Victoria’s Secret Staff Think The Chinese Are Spying On Them

Stories about the shambolic Victoria’s Secret fashion show – which is slated to take place Tuesday Nov. 28 in Shanghai – just keep getting weirder.
Chinese bureaucrats have so far refused to cooperate with the show’s producers and planners, denying visas to Gigi Hadid, one of the show’s highest-profile models, and Katy Perry, the US pop superstar who was slated to be the musical guest.
The Communist Party has also inexplicably refused to issue press passes and visas to members of the western media who were supposed to travel to China to cover the event.
Already, we imagine the marketing brass at L Brands have learned their lesson, and that this will be both the first, and the last, VS fashion show held in China.
But as if all this weren’t enough, the New York Post is now reporting that the show’s organizers believe the Chinese government is spying on them. Which, of course, is probably true, given Chinese authorities’ well-known penchant for monitoring foreigners.

This post was published at Zero Hedge on Nov 19, 2017.

Want Widespread Prosperity? Radically Lower Costs

As long as this is business as usual, it’s impossible to slash costs and boost widespread prosperity.
It’s easy to go down the wormhole of complexity when it comes to figuring out why our economy is stagnating for the bottom 80% of households. But it’s actually not that complicated: the primary driver of stagnation, decline of small business start-ups, etc. is costs are skyrocketing to the point of unaffordability.
As I have pointed out many times, history is unambiguous regarding the economic foundations of widespread prosperity: the core ingredients are:
1. Low inflation, a.k.a. stable, sound money
2. Social mobility (a meritocracy that enables achievers and entrepreneurs to climb out of impoverished beginnings)
3. Relatively free trade in products, currencies, ideas and innovations
4. A state (government) that competently manages tax collection, maintains roadways and harbors, secures borders and trade routes, etc.
Simply put, When costs are cheap and trade is abundant, prosperity is widely distributed. Once costs rise, trade declines and living standards stagnate. Poverty and unrest rise.
These foundations characterize stable economies with widely distributed prosperity across time and geography, from China’s Tang Dynasty to the Roman Republic to the Byzantine Empire to 19th century Great Britain.

This post was published at Charles Hugh Smith on NOVEMBER 19, 2017.

How A Half-Educated Tech Elite Delivered Us Into This Chaos

If our supersmart tech leaders knew a bit more about history or philosophy we wouldn’t be in the mess we’re in now…
One of the biggest puzzles about our current predicament with fake news and the weaponisation of social media is why the folks who built this technology are so taken aback by what has happened. Exhibit A is the founder of Facebook, Mark Zuckerberg, whose political education I recently chronicled. But he’s not alone. In fact I’d say he is quite representative of many of the biggest movers and shakers in the tech world. We have a burgeoning genre of ‘OMG, what have we done?’ angst coming from former Facebook and Google employees who have begun to realise that the cool stuff they worked on might have had, well, antisocial consequences.
Put simply, what Google and Facebook have built is a pair of amazingly sophisticated, computer-driven engines for extracting users’ personal information and data trails, refining them for sale to advertisers in high-speed data-trading auctions that are entirely unregulated and opaque to everyone except the companies themselves.
The purpose of this infrastructure was to enable companies to target people with carefully customised commercial messages and, as far as we know, they are pretty good at that. (Though some advertisers are beginning to wonder if these systems are quite as good as Google and Facebook claim.) And in doing this, Zuckerberg, Google co-founders Larry Page and Sergey Brin and co wrote themselves licences to print money and build insanely profitable companies.
It never seems to have occurred to them that their advertising engines could also be used to deliver precisely targeted ideological and political messages to voters.

This post was published at Zero Hedge on Nov 19, 2017.

“Worst Case Scenario” Looms As Merkel’s “Jamaica Coalition” Collapses; EUR Sinks

We warned on Friday that German Chancellor Angela Merkel faced a ‘night of the long knives’ in her efforts to bring together the co-called ‘Jamaica’ coalition of four parties and after a desperate weekend of talks, Bloomberg reports Merkel’s efforts at forming a coalition have failed meaning a second election looms and sending the euro sliding.
As Bloomberg reports, talks on forming German Chancellor Angela Merkel’s next government collapsed, throwing the future of Europe’s longest-serving leader into doubt and potentially pointing the world’s fourth-biggest economy toward new elections.
After a 12-hour negotiating session that ended shortly before midnight Sunday, the Free Democratic Party walked out of the exploratory talks, saying the differences with the Green party were too great to bridge.
Merkel has sought for four weeks to enlist the two smaller parties for her fourth-term coalition.

