dinsdag 23 januari 2018

Jeremiah Johnson; "The Public's Attention Is Being Diverted From What Is Really Happening"

The Russian surveillance vessel the Viktor Leonov was reportedly leaving the Caribbean over the weekend bound toward the U.S. East Coast. Florida will be reached by next Friday, and before this, the King’s Bay ballistic missile submarine base in Georgia is also along their projected route. This comes on the heels of what has gone largely unreported by the Mainstream Media. On Friday, 1/19/18, a report from U.S. National News emerged, entitled Submarine off of NJ/DE/MD coasts? US Navy deploys NINE Anti-Submarine Aircraft off East Coast Fearing Sub Missile Launch Against US.
Here is an excerpt: The East Coast of the United States may be subjected to attack by submarine launched missile(s) and the US Navy has scrambled NUMEROUS P-8A POSEIDON anti-submarine aircraft, to repeatedly search coastal waters from New York City to Washington, DC ALL DAY Thursday into Thursday Evening. According to flight records, at least NINE anti-submarine warfare aircraft were sortied Thursday off the US East Coast, and Flight Records show they were engaged in very active hunting for submarine(s) off the East Coast, well WITHIN the 12-mile territorial limit of the United States. This article has plenty of photos, and some with the locations of CAP (Civil Air Patrol) enlisted to aid the U.S. Navy with the “shortfall” in radar coverage and area surveillance. The article also gives the disposition of numerous aircraft and shows the locations of monitored Russian submarines. While all of this has been happening, “statesman” Rex Tillerson just came out and declared this at Stanford University on Wed., 1/17/18, as reported by RT News:
# "The Japanese have had over a 100 North Korean fishing boats that have drifted into Japanese waters. Two-thirds of the people on those boats have died.” "The fishermen are being sent in the wintertime to fish because there are food shortages. And they are being sent out to fish with inadequate fuel to get back. So, we are getting a lot of evidence that these [sanctions] are really starting to hurt." 
Honorable Secretary of State Rex Tillerson. Pure statesmanship, pure diplomacy? No: pure extortion. This coming from a country (the U.S.) that wanted to depose Assad for the “brutal human rights violations” against civilians…but when it involves the civilians of a country we want to crush, what are a few hundred starving North Korean fisherman’s lives worth? Hey, the sanctions work! We oust leaders for human rights violations, but our policies and sanctions are “humane,” and “altruistic.” Let them join the IMF and World Bank, become a vassal, then they can shop at Costco. Then: let them eat cake! North Korea has the resolve to see through any paper-tiger sanctions initiated by a country that is a dying empire backed up by a “toothless” UN. China and Russia have the resolve to be positioning their assets now, prior to the conflict, the war that is forthcoming. It has been reported that the Chinese have moved troops and radiation detectors along their border with North Korea. Just about a week ago, the RAF had to scramble Typhoons to escort Russian bombers conducting practice runs along the Cold War routes that cover the UK.
# A very in-depth article came out that reports Russia and China to be skeptical concerning the U.S.’s gold supply. Economics is another form of warfare: should they prove the U.S. to not have on hand the gold reserves it claims to have, or (as it states) that the gold is of inferior quality to that traded by the rest of the world? This may very well be the final kicker to persuade nations to distrust the falling Petrodollar and remove the dollar as the World Currency exchange. Such would establish the positions of gold-backed Rubles and Yuan that also have oil to trade, to further bolster that worth on a global economy. For those who still watch television, enjoy your football and the upcoming Olympics. But keep this in mind: the powers that be will not rest in their inexorable march toward global government. It would not be the first time that bread and circuses were used to keep the mob entertained and distracted from the sinister actions and purposes of their leaders and governments. In the meantime, other nations are preparing and positioning their forces, as well as conducting intelligence and surveillance on us, prior to the war that may come anytime. If the politicians are any indicator of how we’ll fare, the prognosis doesn’t look good. All of it can be avoided with diplomacy, but war is a money-maker, and a game changer for an incumbent whose ratings are flagging. War is their solution. Why? Because they live off our labors and our tax dollars ensure they’ll be safe and sound in their bunkers. Their world: opulent feasts, riches, maintaining power, with armies and unlimited resources...it will remain intact. Ours will not....

If Bitcoin Doesn’t Hold On Here, Bulls Get Hurt

Below looks at Bitcoin from two different time frames. The chart on the left looks at Bitcoin on a weekly basis over the past few years and the chart on the right looks at it on a Daily basis over the past 5-months. The left chart highlights that Bitcoin has spent the majority of the past 5-years inside of rising channel (1). Bitcoin hit the top of this channel last month, where selling pressure has started taking place...


Once Bitcoin hit the top of the channel last month, it could be forming new falling channel (2), where lower highs and lower lows are taking place. The bottom of falling channel (2) looks to have started on a bullish reversal pattern at (3), which took place at the 11,200 level. Last week this level was tested, where bullish reversals took place. Key support is being tested again today at (4), where Bitcoin bulls have their fingers crossed that support holds. If support does not hold at (4), Bitcoin could end up testing the bottom of falling channel (2) again....

"Something Is Very Wrong With The Global Economy": Richest 1% Made 82% Of Global Wealth In 2017

It is appropriate that as the world's richest and most popular and influential celebrities, thought leaders, economists, pundits and politicians sit down in Davos this week to discuss such topics as wealth inequality and populism, that the global charity Oxfam released its latest annual study which found that global inequality is not only worsening, but 2017 may have been the worst year ever for the split between rich and poor. There are now 2,043 billionaires worldwide, according to the report titled “Reward Work, Not Wealth." "The billionaire boom is not a sign of a thriving economy but a symptom of a failing economic system," Oxfam executive director Winnie Byanyima said in a statement...

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In addition to finding that the world’s richest 42 people own the same amount of wealth as the poorest 50% of people worldwide, a number that is fast approaching 4 billion, the report also showed that 2017 saw the biggest increase in the number of billionaires in history, with new ones created at a rate of one every two days. Their wealth has increased by 13% a year on average in the decade from 2006 to 2015. In other words, in 2017 the world's richest one % raked in 82% of the wealth created last year while the poorest half of the population received none, Oxfam said just hours before the world's elite prepared to mingle at the World Economic Forum in Davos and pretend to care about the plight of the world's poor...

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Just as concerning, if only in theory, to the fake warriors for wealth and income equality in Davos, is that the three richest Americans have the same amount of wealth as the poorest half of the U.S. population. Bill Gates, Jeff Bezos and Warren Buffett are the three Americans whose combined wealth matches that of the poorest 160 million Americans, about $250 billion. Among the other findings: the wealth of the super-rich increased by $762 billion in just 12 months to March 2017 which is enough to end extreme poverty seven times over. Nine out of 10 of the world's 2,043 billionaires were men. Separately, chief executives of the top five global fashion brands made in just four days what garment workers in Bangladesh earn over a lifetime. "The people who make our clothes, assemble our phones and grow our food are being exploited to ensure a steady supply of cheap goods, and swell the profits of corporations and billionaire investors,"said Byanyima... 

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According to Mark Goldring, chief executive of Oxfam, the statistics signal that “something is very wrong with the global economy. The concentration of extreme wealth at the top is not a sign of a thriving economy but a symptom of a system that is failing the millions of hard-working people on poverty wages who make our clothes and grow our food," he said, and while he is right, the rich have little incentive to actually do anything about this record wealth divergence - besides pretending they are horrified by it, of course - at least until more Brexits, and more Trumps emerge, and eventually, a global uprising against the super wealthy. “Inequality is reaching such extreme levels that it might actually be bad for really wealthy people because it’s slowing down economic growth and leading to political disruption,” said David Hulme, an expert global development at the University of Manchester. Hulme added that “globally, across the world’s 7.6 billion people, extreme poverty is actually reducing. It’s only when you look at the top group, the richest people, that wealth is concentrating amazingly. Both of those things can happen at the same time.” Over the next 20 years, the report claims that 500 of the world’s richest people will give $2.4 trillion to their heirs, a sum larger than the GDP of India, which has 1.3 billion people...


