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  • After 16 Months Without a 5% Market Pullback, Goldman’s Clients Want To Know Just One Thing

    It’s confusing to be a Goldman client these days.
    One month after the investment bank reported that its Bear Market Risk indicator had jumped to 67%, a level it hit most recently before the dot com bubble crash and just before the global financial crisis and prompted Goldman to ask “should we be worried now”…

    This post was published at Zero Hedge on Oct 22, 2017.


  • Bank Of Japan Is Buying Bonds From Scandal-Hit Kobe Steel

    Last week, the simmering scandal involving Japan’s third largest steel producer exploded, when following reports that Kobe Steel had falsified data about the quality of its steel, aluminum, copper, iron powder and other products it sold to customers across virtually every single industry, Japan’s Nikkei also reported that some Kobe Steel plants in Japan had been falsifying product quality data for decades, well beyond the roughly 10-year time frame given by the lying steelmaker. Worse, not only did the company, having already been caught, lie to shareholders and rule-abiding employees how long this illegal behavior had been going on, but – in a glaring example of corporate idiocy – had effectively enshrined and codified its fraudulent ways, as the cheating procedures eventually became institutionalized in what was a fraud manual, allowing the practice to continue as managers came and went.
    As all this was taking place, not only did the stock price of Kobe Steel plunge, but its bonds tumbled sending its default probability sharply higher.

    This post was published at Zero Hedge on Oct 22, 2017.


  • For The First Time In 26 Years, US To Put Nuclear Bombers On 24 Hour Alert

    The unexpected decision by President Trump to amend an emergency Sept 11 order signed by George W Bush, allowing the Air Force to recall up to 1,000 retired air force pilots to address what the Pentagon has decribed as “an acute shortage of pilots” caught us by surprise. After all, this was the first time we have heard of this particular labor shortage – perhaps there was more to this executive order than meets the eye. Indeed, a just released report may help explain the reasoning behind this presidential decision.
    According to Defense One, the US Air Force is preparing to put nuclear-armed bombers back on 24-hour ready alert, a status not seen since the Cold War ended in 1991.
    That means the long-dormant concrete pads at the ends of Barksdale Air Force Base’s 11,000-foot runway – dubbed the ‘Christmas tree’ for their angular markings – could once again find several B-52s parked on them, laden with nuclear weapons and set to take off at a moment’s notice.

    This post was published at Zero Hedge on Oct 22, 2017.


  • 22/10/17: Italian North: another chip off Europe’s Nirvana

    Having just written about the Czech electoral pivot toward populism last night, today brings yet another news headline from the politically-hit Europe.
    In a non-binding referendums in two wealthiest Italian regions, Veneto and Lombardia, the voters have given local governments strong mandates to push for greater autonomy from Rome and the Federal Government. Both regions are dominated by the politics of Lega Nord, a conservative, autonomy-minded party with legacy of euro scepticism, strong anti-immigration sentiment and the past promotion of outright independence for the Northern Italy.
    In both referendums, turnout was relatively strong by Italian standards (58% projected for Veneto and over 40% for Lombardia). And in both, exit polls suggest that some 95% of voters have opted for stronger regional autonomy.
    The referendums were not about outright independence, but about wrestling more controls over fiscal and financial resources from Rome. Both regions are net contributors to the Italian State and are full of long run resentment over the alleged waste of these resources. Both regions want more money to stay local.

    This post was published at True Economics on October 23, 2017.


  • US Treasury Rates Hit Nine-Year Highs

    But the yield spread collapses to lowest since early in the Financial Crisis. Even the Fed is worried.
    Prices of US government bonds fell across the board on Friday, and their yields rose and set a number of nine-year highs, in some cases nine years to the day.
    Many people have pointed at the Senate where the prospects of the tax cut are said to have ‘brightened’ when the Senate approved a budget resolution. The tax cuts, if they make it, are said to lower government revenues by $1.5 trillion over 10 years. So maybe the bond market is starting to pay attention to government deficits and the national debt once again. But the bond market hasn’t paid attention in many, many years, and until the proof is in, I doubt it.
    There are, however, other factors that predate Friday by many months. In fact, the moves in Treasury yields for maturities up to two years have been fairly consistent: yields have been surging.
    On Friday, the three-month Treasury yield rose to 1.11%, the highest since the brief spike around July 25, when the debt ceiling issue hit a speed bump. At the time the thinking was that in late September – when these securities would mature and the government would have to come up with the money to redeem them – the government might not be able to come up with enough money due to the debt ceiling. But this scare passed, the debt ceiling was extended temporarily, and the trajectory of the three-month yield returned to normal. Except for this spike, the three-month yield, at 1.11%, is now at the highest level since October 20, 2008 (let’s remember that date, it keeps cropping up):

    This post was published at Wolf Street on Oct 22, 2017.


