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Zero Hedge
26 сентября, 20:33

Advice from the trader who made $1+ billion in 1929…

Via Soveriegnman.com [Editor’s note: This letter was co-written with Tim Price, co-founder of the VT Price Value portfolio and editor of Price Value International.] In the late spring of 1720, Sir Isaac Newton decided to sell his stocks. Newton had been an investor in the South Sea Company, a famous enterprise which effectively commanded a trading monopoly with South America. The investment had already made Newton a lot of money, he was up more than 100% in a very short time. In fact, investors were clamoring to buy up the South Sea Company’s stock, and the share price kept climbing. And climbing. Newton sensed that the market was getting overheated. It no longer made sense to him. So he sold. There was only one problem: the share price of the South Sea Company kept climbing. All of Newton’s friends were getting rich. So, against his better judgement, Newton went back in, repurchasing shares at more than three times the price of his original stake. The market then collapsed, and he lost virtually all his life savings. The experience is said to have given rise to his bemused response: “I can calculate the movement of stars, but not the madness of men.” It’s now been roughly ten years since the Global Financial Crisis began. In the time-honoured manner of regulators, they waited until the battle was largely over, then waded onto the battlefield and shot the survivors. The decade since has seen unprecedented monetary stimulus, i.e. central bankers have expanded their various money supplies by trillions upon trillions of dollars, giving rise to a massive bubble in asset price worldwide. Stocks are at all-time highs. Bonds are at all-time highs. Property prices are at all-time highs. Many alternative assets like private equity and collectibles are at all-time highs. Yet asset prices keep climbing. Perhaps desperate to avoid the mistakes of Isaac Newton, Scotsman Hugh Hendry, founding partner of Eclectica Asset Management, has recently announced that he is closing his hedge fund. Hendry is a famous critic of this monetary absurdity and consequent asset bubble. “It wasn’t supposed to be like this.. markets are wrong,” Hendry told investors. Of course, the market is under no obligation to be right. Ever. Hendry’s view is accurate– nearly every objective metric shows that the market is incredibly overpriced. Clint Eastwood’s infamous character Dirty Harry once remarked that a man needs to know his limitations. We think we know at least some of ours: we can’t time markets. And the only thing we know with any certainty, as sure as night follows day, is that there are always corrections– both booms AND busts. A decade’s worth of QE and ZIRP has fuelled a runaway train, and at some point there will be a correction. Does it make sense to stand in front of the train? Or is it better to, as Isaac Newton did, leap aboard for some final thrills? We prefer neither. Instead we’re diversifying as pragmatically as we can, working diligently to find undervalued companies run by honest, talented managers. It requires more hard work and patience than buying some overpriced index fund or whatever the popular investment du jour happens to be. But nobody ever said this investing business was supposed to be easy. Earlier this year my publishers invited me to write the foreword to their definitive edition of Reminiscences of a Stock Operator, a thinly disguised biography of the legendary trader Jesse Livermore. Livermore was extraordinary. Born in 1877, Livermore ran away from home as a child and soon began trading stocks. By the time he was 20, he had already amassed a fortune of $3 million, more than $75 million in today’s money. Livermore sold short, i.e. bet that stock prices would fall, just prior to the 1907 crash, as well as the 1929 crash. His bets were so lucrative that, going into the Great Depression, Livermore had a fortune of more than $100 million, or about $1.4 billion today. But Livermore wasn’t just great at making money from overheated markets. He was also a master of losing money. This book is widely and rightly regarded as an investment classic. It is also crammed with valuable observations about the practice of speculation and successful trading. Among them, the importance of being patient and disciplined: “After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made big money for me. It was always my sitting.” Sitting. As in, doing nothing. As in… neither standing in front of the train, nor jumping on board. Hedge fund managers like Hugh Hendry don’t have this option. They have to be invested. They have to report to their investors every quarter… and if they’re not making money, investors bail. But as an individual, you are not accountable to anyone but yourself. So you are free to sit… and patiently wait for the safe, compelling investments that will arise once market conditions return to sanity.

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26 сентября, 20:26

Black Congresswoman 'Takes A Knee' On House Floor... Because "Trump's A Racist"

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Texas Rep. Sheila Jackson Lee kneeled during a speech on the House floor Monday as a show of support for NFL players who demonstrated this weekend against President Trump. As The Daily Caller reports, Jackson Lee said during remarks on the House floor... “There is no basis in the First Amendment that says that you cannot kneel before the national anthem or in front of the flag,” Jackson Lee, a member of the Congressional Black Caucus, took issue with a speech Trump gave on Friday in which he called on NFL owners to fire players who refused to stand for the national anthem. Jackson Lee claimed that the “son of a bitch” remark was a racist comment by Trump. “There is no regulation that says that these young men cannot stand against the dishonoring of their mothers by you calling them ‘fire the son of a b.’ You tell me which of those children’s mothers is a son of a b. That is racism. You cannot deny it. You cannot run for it, and I kneel in honor of them,” Jackson Lee said. And in case you wondered why she specifically decided to 'take a knee' during her House Floor speech, this is what she said... "...I kneel because I’m going to stand against racism. I kneel because I will stand with those young men, and I’ll stand with our soldiers. And I’ll stand with America, because I kneel..." Clear enough? Jackson Lee was not alone in her disdain as The Hill reports a second House Democrat kneeled on the House floor on Tuesday to show support for NFL players protesting police brutality. Rep. Mark Pocan (D-Wis.) took a knee behind his podium at the end of a floor speech denouncing President Trump’s attacks on athletes who have been kneeling during the national anthem to draw attention to law enforcement’s treatment of African Americans. “I think today, taking a knee is becoming a broader sign of patriotism and respect for our country,” Pocan said. .@Repmarkpocan displays word cloud from President Trump's tweets and kneels at end of his remarks. #TakeAKnee pic.twitter.com/Dnjq7AnxRV — CSPAN (@cspan) September 26, 2017 Moments later on the House floor, Rep. Alex Mooney (R-W.Va.) defended Trump for calling on NFL players to stand during the national anthem. “The president is right to publicly object to this disrespect to our flag and nation,” Mooney said.   “While we can disagree on politics and policies, we should not denigrate our flag in our national anthem.” San Antonio Spurs coach Gregg Popovich went a little further than most, claiming on ESPN2’s “The Paul Finebaum Show” Monday that “people have to be made to feel uncomfortable,” specifically singling out white people. “If you read some of the recent literature, you’ll realize there really is no such thing as whiteness, but we kind of made that up. That’s not my original thought, but it’s true,” Popovich said.   He added, “Because you were born white, you have advantages that are systemically, culturally, psychologically there. And they have been built up and cemented for hundreds of years. But many people can’t look at it. It’s too difficult.”