The World Inequality Report 2018, a separate report published in December last year, noted that income inequality varies greatly across the world. When defined as the share of total national income accounted for by a nation’s top 10% earners, it is lowest in Europe (37%) and highest in the Middle east (61%). The United States (47%) lags China (41%) and Russia (46%). Oxfam said the massive inequality is being driven by factors that include excessive financial returns to company owners and shareholders at the expense of ordinary workers and the rest of the economy; the ability of rich individuals and corporations to use tax havens that allow them to evade or shield trillions of dollars from tax authorities; public policy that permits market conditions that push down wages and infringe on labor rights; and extreme wealth that is inherited, not earned. Byanyima blamed “tax dodging” as one of the major causes of global inequality and urged leaders to crack down on tax havens and inject money into education, healthcare and jobs for young people. "It reveals how our economies are rewarding wealth rather than the hard work of millions of people,” Byanyima told Reuters, adding “The few at the top get richer and richer and the millions at the bottom are trapped in poverty wages." 
# As noted above, the study was released on the eve of top political and business figures meeting at a luxury Swiss ski resort and private jet parking lot for the annual World Economic Forum, which this year says it will focus on how to create "a shared future in a fractured world". "It's hard to find a political or business leader who doesn't say they are worried about inequality," said Byanyima. "It's even harder to find one who is doing something about it. Many are actively making things worse by slashing taxes and scrapping labor rights"....

Jeff Thomas; Destroying The "Capitalism Has Failed" Narrative

Today, more than at any time previously, Westerners are justifying a move toward collectivist thinking with the phrase, “Capitalism has failed.” In response to this, conservative thinkers offer a knee-jerk reaction that collectivism has also had a dismal record of performance. Neither group tends to gain any ground with the other group, but over time, the West is moving inexorably in the collectivist direction. As I see it, liberals are putting forward what appears on the surface to be a legitimate criticism, and conservatives are countering it with the apology that, yes, capitalism is failing, but collectivism is worse. Unfortunately, what we’re seeing here is not classical logic, as Aristotle would have endorsed, but emotionalism that ignores the principles of logic. If we’re to follow the rules of logical discussion, we begin with the statement that capitalism has failed and, instead of treating it as a given, we examine whether the statement is correct. Only if it proves correct can we build further suppositions upon it. Whenever I’m confronted with this now oft-stated comment, my first question to the person offering it is, “Have you ever lived in a capitalist country?” That is, “Have you ever lived in a country in which, during your lifetime, a free-market system dominated?” Most people seem initially confused by this question, as they’re residents of either a European country or a North American country and operate under the assumption that the system in which they live is a capitalist one.
# So, let’s examine that assumption. A capitalist, or “free market,” system is one in which the prices of goods and services are determined by consumers and the open market, in which the laws and forces of supply and demand are free from any intervention by a government, price-setting monopoly, or other authority. Today, none of the major (larger) countries in what was once referred to as the “free world” bear any resemblance to this definition. Each of these countries is rife with laws, regulations, and a plethora of regulatory bodies whose very purpose is to restrict the freedom of voluntary commerce. Every year, more laws are passed to restrict free enterprise even more. Equally as bad is the fact that, in these same countries, large corporations have become so powerful that, by contributing equally to the campaigns of each major political party, they’re able to demand rewards following the elections, that not only guarantee them funds from the public coffers, but protect them against any possible prosecution as a result of this form of bribery. There’s a word for this form of governance, and it’s fascism. Many people today, if asked to describe fascism, would refer to Mussolini, black boots, and tyranny. They would state with confidence that they, themselves, do not live under fascism. But, in fact, fascism is, by definition, a state in which joint rule by business and state exists. (Mussolini himself stated that fascism would better be called corporatism, for this reason.) In recognizing the traditional definition of fascism, there can be no doubt that fascism is the driving force behind the economies of North America and Europe. In addition, the concept of any government taking by force from some individuals the fruits of their labour and bestowing it upon others is by no means free-market. It is a socialist concept. And, in any country where roughly half of the population are the recipients of such largesse, that country has, unquestionably, settled deeply into a socialist condition. However, this is by no means a new idea. As Socrates asked Adeimantus: Do not their leaders deprive the rich of their estates and distribute them among the people; at the same time taking care to preserve the larger part for themselves?

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# So, which is it? Are we saying here that these countries are socialist or fascist? Well, in truth, socialism, fascism, and, indeed, communism are all forms of collectivism. They all come under the same umbrella. So, what we’re witnessing is liberals, rightfully criticising the evils of fascism, but failing to understand it for what it is, a form of collectivism. Conservatives, on the other hand, do their best to continue to operate under their countries’ socialist laws, regulations, and regulatory bodies, whist continuing to imagine that a remnant of capitalism remains. And so we return to the question, “Have you ever lived in a country in which, during your lifetime, a free-market system dominated?” Such countries do exist. It should be pointed out, however, that even they tend to move slowly toward collectivism over time. (After all, it’s in collectivism that they gain their power.) However, some countries are “newer,” just as the US was in the early nineteenth century and, like the US, the governments have not yet had enough time to sufficiently degrade the economies that have been entrusted to them. In addition, some citizenries are feistier than others and/or are less easy to convince that, by allowing themselves to be dominated by their governments, they’ll actually be better off. Whatever the reasons, there are most certainly countries that are far more free-market than the countries discussed above. But, what does this tell us of the future? What can be done to turn these great powers back to a more free-market system? Well, the bad news is that that’s unlikely in the extreme.
To be sure, we, from time to time, have inspired orators, such as Nigel Farage or Ron Paul, who remind us what we “should” do to put these countries back on track, so that they serve the people of the country, rather than its leaders. But, historically, such orators have never succeeded in reversing the trend one iota. History tells us that political leaders, in their pursuit of collectivism, never reverse the trend. They instead ride it all the way to the bottom, then bail out, if they can. However, it is ever true that, in some locations in the world, there have always been free-market societies. Over time, they deteriorate under the hands of their leaders and, as they do, others spring up. The choice of the reader is to look upon the world as his oyster, to assess whether he is more or less content with the country he’s in and confident that it will continue to be a good place in which to live, work, invest, and prosper, or, if not, to consider diversifying, or even moving entirely, to a more rewarding, more capitalist jurisdiction....

SEC Cracks Down On "Overnight Blockchain" Companies

One month after the addition of "blockchain" to a company's name, or business model, became a joke in financial circles, not to mention a shortcut to soaring market cap for countless micro-cap companies, the SEC is finally getting involved. As Reuters reports, the SEC is scrutinizing public companies that change their name or business model overnight in a bid to capitalize upon the hype surrounding blockchain technology, SEC Chairman Jay Clayton said on Monday. Dozens of little-known companies - and not so little-known in the case of Kodak and its infamous KodakCoin, across the globe saw their share prices surge higher in recent months after unveiling plans to enter the bitcoin industry or that of its underlying distributed ledger blockchain technology...

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The topic of "blockchain" renaming euphoria was a prominent topic in the latest investor letter from Upslope Capital Management in which George Livadas wrote the following: If most investors are indeed “all-in,” we’d expect to see signs of reaching for returns and questionable risk-taking behavior. That’s exactly what we are starting to see, in my view. If there is an “obvious” bubble, it’s Bitcoin and all things blockchain-related. The phenomenon seems to be bleeding into equity markets, where almost every week, another stock jumps on reports of (often highly questionable) involvement in Bitcoin, blockchain, etc. “I know this idea is crazy, but it’s going to get crazier!” is an oftenmentioned investment thesis here. The mood was captured perfectly in a January 2nd CNBC headline that read: “Tiny company that owns some Hooter’s restaurants says it will use blockchain for rewards program, boosting stock by 50%.” Lest you think this was an isolated incident, note the eye-popping returns (over just 60 days) for the stocks listed below. Many of these companies pulled off similar gimmicks...

