another’s reality…

 

 

But what happens when Europe closes?

 

But Russell is still red…

 

Silver and Crude getting flushed into EU Close…




via Zero Hedge http://ift.tt/YHv4rI Tyler Durden

Stock-Bond Disconnect Deja Vu; Silver & Crude Crushed Into Europe’s Close

Well it wouldn’t be the US trading session if bonds and stocks didn’t decouple from one another’s reality…

 

 

But what happens when Europe closes?

 

But Russell is still red…

 

Silver and Crude getting flushed into EU Close…




via Zero Hedge http://ift.tt/YHv4rI Tyler Durden

Eurostat Fabricates European Inflation Data, Apologizes

When it comes to openly fabricating data, 2014 was bad for goalseeked data quality control: first it was the ISM’s infamous climategate, where for some reason everyone in the organization missed that the June press release contained a wrong seasonal adjustment factor (why one seasonally adjusts a survey is still clear to nobody), and then even more comically, after releasing absolutely terrible jobs data in August, Canada laughably revised it to far above the highest estimate, in the process confirming that both ISM and Canadian jobs data is absolute rubbish and is made up on the fly to satisfy ministry of truth mandates.

Now we can add European inflation data, because apparently this morning’s Eurostat release, which showed the lowest headline inflation since 2009 and the lowest core inflation ever was not precleared by Europe ex-Goldmanite money printer, Mario Draghi, and as a result this

became this…

 

But at least Eurostat was kind enough to apologize that it had released made up data (on both accounts).

That’s ok: we forgive you dear Eurocrats for making it clear that European inflation data is merely the latest data point that has absolutely zero credibility and is merely goalseeked to “validate” and fast-track the ECB’s money printing which has long since been decided.

Source: Eurostat, for those who wish to forgive Eurostat personally, may do so here.




via Zero Hedge http://ift.tt/1vtBgAa Tyler Durden

Hong Kong Student Begs for International Support

What the international community can do about the plight of
pro-democracy demonstrators in Hong Kong is an open question. China
is a sovereign country and even Hong Kong’s special and relatively
free status within the authoritarian state doesn’t fully shield its
people from the wrath of the authorities or invite outside
intervention. If the Chinese government insists on holding bogus
elections in the region, then it’s up to locals to give them good
reason to change their minds (Anthony Fisher
described the players
in the protests last week). But it’s
difficult to avoid being moved by this Hong Kong student’s
description of protests and the police response, and her plea for
support.

from Hit & Run http://ift.tt/1rqymfA
via IFTTT