26 сентября, 20:15

Dramatic "Before And After" Photos Show Puerto Rico's Plunge Into Darkness

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It’s been a week since Hurricane Maria made landfall in eastern Puerto Rico, and hundreds of thousands of Puerto Ricans living in remote villages remain cut off from the world, after the storm trashed power grids, tore up roads, downed cell towers and caused a dam in the northwestern part of the island to fail, endangering tens of thousands of people living in a valley below. Hospitals, especially in rural areas, have been hopelessly crippled by the storm, which has left them dependent on backup generators for power, threatening the lives of thousands of vulnerable patients. Shipments of diesel fuel to the hospitals are delivered by armed guards to protect against looters – which sounds like something from the plot of one of the “Mad Max” movies. CNN sent low-flying planes over the island to survey the landscape, and they’ve brought back some stunning footage of the damage. News anchor Jake Tapper tweeted this before-and-after photo, which shows how more than 90% remains mired in blackouts more than a week after the storm made landfall. Puerto Rico before the hurricane: And after: Some meteorologists said Maria hit Puerto Rico with the flooding of Hurricane Harvey in Houston, and the windspeeds of Hurricane Irma in Florida.   "It is as if Puerto Rico got hit with the strength of Irma's winds, leaving a trail of devastation worse than much of the destruction Irma left in Florida," said CNN meteorologist Judson Jones. "The rainfall in some areas of Puerto Rico rival the amounts of rain left by Harvey in Houston. And now they are contending with a dam disaster that is reminiscent of California's Oroville Dam crisis earlier this year." After flying over Puerto Rico on Sunday, CNN's Leyla Santiago said residents could be seen along the highways searching for a cellphone signal. With the island’s emergency responders still struggling to evacuate and rescue villagers, the Trump administration has been criticized for not doing enough. In a tweet Sunday, Clinton said, "President Trump, Sec. Mattis, and DOD should send the Navy, including the USNS Comfort, to Puerto Rico now. These are American citizens." President Trump, Sec. Mattis, and DOD should send the Navy, including the USNS Comfort, to Puerto Rico now. These are American citizens. https://t.co/J2FVg4II0n — Hillary Clinton (@HillaryClinton) September 24, 2017 Puerto Rico Governor Ricardo Rosselló appeared on Morning Joe Tuesday morning to plead for more assistance for the island. “This has been an unprecedented disaster, not only for Puerto Rico, but for all of the region...we need more help. We need more help with resources. We need more help with people being deployed so that we can get logistical support elsewhere." However, the White House has countered that airplanes and ships loaded with meals, water and generators have been arriving or are headed to Puerto Rico and other affected Caribbean islands. FEMA tweeted that more than 10,000 federal employees are in Puerto Rico and the US Virgin islands helping with search and rescue efforts and moving goods. .@USCG continues hurricane #Maria response with 13 cutters, 10 aircraft, partners @fema @USNavy @prffa Read more https://t.co/HbIHmFe2f3 pic.twitter.com/R6ZBB13iuq — USCGSoutheast (@USCGSoutheast) September 25, 2017   10k+ federal staff are on the ground in PR/USVI assisting with search & rescue, restoring power, & moving commodities. #Maria [????: @USArmy] pic.twitter.com/8mbThIzD7T — FEMA (@fema) September 25, 2017              CNN              reported that Homeland Security Adviser Tom Bossert and FEMA administrator Brock Long were traveling to Puerto Rico. "The federal response has been anything but slow," Sanders said. "There's been an unprecedented push through of billions of dollars in federal assistance." As Bloomberg points out, Puerto Rico’s recovery will depend heavily on federal aid because the island simply has no money to cope with a catastrophe like the storm that passed through last week. The island has effectively filed for bankruptcy to try and escape $70 billion of debt. The fiscal collapse has effectively shut down Puerto Rico’s access to the US bond market, promising to make it more difficult for the island’s government to borrow money for the rebuilding effort. As President Trump pointed out in a series of late-night tweets, the island is in “deep trouble,” noting that the country’s “old” electrical grid was devastated. Texas & Florida are doing great but Puerto Rico, which was already suffering from broken infrastructure & massive debt, is in deep trouble.. — Donald J. Trump (@realDonaldTrump) September 26, 2017   ...It's old electrical grid, which was in terrible shape, was devastated. Much of the Island was destroyed, with billions of dollars.... — Donald J. Trump (@realDonaldTrump) September 26, 2017   ...owed to Wall Street and the banks which, sadly, must be dealt with. Food, water and medical are top priorities - and doing well. #FEMA — Donald J. Trump (@realDonaldTrump) September 26, 2017 Congress last year enacted emergency rescue legislation that extended Puerto Rico’s authority to seek court protection from creditors, which it previously lacked. But the federal government has provided little financial assistance beyond that. Puerto Rico’s representative in Congress, Jennifer Gonzalez Colon, said she has talked with House Speaker Paul Ryan about securing more aid from the Federal Emergency Management Agency. When all is said and done, the disaster could cost as much as $30 billion and some residents could be without power for months. As we reported yesterday, in many areas, residents have been forced to transact only in cash, which is quickly becoming a problem for those who didn’t stockpile enough money ahead of the storm.

