“Markets Are Ripe For A Black Swan Event” – Why Most ‘Well Hedged’ Funds Won’t Survive

George Sokoloff, founder and CIO of Carmot Capital, recently explained why typical asset allocation strategies, including those employed by most “sophisticated” hedge fund managers, end up getting slaughtered during market shocks despite perceptions of being “well hedged”. One has to look no further than the last “great recession” to get a glimpse of just how well the typical “hedged” portfolios fared during the last “Black Swan” event.
Unfortunately, large pools of institutional capital have grown increasingly accustomed to making allocation decisions based on short-term returns and relative performance rather than absolute returns over extended periods of time. Therefore, massive losses are ok as long as everyone is losing money at the same time, right? Absolute returns only matter to the suckers that are actually planning to use those pension assets to retire at some point. And, as for the hedge fund manager, don’t worry if your relative returns suffer as that’s not such a big deal either…simply shut your fund down…go on a really long vacation then come back and raise even more assets than before. But we digress.

This post was published at Zero Hedge on Aug 19, 2016.

Cathay Pacific Crushed As Chinese Corporate Travel Collapses

Cathay Pacific announced earnings earlier this week which paint a fairly ominous picture for China. The airline posted a 9.3% YoY drop in revenue and an 82% decline in net profit which they attributed to, among other things, “weak passsenger demand, particularly in the premium class“. Comments from the Cathay’s press release clearly indicate weak corporate travel with the company pointing out that corporate enplanements in Hong Kong declined for the first time since 2009:
The slowdown in the Mainland China economy and economic fragility elsewhere caused restrictions to be placed on corporate travel. This adversely affected premium class demand, particularly on long-haul routes. Yield was further affected by strong competition, adverse currency movements and a significant reduction in premium corporate travel.

This post was published at Zero Hedge on Aug 19, 2016.

A Review of ‘Hillary’s America’

I went to go see ‘Hillary’s America.’ When I Googled to see where it was playing, there were a bunch of pro-Hillary sites at the top of the page. Nevertheless, about four down, I finally came to the movie. The movie was different than I expected. It went through the history of the Democratic Party, which was amazingly spot-on and not distorted. Indeed, it showed one of the greatest scams of all time. The Democrats pretend to be the party of minorities and the poor, but in fact, they have been the primary oppressors.

This post was published at Armstrong Economics on Aug 20, 2016.

The Biggest American Layoff Queens in 2016 ‘So Far’

The year isn’t over yet. More mass layoffs to come.
The most recent company to announce four-digit layoffs was Cisco on Wednesday with 5,500 people on its list. It followed numerous other announcements of mass layoffs this year – particularly in oil-and-gas, brick-and-mortar retail, and tech.
Since the oil bust began, there have been 195,000 job cuts in the US alone, according to Challenger, Gray & Christmas. Of those, about 95,000 occurred in 2016. They were concentrated in just a few states, particularly Texas. And it’s not over: there was a ‘resurgence’ of 17,725 job cuts in July.
Tech announced about 55,000 layoffs so far this year, including Cisco. The sector is getting clobbered by a sea change in technology, the shift to mobile, and the downward spiral of the entire PC ecosystem. And retail announced nearly 44,000, not including Macy’s still unspecified job cuts associated with shuttering 100 Macy’s stores.

This post was published at Wolf Street by Wolf Richter ‘ August 19, 2016.

Market Talk – August 19, 2016

The Nikkei did manage a positive close for the end of the week but finished down just over 2% on the week. The JPY continues to play around the par level until the stock markets decide their direction. Shanghai and Hang Seng closed mixed in thin summer trading in what can only be described as lethargic trade. With very little in the way of data to get excited about in either Europe or the US markets were content to drift into the weekend.

This post was published at Armstrong Economics on Aug 19, 2016.

