The Coming Fiscal Derailment—Why FY 2019 Will Sink The Casino

Since last November 8th the Russell 2000 has risen by 30% and the net Federal debt has expanded by an astounding $1.0 trillion dollars.
In a rational world operating with honest financial markets those two results would not be found in even remotely the same zip code; and especially not in month #102 of a tired economic expansion and at the inception of an epochal pivot by the Fed to QT (quantitative tightening) on a scale never before imagined.
And we do mean exactly those words. By next April the Fed will be shrinking its balance sheet at $360 billion annual rate and by $600 billion per year as of next October.
Altogether, the Fed’s balance is scheduled to contract by upwards $2 trillion by the end of 2020. And it’s apparently on a path that is so locked-in—-barring a recession—that Janet Yellen affirmed in her swan song that the Fed’s giant bond dumping program (euphemistically called “portfolio runoff”) would no longer even be mentioned in its post-meeting statements.

This post was published at David Stockmans Contra Corner on Tuesday, December 19th, 2017.

Litecoin Founder Cashes Out, Sells Entire Stake After 9,300% Rally

Charlie Lee, the creator of the world’s fifth-biggest cryptocurrency, Litecoin, announced shortly after midnight that he was cashing in his profits after a torrid, 9,300% rally in the past 12 months. In a post on reddit, the San Francisco-based software engineer who founded litecoin in 2013, said that he sold and donated all of his holdings over the past few days.
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“Litecoin has been very good for me financially, so I am well off enough that I no longer need to tie my financial success to Litecoin’s success. For the first time in 6+ years, I no longer own a single LTC that’s not stored in a physical Litecoin” Lee said in the post.
Lee explained that his liquidation was aimed at preventing a ‘conflict of interest’ when the creator of what is known as “Bitcoin Silver” makes comments on twitter about the digital currency – something he tends to do with chronic zeal – that could influence its price, he said. That said, Lee declined to comment in the post on how many coins he sold or at what price, and asked readers to please “don’t ask me how many coins I sold or at what price. I can tell you that the amount of coins was a small percentage of GDAX’s daily volume and it did not crash the market.”

This post was published at Zero Hedge on Dec 20, 2017.

OPEC vs IEA: Who’s Right On Oil Prices?

Last week, the International Energy Agency made a lot of OPEC brows furrow when it warned that 2018 may not be a very happy new year for the cartel.
U. S. shale supply, the IEA said in its December Oil Market Report, is set to grow more than OPEC has estimated and this could be the undoing of the production cut that boosted prices this year.
OPEC, for its part, has insisted that U. S. shale production won’t grow as much as the IEA says, baffling some observers who now wonder who they should believe. But let’s put it another way: If the coach of a football team tells you that his team will win the cup because they’re the best, but the football association has estimated that the team is not the best one in the league, who would you believe?

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

The RussiaGate Witch-Hunt—The Deep State’s “Insurance Policy”

There was a sinister plot to meddle in the 2016 election, after all. But it was not orchestrated from the Kremlin; it was an entirely homegrown affair conducted from the inner sanctums—the White House, DOJ, the Hoover Building and Langley—-of the Imperial City.
Likewise, the perpetrators didn’t speak Russian or write in the Cyrillic script. In fact, they were lifetime beltway insiders occupying the highest positions of power in the US government.
Here are the names and rank of the principal conspirators: John Brennan, CIA director; Susan Rice, National Security Advisor; Samantha Power, UN Ambassador; James Clapper, Director of National Intelligence; James Comey, FBI director; Andrew McCabe, Deputy FBI director; Sally Yates, deputy Attorney General, Bruce Ohr, associate deputy AG; Peter Strzok, deputy assistant director of FBI counterintelligence; Lisa Page, FBI lawyer; and countless other lessor and greater poobahs of Washington power, including President Obama himself.
To a person, the participants in this illicit cabal shared the core trait that made Obama such a blight on the nation’s well-being. To wit, he never held an honest job outside the halls of government in his entire adult life; and as a careerist agent of the state and practitioner of its purported goods works, he exuded a sanctimonious disdain for everyday citizens who make their living along the capitalist highways and by-ways of America.