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And now it is the SEC's turn, although to be fair, the SEC already got involved back in December, when the regulator suspended trading in the shares of Crypto Company, a small firm that saw its stock rise more than 2,700 percent after signing a deal to buy a cryptocurrency data platform. Addressing the trader euphoria in this small corner of the market, Clayton warned that "it was not acceptable for companies without a meaningful track record in the sector to dabble in blockchain technology, change their name and immediately offer investors securities without providing adequate disclosures around the risks involved." Although in light of the recent performance gains one doubts whether a 100 page powerpoint presentation of risk factors would do anything to dent the mania as long as the overall momentum was higher. "The SEC is looking closely at the disclosures of public companies that shift their business models to capitalize on the perceived promise of distributed ledger technology and whether the disclosures comply with the securities laws, particularly in the case of an offering", the SEC chair said at a conference on Monday. Clayton also said the SEC had seen “disturbing” evidence that legal professionals have been wrongly counseling clients that initial coin offerings do not need to comply with federal securities law.
Previously, the SEC has said that such fundraisings should comply with securities law and has warned investors more broadly over the risks of cryptocurrency fraudsters. “I have instructed the SEC staff to be on high alert for approaches to ICOs that may be contrary to the spirit of our securities laws and the professional obligations of the U.S. securities bar,” Clayton said. Today's crackdown on "blockchain" companies comes just days after the SEC effectively blocked the path for any bitcoin-based ETFs, warning that they are far too risky for the general public, which should instead invest its money in the stock market which is currently in its "blow off top" meltup phase, and trading at Shiller PE of over 34x, roughly 4 turns higher than where it was just before the Great Depression....

maandag 22 januari 2018

Netflix Explodes To Record Highs After Smashing Subscriber Expectations, Will Burn Up To $4BN In 2018

Netflix stock is exploding higher to new all time highs, a repeat of what it did last quarter, soaring above its record high price and up over 9% after hours, rising above $247 per share after reporting Q4 numbers which while beating slightly on revenues ($3.29Bn, Exp. $3.28Bn), and in line on non-GAAP EPS (Adj. EPS$0.41, exp. $0.41), were far more remarkable for the subscriber numbers, which absolutely smashed expectations especially on the international streaming side, as follows:
- Q4 total net streaming additions 8.34MM, Exp. 6.34MM 
- Q4 domestic net streaming additions 1.98MM; Wall Street exp. 1.29MM, guidance 1.25MM 
- Q4 international net streaming additions 6.36MM, Wall Street exp. 5.05MM, guidance 5.05MM 
The addition of 8.4 million subs in Q4 was the company's largest ever quarterly increase. Netflix' Q1 2018 outlook was also far above expectations, with the company now expecting Q1 net streaming adds of 6.35 million (1.45MM in the US and 4.9MM internationally) well above the consensus estimate of 5.18 million, although this will come at a cost: Netflix expect to burn between $3 and $4 billion in cash in 2018. The company expects $3.686 billion in Q1 revenue, also above the consensus estimate of $3.49 billion, generating EPS of 63 cents, above consensus of 55 cents...

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In addition to the stellar subscriber adds, one thing that investors will focus on is the company's content spend for next year, which Netflix is increasing once again: having previously said they would spend $7 billion, they are raising that by as much as a $500 million on the low end forecasting that "we’ll spend $7.5-8 billion on content on a P&L basis in 2018." The previous range was $7.0-$8.0 billion. Also, it will come as no surprise that with Wall Street expecting the company to spend $8.7 billion this year on content...

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It will continue spending an ungodly amount. Netflix now has 117.6 million subscribers worldwide, but the success has come at a steep price and as of Sept.30, NFLX's total content obligations were a record $17 billion. The company's historical content spending is as follows:
2018: $7.5-$8 billion (forecast)
2017: $6 billion
2016: $5 billion
2015: $4 billion
2014: $3 billion
2013: $2 billion
Also, as one would expect, the company remains in its near-record cash burning ways, reporting that in Q5 it burned $523 million, modestly below the $639 million it burned one year earlier but above the $465 million it burned in Q3...

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The Q4 burn brought Netflix full year 2017 FCF to -$2.0 billion, "at the lower end of the -$2.0 to -$2.5 billion range we had previously indicated." However, this means that FCF in 2018 will jump as Netflix said the calendar effect means content payments "will now occur in 2018." It gets scarier, because as Netflix admits, "we’re growing faster than we expected, which allows us to invest more in original content than we had planned, so our FCF will be around negative $3B-$4B in 2018." While there was no discussion of the Kevin Spacey elimination from the company's House of Cards juggernaut, Netflix did note that it took a $39m non-cash charge in Q4 for unreleased content we’ve decided not to move forward with.
# However, judging by the afterhours stock response, which sent NFXL to a new all time high with a market cap above $100 billion for the first time ever, investors are far less worried about the relentless cash burn, and the $17 billion in already accrued content commitments, and instead are more impressed with the subscriber additions, as a result sending the stock 9% higher. And as shown on the chart below, the stock is now 30% higher YTD...

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Government Un-Shutdown Sends Stocks To Record Highs, Bonds "Most Oversold" In 13 Months

"Don't worry, be happy"...


While stocks soared to new record highs, the dollar was completely unexcited and bonds ended the day unchanged...

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Spot the odd one out...

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US Equity futures show the immediate selling pressure at Sunday's open (the shutdown occurred after the close Friday) a panic bid at the US cash open. And then another leg higher on the actual Senate vote. And the ubiquitous melt-up into the close...

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But record highs for all four major US equity indices by the close. Nasdaq was the day's big performer despite AAPL weakness...

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As AAPL slid, so FANGs were bid (ahead of NFLX earnings tonight) High yield bonds underperformed once again, again...

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Treasury yields ended the day broadly unchanged with the long-end very modestly bid (30Y -1bps)...       
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This left the yield curve modestly flatter on the day once again...

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Treasuries are now the most oversold in 13 months...

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The Dollar Index just refused to hold on to any gains once again today, mounting a brief algo ramp on the Senate vote only to fade back into the red...

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Copper, Crude and Gold managed gains on the day as silver slipped...

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Cryptos had another ugly day, with Ripple down 20% from Friday's close...

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With Bitcoin below $11k and Ethereum below $1000...

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Finally we note that Jeff Gundlach's favorite 10Y yield indicator is very close to recoupling...

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2Y Treasuries now yield 27bps more than the S&P 500, the most in 10 years...

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Doug Bandow; America Is Bankrupt And Washington Doesn't Care