The Fear Economy: It Couldn’t Possibly Happen Here But It Did

Submitted by Jeffrey Snider via Alhambra Investment Partners,
In the late 1990’s, economists attempted to get reacquainted with something that they previously believed was an artifact of long ago history. The plight of Japan during that decade had revived fears of deflation and depression. Some economists, those daring enough to challenge entrenched notions, began even to contemplate whether or not it could happen here.
Writing in the New York Times in early July 1999, Louis Uchitelle noticed not just the increased interest but also the distinct lack of available literature. He noted in his article, appropriately titled Reviving The Economics of Fear; In Bad Times, Consumers Might Simply Refuse To Spend, that one economics professor at Northwestern revised at the last minute his latest undergraduate textbook from a single footnote discussing fear of spending among consumers to a full-blown discussion within it about it. As the professor said, ‘When you go 50 years without a phenomenon being relevant, it dies out of the curriculum.’
This was the dot-com era, a period where it seemed nothing might ever go wrong in the United States. The Fed had, it was believed, engineered the perfect expression of technocratic accomplishment, the Great ‘Moderation.’ It was exceedingly far-fetched at that time that the United States or anywhere else in the world orthodox economics was practiced would ever become Japan except Japan.

This post was published at Zero Hedge on Aug 19, 2016.

Gold Miners’ Q2’16 Fundamentals

The gold miners’ stocks have skyrocketed this year as investors started returning to this long-abandoned sector. Many have tripled, quadrupled, or even quintupled since mid-January alone! But are such epic gains fundamentally justified? Much insight into this crucial question for investors can be gleaned from the gold miners’ latest quarterly financial and operational results. Their Q2 reports just finished coming in.
Companies trading on the US stock markets are required by the Securities and Exchange Commission to file quarterly earnings reports four times a year. For normal quarters that don’t end fiscal years, these 10-Q reports are due 45 calendar days after quarter-ends. They are a great boon to financial-market transparency and investors seeking to understand companies, yielding a treasure trove of information.
The gold miners are no exception, so about 6 weeks after quarter-ends I eagerly look forward to digging into their latest quarterly reports to see how they’re faring. And the just-reported second quarter of 2016 proved an exceedingly-strong one for gold stocks. Their benchmark HUI NYSE Arca Gold BUGS Index soared 38.4% higher in Q2 on a mere 7.4% gold rally! Gold stocks’ 5.2x upside leverage to gold was extreme.
The gold stocks began 2016 at fundamentally-absurd price levels relative to gold, the overwhelmingly-dominant driver of their profits and hence ultimately stock prices. Coming out of mid-January’s crazy 13.5-year secular low, the gold stocks were certainly overdue to soar in a massive mean-reversion rally. But with the HUI skyrocketing 182.2% at best in just 6.5 months by early August, the gains have been huge!

This post was published at ZEAL LLC on August 19, 2016.

Shocker: This Libertarian State Has Lowest Poverty Rates in America

Reporting from Hazard, KY…
Pop quiz time: Can you guess what the following state is?
It has…
The highest quality of life in the country and the lowest poverty rate… No income taxes or sales tax… No seatbelt laws and no mandatory car insurance (although over 90% have coverage)… Abolished the state minimum wage law and… surprise… has the lowest youth and adult unemployment rates in America… The highest income mobility for minorities… The smallest homeless population in America, too… Strong personal self-defense protections, with one of the lowest crime rates in the country…

This post was published at Laissez Faire on Aug 19, 2016.

AUGUST 19/NO CHANGE IN GLD/SLV/AUGUST GOLD STANDING; 42.815 TONNES/BIG NEWS OF THE DAY: ENGLAND TO INVOKE ARTICLE 50 BY APRIL 2017 AND LEAVE THE EU/TWO MORE BANKS CHARGE CLIENTS DUE TO NEGATIVE I…

Gold:1340.40 down $10.80
Silver 19.30 down 42 cents
In the access market 5:15 pm
Gold: 1342.00
Silver: 19.31
.
For the August gold contract month, we had a good sized 157 notices served upon for 15,700 ounces. The total number of notices filed so far for delivery: 13080 for 1,308,000 oz or tonnes or 40.684 tonnes. The total amount of gold standing for August is 42.815 tonnes.
In silver we had 78 notices served upon for 390,000 oz. The total number of notices filed so far this month: 471 for 2,355,000 oz.
The crooks love to raid on Friday’s especially after the Shanghai Fix and London fixes because there is no risk on paper turning into real metal for the rest of the day. However come Monday, it will become a problem.