This post was published at David Stockmans Contra Corner on Monday, December 18th, 2017.

Ramaphosa Elected President Of ANC: South African Rand Soars 4%, Biggest Jump In 2 Years

Update 2: It’s all over, and the best case outcome is now fact, with Cyril Ramaphosa elected president of South Africa’s ruling African National Congress on Monday.
CYRIL RAMAPHOSA ELECTED PRESIDENT OF SOUTH AFRICA’S ANC RAMAPHOSA GETS 2440 VOTES IN S. AFRICA’S ANC LEADERSHIP VOTE Ramaphosa victory threatens President Jacob Zuma’s grip on power after the most divisive vote in the party’s history. Ramaphosa, the deputy president, defeated Nkosazana Dlamini-Zuma, Zuma’s former wife, whom the president had backed. As the FT notes, it is widely speculated that Mr Zuma lent Ms Dlamini-Zuma his support because he believed that as state president she would protect him from prosecution in a corruption case.
Meanwhile, Ramaphosa campaigned on a promise to root out corruption and save the ANC from losing its majority for the first time at the 2019 election.


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

INDONESIA: Crony Capitalism has Reduced Cities to Dehumanized, Polluted Environments for Ordinary People

Several years ago, a prominent Indonesian businessman who now resides in Canada, insisted on meeting me in a back room of one of Jakarta’s posh restaurants. An avid reader of mine, he ‘had something urgent to tell me’, after finding out that our paths were going to be crossing in this destroyed and hopelessly polluted Indonesian capital.
What he had to say was actually straight to the point and definitely worth sitting two hours in an epic traffic jam:
‘No one will be allowed to build comprehensive public transportation in Jakarta or in any other Indonesian city. If a mayor or a governor tries and defies the wishes of the ruthless business community which is in fact controlling most of the Indonesian government, he or she will be dethroned, or even totally destroyed.’
These ‘prophetic’ words are still ringing in my ears, several months after the complete destruction of the progressive Jakarta governor, known as Ahok (real name: Basuki Tjahaja Purnama), who tried very hard to improve the seemingly ungovernable and thoroughly destroyed city, constructing new mass transit lines (LRT), restoring old train stations, cleaning canals, attempting to build at least some basic net of sidewalks, as well as planting trees and creating parks.
After Ahok’s first and extremely successful term in office, the opposition consolidated its forces. It consisted mainly of the Islamists, big business tycoons, and the military as well as other revanchist cadres (almost exclusively pro-business and pro-Western individuals) that are still controlling Indonesia.
‘Ahok’, an outsider and an ethnic Chinese, patently lost.

This post was published at 21st Century Wire on DECEMBER 17, 2017.

Why Does The New $1 Billion US Embassy In London Need The First Moat Since Medieval Times

If you google ‘London moats’, you’ll probably alight on a link which will take you to ‘London’s Top 10 Moats: A Spotter’s Guide’. We had no idea there were so many and could only think of the ‘obvious’ one surrounding the Tower of London, even if it’s waterless these days. According to the guide, a defensive ditch has surrounded the Tower since its origins in the eleventh century. The moat, which contained water from the thirteenth century until the 1840s, helps to protect the roughly cuboid ‘White Tower’ keep, which gives the Tower of London its name. Built by William the Conqueror in 1078, the White Tower was resented as a symbol of oppression inflicted on London by the new ruling elite.
Yesterday saw the press launch for the new US embassy in London which is situated on the south bank of the River Thames in the re-developed – albeit unattractively – part of the city near to Battersea Power Station. During the ‘celebrations’, architect James Timberlake, of Philadelphia-based firm Kieran Timberlake, described the new building as ‘the embodiment of peace and security’. The Daily Mailreported a spokesperson saying the glass structure ‘gives form to the core democratic values of transparency’. The lobby looks a bit ‘imperial’ to us, but we’re probably mistaken.

This post was published at Zero Hedge on Dec 15, 2017.

Good Riddance!