These poseurs of fiscal responsibility are about to drive up debt to its highest levels since World War II. The United States is effectively bankrupt, but that doesn’t matter to the GOP. Once evangelists of fiscal responsibility and scourges of deficit spending, Republicans today glory in spilling red ink. The national debt is now $20.6 trillion, greater than the annual GDP of about $19.5 trillion. Alas, with Republicans at the helm, deficits are set to continue racing upwards, apparently without end. This flood of red ink will increase. Last year the Congressional Budget Office figured the U.S. was going to again run trillion dollar deficits around 2022. An extra $10 trillion would be added to the deficit over the following decade. But under Republican fiscal “stewardship,” analysts now believe the deficit could hit a trillion dollars next year. Why? Congress relaxed the sequester, eliminating its modest pressure for fiscal responsibility, and approved disaster relief, without making any corresponding spending cuts. Legislators also inflated military outlays, even though much of the Pentagon budget constitutes defense welfare, subsidies for prosperous and populous allies. Even after the most optimistic accounting for the impact of increased economic growth, the tax bill will still add $500 billion to $1 trillion to the deficit over the coming decade. (In fact, those estimates probably understate the final cost since Congress is likely to extend provisions set to sunset in order to meet Senate budget rules.)
If the president and Congress come up with an infrastructure bill, even more red ink will flow. The Committee for a Responsible Federal Budget predicts deficits of $1.05 trillion and $1.1 trillion in 2019 and 2020, respectively. Welcome to modern Republican budgeting. Complained Congressman Walter Jones, the North Carolina Republican who has become a GOP dissident of sorts: “At the time I joined, the Republican Party was very outspoken about the debt of the nation. I look at where we are as a nation now, and the Republican Party doesn’t stand for less government and less spending. It spends like no tomorrow.” Congressman Justin Amash, Republican of Michigan, was equally critical, telling Reason’s Matt Welch: “It’s looking as bad as any time I’ve seen I’ve been in Congress.” Legislators, Amash says, continue “to move in the wrong direction.” The last time the deficit ran this high was 2012, part of a four-year, trillion-dollar-plus spending run in the aftermath of the financial crisis and ensuing bailout tsunami.
This time Washington is breaching the trillion dollar barrier during seemingly good economic times. Last year’s CBO assessment was sobering enough. Deficits were to rise due to accelerating Social Security, Medicare, and Medicaid spending and rising interest costs on the growing debt, “accompanied by only moderate growth in revenue collections,” which will be even more moderate due to the tax cuts that took effect on January 1. Added the CBO: “Those accumulating deficits would drive up debt held by the public from its already high level to its highest percentage of gross domestic product (GDP) since shortly after World War II.” Which constituted genuinely unique circumstances, the worst conflict in modern human history, requiring an enormous financial commitment by the Greatest Generation, who borrowed money to, well, save the world. Alas, the projected numbers continually worsen. Last June, the CBO offered its updated estimate, which figured greater deficits and debt since just six months before. Now those numbers will be higher, though the agency has yet to release its estimates. The years beyond look even bleaker. The CBO focuses on debt held by the public, excluding that nominally “borrowed” by the Treasury Department from the Social Security Administration (which represents unfunded but not legally vested future liabilities).
Using this calculus, the CBO warned: “As deficits accumulate in CBO’s baseline, debt held by the public rises from 77 percent of GDP ($15 trillion) at the end of 2017 to 91 percent of GDP ($26 trillion) by 2027. At that level, debt held by the public would be the largest since 1947 and more than twice the average over the past five decades in relation to GDP.” That, however, is just the start. The agency continued: “Beyond the 10-year period, if current laws remained in place, the pressures that are projected to contribute to rising deficits during the baseline period would accelerate and push debt up even more sharply. Three decades from now, for instance, debt held by the public is projected to be nearly twice as high, relative to GDP, as it is this year—a higher percentage than any previously recorded in the nation’s history.” Such a red ink tsunami likely would result in all sorts of fun. The agency pointed to much greater interest costs; not only will the amount of debt rise, but rates likely will climb as the Federal Reserve continues to step back from a decade of loose monetary policy. Former federal budget director David Stockman figures that the Fed will be dumping some $2 trillion of bonds that it accumulated to stimulate the economy. Over the next decade the CBO predicts that total interest payments will rise from about $300 billion to $800 billion, making it one of the largest federal “programs.”
Indeed, that is more than the CBO expects the Pentagon to spend. By reducing total saving, federal borrowing would result in a smaller capital stock. Thus, “productivity and total wages would be lower,” which means less economic growth, smaller taxable incomes, and less tax revenues. Washington would have to tax or borrow more, while people would earn less and have to pay more to government. Finally, warned the CBO, “the likelihood of a fiscal crisis in the United States would increase. There would be a greater risk that investors would become unwilling to finance the government’s borrowing unless they were compensated with very high interest rates. If that happened, interest rates on federal debt would rise suddenly and sharply.” Imagine a repeat of 2008, when the president and Congress borrowed wildly to bail out most every failed institution. Only this time it would come at a much higher cost, likely to create a fiscal crisis when the bills came due. Yet neither Democrats nor Republicans demonstrate the slightest concern about the fiscal cliff over which they are taking the nation. Once it was possible to believe in the theory of “starving the beast”: deny Uncle Sam revenue and he would have to spend less. But legislators quickly worked around that, funding their priorities through borrowed funds. Democrats want more money to spend so they naturally prefer increased revenues. However, tax cuts create no barrier for them, as they cheerfully embrace deficits as “stimulating the economy.” They’ll spend as much as possible at whatever level of debt.
Congressional Republicans prefer to spend while pretending to be fiscal hawks. They want to cut outlays in general but few programs in particular. The president likes and defends the expansive entitlement programs that threaten to bust the budget. Almost every other federal program has at least some GOP backing. Military hawks are the worst, pushing to bury the Pentagon in cash in order to subsidize wealthy allies, fix failed states, and join other nations’ foolish wars. Ironically, fiscal responsibility appears most likely with divided government. Argued Amash of rising spending: “I think this tends to happen when one party has full control of government. That party starts to go on a spending spree, and stops worrying about the debt and deficits.” The best hope may be when congressional Republicans hold the purse strings and have a partisan reason to limit the executive branch. Even then, though, at best the inexorable rise of federal outlays slows. It has been a half century since Uncle Sam’s allowance was actually cut. Of course, better economic growth, spurred by both deregulation and tax cuts, should help ameliorate the impact of increased debt. But slowing the deficit increase is not enough. The U.S. will still be heading into the same abyss, only at a slightly slower speed.
The federal budget is a bit like North Korea: there is no obvious answer. Since any response is immediately painful while the threat looms far in the future, politicians across the political spectrum prefer to leave the problem to their successors. Today’s profiles in courage simply hope to finish their terms before catastrophe arrives. The American people are and will always be the losers. Washington is filled with partisan battles these days. But rarely are they fought over the most important issues, such as a promiscuously interventionist foreign policy and recklessly spendthrift fiscal policy. Republicans should stop play-acting as fiscal conservatives. They should start living up to their rhetoric, or admit that they are little more than Democrats Lite when it comes to fiscal responsibility....

Senate Votes To End Government Shutdown: Stocks Surge To New All Time High

Update 2 and final: Shortly before 1pm ET, the Senate voted to advance a funding bill in an 81 to 18 vote, that will reopen the government, ending a three-day standoff that left federal agencies shuttered and hundreds of thousands of workers furloughed. Democrats agreed to advance a stopgap spending measure lasting until Feb. 8 after Senate Majority Leader Mitch McConnell promised to allow an immigration bill to reach the floor next month. "After several discussions, offers and counteroffers, the Republican leader and I have come to an arrangement. We will vote today to reopen the government to continue negotiating a global agreement," Senate Minority Leader Charles Schumer (D-N.Y.) said ahead of the vote.
The three-week funding bill still needs to pass on a final up-or-down vote, but that is a formality now that the Senate has voted to end dilatory debate. Schumer said McConnell has committed that if negotiators fail to reach an immigration deal before the stopgap spending measure expires on Feb. 8 “the Senate will immediately proceed to consideration of legislation” to protect Dreamers. He said McConnell has promised that immigration debate “will be neutral and fair to all sides.” “Now there is a real pathway to get a bill on the floor and through the Senate. It is a good solution and I will vote for it,” Schumer added. In other words, absent Trump caving on DACA, which is unlikely - the next government shutdown will take place just after midnight on Friday, February 9, which is that much closer to the debt ceiling X-Date...
Update: and there it is, the government shutdown is officially over after 2 and a half days.
*SENATE DEAL REACHED TO END U.S. GOVERNMENT SHUTDOWN: SCHUMER
*SCHUMER SAYS HAS COME TO AN ARRANGEMENT WITH REPUBLICAN LEADER MCCONNELL ON FUNDING BILL
*SCHUMER SAYS THERE'S A `REAL PATHWAY' FOR DACA BILL IN SENATE
*SCHUMER SAYS WILL CONTINUE NEGOTIATING IMMIGRATION LEGISLATION FOR 'DREAMERS'
Schumer's statement...


# TicToc by Bloomberg @tictoc Schumer: “In a few hours, the government will reopen. We have a lot to do…The Trump shutdown will soon end, but the work must go on. And it will” #tictocnews
And so, the government will now reopen for another two and a half weeks, when we go through the same farce on February 8. The reaction is clear - stocks and the dollar up, bonds and bullion down... 

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The Dollar is spiking...