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26 сентября, 20:14

Tailing 2-Year Auction Prints At Highest Yield Since 2008

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Having spooked the bond market earlier with her surprisingly hawkish remarks, and sending the 2Y surging while flattening the curve even more, moments ago the Treasury sold $26 billion in 2 Year paper at a yield of 1.462%, a notable jump from last month's 1.345%, and the highest since October 2008. It also tailed by 0.2 bps to the 1.460% When Issued, which however was to be expected following the sharp move just minute earlier. The internals were average, with the cid-to-cover at 2.88 vs last month's 2.86%, and the six previous auction average of 2.91. Indirect bidders withdrew further, and were awarded 44.2% vs six previous auction average 55.1%, and down from 45.80% in August. This was the lowest Indirect takedown since December. Direct bidder interest jumped, resulting in an award of 19% vs six previous auction average 13.7% and notably higher than the 12.6% in August. Finally, Dealers were left to sop up the mess, and were awarded 36.8% vs six previous auction average 31.2%. Overall an average auction, and judging by the rising yield, the bond market is increasingly confident that the short end will continue to rise even if it means the yield curve flattens further as the long end refuses to move nearly as much.

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24 сентября, 00:54

Former Democratic Congresswoman Urges All NFL Players To Kneel During National Anthem

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Having left public office in January, former U.S. Congresswoman from Maryland, Donna Edwards, has decided to get involved in the current meme of the moment battle over respect and freedom of 'speech' between President Trump and The NFL... On Sunday, I hope every @NFL player takes a knee in solidarity w @Kaepernick7 against the white supremacist who squats in our White House. — Donna Edwards (@DonnaFEdwards) September 23, 2017 We have to admit we are a little confused. We thought that if you disrespected anything American, you were automatically a 'Russian puppet', but now it's 'cool' to bash America's flag, its anthem, and The White House? For some reason, Edwards decided to tweet this shortly after... For the record, I do stand for the flag. I stand because I respect our Constitution and value the freedom of speech of others not to do so. https://t.co/0WW92UwS2d — Donna Edwards (@DonnaFEdwards) September 23, 2017 So do as I say, not as I do? This seemed to sum up what we suspect will occur should this former congresswoman get her wishes... I support NFL players’ right to take a knee, and NFL fans’ right to take a walk. — David Burge (@iowahawkblog) September 23, 2017

24 сентября, 00:45

Cops Delete Facebook Post Of Massive "Weed" Bust After The Internet Corrects Them

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Authored by Carey Wedler via TheAntiMedia.org, Last week, officers from Missouri’s Jasper Police Department celebrated a marijuana bust they deemed worth roughly $100,000. In a now-deleted Facebook post, they disclosed their satisfaction with their operation, which took ten cops and sheriff’s deputies and a National Guard helicopter to conduct. As the Riverfront Times noted (grabbing screenshots before the post was taken down): "’What a great team effort today,’ the Jasper department’s now-deleted post read. ‘It was hot and humid and not easy getting these plants. We ALL got in the thick of things and got it done.’“ The Times summarized the post’s sentiment: “In a curious bit of show-your-work math, the department calculated the nearly 290 plants seized would have produced — “on the low side” — 63 pounds of marijuana with a “street value” of roughly $100,000.” But commenters were quick to point out an apparent flaw in the officers’ bust: it wasn’t cannabis they had seized, but hemp, they said. You can’t get high from smoking hemp, and the material can be used to create anything from clothing, soap, paper to sails, rope, fuel, and concrete, called “hempcrete.” It is both durable and sustainable. “That’s hemp,” one comment bluntly said, according to the Times, though the rest of the comments are not available to view because the original post has been removed.   One of Missouri’s two entities allowed to grow hemp for certain medicinal purposes, Mitch Meyers of BeLeaf, said, “Sure looks like hemp to me.”   “These look to me like wild hemp plants, because they are tall and without buds,” Show-Me Cannabis Executive Director John Payne told the Times, which sent images of the confiscated plants to several experts.    “That probably means that no one was actively cultivating them. If that’s the case, the street value of those plants is next to nothing.” Many comments echoed similar sentiments, “as the post racked up hundreds of comments, among them mocking congratulations to cops for confiscating the raw material of natural fiber rope,” the Times reported.“Jasper Police, who cover an area about twenty miles northeast of Joplin, pulled the post on Wednesday morning.” However, there is still some doubt as to whether the plants were hemp or cannabis. Dr. Jason Strotheide, founder of licensed hemp grower Noah’s Arc Foundation, said it is “nearly impossible to tell the difference between hemp and marijuana until late in flower.“ Rusty Rives, police chief of the Lamar Police Department, which participated in raid stuck by the claim that it was weed. “I’m just looking at the picture,” he said. “but they look like marijuana plants to me.” It doesn’t matter either way. Both are illegal in the state of Missouri despite nationwide efforts to legalize both marijuana and the hemp plant. The Times had difficulty obtaining comment other officials involved, but by last Thursday, Jasper police chief Chad Karr responded, defending the Facebook post. “The goal, Karr says, was never to brag about a bunch of pot plants, but rather to serve notice to a suspected meth dealer operating in the area.” But the post reached many more people, accruing over 1,000 comments, Karr said, some of which were “abusive.” As far as the “$100,000” estimation, “Karr says he tried to estimate conservatively. He admits he’s no expert when it comes to marijuana and doesn’t care to be.” However, he suggested the plants were not growing on their own, without human cultivation, because there were trails leading out to the field where they were confiscated. Nevertheless, he claims cannabis is not an issue for him. “I think the misconception is we go to work to bust pot heads,” he said. “I personally do not. I know what the problem is — it’s opiates and methamphetamine.” Hopefully, his sentiment will continue to grow among law enforcement, who are increasingly trolled when they boast of cannabis busts on social media. The Times reports that for now, it doesn’t appear any charges have been filed over the plants.