  • Working-Age Depopulation Is Hugely Bullish For Assets… Bearish For Mankind

    Population growth is the primary, if not sole, contributor to growth in consumption and the resultant economic growth. But not simply any population, but it is the growing population of the working age or “core” population of 20 to 65 year olds (particularly among the wealthy or developing nations) that is hyper-critical. The chart below shows the average household income and expenditures by the age of the head of the household. Not surprisingly, the 35 to 64 year old age group makes and spends more than double the younger or older age groups. Although the dollar amounts vary, this principle is true worldwide.
    The rise, peak, and deceleration of core population growth among the nations with income, savings, and/or access to credit goes an awful long way in explaining the deceleration of economic growth. That decelerating growth explains the interest rate cuts, rise in debt, and now the rise in central bank monetization. This change in core growth (and the central banks reactions to it) explains the great and accelerating divergence of negative economic activity vs. positive asset valuations. The charts below show core population growth (which is determined through 2035, and estimates from there on all taken from the United Nations).

    This post was published at Zero Hedge on Oct 22, 2017.


  • California Attorney General Dodges Question About ‘Calexit’ Referendum

    Two days after former White House chief strategist Stephen Bannon warned that California may attempt to secede from the US over the next decade if Republicans failed to reassume control of the state, the state’s attorney general played down speculation that the state would make a credible attempt at leaving the US in the coming years.
    During an interview on “Fox News Sunday,” Becerra evaded a question about whether he would allow a ‘Calexit’ referendum on the ballot even though it’s unconstitutional, saying only that the state would do everything it can to be the “leading force” in this country, rather than becoming an independent state.
    Becerra said there are people in California who are frustrated with the Trump administration “constantly taking digs and hurting California’ – but despite these frustrations, California needs the US as much as the US needs California.


    This post was published at Zero Hedge on Oct 22, 2017.


  • One River CIO “We’re Willing Participants In Our Own Demise”

    With the world’s focus falling on Beijing this week, where president Xi Jinping give a glowing account of China’s future during the 19th Party Congress, boasting that ‘the banner of scientific socialism with Chinese characteristics is now flying high and proud for all to see,” not all are impressed by China’s vision of the world in which China sees itself as increasingly taking over from the US as the world’s superpower. And it’s not just stories about China’s neverending behind the scenes bailouts of anything that may telegraph a hard landing for the economy (as decribed in “China’s Government Is Expected To Buy 24% Of All Residential Real Estate For Sale In 2017“); it’s the country’s entire financial system, which Kyle Bass has been shorting for nearly two years now but which he has failed to recognize now holds the entire world hostage: if it goes, so does the global financial system, unleashing a worldwide depression the likes of which have not been seen.
    Here is Eric Peters, CIO of One River Asset Mgmt, explaining why everyone is wrong about the $35 trillion Chinese financial system, and yet how Beijing has figured out a way to become a parasite on the global financial system, resulting in an outcome in which “we’re willing participants in our own demise.”
    Excerpted from One River’s latest Weekend Notes:

    This post was published at Zero Hedge on Oct 22, 2017.