CNBC’s Fed fanboy, Steve Liesman, accidentally knocked one out of the park yeserday when he lured Janet Yellen into a quip that will surely go down as the signature insanity of her baleful tenure. Liesman thus queried:
“Every day it seems the stock market goes up triple digits… is it now, or will it soon become a worry for the central bank that valuations are this high?”
After a bit of double talk interspersed with gobbledygook, Yellen uttered the money quote:
”There is nothing flashing red there or possibly even orange,” on asset valuations…
Holy cow!
Surely our soon to be pensioned-off Keynesian School Marm was not thinking about the fact that the S&P 500 stood at 2662 as she spoke, which amounts to 24.9X the $107 per share of earnings posted by America’s leading companies for the LTM period ending in September 2017.

This post was published at David Stockmans Contra Corner on Thursday, December 14th, 2017.

MONSANTO IS PAYING FARMERS TO USE ITS CONTROVERSIAL PESTICIDE

Corporate pesticide maker Monsanto, which has faced several recent lawsuits against its products, is paying farmers to use its controversial weedkiller XtendiMax with VaporGrip, an herbicide based on a chemical known as dicamba, Yahoo News reported.
The incentive to use XtendiMax aims to refund farmers over half the sticker price of the product in 2018 if they spray it on soybeans that Monsanto engineered to resist it, according to company data.
‘We believe cash-back incentives for using XtendiMax with VaporGrip Technology better enable growers to use a management system that represents the next level of weed control,’ said Ryan Rubischko, Monsanto product manager.
Monsanto faces bans and restrictions of its pesticides in several states due to damaged crops from its product which affected 3.1 million acres in nearly two dozen states, according to Reuters.
Reuters reported:
XtendiMax costs about $11 per acre to buy, and Monsanto is offering an extra $6 per acre in cash back to farmers when they apply it on Xtend soybeans, rather than using another seed-and-chemical combination to control weeds.
The rebate means farmers can receive up to $11.50 per acre in cash back next year when they use XtendiMax along with other approved chemicals, such as one called Intact that aims to prevent drift and costs $2.40 per acre, according to Monsanto.

This post was published at The Daily Sheeple on DECEMBER 14, 2017.

Bubble Finance And The Era of No-See-Um Recessions

Today’s single most dangerous Wall Street meme is that there is no risk of a stock market crash because there is no recession in sight. But that proposition is dead wrong because it’s a relic of your grandfather’s economy. That is, a reasonably functioning capitalist order in which the stock market priced-out company earnings and the underlying macroeconomic substrate from which they arose.
Back then, Economy drove Finance: You therefore needed a main street contraction to trigger tumbling profits, which, in turn, caused Wall Street to mark-down the NPV (net present value) of future company earnings streams and the stock prices which embodied them.
No longer. After three decades of monetary central planning and heavy-handed falsification of financial asset prices, causation has been reversed.
Finance now drives Economy: Recessions happen when central bank fostered financial bubbles reach an asymptotic peak and then crash under their own weight, triggering desperate restructuring actions in the corporate C-suites designed to prop up stock prices and preserve the collapsing value of executive stock options.

This post was published at David Stockmans Contra Corner on Wednesday, December 13th, 2017.

Do Graduate Degrees Produce Value?

One of the more contentious aspects of the tax reform bill currently going through Congress is a proposal to treat the value of graduate-student tuition waivers as taxable income. In the US most PhD programs charge tuition, like undergraduate programs, but PhD students are typically granted a waiver of tuition along with a modest stipend to cover living expenses. In the early versions of the tax bill, the value of this waiver — which could be $50,000 to $60,000 at a private university — would be classified as taxable income. University officials, graduate student associations, academics, and most journalists have condemned this aspect of the tax plan. As a university professor I have received multiple communications urging me to write my Congressional representatives, speak out publicly, and otherwise fight to defeat this legislation.
As of this writing, it appears the tuition-waiver piece will not be in the final bill, so university officials, the AAUP, the grad student unions, and other graduate-education supporters can rest easy. Maybe all that lobbying paid off.

This post was published at Ludwig von Mises Institute on Dec 13, 2017.

Look, Mom, No Hands!