24 сентября, 00:13

U.S. B-1B Bombers Fly Just Off Coast Of North Korea: 4 Reasons Why This Time It's Different

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Just before North Korea’s foreign minister was due to address the United Nations, the Pentagon announced that U.S. Air Force B-1B Lancer bombers escorted by fighter jets flew in international airspace over waters east of North Korea on Saturday, in a show of force which "demonstrated the range of military options available to President Donald Trump." The flight was the farthest north of the demilitarized zone separating North and South Korea that any U.S. fighter jet or bomber has flown in the 21st century, the Pentagon added. B-1B Lancer prepares to take off from Andersen AFB, Guam, Sept. 23, 2017 According to Reuters, the B-1B Lancer bombers came from Guam and the U.S. Air Force F-15C Eagle fighter escorts came from Okinawa, Japan. The Pentagon saod the operation showed the seriousness with which it took North Korea’s “reckless behavior.” #USAF bombers, fighters fly in international airspace east of #NorthKorea, farthest north of the DMZ in 21st century https://t.co/R5DLUQigSF pic.twitter.com/fsFx4Q1oKE — U.S. Pacific Command (@PacificCommand) September 23, 2017 “This mission is a demonstration of U.S. resolve and a clear message that the President has many military options to defeat any threat,” said Pentagon spokeswoman Dana White, calling North Korea’s weapons program “a grave threat" adding that “we are prepared to use the full range of military capabilities to defend the U.S. homeland and our allies.” #PACOM stands prepared to use our full range of military capabilities to defend the U.S. homeland and our allies if called upon to do so. — U.S. Pacific Command (@PacificCommand) September 23, 2017 The DMZ is a strip of land running across the Korean Peninsula near the 38th Parallel, separating North Korea from South Korea. It was created in 1953, following the armistice which ended the Korean War. The patrols came after officials and experts said a small earthquake near North Korea’s nuclear test site on Saturday was probably not man-made, easing fears Pyongyang had exploded another nuclear bomb just weeks after its last one. Reversing its original assessment, China’s Earthquake Administration said the quake was not a nuclear explosion and had the characteristics of a natural tremor. While the US has flown similar sorties before, according to The Aviationist, the show of force is a bit more interesting than usual, for four reasons: it is the farthest north of the Demilitarized Zone (DMZ) any U.S. fighter or bomber aircraft have flown off North Korea’s coast in the 21st century; unlike all the previous ones, the latest sortie was flown at night, hence it was not a show of force staged to take some cool photographs; no allied aircraft is known to have taken part in the mission at the time of writing, whereas most of the previous B-1 missions near the Korean Peninsula involved also ROKAF (Republic Of Korea Air Force) and/or JASDF (Japan’s Air Self Defense Force) jets; it was a U.S. Air Force job: no U.S. Marine Corps F-35B stealth jet took part in the show of force this time, even though the STOVL (Short Take Off Vertical Landing) variant of the Joint Strike Fighter has taken part in all the most recent formations sent over Korea to flex muscles against Pyongyang. The photo here below shows the “package” assembled for Sept. 14’s show of force. Munitions from a U.S. Air Force, U.S. Marine Corps and Republic of Korea Air Force (ROKAF) bilateral mission explode at the Pilsung Range, South Korea, Sept 17, 2017.

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23 сентября, 23:45

Congress Passed A Bill To Deport Suspected 'Gang' Members - There's Just One Problem