  • Here Is The IMF’s Global Financial Crash Scenario

    Hidden almost all the way in the end of the first chapter of the IMF’s latest Financial Stability Report, is a surprisingly candid discussion on the topic of whether “Rising Medium-Term Vulnerabilities Could Derail the Global Recovery”, which is a politically correct way of saying is the financial system on the verge of crashing.
    In the section also called “Global Financial Dislocation Scenario” because “crash” sounds just a little too pedestrian, the IMF uses a DSGE model to project the current global financial sitution, and ominously admits that “concerns about a continuing buildup in debt loads and overstretched asset valuations could have global economic repercussions” and – in modeling out the next crash, pardon “dislocation” – the IMF conducts a “scenario analysis” to illustrate how a repricing of risks could “lead to a rise in credit spreads and a fall in capital market and housing prices, derailing the economic recovery and undermining financial stability.”
    * * *
    From the IMF’s Financial Statbility Report:
    “Could Rising Medium-Term Vulnerabilities Derail the Global Recovery?”
    This section illustrates how shocks to individual credit and financial markets well within historical norms can propagate and lead to larger global impacts because of knock-on effects, a dearth of policy buffers, and extreme starting points in debt levels and asset valuations. A sudden uncoiling of compressed risk premiums, declines in asset prices, and rises in volatility would lead to a global financial downturn. With monetary policy in several advanced economies at or close to the effective lower bound, the economic consequences would be magnified by the limited scope for monetary stimulus. Indeed, monetary policy normalization would be stalled in its tracks and reversed in some cases.

    This post was published at Zero Hedge on Oct 22, 2017.


  • Are Cryptocurrencies Inflationary?

    There’s a debate raging over what, exactly, bitcoin and the thousand or so other cryptocurrencies actually are. Some heavy-hitters are weighing in with strong, if not always coherent opinions:
    Jamie Dimon calls bitcoin a ‘fraud’
    JPMorgan Chase CEO Jamie Dimon did not mince words when asked about the popularity of virtual currency bitcoin.
    Dimon said at an investment conference that the digital currency was a ‘fraud’ and that his firm would fire anyone at the bank that traded it ‘in a second.’ Dimon said he supported blockchain technology for tracking payments but that trading bitcoin itself was against the bank’s rules. He added that bitcoin was ‘stupid’ and ‘far too dangerous.’
    – – – – – – – –
    Peter Schiff: Even at $4,000 bitcoin is still a bubble
    One of the best-known among the bears, investor Peter Schiff, is now making his case in even stronger terms for why bitcoin has advanced ever farther into bubble territory.
    Schiff, who predicted the 2008 mortgage crisis, famously referred to bitcoin as digital fool’s gold and compared the cryptocurrency to the infamous bubble in Beanie Babies.

    This post was published at DollarCollapse on OCTOBER 22, 2017.


  • Big Tech’s Dangerous Influence: “Coming Between Us And Reality”

    Author Franklin Foer reflects on the dangers of losing ourselves in a society dependent on a handful of tech firms.
    French philosopher Rene Descartes famously said ‘I think, therefore I am.’ But in the digital age, what we think and how we live are being influenced in a big way by just a handful of tech firms: We are informed by Google and entertained by Apple; we socialize on Facebook and shop on Amazon. It’s time to reclaim our identities and reassert our intellectual independence, according to Franklin Foer, a national correspondent for The Atlantic and former editor of The New Republic, in his book, World Without Mind: The Existential Threat of Big Tech.
    He recently joined the Knowledge@Wharton show, which airs on SiriusXM channel 111, to explain why these firms’ hold on society is a cautionary tale for the future.
    An edited transcript of the conversation follows.
    Knowledge@Wharton: Tech companies such as Amazon have truly transformed themselves over the last couple of decades [and become a big part of our lives].
    Franklin Foer: Amazon is really one of the most impressive specimens in the entire history of American business. It started off as a bookstore, then it morphed into becoming the ‘everything’ store. And it’s morphed beyond that. We know about Amazon Web Services and how it powers the cloud. We’ve seen how it just keeps expanding, culminating most recently in its decision to purchase Whole Foods. The same could be said for Google, which set out to organize knowledge but then became Alphabet, which has this massive portfolio, including a life-sciences company that aims to make us immortal.

    This post was published at Zero Hedge on Oct 22, 2017.


  • Maxine Waters Threatens To “Go And Take Out ‘Moron’ Trump”, The Most “Dangerous President Ever”

    It’s been a big weekend for California Congresswoman Maxine Waters.
    Having slammed White House Chief of Staff John Kelly on Saturday for defending President Donald Trump’s conversation with a Gold Star family, demanding that he apologize for his remarks toward Democratic Rep. Frederica Wilson of Florida…
    “Gen. Kelly has been tainted by Trump lying in the face of facts. Hasn’t he seen the same video of Rep. Wilson that everyone else has seen?”
    ‘If the wife and family of Sgt. Johnson feel they were disrespected by Trump, then they were disrespected. Period!’


    This post was published at Zero Hedge on Oct 22, 2017.