Wall Street’s manic melt-up is pushing stock prices ever deeper into the realm of insanity, and nowhere is that more evident than in the Russell 2000 (RUT). At today’s level of 1525, it is now up by 312% from the post-crisis bottom and nearly 80% from the prior tippy-top peak in May 2007.
More significantly, the RUT has risen by 6.8% per year since January 2000 while domestic final sales have increased from $10.6 trillion to $20.0 trillion or by just 3.8% per annum. That is, the RUT index has gained at nearly twice the growth rate of nominal domestic final sales.
Surely it doesn’t take an MBA from Harvard to recognize that a gap that wide stretching over 17 years is deeply suspect. For instance, had this broad-based basket of domestic stocks risen in parallel with domestic sales, which over time they must, the index would today stand at 935 or nearly 40% below the current price level.

This post was published at David Stockmans Contra Corner on Tuesday, December 12th, 2017.

The 30-Years Bubble—Why America Ain’t That Rich

The entire financial and economic narrative in today’s Bubble Finance world is virtually context- and history-free; it’s all about the short-term deltas and therefore exceedingly misleading and dangerous.
So when a big trend or condition is negative and unsustainable, you generally can’t even get a glimpse of it from the so-called “high-frequency” weekly, monthly and even quarterly data on which the financial press and its casino patrons thrive. And that’s not merely because most of the data from the government statistical mills is heavily massaged and modeled and often “adjusted” beyond recognition over 3-5 year intervals of statistical revision.
Beyond that, however, even medium term trends get largely ignored. That’s because the purpose of economic and financial data today is to facilitate daily (and hourly) trading in the casino—not inform long-term investors about underlying trends, conditions and prospects.

This post was published at David Stockmans Contra Corner on Monday, December 11th, 2017.

America’s Decline And The Neglect Of Luther’s Principles Of Liberty

Authored by S. T. Karnick via Specator.org,
Freedom requires a sense of personal responsibility if it is to survive.
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With the nation’s news dominated by reports of political corruption (most recently, the Clintons’ apparent use of ‘pay to play’ schemes during Hillary Clinton’s tenure as U. S. secretary of state), sexual harassment scandals pandemic among the nation’s elites, extreme vulgarization of political speech and the common culture, riots against freedom of speech on the nation’s college campuses, paralyzing partisanship in Congress, death threats and open assassination attempts against government leaders and police officers, and the rest of the dismaying parade of moral shortcomings on display among the nation’s leaders in all walks of life, it appears that we are in the midst of a war not just between political and cultural factions, but over the very definition of our civilization.

This post was published at Zero Hedge on Dec 11, 2017.

Senior DOJ Official’s Wife Worked At Oppo Research Firm That Produced “Trump Dossier”

In what looks to be another embarrassing blow to the FBI’s (already dubious) credibility, Fox News reported Monday night that the senior DOJ official who was demoted last week after allegedly trying to conceal his contacts with the firm that compiled the infamous ‘Trump dossier’ has deep ties to the firm through his wife.
As it turns out, Nellie Ohr, the wife of disgraced DOJ official Bruce Ohr, was employed at Fusion GPS last year. Her term of employment overlapped with the period when the Trump dossier was being compiled. Though Fox was unable to discern the exact nature of her role at the firm, its reporters discovered that she has done extensive research on Russia-related topics for think tanks based in the Washington, DC area.
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Ohr is the second senior DOJ official involved in the DOJ’s probe into Trump’s Russia ties to be demoted this year for suspected bias pertaining to the investigation. The other official, Peter Strzok, allegedly exchanged text messages expressing anti-Trump sentiments with another DOJ official with whom he was having an affair. And as if that weren’t enough to signal a conflict of interest, Strzok, it was revealed, possibly saved then-presidential candidate Hillary Clinton from prosecution by making a crucial change to the language in the now-infamous letter excusing Clinton for her suspected crimes. Specifically, Strzok changed language in Comey’s letter to “extremely careless” from the original language of “grossly negligent.”

This post was published at Zero Hedge on Dec 11, 2017.