This post was published at Zero Hedge on Nov 19, 2017.

Multifamily Starts Rise 37.4% In October, Largest Increase In 2017 (West Declines 3.70% As Lonzo Ball Forgets How To Shoot)

Housing starts rose 13.7% MoM in October to 1,290K units SAAR (or 1.29 million). However, the largest share of housing starts were in the 5+ unit (multifamily) category. Multifamily units grew at a rate of 37.4% MoM.
October was the highest growth in 5+ unit starts in 2017.

This post was published at Wall Street Examiner on November 17, 2017.

Technical Scoop – Weekend Update Nov 19

Weekly Update
‘Bubble, bubbles everywhere, and not a drop to drink…yet’
– Willy Wonka, Willy Wonka & the Chocolate Factory, 1971

‘Money…. Money, Money makes the world go around’
– Liza Minnelli, Joel Grey, Cabaret, 1972

‘There is too much money in the world’
– Lawrence Luhring, New York art dealer, on sale at auction of Leonardo da Vinci’s ‘Salvator Mundi’
Yikes! $450.3 million for Leonardo da Vinci’s ‘Salvator Mundi’ sold on Wednesday night at Christie’s auction, shattering the high for any work of art sold at auction. It far surpassed Picasso’s ‘Women of Algiers’ which fetched $179.4 million at Christie’s in May 2015. It also far surpassed the $127.5 million that Russian billionaire oligarch Dmitry E. Rybolovlev paid for it in 2013. In 1958, the painting sold for 45 because it was believed this was not an authentic da Vinci but merely one done by one of his students. In 2005, an art dealer purchased it for $10,000. There have been numerous questions surrounding its authenticity and the fact that it had at times been restored. The painting dates from around 1500 and is believed to have been commissioned for King Louis XII of France. The current buyer is unknown.
Bubbles, bubbles everywhere. There are bubbles in the stock market, the bond market, the corporate bond market, auto loans, student loans, real estate, government debt, art and collectibles, and yes, Bitcoin! But it also begs the question – why isn’t there a bubble in commodities and especially gold?

This post was published at GoldSeek on 19 November 2017.

Before You Book That Vacation, JPM Warns Multiple Spoilers Are Converging In November

One week ago, Jan Loeys – the person who wrote “The JPMorgan View” for 15 years – announced his exit, as he transitioned from tactical asset allocation to longer-term strategy, and that he would be handing over the authorship to John Normand, and soon Nikos Panigirtzoglou and Marko Kolanovic, but not before summarizing what he has learned in 30 years of investing in a must-read bulletin which he published last week.
In any case, this weekend it was Normand’s turn to regale JPM’s countless retail and institutional clients with a preview of the upcoming key “spoilers” which according to Normand boil down to 3: a reality check on US tax reform, weaker-than-expected China data, and a Russian rethink on extending oil cuts. Not surprisingly, JPM focuses on the first issue, because as Norman writes, “tax overhaul seems the most complicated market driver given its fluid composition and tortuous legislative process.”
By contrast, China’s slowdown looks familiar and was already part of our economists’ baseline; hence, our neutral recommendation on base metals ex aluminum. The November 30th oil producers’ summit is not a drop-dead date for extending their year-old agreement, but we took profits anyway on a long Brent trade last week because oil’s geopolitical premium looked excessive.
For those curious what the largest US bank thinks will be dominant events over the balance of the month, here it is straight from the horse’s mouth.

This post was published at Zero Hedge on Nov 19, 2017.