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Authored by Sarah Cronin via TheAntiMedia.org, Last week the House passed a bill to expand the government’s ability to deport immigrants on the basis of alleged gang affiliation.  Promoted by Republicans as a way to target members of gangs such as the transnational M13 gang, H.R. 3697, the “Criminal Alien Gang Member Removal Act,” amends the Immigration and Nationality Act by adding gang affiliation to the list of criminal offenses that qualify as grounds for detention and deportation. The bill passed 233 – 175 with almost unanimous Republican support and now must gain approval in the Senate, where it is currently pending in the Committee on the Judiciary. While the bill still has yet to come to a vote in Senate, it has already gained the presidential nod of approval. Shortly following the bill’s passage, the White House Press Secretary published a statement applauding Congress’ decision, and the administration already affirmed that “If H.R. 3697 were presented to the president in its current form, his advisors would recommend that he sign the bill into law,” according to a  statement of administrative policy published last Tuesday. The bill has received strong criticism from House Democrats and organizations such as the National Immigrant Justice Center (NIJC) and the American Civil Liberties Union (ACLU), who claim the bill provides the government with sweeping discretion to detain and deport immigrants using a broad and arbitrary label. The bulk of the debate on the bill revolves around how it defines ‘gangs.’ The bill defines a gang as any group of five or more people that has as one of its primary purposes the commission of one or more specified criminal offenses. The bill goes on to expand on these ‘criminal offenses’ to include felony drug offenses, which would include the possession of marijuana. It also explicitly names the ‘harboring’ of undocumented immigrants as a crime. This means, theoretically, that any organization that helps, shelters, or hires undocumented immigrants could be considered a gang, and thus any immigrant member of such group could theoretically be detained or deported as a gang member. The National Immigrant Justice Center’s recent policy report explains:  “For example, the government could attempt to designate a church group that elects to offer shelter to an undocumented immigrant as a gang. Similarly, a fraternity whose members use expired identification documents to purchase liquor or engage in initiation rites or a Fortune 500 company that employs workers who may or may not have irregular documents could also fall under this definition.” The government already has a history of liberally applying the ‘gang’ label. Just ask the Juggalos, a fan group of the Insane Clown Posse. They took to the streets Saturday to protest the FBI’s designation of their group as a gang in the bureau’s National Gang Threat Assessment report back in 2011. The fans and the band have been fighting to clear their name ever since. The issue even ended up in court last year when the Clown Posse sued the FBI for withholding documentation about the gang classification of their fans. In a revealing profile about the group, Vox writer Dylan Matthews explained that the parallel would be to criminalize someone for being a “Belieber”(Justin Bieber fan) or a “Swiftie” (Taylor Swift fan). While perhaps ridiculous in theory, the classification has had serious consequences for group members, causing some fans to lose their jobs and, in some cases, their parental rights because of their affiliation with the so-called ‘gang.’ In the case of H.R. 3697, the consequences of alleged gang affiliation would be much more dire — as in no-bond mandatory detention. “Mandatory detention refers to a provision of the INA that states that non-citizens with certain criminal convictions must be detained by ICE. People who are subject to mandatory detention are not entitled to a bond hearing and must remain in detention while removal proceedings are pending against them,” explains a policy handout by the Immigrant Law Research Center. H.R. 3697 would expand the terms of mandatory detention, which the ACLU considers a clear violation of the Fifth Amendment’s Due Process Clause. It also transfers the discretion of determining bond eligibility from the Attorney General to the Secretary of Homeland Security. “[The bill] grants the Department of Homeland Security massive discretion to designate a group of people as a ‘criminal gang,’ based on secret evidence, and without meaningful judicial review,” the ACLU writes in their vote recommendation and analysis of the bill. While the practice may appear unconstitutional, it wouldn’t be the first time the government has sanctioned detention without trial. During the War on Terror era, the government adopted the practice of ‘indefinite detention’ whereby suspected terrorists can be held without charge or trial. Despite facing challenges in Congress and in the courts, indefinite detention was signed into law as a provision of the 2012 National Defense Authorization Act, where it remains in legal standing today. In the same way the War on Terror became a catch-all justification for constitutionally questionable policies, it seems that the vaguely defined threat of immigration and ‘criminal aliens’ will be this administration’s keyword for getting around civil liberties.

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23 сентября, 23:15

Pentagon To Probe "Evacuation Hoax" Messages Sent To US Soldiers In South Korea

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The Pentagon announced Friday that it would be launching an investigation into a series of fake messages sent to US soldiers stationed in South Korea and their family members on Thursday. In what probably sent a temporary chill down the spines of recipients, the messages warned that all "non-essential" (i.e. non-combat) personnel must evacuate the Korean Peninusla - suggesting that the long-dormant Korean War was about to explode once again into violence, Reuters reports. The hoax, which was spread via fake SMS messages and Facebook posts, was carried out during a particularly tense period in the ongoing standoff between the US and North Korea over the latter's insistence on developing a nuclear weapon capable of striking the US. Also on Thursday, the North's foreign minister warned that the regime was considering a test of a nuclear weapon over the Pacific – something that would represent an unprecedented escalation and possibly force the US to respond with a military strike. A military spokesman said there was no way of knowing how many soldiers or family members received the messages, but said the chain of command quickly acted to shut down the hoax. “We have no accurate way to know how many people received it,” the spokesman said. “Incidents were ‘self-reported’ and many people claimed the message disappeared as soon as they unlocked their phone.” The spokesman added that the “good news here” is that the hoaxer's attempt to create an outbreak of chaos was foiled. “The good news here is: informed, savvy family members plus an engaged chain of command means no panic or over-reaction,” he added. “We had no reports of anyone acting on message other than notifying the appropriate authorities.” Stars and Stripes reports that the hoax was reported by soldiers less than an hour after the alerts were sent. The hoax was spread via fake text messages and Facebook posts, the military said. The USFK posted a statement on its official Facebook page on Thursday making clear that the US military did not issue any evacuation-related alerts. It has also instructed all US Department of Defense personnel and their family to confirm any evacuation-related communications before acting. The notice alerted soldiers and their family members that the USFK did NOT issue the alert: “On Thursday, 21 SEP, we received multiple reports of a fake text-to-cell and social media message regarding a  “real world noncombatant evacuation operation (NEO) order issued” which instructed DOD family members and non-emergency essential DOD civilians on the Korean peninsula that an evacuation order had been issued.” Warnings were also posted on the 8th Army’s official Facebook page.   As Stars and Stripes explains, the messages referred to what is known as a noncombatant evacuation operation, or NEO, which would affect family members of the 28,500 U.S. servicemembers stationed in South Korea and non-emergency essential Defense Department civilian employees. According to Reuters, the USFK holds biannual NEOs to prepare soldiers and their families for just such an eventuality. 