THE FEDERAL GOVERNMENT JUST ADMITTED IT WILL CONTINUE WARRANTLESS SPYING – EVEN IF CONGRESS VOTES TO STOP IT

Bypass the Fourth Amendment With One Weird Trick — Edward Snowden (@Snowden) December 6, 2017

U. S. officials admit they are not planning on shutting down the government’s warrantless spying program, even if it is not reauthorized by 2018.
As the United States Congress runs out of time to vote on a bill that would reauthorize one of the government’s most egregious warrantless spying programs, officials are claiming that those programs won’t end anytime soon – even if they are not reauthorized by the end of the year.
The USA Liberty Act will reauthorize Section 702 of the Foreign Intelligence Surveillance Act (FISA), which is set to expire on Dec. 31, 2017. While the bill’s proponents have claimed it will help ensure ‘security’ in the United States, privacy advocates have warned that will provide additional loopholes for the government to continue conducting warrantless surveillance of innocent Americans.
The assumption may be that if the USA Liberty Act is not signed into law, then the provisions from Section 702 will no longer be legal and the U. S. government will stop collecting data from innocent Americans without warrants – but intelligence officials do not see it that way.

This post was published at The Daily Sheeple on DECEMBER 8, 2017.

Peak Fantasy Time

If you want to know why both Wall Street and Washington are so delusional about America’s baleful economic predicament, just consider this morsel from today’s Wall Street Journal on the purportedly awesome November jobs report.
Wages rose just 2.5% from a year earlier in November – near the same lackluster pace maintained since late 2015, despite a much lower unemployment rate. But in a positive signfor Americans’ incomes, the average work week increased by about 6 minutes to 34.5 hours in November…. November marked the 86th straight month employers added to payrolls.
Whoopee!
Six whole minutes added to a work week that has been shrinking for decades owing to the relentlessly deteriorating quality mix of the “jobs” counted by the BLS establishment survey. In fact, even by that dubious measure, the work week is still shorter than it was at the December 2007 pre-crisis peak (33.8) and well below its 2000 peak level.
The reason isn’t hard to figure: The US economy is generating fewer and fewer goods producing jobs where the work week averages 40.5 hours and weekly pay equates to $58,400 annually and far more bar, hotel and restaurant jobs, where the work week averages just 26.1 hours and weekly pay equates to only $21,000 annually.

This post was published at David Stockmans Contra Corner on Friday, December 8th, 2017.

Bulgaria Government Shocked To Discover It Owns $3 Billion In Bitcoin

Bulgaria’s GDP is about $52.4 billion (2016), so it is quite a shock that the Bulgarian Government is sitting on an approximate $3 billion worth of Bitcoins seized in an anti-corruption operation back in May.
Putting this into a little more glaring context, Bulgaria is holding 18% of the national debt in bitcoins…
Fun fact: today's bitcoin prices have been interesting enough that there was a significant difference in how much Bulgaria had in USD between me writing this story and my editor editing it.
— Nikhilesh De (@nikhileshde) December 7, 2017

This post was published at Zero Hedge on Dec 9, 2017.

Spend, Cut And Borrow—-How The GOP Is Heading For Fiscal Calamity, Part 1

Ain’t them Republicans something?
They just gifted to American businesses (corporate and pass-thrus) a $1.8 trillion tax cut over the next decade—most of it permanent.
And, seemingly, it was as easy as pie to accomplish. That’s because beforehand they had written themselves the equivalent of a parental note to the teacher saying it was OK to borrow $1.5 trillionof the cost.
This meant, in turn, they didn’t have to squeeze K-Street too hard for offsetting “payfors”. And off-setting spending cuts weren’t even on the table.
Moreover, the fiscal ease of it was aided immensely by the fact that they wrote the big revenue-loss hogs on the individual income tax side in disappearing ink—otherwise known as a “sunset”.
For instance, the GOP pols have been talking up a storm about doubling the standard deduction to $24,000 per family and raising the child credit from $1,000 to $2,000. Absolutely pro working family, that. Woo-woo!

This post was published at David Stockmans Contra Corner on December 5th, 2017.