A Fiscal Disappointment – Of Tax Reform & Growth Fairies

I encourage you to take a few minutes to review my previous analysis of the effectiveness of tax cuts on the economy.
Bull Trap – The False Promise Of Tax Cuts 3-Myths About Tax Cuts It’s The Debt, Stupid The Committee For A Responsible Budget penned after the passage of the tax bill:
‘The House approved debt-financed tax cuts based on predictions of magical economic growth that defy history and all credible analyses.
Tax reform should grow the economy and not add to the debt. Unfortunately, lawmakers are assuming faster economic growth will pay for that debt increase when there is no evidence it will cover more than a fraction of the tax bill’s costs.
The last time Congress added 10-figures worth of tax cuts to the debt in 2001, it blew a hole in the budget and helped erase our surpluses – despite claims that economic growth would cover the cost.
The growth fairy did not appear then, and it would be unwise to assume she will this time around.

This post was published at Zero Hedge on Nov 19, 2017.

The Corporate Earnings Fiction in Q3

The Biggest Sinners in the Dow.
All 30 companies in the Dow Jones Industrial Average have now reported earnings for the third quarter. As required, they reported these earnings under Generally Accepted Accounting Principles (GAAP). These standardized accounting rules are supposed to allow investors to compare the results of different companies. But that’s too harsh a fate for many of our corporate heroes, and so they proffer their own and much more pleasing accounting strategies – as expressed in ‘adjusted’ earnings and ‘adjusted’ earnings per share (EPS).
Of the 30 companies in the DJIA, 14 reported ‘adjusted’ or ‘non-GAAP’ earnings in Q3 that were significantly higher than their GAAP earnings. Total ‘adjusted’ EPS of these 14 Dow components exceeded their total EPS under GAAP by 26%! Nice work!
‘Adjusted’ earnings are the great American fiction conceived to serve the great American passion: inflating share prices by hook or crook.
The biggest sinner: Merck & Co. miraculously turned its loss of -$0.02 per share under GAAP into an ‘adjusted’ profit of $1.11 a share. This is not a ‘one-time’ event either. Merck keeps showing up in the ignominious top five Dow earnings adjusters time after time. Among the repeat offenders in the top five are also Pfizer, Coca-Cola, and GE.

This post was published at Wolf Street on Nov 19, 2017.

Business Cycles and Inflation, Part II

Early Warning Signals in a Fragile System
[ed note: here is Part 1; if you have missed it, best go there and start reading from the beginning] We recently received the following charts via email with a query whether they should worry stock market investors. They show two short term interest rates, namely the 2-year t-note yield and 3 month t-bill discount rate. Evidently the moves in short term rates over the past ~18 – 24 months were quite large, even if their absolute levels remain historically low.
The first thing that comes to mind in connection with asset prices is that the cost of carry for leveraged positions is rising. Eventually this will have an effect on such positions, particularly in fixed-income instruments, which inter alia include structured products such as CLOs (collateralized loan obligations). Some market participants reportedly employ leverage of up to 1:10 in these in order to boost returns, which the banks are apparently happy to provide, as the risk is deemed to be low.
As we have discussed previously, CLOs are conceptually not different from the CMOs that created such heavy conniptions in 2007-2009, but CLOs ultimately turned out to be quite resilient at the time. The problem is of course that it is definitely not a given that they will be similarly resilient in the next crisis. Banks no longer have large proprietary books of corporate bonds, but by providing margin loans to investors who buy them on leverage, they remain exposed – and the degree of leverage is reminiscent of the margin requirements of Wall Street bucket-shops in the 1920s.
Obviously these enhanced returns are highly dependent on borrowing costs, so rising short term rates are bound to become a problem at some point. As a more general remark: the central bank policy of suppressing rates to zero or close to zero provided the incentive for investors to take up enormous leverage, which is seen as the only way of obtaining half-way decent yields. In other words, central bank manipulation of interest rates has definitely made the financial system a lot more fragile.

This post was published at Acting-Man on November 17, 2017.

Mnuchin On Bond-Villain Comparison: “I Guess I Should Take That As A Compliment”

Treasury Secretary and noted Hollywood producer Steven Mnuchin provoked criticisms from his political opponents after photos surfaced last week of Mnuchin and his wife Louise Linton posing with a sheet of newly printed dollar bills bearing Mnuchin’s signature.
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Asked by Fox News Sunday host Chris Wallace what it was like being compared with a bond villain after the photos went viral, Mnuchin said he took it as a compliment.
‘I heard that. I never thought I’d be quoted as looking like a villain from the James Bond [movies]. I guess I should take that as a compliment that I look like a villain in a great, successful James Bond movie,’ Mnuchin said.
‘I was very excited about having my signature on the money and it’s something I’m very proud of being the secretary and helping the American people.’