23 сентября, 22:55

Bond Market Bulls Embrace China Debt Downgrade

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It appears credit ratings agencies simply get no respect... Four months after Moody's downgraded China to A1 from Aa3, unwittingly launching a startling surge in the Yuan as Beijing set forth to "prove" just how "stable" China truly is through its nationalized capital markets, S&P followed suit this week when the rating agency also downgraded China from AA- to A+ for the first time since 1999 citing risks from soaring debt growth, less than a month before the most important congress for Chiina's communist leadership in the past five years is set to take place. In addition to cutting the sovereign rating by one notch, S&P analysts also lowered their rating on three foreign banks that primarily operate in China, saying HSBC China, Hang Seng China and DBS Bank China Ltd. are unlikely to avoid default should the nation default on its sovereign debt. Following the downgrade, S&P revised its outlook to stable from negative. “China’s prolonged period of strong credit growth has increased its economic and financial risks,” S&P said.   “Since 2009, claims by depository institutions on the resident nongovernment sector have increased  rapidly. The increases have often been above the rate of income growth.  Although this credit growth had contributed to strong real GDP growth and higher asset prices, we believe it has also diminished financial stability to  some extent." According to commentators, the second downgrade of China this year represents ebbing international confidence China can strike a balance between maintaining economic growth and cleaning up its financial sector, Bloomberg reported. The move may also be uncomfortable for Communist Party officials, who are just weeks away from their twice-a-decade leadership reshuffle. The cut will “have a relatively big impact on Chinese enterprises since corporate ratings can’t be higher than the sovereign rating,” said Xia Le, an economist at Banco Bilbao Vizcaya Argentaria SA in Hong Kong. “It will affect corporate financing.”   “The market has already speculated S&P may cut soon after Moody’s downgraded,” said Tommy Xie, an economist at OCBC Bank in Singapore. “This isn’t so surprising.”   S&P said that its stable outlook "reflects our view that China will maintain robust economic performance over the next three to four years. We expect per capita real GDP growth to stay above 4% annually, even as public investment growth slows  further. We also expect the stricter implementation of restrictions on  subnational government off-budget borrowing to lead to a declining trend in the fiscal deficits, as measured by changes in general government debt in terms of GDP." But bond investors are saying meh to the downgrade and bid bonds back to their richest in 2 months... The average spread on dollar bonds from the nation’s corporations fell 3.3 basis points on the day to 266, the second largest drop since May 31, according to JPMorgan indexes.  While the timing of the rating cut was less than opportune because China is planning to sell a dollar bond soon, “this might make the Chinese authorities more determined to price a very tight sovereign new issue,” said Jethro Goodchild, head of Asian credit at Aviva Investors.  "It will be an opportunity for the Chinese government to create the image in investors’ minds that they have a coherent and well-articulated plan for the country’s economic growth and fiscal stability." But, of course, S&P (and Moody's) are correct in their downgrade. All is not at all well under the hood in China and without the endless flood of liquidity ("well we have to put it somewhere"), the reactions to downgrades could be very different. As we previously noted, China's dent minefield is worse than ever. Last June, Goldman made a "surprising" finding when it calculated that China real debt load was far higher than it had represented. In other words, whether due to using shadow banking strategies to cover the true debt load, or simply because Chinese corporations and the government were not booking all their obligations, China was covering up its true debt load. That strategy worked as long as China was flooding its ponzi debt system with far more debt than we maturing or being otherwise taken out. However, now that Beijing once again appears intent on breaking China's leverage addition - at least until overnight repo rates soar to 30% or higher as happened in the summer of 2013 when China tried this exercise for the first time - this is changing, but the real catalyst is China's recent surge in defaults, a development which the local financial system had not had to deal with until as recently as two years ago, as virtually all defaults were settled privately, and usually involved a government bailout of some nature. Now, with corporate bankruptcies soaring, we are finally getting first hand evidence that Goldman - and many other skeptics - were right, because as Bloomberg reports, "defaults in China are unearthing hidden debt at companies across the country." Think of it as nested debt: big companies, themselves reliant on debt, arbing interest expense by providing loans to smaller companies at higher rates, without declaring said loans, or as Bloomberg puts it, "small firms that can’t get loans by themselves have been winning banks over by getting other companies to guarantee their borrowings. The companies making those pledges exclude them from their balance sheets, leaving creditors in the dark. Borrowers often extend the guarantees for each other, raising the risk that failures could ricochet, at a time when increasing borrowing costs have already added to strains." *  *  * And just in case you needed a reminder, this is what happened when S&P dared to downgrade the US Sovereign rating in 2011...

23 сентября, 22:25

Trump Trounces "Hypocrite" McCain, Thinks Rand Paul "May Find A Way" To Save Obamacare Repeal Bill

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In a surprising demonstration of wit, President Donald Trump told a crowd of rowdy Alabamians Friday night that it would be amusingly “ironic” if Kentucky Senator Rand Paul offered to vote for the Republicans’ floundering Graham-Cassidy health-care bill after John McCain blindsided the administration by withdrawing his support On Friday. The two senators, Trump explained, do not get along. And by swooping in to save the Republicans’ Obamacare repeal-and-replace effort at the last second, Paul would be coronated a hero. After saying earlier this year that he is determined to win Paul’s vote on health-care, the president appears to be making good on his word, launching what appears to be a personal charm offensive to try and win the support of one of the most intransigent Republican senators. That campaign continued Saturday morning, when the president tweeted that he “might have” a way to finally win the Kentucky senator’s vote. “I know Rand Paul and I think he may find a way to get there for the good of the Party!” I know Rand Paul and I think he may find a way to get there for the good of the Party! — Donald J. Trump (@realDonaldTrump) September 23, 2017 The tweet was part of a series about the Graham Cassidy bill, which was effectively killed on Friday when McCain withdrew his support. In the series, Trump took shots at McCain, and also Alaska Moderate Lisa Murkowski, who opposes the bill. The third Republican “no” vote belongs to Sen Susan Collins of Maine. Trump began by bashing McCain for opposing repeal and replace after campaigning on repealing Obamacare during his most recent Senatorial bid. The president also warned that McCain’s decision could elicit substantial political backlash in his state as premiums skyrocket…although, given his recent brush with brain cancer, we doubt McCain is still motivated by these types of political considerations…particularly after opposing a bill sponsored by his close friend, South Carolina Sen. Lindsey Graham. John McCain never had any intention of voting for this Bill, which his Governor loves. He campaigned on Repeal & Replace. Let Arizona down! — Donald J. Trump (@realDonaldTrump) September 23, 2017 Arizona had a 116% increase in ObamaCare premiums last year, with deductibles very high. Chuck Schumer sold John McCain a bill of goods. Sad — Donald J. Trump (@realDonaldTrump) September 23, 2017 In a plug for Graham Cassidy, Trump said adopting a system of large block grants to states would be “a good thing to do.” Large Block Grants to States is a good thing to do. Better control & management. Great for Arizona. McCain let his best friend L.G. down! — Donald J. Trump (@realDonaldTrump) September 23, 2017 In a shot at Murkowski, Trump tweeted that Alaskans would be angry after their premiums skyrocket 200%, implying that they would express that anger by voting against their senator. But “Lisa M” still has a chance to be a hero by changing her mind and voting for the bill. Alaska had a 200% plus increase in premiums under ObamaCare, worst in the country. Deductibles high, people angry! Lisa M comes through. — Donald J. Trump (@realDonaldTrump) September 23, 2017 So, has Trump found a way to save the repeal and replace effort by turning Paul? Maybe, maybe not. As the public is well aware, Trump is fond of bluffing. Of course, the math is simple: Republicans have 52 seats and need 50 senators to support the bill, which would require Vice President Pence to break a tie, under the special budget rules being used to avoid a Democratic filibuster. The clock on those rules runs out at the end of the month, effectively closing the Republicans’ window to pass a repeal and replace bill – for now, at least. Of course, on Friday, Paul reaffirmed his opposition to the bill in a series of tweets on Friday, saying he "wouldn't be bullied" into supporting it after Trump had admonished him via twitter earlier in the week. I won't vote for Obamacare Lite that keeps 90% of the taxes & spending just so some people can claim credit for something that didn't happen — Senator Rand Paul (@RandPaul) September 22, 2017 I won't vote for Obamacare Lite that keeps 90% of the taxes & spending just so some people can claim credit for something that didn't happen — Senator Rand Paul (@RandPaul) September 22, 2017 That sounds like a "hard pass" to us.