This post was published at Harvey Organ Blog on August 19, 2016.

Dennis Prager, Donating Money to Universities

Although I do not often agree with Dennis Prager, I must acknowledge that this short essay of his is excellent. Its title is: ‘Why Do People Still Donate to Universities?’ And his answer, if I can put words in his mouth, is, ‘Don’t do it, if you love our country.’ He concludes his note with this statement: ‘But if you love America, among the worst things you can do is contribute to 95 percent of the country’s universities. America would better off if you burned that money.’ I heartily concur with him on this.
As a person who has spent almost his entire professional career in academia, I can attest that colleges and universities have become dens of intellectual iniquity, based on cultural Marxism (it is no longer only the bourgeois who are oppressing the proletariat; it is now, also, white males who do so, to pretty much everyone else) and political correctness (safe spaces, trigger warnings, and all the rest). Here is an instance of this of which even I was not cognizant, thanks to George Leef in his op-ed: ‘How American Higher Education Turned into a False Promise.’ He gives this example: ‘Perhaps the most telling is the nasty treatment a 79-year-old UCLA professor, Val Rust, received for his ‘microaggression’ of correcting grammatical errors in the papers of Ph. D. candidates. Among other ‘offenses’ against these students, he’changed the capitalization of ‘indigenous’ in one of the papers,’ which allegedly signaled ‘disrespect for the student’s ideological point of view.’ A few of Professor Rust’s students defended him, one writing that the protest was merely ‘a cheap way of arousing public support.’ But instead of telling the students to behave like adults, the UCLA administration overreacted by appeasing the protesters and sending an email to all staff and students declaring that this ‘troubling racial incident’ required that the university community ‘work toward just, equitable, and lasting solutions.” There you have it: a professor doing a reasonable job of editing, a culturally Marxist student, and an administration which supports the latter, not the former.

This post was published at Lew Rockwell on August 19, 2016.

Princeton University Kindly Requests You Stop Using “Gender-Binary” Hate Speech Like “Freshman”

For those of you, like us, who are constantly putting your foot in your mouth with highly offensive terms like “businessman” instead of “businessperson” or “freshman” instead of “first-year student,” Princeton University has published the perfect pamphlet to help you develop a more “gender-inclusive” vocabulary. As Princeton points out, “gender-inclusive” language is much preferred to the traditional “gender-binary” language used by people in ancient times who largely identified as men OR women. Can you imagine? How could they live in such an unsafe space?
For those of you who are still unsure if your language is “gender-inclusive” compliant, Princeton offers the following definitions:
Gender-inclusive language is writing and speaking about people in a manner that does not use gender-based words. Gender binary is the traditional view on human gender, which does not take into consideration individuals who identify as otherwise, including and not limited to transgender, genderqueer, gender non-conforming, and/or intersex.

This post was published at Zero Hedge on Aug 19, 2016.

The Power Of The Gold Community: Crowdfunding For FOIA Request Fort Knox Audit Documents Completes Within 24 Hours.

Since 2014 I’ve been investigating the alleged audits of the US official gold reserves. Of course my goal is to figure out if these audits are credible, or if they’re invented by the US government to silence the people that think gold has any value and forms the very material basis for a well-functioning monetary system.
My first post on this subject, A First Glance At US Official Gold Reserves Audits, published on March 27, 2014, was purely based on publicly available reports. Not surprisingly, all those reports together compounded to a logical story. The US government wouldn’t present anything that’s implausible at the surface. That first post was more or less a summary of the official narrative. After that post I decided to dig a little deeper.
According to the Department of the Treasury’s Office of Inspector General (OIG), which is responsible for the audits, the vast majority of the US monetary stock stored at the US Mint had been audited by 1986, 241,247,820.61 fine troy ounces to be precise, as was said by Inspector General Eric M. Thorson during his Statement to the House Financial Services Committee on June 23, 2011:
… the Committee for Continuing Audit of the U. S. Government-owned Gold performed annual audits of Treasury’s gold reserves from 1975 to 1986. … by 1986, 97 percent of the Government-owned gold held by the Mint had been audited and placed under joint seal.