  • “It Could Open A Pandora’s Box”: Italy’s 2 Richest Regions Are Voting In Historic Autonomy Referendums

    Voters in Italy’s two wealthiest northern regions of Lombardy and Veneto are voting on Sunday in referendums for greater autonomy from Rome, in which a positive outcome could fan regional tensions in Europe at a time when neighboring Spain is cracking down to prevent Catalonia from breaking away.
    ***
    Lombardy, which includes Milan, and Veneto, which houses the tourist powerhouse Venice, are home to around a quarter of Italy’s population and account for 30% of Italy’s economy, the Eurozone’s third largest. Unlike Catalonia, the consultative votes are only the beginning of a process which could over time lead to powers being devolved from Rome. Also unlike Catalonia, which held an independence referendum on Oct. 1 despite it being ruled unconstitutional, the Italian referendums are within the law. Like Catalonia, however, Lombardy and Veneto complain they pay far more in taxes than they receive.

    This post was published at Zero Hedge on Oct 22, 2017.


  • Examining The Most Hated Bull Market Ever

    From last week:
    ‘The seemingly ‘impervious’ advance since the election last November, has had an interesting ‘stair step’ pattern with each advance commencing from a breakout of a several month 3%-ish consolidation range. Furthermore, each advance then pushes to a 3-standard deviation extreme, black circles, of the 50-dma before beginning the next consolidation trading range.’
    ***
    The last leg higher has been directly responsive to the ramp up in the political ‘marketing surge’ surrounding ‘tax cuts and tax reform.’ With the House having already passed their respective budget resolutions, late Thursday, the Senate passed a budget blueprint for the next fiscal year. With both of the ‘budget resolutions’ in place, it was seen as clearing a hurdle to the goal of overhauling the tax code.

    This post was published at Zero Hedge on Oct 22, 2017.


  • Exit Polls Project Sweeping Victory, Supermajority For Japan’s Abe

    As widely expected, Japan Prime Minister Abe’s ruling coalition is set for a sweeping victory in Sunday’s general election, and may retain the two-thirds parliamentary majority needed to revise Japan’s constitution, according to an NHK exit poll.
    ***
    Shortly after polls closed at 8pm, an NHK exit poll showed that Abe’s Liberal Democratic Party and coalition partner Komeito are set to win between 281 and 336 seats of the 465 total, boosting Abe’s chances of becoming Japan’s longest serving political leader: the Prime Minister needs 233 for a simple majority and 310 for a supermajority. Opposition parties are set to split the rest, with the left-leaning Constitutional Democratic Party projected to come in second. Actual results are now being counted.

    This post was published at Zero Hedge on Oct 22, 2017.


  • Unprecedented Housing Bailout Revealed, As China Property Sales Drop For First Time In 30 Months

    Back in March, we explained why the “fate of the world economy is in the hands of China’s housing bubble.” The answer was simple: for the Chinese population, and growing middle class, to keep spending vibrant and borrowing elevated, it had to feel comfortable and confident that its wealth will keep rising. However, unlike the US where the stock market is the ultimate barometer of the confidence boosting “wealth effect”, in China it has always been about housing: three quarters of Chinese household assets are parked in real estate, compared to only 28% in the US with the remainder invested financial assets.

    This post was published at Zero Hedge on Oct 21, 2017.


  • First A.I. ETF Claims It Can Replace An Army Of Research Analysts

    ‘Look Dave, I can see you’re really upset about this. I honestly think you ought to sit down calmly, take a stress pill and think things over.’
    From Stanley Kubrick’s 2001: A Space Odyssey.
    As if MiFID II wasn’t bad enough, now this ‘EquBot AI Technology with Watson has the ability to mimic an army of equity research analysts working around the clock, 365 days a year, while removing human error and bias from the process.’ That is the claim of Chida Khatua, the ETF’s CEO. Unlike the existing algos used by quant funds, A. I. the ability to learn from its mistakes without further requiring programming.
    This week, EquBot LLC, in partnership with ETF Managers Group (ETFMG) launched the world’s first ETF powered by artificial intelligence, the AI Powered Equity ETF (NYSE Arca: AIEQ). According to Business Wire, the new ETF uses ‘cognitive and big data processing abilities of IBM Watson to analyze U. S.-listed investment opportunities’.
    For those in the dark as far as ‘Watson’ is concerned, it’s Wiki entry notes ‘Watson is a question answering (QA) computing system that IBM built to apply advanced natural language processing, information retrieval, knowledge representation, automated reasoning, and machine learning technologies to the field of open domain question answering. Watson was named after IBM’s first CEO, industrialist Thomas J. Watson. The computer system was specifically developed to answer questions on the quiz show Jeopardy! and, in 2011, the Watson computer system competed on Jeopardy! against former winners Brad Rutter and Ken Jennings winning the first place prize of $1 million. Watson had access to 200 million pages of structured and unstructured content consuming four terabytes of disk storage…but was not connected to the Internet during the game. For each clue, Watson’s three most probable responses were displayed on the television screen. Watson consistently outperformed its human opponents on the game’s signaling device, but had trouble in a few categories, notably those having short clues containing only a few words.’