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23 сентября, 22:05

Kass Warns: "The Scent Of Group Stink Is As Strong As In 2000 & 2007"

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Authored by Doug Kass via RealInvestmentAdvice.com, * In a paperless and cloudy world, are investors and citizens as safe as the markets assume we are? –Kass Diary Another provocative missile launched by North Korea and another apparent terrorist attack in London, England, are, once again, overnight and early-morning features of our reality as investors and as citizens. The S&P futures fell a meaningless four handles from the time of the events, indicating even the machines and algorithms couldn’t care less about much of anything impacting equities! “Nothing succeeds like success.” –Alexandre Dumas “Group stink” runs thick these days, as Dumas, a 19th century French writer, noted. To this observer, our markets’ resilience is all too reminiscent of former Citigroup CEO Chuck Prince, who kept on dancing because the music was still playing. To me, the indomitable market is more a function of lemming-like behavior in a market, economy and profit setting that is far less secure and strong than many subscribe to. Group stink is a powerful force in the markets, especially when the machines and algorithms and the ever-constant inflows into popular passive funds and ETFs dominate the investment backdrop. These factors exacerbate short-term trends and may contribute to the perpetuation of an ill-conceived perception of a daunting and inexhaustible virtuous market cycle. Golfer Tom Watson once wrote, “Sometimes thinking too much can destroy your momentum.” And most investors and traders, in a reactionary mode, seem to prefer to adopt such a strategy. But, I vividly remember the positive and incessant price momentum in early 2000 and late 2007 that appeared impossible to divert until, all at once, an important change in price trend occurred, seemingly overnight. The market consequences were ugly. There is now a near-universality of view that stocks will move higher and that any dip is to be bought. Even the threat of a potential nuclear attack now brings on a market yawn. The one-way action and lack of volatility have resulted in some of the greatest hedge-hoggers giving back tons of money (e.g., Seth Klarman’s Baupost) and/or closing down completely (as chronicled here and here.) If some of the greatest minds can’t deliver alpha, we possibly should consider that things have gone awry and think about accepting something that Grandma Koufax used to say: “Dougie, something is rotten in Flatbush.” As I recently wrote in “The Market Band Plays On, But You Won’t Catch Me Humming Its Mindless Tune”: Throughout the last six months I have expressed the view that the S&P 500 Index was in the process of making an important top and that risk was being underpriced.   Throughout the last month I have grown more bearish than I have been in several years. That negative outlook is reflected in the extreme condition that, beyond indirect holdings in my hedge fund, I am in the unique position of owning no individual equities in my personal account.   That’s a statement of conviction in view. In “Dark Conditions Totally Eclipse Anything We’ve Seen in Decades” I outlined my concerns: * Markets: The dominance and popularity of passive investing — most notably ETFs and volatility-trending and risk-parity strategies — are relatively new to the market’s picture. I contend that the lack of price discovery from these influences may have spoiled stock charts and partially ruined the ability of some to rely on technical analysis.   * Valuations: Most valuation metrics are at least in the 95% decile, an occurrence that typically has coincided over history with the end of maturing bull markets or in the ninth inning of speculative eras.   * Corporate Profits: With the largest spread between GAAP and non-GAAP earnings in history, never has such liberal use of accounting standards been accepted by the masses of market participants.   * Central Banks: With $19 trillion ($1.5 trillion added in 2017 alone) in central bank assets, monetary authorities never have had such influence as they have in the past few years. Like quantitative strategies, the outsize role of central banks is new and its impact is great. It also has diminished price discovery. As I recently wrote, the “Debt Opioid Addiction Could Turn Ugly Fast.”   * Economic: As the years go by it is increasingly clear that, despite the unprecedented role of central bankers reducing interest rates, secular global growth prospects have been reduced relative to the last several decades. Moreover, The Screwflation of the Middle Class has resulted in an income and wealth gap that has not improved over the last three to five years.   * Politics: The Orange Swan is a new factor, as articulated here and here. Like him or hate him, President Trump is unlike any POTUS in history. Another aspect of politics that is different is the degree of animus in Washington, D.C. There has never been such partisanship. Ever.   * Geopolitical: Markets have never been as exposed to such geopolitical acts and risks. Specifically, it has been 53 years since we faced a nuclear risk. Respectfully, unlike some others, I belief the cause of the recent market indigestion — and possible future market drawdowns — likely has very little to do with seasonality or the month of August, nor will it likely be a function of the historical weakness often seen in September and October. The market’s issues run deeper and my concerns are based on both technical and fundamental grounds. They have to do in part with the uncertainty surrounding various political, geopolitical, economic, market and monetary policy issues, many of them with potentially adverse outcomes. At least to me, the macroeconomic does impact Bristol-Myers Squibb (BMY) and Amazon (AMZN) and General Motors (GM) . My concerns also have to do with the message of the bond market (this morning, the yield on the 10-year U.S. note is down by nearly five basis points to 2.11%), which indicates to me that the trajectory of domestic GDP growth and corporate profits is likely to disappoint