This post was published at Bullion Star on 18 Aug 2016.

Socialism: The World’s Greatest Generator of Poverty

If you’re looking for a short introduction to socialism that rewards rereading, Thomas DiLorenzo’s The Problem With Socialism is it.
Perhaps your son or daughter has returned from college talking about collective control of the means of production and sporting Bernie Sanders t-shirts. Perhaps you’re a political novice looking for informed guidance.
Perhaps you’re frustrated with America’s economic decline and deplorable unemployment rates. Perhaps you listened with bewilderment as some pundit this election season distinguished democratic socialism from pure socialism in an attempt to justify the former.
Whoever you are, and whatever your occasion for curiosity, you’re likely to find insight and answers from DiLorenzo.
A professor of economics at Loyola University Maryland, DiLorenzo opens his book with troubling statistics: 43% of millennials, or at least those between ages 18 and 29, view socialism more favorably than capitalism, and 69% of voters under 30 would vote for a socialist presidential candidate. Socialism – depending on how it’s defined in relation to communism – may have killed over 100 million people and impoverished countless others over the course of the 20th Century.

This post was published at Ludwig von Mises Institute on August 19, 2016.

The Marginal Buyer Holds The Pin That Pops Every Asset Bubble

Q: How much is my house worth?
A: Whatever the highest bidder is willing to pay for it.
Those of you who took an introductory Economics class in high school or college may remember learning that prices are set “at the margin”. That’s a fancy way to say that prices are set by the person (or people) willing to pay the most.
This person willing to pay top dollar is called the “marginal buyer”. Most of us don’t really think about him much, but he (or she) is very, very important.
Why? Because the marginal buyer not only determines price levels, but also their stability and degree of volatility. The behavior of the marginal buyer, as well as the degree of competition for his/her “top dog” spot, sets the prices of nearly every asset class held by today’s investors.
Imagine for a moment an auction room, filled with people holding their bidding paddles. A rare Picasso painting is brought to the block. Paddles all around the room compete furiously as the auction starts; but as the bid price rises higher and higher, fewer and fewer paddles participate in the bidding. Pretty soon, it’s down to just two bidders dueling back and forth with one another. Then, after a stunningly high bid of $106.5 million dollars, no more paddles are raised. The marginal buyer has been found. No one is willing to outbid his price. (For the record, this is exactly what happened back in 2010 when Picasso’s Nude, Green Leaves and Bust came up for sale.)

This post was published at PeakProsperity on Friday, August 19, 2016,.

Weekend Reading: Valuationally Challenged

Submitted by Lance Roberts via RealInvestmentAdvice.com,
As another week comes to a close, we continue to wrestle with a market that remains detached from underlying economic data and clings to recent levels of over overbought, overextended and low reward/risk outcomes. Of course, in the final stages of a bull market, this is what has historically been the case.

This post was published at Zero Hedge on Aug 19, 2016.

‘Saving Social Security’ May End in Dollar Devaluation

As the US presidential election nears, we are doing a series of reports on the differences and agreements of major parties on various economic and financial topics. Last week, we noted one area where the major-party candidates are in agreement: trade. In different ways, the candidates have challenged the free-trade status quo. US multinationals will face an environment in which established free-trade treaties are renegotiated, and treaties that are currently in the works (such as the Trans-Pacific Partnership) are scrapped or drastically revamped, potentially disrupting long-settled plans.
Where the candidates agree, we have some sense of what waits for us after the election. In many areas, though, their visions of the way forward for the US differ substantially. This is certainly true for the approach each would take to retirement and tax issues.

This post was published at FinancialSense on 08/19/2016.