This post was published at Zero Hedge on Nov 19, 2017.

How to Face the Housing Crisis in Expensive Cities

The lowest hanging fruit of them all: Airbnb and its ilk. By John E. McNellis, Principal at McNellis Partners, for The Registry: There are problems and then there are ‘high-class’ problems. Being unemployed is a problem. Getting hit with a huge tax bill is a high-class problem. Not qualifying for food stamps is a problem while discovering your favorite bistro is fully booked is a high-class problem. Being chased by debt collectors is qualitatively different than being hounded by paparazzi. You get the picture.
Perhaps explaining why we hear so much about it, our housing crisis is another high-class problem. There is no housing crisis in the bottom 20% of our zip codes. According to the Economic Innovation Group, a business-backed DC think tank, the vacancy rate in distressed America is 14.4%, a rate guaranteed to floor rents and prices. The elite zip codes – the top 20% – have a vacancy rate a bit under 5% and no doubt approaching effective zero in the white-hot coastal zip codes.
And elite neighborhoods have – you guessed it – high class problems. One is Airbnb.
In order to continue its phenomenal growth, Airbnb has been forced to shed its sheep’s clothing and admit its essence. With the recent announcement of a joint venture with Newgard Development Company, a Florida builder, the company has all but proclaimed that it’s nothing more than a hotel operator. A poorly-regulated hotel operator, as much about grandma renting out her sewing room as Uber is about helping drivers earn pocket money. Hand-in-hand with Airbnb, Newgard intends to build a couple thousand apartments where tenants can Air-out their units 180 days a year and split the profits three ways.

This post was published at Wolf Street on Nov 19, 2017.

Doug Noland: Not Clear What That Means”

This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
November 15 – Bloomberg (Nishant Kumar and Suzy Waite): ‘Hedge-fund manager David Einhorn said the problems that caused the global financial crisis a decade ago still haven’t been resolved. ‘Have we learned our lesson? It depends what the lesson was…’ Einhorn said he identified several issues at the time of the crisis, including the fact that institutions that could have gone under were deemed too big to fail. The scarcity of major credit-rating agencies was and remains a factor, Einhorn said, while problems in the derivatives market ‘could have been dealt with differently.’ And in the ‘so-called structured-credit market, risk was transferred, but not really being transferred, and not properly valued.’ ‘If you took all of the obvious problems from the financial crisis, we kind of solved none of them,’ Einhorn said… Instead, the world ‘went the bailout route.’ ‘We sweep as much under the rug as we can and move on as quickly as we can,’ he said.’
October 12 – ANSA: ‘European Central Bank President Mario Draghi defended quantitative easing at a conference with former Fed chief Ben Bernanke, saying the policy had helped create seven million jobs in four years. Bernanke chided the idea that QE distorted the markets, saying ‘It’s not clear what that means’.’
Once you provide a benefit it’s just very difficult to take it way. This sure seems to have become a bigger and more complex issue than it had been in the past. Taking away benefits is certainly front and center in contentious Washington with tax and healthcare reform. It is fundamental to the dilemma confronting central bankers these days.

This post was published at Wall Street Examiner on November 18, 2017.

Russia-Gate Spreads To Europe

Ever since the U. S. government dangled $160 million last December to combat Russian propaganda and disinformation, obscure academics and eager think tanks have been lining up for a shot at the loot, an unseemly rush to profit that is spreading the Russia-gate hysteria beyond the United States to Europe…
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Now, it seems that every development, which is unwelcomed by the Establishment – from Brexit to the Catalonia independence referendum – gets blamed on Russia! Russia! Russia!
The methodology of these ‘studies’ is to find some Twitter accounts or Facebook pages somehow ‘linked’ to Russia (although it’s never exactly clear how that is determined) and complain about the ‘Russian-linked’ comments on political developments in the West. The assumption is that the gullible people of the United States, United Kingdom and Catalonia were either waiting for some secret Kremlin guidance to decide how to vote or were easily duped.

This post was published at Zero Hedge on Nov 18, 2017.