    This post was published at Zero Hedge on Oct 21, 2017.


  • 21/10/17: Prague Pages Brussels… Following Vienna

    Just after Austria, the Czech Republic too has swung decisively in the direction of embracing populism as Populist billionaire’s Eurosceptic party wins big in Czech Republic.
    As Radio Praha describes it: “The Czech Donald Trump or Silvio Berlusconi, maverick millionaire, political populist, mould breaker; these are all labels that have been tagged on to ANO leader Andrej Babi”.
    Jakub Patocka for the Guardian: “Open racism has become a normal part of public discourse. Trust in democratic institutions and the European Union has been crumbling before our eyes. It is shocking how easily and quickly this has happened. Many Czechs are going to the polls with grim fears for the future. A broad coalition of democratic parties is not likely to have enough votes to control parliament. Apart from the far right, communists and a peculiar Czech version of the Pirate party are expected to do well.”

    This post was published at True Economics on Sunday, October 22, 2017.


  • “Carnival Barker” Krugman & The Inevitable Weimar Endgame

    Authored by Jeffrey Snider via Alhambra Investment Partners,
    Who President Trump ultimately picks as the next Federal Reserve Chairman doesn’t really matter. Unless he goes really far afield to someone totally unexpected, whoever that person will be will be largely more of the same. It won’t be a categorical change, a different philosophical direction that is badly needed.
    Still, politically, it does matter to some significant degree. It’s just that the political division isn’t the usual R vs. D, left vs. right. That’s how many are making it out to be, and in doing so exposing what’s really going on.
    As usual, the perfect example for these divisions is provided by Paul Krugman. The Nobel Prize Winner ceased being an economist a long time ago, and has become largely a partisan carnival barker. He opines about economic issues, but framed always from that perspective.
    To the very idea of a next Fed Chair beyond Yellen, he wrote a few weeks ago, ‘we’re living in the age of Trump, which means that we should actually expect the worst.’ Dr. Krugman wants more of the same, and Candidate Trump campaigned directly against that. As such, there is the non-trivial chance that President Trump lives up to that promise.
    Again, it sounds like a left vs. right issue, but it isn’t. The political winds are changing, and the parties themselves are being realigned in different directions (which is not something new; there have been several re-alignments throughout American history even though the two major parties have been entrenched since the 1850’s when Republicans first appeared). Who the next Fed Chair is could tell us something about how far along we are in this evolution.
    What Krugman wants, meaning, it is safe to assume, what all those like him want, is simple: success. He believes that the central bank has given us exactly that, therefore it is stupid to upset what works.

    This post was published at Zero Hedge on Oct 21, 2017.


  • US Treasury Rates Hit 10-Year Highs

    But the yield spread collapses to lowest since early in the Financial Crisis. Even the Fed is worried.
    US government bonds fell across the board on Friday. Yields rose and set a number of 10-year highs, in some cases ten years to the day.
    Many people have pointed at the Senate where the prospects of the tax cut are said to have ‘brightened’ when the Senate approved a budget resolution. The tax cuts, if they make it, are said to lower government revenues by $1.5 trillion over 10 years. So maybe the bond market is starting to pay attention to government deficits and the national debt once again. But the bond market hasn’t paid attention in many, many years, and until the proof is in, I doubt it.
    There are, however, other factors that predate Friday by many months. In fact, the moves in Treasury yields for maturities up to two years have been fairly consistent: yields have been surging.

    This post was published at Wolf Street by Wolf Richter ‘ Oct 22, 2017.