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As The Hill adds, Senate Democrats said they are accepting a deal with Senate Majority Leader Mitch McConnell (R-Ky.) for an immigration vote, clearing the way for passage of a bill to reopen the federal government. McConnell early Monday promised to take up an immigration bill that would protect an estimated 800,000 Dreamers from deportation, under an open amendment process, if Democrats would agree to end the government shutdown. Senate Minority Leader Charles Schumer (D-N.Y) said that pledge was enough for his caucus to accept a three-week government funding bill, which is now set to pass at noon. "After several discussions, offers and counteroffers, the Republican leader and I have come to an arrangement. We will vote today to reopen the government to continue negotiating a global agreement," Schumer said...

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If lawmakers aren't able to get an immigration bill as part of that larger agreement by Feb. 8, the Senate would then take up a separate bill and "the process will be neutral and fair to all sides," Schumer added. The agreement likely ends a three-day government shutdown that began at midnight Saturday after Democrats voted to block a month-long House-passed stopgap that extended funding for the Children’s Health Insurance Program but did nothing to protect illegal immigrants who came to the country at a young age facing deportation...

"The Whole World Is Sick And Tired Of US Foreign Policy"

According to four-star General Wesley Clark, in a 1991 meeting with Paul Wolfowitz, then-under-secretary of defense for policy at the Department of Defense, Wolfowitz seemed a little dismayed because he believed the U.S. should have gotten rid of Saddam Hussein in Operation Desert Storm but failed to do so. Clark summarized what he says Wolfowitz said: “‘But one thing we did learn. We learned that we can use our military in the region, in the Middle East, and the Soviets won’t stop us. We’ve got about five or ten years to clean up those old Soviet client regimes, Syria, Iran, Iraq, before the next great superpower comes on to challenge us.’”
This was certainly the case in the years that followed, as the United States used the pretext of 9/11 to attack both Afghanistan and Iraq with little to no substantive resistance from the international community. This trend continued as the Obama administration heavily expanded its operations into Yemen, Somalia, Pakistan, and even the Philippines, to name a few, right up until the U.S. led a cohort of NATO countries to impose regime change in Libya in 2011. At the time, Russia withheld its veto power at the U.N. Security Council because it had received assurances that the coalition would not pursue regime change. After NATO forces began bombing Muammar Gaddafi’s palaces directly, a furious Vladimir Putin questioned: “Who gave NATO the right to kill Gaddafi?” Following Gaddafi’s public execution on the streets of Sirte, Putin’s criticism of NATO’s betrayal went even further. He stated: “The whole world saw him being killed; all bloodied. Is that democracy? And who did it? Drones, including American ones, delivered a strike on his motorcade. Then commandos – who were not supposed to be there – brought in so-called opposition and militants and killed him without trial. I’m not saying that Gaddafi didn’t have to quit, but that should have been left up to the people of Libya to decide through the democratic process.” No one appreciated it at the time, but America’s unchallenged ability to intervene anywhere and everywhere it chooses ended on that day. Fast forward to Barack Obama’s plans to implement an extensive strike plan against the Syrian government in 2013, which never transpired due strong Russian opposition and widespread protests in the U.S.
A few years later, Russia directly intervened in Syria at the request of the Syrian government and effectively implemented its own no-fly zone in significant portions of the country. Donald Trump’s April 2017 strike on the Syrian government was only conducted after his administration first notified the Russians through a deconfliction hotline set up to manage the Syrian conflict. However, Russia isn’t the only country that is tired of America’s foreign policy, and the recent “emergency U.N. Security Council meeting” to discuss the current situation in Iran is a testament to that. Even Washington’s traditional allies cannot withhold their criticism of America’s desire to police the world. “However worrying the events of the last few days in Iran may be they do not constitute per se a threat to international peace and security,” French Ambassador to the U.N. Francois Delattre said. “We must be wary of any attempts to exploit this crisis for personal ends, which would have the diametrically opposed outcome to that which is wished.” Russia went even further, bringing up America’s own behavior and treatment of protesters as a counter-argument to the notion that Washington is motivated by human rights concerns in Iran. “By your logic, we should have initiated a Security Council meeting after the well-known events in Ferguson,” said Russian U.N. Ambassador Vasily Nebenzya, addressing the U.S. delegation. Iran also insisted the matter was an internal affair and not something for the U.N. to weigh in on, and China agreed, with their ambassador calling it a purely “domestic issue.”
French President Emmanuel Macron even went so far as to accuse the U.S., Israel, and Saudi Arabia of instigating a war with Iran. “The official line pursued by the United States, Israel and Saudi Arabia, who are our allies in many ways, is almost one that would lead us to war,” Macron told reporters, according to Reuters. Instead, Macron called for dialogue with Tehran as he warned against the approach adopted by the aforementioned three countries. Turkish President Recep Tayyip Erdogan also came to Iran’s aid during the protests with Turkey’s Foreign Minister Mevlut Cavusoglu, openly stating: “Iran’s stability is important for us…We are against foreign interventions in Iran.” At the end of last year, Erdogan stated that U.S. sanctions on Iran were not binding on Turkey as it sought to outmaneuver them. At the time, Hurriyet news quoted Erdogan as saying “[t]he world does not consist of the U.S. alone.” America’s influential decline was most evident in Donald Trump’s recent Jerusalem debacle, which saw the Trump administration issue stern threats to the entire world, warning they needed to vote in favor of Washington’s interests at the U.N. Most of the world chose to ignore those threats and gave the United States a giant “middle finger,” so to speak, voting overwhelmingly against the Trump administration. While Washington is more than capable of unilaterally attacking other countries both covertly and overtly with an ever depleting list of allies, what is becoming increasingly clear is that it may not be able to do so without active opposition from the rest of the world, including nuclear powers Russia and China, which refuse to stay silent as the U.S. tries to shape the world in accordance with its geopolitical desires....

The One Reason Why the Crypto Crash Is Temporary

Cryptocurrency prices are tumbling once again overnight with Ripple getting smashed...

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Bitcoin is back below $12,000 and Ethereum testing down towards $1000...

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There are no clear catalysts but @IamJosephYoung notes that the South Korean government previously announced that under-aged investors and foreigners will be prohibited from trading cryptocurrency. Korbit is the first one to comply with that policy. Bithumb and Coinone yet to comment on it. Date expected to be February 1, not confirmed yet. Kookmin Bank and some other banks will not provide support for exchanges. But, Shinhan Bank will. Soon, they'll regret giving the entire market to their competitor. And perhaps the pre-emptive impact of that speculative capital leaving the market is triggering these drops. Additionally, headlines in the SCMP suggest further pressures from China. The People’s Bank of China has ordered financial institutions to stop providing banking or funding to any activity related to cryptocurrencies, further tightening the noose since its shutdown of crypto exchanges last September sent digital currency enthusiasts fleeing overseas. 
# “Every bank and branch must carry out self-inspection and rectification, starting from today,” according to a document issued by the central bank on Wednesday. “Service for cryptocurrency trading is strictly prohibited. Effective measures should be adopted to prevent payment channels from being used for cryptocurrency settlement.” 
The Chinese-language document, as seen by the South China Morning Post, was distributed as an internal document among banks, and not published on the central bank’s official website. However, Government crackdowns, often meant to protect against excessive speculation, also end up dousing the fire of technological innovation, said Kay Van-Petersen, an analyst at Saxo Bank. Decentralised systems like capital cannot be killed because “it will flow to where it is appreciated globally,” he said. “So you can choose to be part of that technological innovation or on the other side of the table.” “Most of the trading is taking place via US dollar now, as some big accounts active in digital currency trading are already on China’s official watch list and payment channel already blocked,” said Zhao Dong, an individual bitcoin investor who spends most of his time in Japan now. “This move by the PBOC is further pushing capital and innovation out of China.” However, as Bonner & Partner's Bill Bonner notes, there's one simple reason why this latest crypto crash is temporary...
# 3.5 million. That’s the estimate for how many “ghost accounts” were created by banking giant Wells Fargo. That’s about 1% of the total U.S. population. It’s also roughly the population of the state of Connecticut. You’ve likely heard the story already, so I won’t go into all the details. But here’s the gist. Wells Fargo created millions of fake accounts for its customers, to charge them fees for services that they never requested. It was later discovered that Wells Fargo was signing customers up for unwanted insurance policies as well, again, to charge customers for services that they never requested. This was outright fraud. It’s for reasons like this that a new type of technology has burst onto the scene. It enables secure, reliable, and transparent transactions, without the potential for manipulation by big financial institutions. As an investor, this technology needs to be on your radar. Here’s why…
# You Can’t Trust the “Trusted” Intermediaries; Recently, I wrote to you to give you an “inside look” at the world of cryptocurrencies. I told you that the crypto market would experience some pullbacks and high volatility. We’re seeing that today. Bitcoin, the world’s first cryptocurrency, dropped about 30% this week. But despite these pullbacks, I’ve also told you that these new crypto assets still have a long way to run in the years ahead. And the reason why can be summed up in one word: blockchain. You’ve likely heard the term “blockchain” associated with the popular cryptocurrency bitcoin. You may even know it as the decentralized ledger technology underpinning cryptocurrencies. But that’s only part of the story. Blockchain technology is also known as distributed ledger technology. We can think of a distributed ledger in its simplest form as a distributed database, distributed in the sense that there are complete copies of this database (or ledger) scattered around the world. Historically, companies, governments, and individuals all keep their records in one centralized database. Imagine a room with racks of computers that store information. But centralized databases can be manipulated. Records can be changed, hard drives can fail, data can be lost, and the records represent only one party’s view of any given transaction. In the world of blockchains and distributed ledger technology, the exact opposite is true. The transactions recorded on the ledger represent a transaction that takes place between the parties involved and is confirmed by the blockchain network via a consensus. Once a transaction is written to the ledger, it is immutable. It cannot be changed. The image below gives you an idea of the difference between these two network types...