for the fourth consecutive year. Further adding to my concerns is the role of passive investing as the dominant influence on the markets. ETFs that rebalance daily and quantitative strategies such as volatility trending and risk parity exacerbate short-term moves and are, too often, the tail that wag the market dog. As I have asked, if the machines decide to sell, who is left to buy? In part, these strategies have elevated valuation metrics above the 95% decile, alarming far too few market participants. Unfortunately, markets that are priced to perfection are vulnerable to exogenous shocks such as an Orange Swan, a missile aimed at Japan, a severe hurricane or a monetary policy mistake. Meanwhile, there were technical breaks developing, starting with the outsize performance gains from the anointed FANG stocks. These conditions also were generally ignored by the bullish cabal. Group Stink has ruled the day — a condition often seen historically at or near market tops. As I have written, the thing to fear is the lack of fear itself. Few commentators and talking heads in the business media, many of whom counseled the lemmings who stood strong in equities in both early 2000 and late 2007, have been willful participants in the Bull Market in Complacency and have contributed to the potential of a Minsky Moment. My bearishness also reflects my view that the business cycle is mature and that there are Peaks Everywhere. Most notably, low interest rates have pulled forward sales in various sectors. Industries such as housing, where affordability again has been stretched, and autos, where the cycle has peaked, are samples of my concerns. Meanwhile, the retail industry has been eviscerated, with ugly consequences for real estate and employment, by a Dark Star named Amazon, a recent target of my disaffection. Nearly three weeks ago on Aug. 10, I wrote “To Heck With the Crowd, I Remain Manifestly Bearish,” which underscored my multiple concerns (as they specifically relate to North Korea, see my boldfaced first question below that gnaws at me every morning). It stated in part: “I won’t tell you that the world matters nothing, or the world’s voice, or the voice of society. They matter a good deal. They matter far too much. But there are moments when one has to choose between living one’s own life, fully, entirely, completely – or dragging out some false, shallow, degrading existence that the world in its hypocrisy demands. You have that moment now. Choose!” –Oscar Wilde Sometimes you need to sit alone on the floor in a quiet room in order to hear your own voice and not let it drown in the noise of others. I am sitting on that floor now, and thinking — and shorting more. Too many traders and investors think they know what will happen in the markets. They establish one, specific price target, usually clothed in certainty. But the most successful traders and investors work with probabilities of outcomes. I continue to maintain a historically high net short exposure because I believe we face numerous political, geopolitical, economic and market outcomes that could end badly — very badly. After yesterday’s “fire and fury” (“TV-tough”) statement by President Trump regarding North Korea, I repeated five of my concerning questions: * In a paperless and cloudy world, are investors and citizens as safe as the markets assume we are?   * With the G-8’s geopolitical coordination at an all-time low, how slow and inept will the reaction be if the wheels do come off?   * Remember when the big argument in favor of President Trump was that he was a dealmaker who knew how to get things done? That was when he was doing real estate deals. Now he has to deal with 535 other politically partisan legislators in Congress on their own real estate turf.   * Does the administration have the depth of experience, understand the extent of the legwork and organization required for passing legislation, or have a coherent idea or shared vision of what it wants to achieve and what problems it means to solve?   * If President Trump can’t easily put through a health care package, what does that mean for more difficult regulatory reforms and his tax and fiscal policy? I then repeated my top 10 market concerns. Bottom Line “I wanted a perfect ending. Now I’ve learned, the hard way, that some poems don’t rhyme, and some stories don’t have a clear beginning, middle, and end. Life is about not knowing, having to change, taking the moment and making the best of it, without knowing what’s going to happen next. Delicious Ambiguity.” –Gilda Radner Market views are like noses - everyone seems to have one! To me, investors are complacent, numerous outcomes of all breeds (many of them adverse) seem possible, the business cycle is mature, machines and algorithms have undue market influence (and if the movie goes into reverse, selling rather than buying remains an existential market threat), valuations are at an historical extreme and thus make markets vulnerable to external shocks, and the market’s technical condition has been deteriorating for months. And, in 2017, our interconnected, flat and networked world is unsafe on numerous fronts. And, as I have expressed, after a lengthy period of quiet, volatility and uncertainty are likely to be great again. I plan to continue to err on the side of conservatism and I continue to maintain a skeptical view of the market’s reward compared to risk and the limited upside relative to downside. But, as described in “Fearlessly Make Uncertainty and Volatility Your Friends!,” I also intend to capture alpha by being opportunistic, both from a trading and investing perspective. *** As it is said, we live in interesting (and challenging) times, influenced by a set of relatively new circumstances and actors that have led to a Bull Market in Complacency - and the risk of a Minksy Moment - in which numerous outcomes, many of them adverse, are possible. Today, as I did in early 2000 and in the late summer of 2007, I pay heed to Woody Allen, who said: “More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly.” Be alert, consider the contrary and think about sitting out some of the market’s dances, perhaps before your legs are chopped off.