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The value and utility that a well-designed blockchain provides is remarkable. Immutability, secure transactions, privacy, transparency, the reduction or elimination of fraud. That last part is key. That’s because in a centralized system, we depend on “trusted” intermediaries (banks and other financial institutions) to conduct transactions. But as we’ve learned time and time again, these “trusted” intermediaries are not at all trustworthy. It wasn’t long ago when the LIBOR scandal uncovered that many of the most “trusted” financial institutions in the world were manipulating interest rates for their own benefit, and of course at the expense of others. Banks like Barclays, Deutsche Bank, JPMorgan Chase, UBS, Citigroup, Bank of America, and the Royal Bank of Scotland were found to be right in the middle of these manipulations. And we’ve already discussed Wells Fargo. The corruption is seemingly endless.
# The New Internet; By design, blockchain technology removes the potential for manipulation to take place. You can think of this as a “new” internet. Today’s internet is how we send pictures, stream videos and music, and send emails. But blockchain networks are different. They are all about transferring value. The internet of value will allow you to send money, fulfill smart contracts, confirm your identity without sending sensitive information, and so much more. The way that value is transferred is typically through a blockchain’s own cryptocurrency. Each blockchain usually has a controlled, finite supply of it by design. For example, in the case of the bitcoin blockchain, bitcoin is its cryptocurrency, its means of transferring value and incentivizing network participants. And the bitcoin supply is finite, only 21 million will ever be produced. Think about that, a blockchain has its own monetary policy written into its software.
# It’s Not Too Late; That’s why I’m so excited about this technology. It has the potential to rewrite our entire society the way the internet did more than 20 years ago. And the assets associated with this technology, cryptocurrency and digital tokens, will continue to soar in value. You may think that the cryptocurrency boom has already peaked. You may think you’re too late. But consider this; I recently came back from a blockchain conference in New York. One of the most remarkable comments made was that the “big money” (hedge funds and large money managers) isn’t really in the cryptocurrency market yet. The total cryptocurrency market sits at around $500 billion. But the institutional funds need the market to hit $1 trillion before they can start investing heavily. And when that happens, most likely sometime this year, the crypto market will really take off. And the institutional money will first put their dollars to work in the cryptocurrencies that have the largest market capitalizations. That means investors should be looking closely at bitcoin, Ethereum, Ethereum Classic, and Bitcoin Cash, to start. There will certainly be some pullbacks and high volatility along the way, like we’re seeing today. But I’m here to tell you, now’s the time to get in....

Overheard At Davos: "Things Are Too Good To Be True"

Last week, the World Economic Forum released its boilerplate list of what it believes are the top risks for 2018. As we reported, the most prominent theme this year was the shift in perceived risk factors: conflict and war, natural disasters, extreme weather and cyberattacks have supplanted social polarization and the rise of populism as the biggest global risk for 2018. Furthermore, the survey of nearly 1,000 experts from government, business, academia and non-governmental organizations showed 93% expect a worsening of political or economic confrontations between major powers in 2018, including 40% who believe those risks have increased significantly. A historical summary of the main risks facing the world according to the WEF...

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And while it's one thing to layout generic risk factors in a paper report, many of which are regurgitated and sterilized for popular use, it's something different to actually discuss the big risks with the participants. That's what Bloomberg has done, and after chatting with some of the world's most influential, most popular and of course, richest, people at this year's Davos boondoggle, notes that there is an overarching sense that the prevailing global complacency will end in tears:
*If things seem too good to be true in the global economy, they probably are. That’s according to some of the investors, Nobel laureates and academics attending the World Economic Forum’s annual meeting in Davos, Switzerland, which kicks off on Monday. “Historically the stock market tends to affect the mood in Davos,’’ said BlackRock Inc. Vice Chairman Philipp Hildebrand, who will be among the 3,000 visitors to the Alpine ski resort. “So if things stay as they are, I expect the mood will be good.’’ The question is, can things stay as they are? Not all of those in Davos are sure they can. 
One person to state the obvious is the man whose name graces the famous Shiller PE multiple, which today is somewhere north of 34: “We are complacent at this moment,” said Robert Shiller, the Nobel laureate from Yale University whose research covers the rise and fall of asset prices. He went as far as to say there are potential parallels between today and 1929, just days before the Great Depression led to the biggest crash in markets in modern history. Any correction would be “probably not as bad as 1929, but it could be disruptive,” Shiller said in an interview. To be sure, as Bloomberg points out, while the meeting’s forecasting track record is patchy, delegates occasionally get the big calls right. Back in 2007, global growth seemed solid and stocks were soaring, yet former U.S. Treasury Secretary Lawrence Summers said that “it’s worth remembering that markets were very upbeat in the early summer of 1914.” Nouriel Roubini of New York University predicted a “hard landing.” Both were eventually proven correct. So, in a nutshell, here are the potential threats to the current outlook, according to those who will grace Davos this year.
# China; The world’s second-largest economy surprised on the upside through 2017, but is beginning to show renewed signs of cooling. A plan to reduce risk in the financial system has slowed credit growth, but the country’s debt pile, equivalent to about 264 percent of gross domestic product in 2017, remains a concern. How the Chinese authorities rein in borrowing without tipping the economy over will be one of the year’s biggest challenges. “I think of China as probably being the epicenter if we got hit by a global recession,” said Rogoff...

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# Global Debt; Of course, it’s not just China. As we showed in early January, according to the IIF, global debt rose to a record $233 trillion in the third quarter of 2017, more than $16 trillion higher from the end of 2016. Private non-financial sector debt hit all-time highs in Canada, France, Hong Kong, South Korea, Switzerland and Turkey. And here lies the rub: as interest rates begin to increase, borrowers might start to feel pain. "We’ve seen the world leverage up,” said Tim Adams, the institute’s president who will be in Davos. “It’s been an incredibly low rate environment which I suspect is going to change." Which brings us to arguably the biggest threat...

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# Interest Rates; Recall over the weekend, One River CIO Eric Peters warned that "Investors Have Made One Gigantic Inflation Bet" With "Devastating" Consequences. In effect, everyone is short inflation which - with central bankers permission - is perpetuating the current Goldilocks environment. However, the trigger for the end to that environment could be an inflationary surge that forces central banks to dump their piecemeal approach to reversing the emergency stimulus of the past decade. With economies expanding so quickly, commodities prices are picking up and manufacturing gauges are pointing to supply constraints. The U.S. also just slashed taxes, and some big employers, like Walmart Inc., are beginning to lift wages. “We could start to see inflation rising more than most people think in financial markets which means the Fed and other central banks will have to raise rates sooner and faster,” said Nariman Behravesh, chief economist at IHS Markit. “That could rattle things up.” Echoing this risk, Rogoff said the “biggest vulnerability” in markets would be a sudden reversal in the trend toward lower inflation-adjusted borrowing costs. It's not just markets, however, which has Davos participants spooked.
# Protectionism; While fears about protectionism proved to be a dud in 2017, 2018 could be different: as Bloomberg notes, President Trump has threatened to tear up the North American Trade Agreement and a pact with South Korea. There’s also a U.S. investigation into allegations that China steals American know-how, and Trump warns he might slap tariffs on Chinese goods, especially steel. “Once there is a major breakdown in trade there is a race to the bottom,” said Dominic Barton, managing director of McKinsey & Co. “It’s important the fragile system we now have continues. We shouldn’t underestimate the potential for disruption.” Margareta Drzeniek Hanouz, a member of the WEF’s Executive Committee, also warned “there is still a danger that the multilateral trading systems could break down as we know it because there are a lot of risks on the horizon."
# Politics; Protectionism a little too tame for your liking? What about all out global conflict? After all, a reminder of where we stand now: North Korea is saber rattling amid Kim Jong Un’s quest for a nuclear-tipped missile. Uncertainty lingers across much of the Middle East as tensions grow between the U.S. and Iran. Syria remains a tinderbox. In Europe, there is still no new government in Germany and Britain’s outlook is obscured by Brexit. “If you could isolate the economics from the politics you would be optimistic about what is happening, but unfortunately you can never isolate the economics from the politics,” said Nobel laureate Christopher Pissarides, who teaches at the London School of Economics. This goes back to what last week's survey revealed, namely that a whopping 79% of respondents see a heightened risk of state-on-state military conflict. In addition to the threat of a conflict on the Korean peninsula, the report pointed to the risk of new military confrontations in the Middle East. It cited a rise in “charismatic strongman politics” across the world and said political, economic and environmental risks were being exacerbated by a decline in support for rules-based multilateralism...

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# Trump; Now that the US government has reopened if only for the time being, Trump is free to make his debut in Davos this year, days after comments that took aim at African nations and the U.K. He still plans to ban travelers from predominantly Muslim countries, build a wall along the Mexico border and has taken an aggressive approach to North Korea. “The most significant political risk is the United States,” said Nobel laureate Joseph Stiglitz of Colombia University. “Uncertainty is bad for the global economy”....

Global Pension Ponzi; Carillion Collapse One Of Many To Come

The looming pension crisis has been signalled in the collapse of Carillion. The deficit of latest private sector dead-on-arrival Carillion is officially £580 million. However, private reports suggest it could be as high as £2.6 BILLION. According to a Sky News investigation: 'the £2.6 billion figure relates to the cost to Carillion of paying an insurance company to guarantee all of its pension liabilities, and is significant because it is likely to be the sum claimed on behalf of the pension schemes as part of the liquidation process.' Nearly 30,000 UK workers' pensions are at risk thanks to Carillion management's total mismanagement of a company that has seen its share price collapse 94% in the last 12 months. Carillion’s 27,500-member pension scheme was placed on an 'at risk list' in autumn 2017. Arguably, it like many other pension funds should have been there many months ago. Sadly, Carillion is just the latest in a very long string of serious company collapses that have highlighted the major pension crisis in the UK and around the Western world. It also likely signals that we may be on the verge of many, many more very large corporate bankruptcies in the UK due to massive debt levels and unfunded liabilities.
This is not a situation unique to the private sector. It will be repeated in the years ahead, both in the public and the private sector. In November 2017, the OECD warned that the UK’s defined benefit workplace pension plans (final salary schemes) as ‘persistently underfunded’ and the state pension as seriously lacking. Everyone is exposed by this and it emphasises the importance of saving for retirement and ensuring your pension is both funded and properly diversified. These ongoing disasters in the UK's pension pots are also a threat to the efforts of prudent individuals who have worked hard to set aside enough for their hard-earned retirements. Private Pension Fund Palaver The UK's Private Pension Fund estimates that it will cost around £900m to cover the costs of the Carillion pension schemes. The idea of the PPF is that it is funded by liquid private companies who offer private pensions, as a sort of insurance should a Carillion-esque disaster strike. The PPF rescue of Carillion pensioners is not a full-blown well-equipped life boat rescue, it's more of a rubber dinghy and a metallic blanket. The rescue fund will pay current Carillion pensioners lower cost-of-living increases than they have been used to, and slash the eventual payments of those who aren’t yet retired. The Telegraph explains the current state of the PPF:
# As of March 2017, the PPF had £28.7bn in invested assets, and cash reserves of £6.1bn. It has a funding ratio, the fund’s assets versus its liabilities, of 121pc. The PPF is the backstop for final salary schemes, which pay guaranteed, inflation-proofed pensions for life. 
At the moment (without the Carillion liability) the levy from the PPF is £550m. With this new expense companies who have their own defined-benefit schemes (and therefore must pay into the fund) will see their reviews increase. What damage will this do to the wider economy? How sustainable is a fund that is designed purely to rescue unfunded and bankrupt pension funds? Why, if you are having to effectively-bailout the pension schemes of your failed contemporaries? Are you at all incentivised to invest in your own company, put up wages or even increase pension contributions yourself? It's not as though the PPF is filling its contributors with confidence that levies are going to go down any time soon. The failure of Carillion is a stark reminder that more often than not institutional shareholders, management board members and (in this specific case) politicians act in their own interest, frequently short term, rather than stopping to think what the overall, long term impact of their actions will be. Reports state that Carillion over 2015 and 2016, £162 million has paid dividends to shareholders, compared with just £94 million to address the pension deficit.
# The UK's pension crisis;   Last year we brought you the news that a Pensions and Lifetime Savings Association report found that three million workers with final salary pensions have 50% chance of losing up to fifth of their income because their employers have made unaffordable promises. We outlined:
* The PLSA data finds the most vulnerable employers have a 50:50 chance of not having an insolvency event in the next 30 years: “More than 11 million people rely on defined benefit pension schemes for some or all of their retirement income but there is a real possibility that without change we will see more high profile company failures such as BHS or Tata Steel.” Former pensions minister Steve Webb told City A.M. that he agrees: “It’s not enough money. It’s just brutally not enough money going in,” Just this week FCA Chief Executive Andrew Bailey made a point of the dangers looming for retirees, in his annual Mansion House speech: “There is a clear risk that the savings rate for retirement is for many people too low to meet their expectations of retirement.”
The Carillion debacle will just add to this drama. The Private Pension Fund will once again have to step in and cover the expenses of the company's 13 pension schemes. Of course, at the moment all of the headlines are all about Carillion's pension disaster. But what about the hundreds of sub-contracting firms who have their own schemes to cover? And are no longer going to be paid? The ripple effect of the downfall of this firm will be far and wide. Yet again the mismanagement by the few will end up having an effect on the many. The pension crisis disaster could leave multiple pension pots unfunded and thousands of people bankrupt. Private pensions are not alone Many Brits and Europeans have more than one pension and this includes the state pension. For those in the United Kingdom, this is sadly also under threat. Back in December, we brought you news of a report from the OECD that found those Brits planning to rely solely on their state pension will be left 'with few resources.' So bad is the situation that the body felt the need to remind politicians of the importance of long-term planning over short-term policy gains. Inevitably, it is the tax payer who ends up forking out for government mistakes when it comes to misspending. Earlier this month the Government Actuary Department (GAD) said the rate of National Insurance (the manner in which Brits contribute to state pensions) may have to increase by as much as 5% in order to maintain the stability of the state pension fund.
This is bad news for both worker and employer. Estimates suggest this increase could add an additional £120 and £138, respectively in contributions from each party. Furthermore, the lack of money means more time is required to have enough for retirees, therefore there is a suggestion that the retirement age is increased once again. This would be a measure to avoid increasing taxes. GAD warned: 'There won't be enough coming in from National Insurance to cover the cost of paying the state pension... 'To stop that happening, NI contributions have to go up or the government will have to make changes to the state pension or the age it is paid from.' However, even with this and recently announced changes to minimum pension contributions the Department of Work and Pensions estimate 38% of the UK workforce are under-saving for retirement. So for those who are saving and working, this is no doubt yet another cost that will come back to bite you no matter how responsible you have been with your own pension pot. When it comes to your pension, beware who you trust It is vital that savers and investors begin to take responsibility for their own pensions and ask questions. Most importantly one must ask if you can hold gold as part of your pension. Gold should be a key part of your pension portfolio. At the moment UK pensions are at threat not just because of Carillion-esque disasters or bad planning by governments, but indirectly due to likely being used to bail-out pension pot implosions. Gold cannot be taken by governments or banks looking to top up their coffers.
The economy shows that whilst stock and bond markets have done well in the short term, they are artificially overvalued. Once again this is with thanks to the easy monetary policies of central banks and governments. So whilst readers may think they are in well-funded pension pots, or have some level of protection, where is the real value coming from? Gold will protect in coming pension crisis This is where gold plays a key role. Dr. Constantin Gurdgiev, formerly an adviser to GoldCore, says the following about the importance of having gold in your pension: “Gold is a long-term risk management asset, not a speculative one. As such it should be analysed and treated predominantly in the context of its role as a part of a properly structured, risk-balanced and diversified portfolio spanning the full life-cycle of the investment and pension horizon for individual investors and those with pensions. Whether they be SIPPs in the UK or IRAs in the USA.” Investors in the UK and Ireland, the US, the EU can invest in gold bullion in their pension, through self-administered pension funds. UK investors can invest in gold bullion through their Self-Invested Personal Pensions (SIPPs), Irish investors can invest in gold in Small Self Administered Schemes (SSAS) and US investors can invest in gold in their Individual Retirement Accounts (IRAs). The pension crisis is a multi-trillion pound crisis.
It is not going to go away. Adding physical gold to your pension is a key way to protect your retirement from the pensions time bomb. As is owning physical gold outside a pension fund and as a hedge and safe haven, store of value. Pension funds, throughout the West, have a distinct lack of diversification when it comes to assets. This has cost pension holders a huge amount of money and places their future viability at risk. Gold bullion has an important role to play over the long term in preserving and growing pension wealth....

Phoenix Capital; The Fed's Frankenstein Policies Are About To Turn On Their Master

The financial media is finally catching on to something we’ve been screaming about for years… That the Fed’s preferred metric for measuring inflation is a complete joke. Making matters more difficult, the Fed’s preferred inflation gauge does a pitiful job of capturing the quandary facing many households that live paycheck to paycheck. The so-called core PCE is the central bank's go-to inflation metric. It is derived by netting out the necessities of food and energy from personal consumption expenditures. But the core PCE also minimizes the weight of rent and over-emphasizes health care due to Medicaid and Medicare’s inputs. What the article doesn't understand is that this scheme is intentional.
The reality is that since the US abandoned the Gold Standard in 1971, the Fed has effectively been “papering over” declining living standards in that the actual “cost of living” in the US has soared relative to real incomes. This fact stares all of us in the face every day. Back in the late ‘60s / early ‘70s, one parent worked and most Americans had a decent quality of life. Today both parents typically work and are one financial emergency away from being broke. The Fed masks this by understating inflation and by providing an endless stream of easy credit/ debt. This is why the Fed's continuous “gosh, inflation is just too low, we better keep on printing money forever,” shtick is so ridiculous. However, like the famous Frankenstein monster, the Fed’s inflationary policies are about to turn on their master. The fact is that inflation is actually clocking in well over 3%. And it’s about to blow up the Everything Bubble. Bonds trade based on inflation. If inflation rises, so do bond yields. When bond yields Rise, bond prices FALL. And when bond prices FALL, the massive debt bubble begins to burst. On that note, the yield on the most important bond in the world: the 10-Year Treasury, has already broken above its 20-year trendline...

US Treasury Yields Rise

The US is not alone, the yield on 10-Year German Bunds has also broken its downtrend...

German Bund Yields Rise

Even Japan’s sovereign bonds are coming into the “inflationary” crosshairs with yields on the 10-Year Japanese Government Bond just beginning to break about their long-term downtrend...

Japanese Bond Yields Rise

Globally the world has added over $60 trillion in debt since 2007 and all of this was based on interested rates that were close to or even below ZERO. All of this is at risk of blowing up courtesy of this spike inflation. And it's going to collapse most asset classes in ways we haven't seen since 2008....

Cryptocurrencies Leg Lower After South Korean Tax Headlines

Update 1100ET: Headlines from South Korea's Yonhap news regarding new tax rules for cryptocurrency exchanges appear to have sparked the latest leg down in cryptocurrencies. As CoinTelegraph reports, Local news agency Yonhap reports that South Korean government has announced Monday, Jan. 22 that it will be collecting a 22 percent corporate tax and a 2.2 percent local income tax from the country’s cryptocurrency exchanges. The tax announcement comes right after the conclusion of an unprecedented anti-money laundering probe into six major South Korean banks that showed a 36 times increase in commissions from virtual accounts linked to crypto exchanges, from 61 mln won ($57,340) in 2016 to 2.2 bln won ($2 mln) in 2017. Yonhap reports that South Korean exchange Bithumb made 317.6 bln won ($295,368,000) last year in total, so is expected to pay about 60 mln won in taxes, according to the tax percentages announced Monday. The announced tax percentages are in line with the South Korean tax code for all corporations that make a yearly income of over 20 bln won ($18.7 mln). Cryptos legged lower...

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Which is slightly odd since this suggests shutdowns are off the cards, why would government go through the logistics of taxation when it will merely shutter these accounts? From South Korean bank blocks to Bulgarian ponzi scheme shutdowns and a Bali bitcoin crackdown, you can take your pick as to what is driving the sudden plunge in cryptocurrencies this morning. Ethereum is back below $1000, Bitcoin is back to a $10k handle, and Ripple is down 30% from the weekend's highs... 

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Weakness began around 6amET but really accelerated at around 8am ET...

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With Bitcoin and Ethereum breaking key support levels...

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The catalyst for the move is uncertain at best with numerous headlines over the weekend:
- OneCoin offices were raided and its servers seized in Sofia, Bulgaria, on Jan. 17 and 18, as yet another step in a series of international raids and court cases against the highly-controversial altcoin. Although the servers were shut down, OneCoin currently remains operational.
- Bitcoin exchanges are under fire in India, as many of the nation’s top banks have suspended or greatly curtailed functionality on exchange accounts. State Bank of India (SBI), Axis Bank, HDFC Bank, ICICI Bank and Yes Bank have all taken strong action toward crypto exchanges, either closing accounts or severely limiting functionality. The banks cite the risk of dubious transactions, according to local reports.
- The biggest Nordic bank sent a memo to all its employees on Monday informing them that they will not be allowed to trade in Bitcoin and other cryptocurrencies. Nordea Bank AB will impose the ban from Feb. 28, after the board agreed to take a stand due to the “unregulated nature” of the market, spokeswoman Afroditi Kellberg said by phone. The bank had about 31,500 employees at the end of the third quarter.
- Bitcoin is under heavy surveillance on Bali, an island in the Indonesian archipelago, according to local reports. Central Bank officials are seeking to crack down on the use of the cryptocurrency anywhere in the nation...

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But we do note that the most recent plunge occurred as Bitcoin broke below its 100-day moving average at $10951...

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The Bitcoin futures short keeps growing...

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And with the short overhang growing weekly, one wonders how long before a short squeeze, whether due to some long-overdue bullish catalyst or for some other reason, in unleashed first in bitcoin futures, then quickly cascading into the spot market, potentially unleashing the next move higher in the cryptocurrency space. Year-to-Date, Ethereum remains the only big winner of the major cryptos...
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Finally, as a reminder, this January weakness in Bitcoin is not unusual as it appears a pre-Lunar-New-Year sell-off is prevalent...

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