Thursday, September 15, 2016

Today's links

Today's quote: "Through last Thursday, the S&P 500 went 43 consecutive trading days without swinging more than 1%, and registered its lowest level of volatility since the 1960s." WSJ (The calm before the storm)

AEP: "It is striking that markets do not believe that the Fed will hit its 2pc inflation target for the next 30 years, based on the pricing of the "TIPS" breakeven curve. Michael Darda from MKM Partners says it would be "utterly absurd" for the Fed to give in to the chorus of calls for a rate rise in such circumstances."

DOD chief Ash Carter's seven Days in May?  "The present divisions are far more ominous, however, pitting active duty US military commanders against the policy of the administration, implicitly posing a challenge to the constitutional principle of civilian control of the military." Bill Van Auken WSWS

1--Consumer is now bigger worry for economy, Fed rate hike odds fall (Bad economic news, stocks go up)

A disappointing drop in retail sales raises more concern about the health of the consumer and reaffirms a widespread view that the Fed will not raise rates next week. ...

Industrial production was also reported at a greater than expected decline of 0.4 percent, versus an expected 0.2 percent. That reaffirms weakness seen in other manufacturing data. ISM manufacturing for August actually showed a contraction in manufacturing activity...

The disappointing sales report follows a weaker-than-expected August jobs report, where just 151,000 jobs were created — 30,000 less than expected. The August report on ISM nonmanufacturing activity also showed a startling slowdown in growth in the services sector.

2--Keeping an eye on FX: The Smartest Market in the World Isn’t Buying the Bounce

One of the most critical ideas you need to understand as an investor is that while the media focuses on stocks, they are the usually the last asset class to “get” major changes to the financial system.

This is simply due to liquidity and size of markets.

1.     Globally, the stock market is about $69 trillion in size, trading about $191 billion in shares per day.
2.     The bond markets are well north of $140 trillion, and trade about $700 billion in volume per day,
3.     The currency markets are unmeasured as every currency trade is ultimately a pairs trade (meaning to buy one currency you have to sell another). However, we do know that the currency markets trade $5.3 trillion in volume per day.

the currency markets trade over 26 times more volume than the global stock market every single day. As such they are the most liquid, sensitive markets in the world.So major changes in the markets first hit in the currency markets. And the key item to watch is the $USD

The US Dollar is coiling tighter and tighter into a triangle pattern. If we get a breakout to the upside, the next target is 97.
Historically, spikes to this level have resulted in a stock market meltdown soon after

3--Business Inventories, Sales Disappoint; Leave Ratio Deep In Recession

4--Retail Sales Growth Tumbles To 6 Month Lows, Stuck In Recession Territory

5--On This Day Eight Years Ago Lehman Filed For Chapter 11: There Have Been 672 Rate Cuts Since

We estimate that since the collapse of Lehman, Central Banks around the world have cut interest rates 672 times. A phenomenal statistic and that's before we even get to unconventional measures.

As a bit of fun it’s interesting to have a look at where markets are now based on last night’s close versus this time 8 years ago. Starting first and foremost with the Treasury market, 10y yields are at 1.698% this morning which compares to 8 years ago when they were at 3.389%...

At the other end of the risk spectrum, the S&P 500 at 2,126

6--US confidence in media hits fresh low: Gallup : Democrats dumber about media than Republicans

Americans' trust in the media has sunk to a new low, and a bitter presidential race may be to blame, a Gallup survey showed Wednesday.
The poll asking whether the media report the news "fully, accurately and fairly" found just 32 percent of Americans have a great deal or fair amount of trust, the lowest level in Gallup polling history and eight percentage points below last year.

Gallup began asking the question in 1972, and has polled Americans on a yearly basis since 1997.
Trust and confidence in the media hit its highest point in 1976, at 72 percent following the investigative journalism coverage of the Vietnam and the Watergate scandal, according to the research group. But confidence has been below 50 percent since 2007.

"While it is clear Americans' trust in the media has been eroding over time, the election campaign may be the reason that it has fallen so sharply this year," Gallup said in its report.

"With many Republican leaders and conservative pundits saying (Democratic presidential nominee) Hillary Clinton has received overly positive media attention, while (Republican nominee) Donald Trump has been receiving unfair or negative attention, this may be the prime reason their relatively low trust in the media has evaporated even more."...

Just 14 percent of Republicans said they trust the media, down sharply from 32 percent a year ago and the lowest level of confidence among Republicans in 20 years, according to Gallup.

Among Democrats, 51 percent expressed confidence in the media, down from 55 percent a year ago, while the number of independents trusting news organizations fell to 30 percent from 33 percent.
Trust was also low among younger adults: just 26 percent of those between the ages of 18 and 49 said they felt confidence in the media compared with 38 percent of those 50 and older.

The CBOE Volatility Index VIX, -7.33% often used as a measure of fear in the market, rose 18% on Tuesday at 17.85—its highest level since June 28 and implying that investors are starting to dial up bets that stocks could suffer further near-term swings turbulent...(important)

The growth rate of nominal GDP in the US has fallen to 2.4pc, the lowest level outside recession since the Second World War.....

It has been sliding relentlessly for almost two years, a warning signal that underlying deflationary forces may be tightening their grip on the US economy.
Given this extraordinary backdrop, the violent spike in US and global bonds yields over the last four trading days is extremely odd. It is rare for AAA-rated safe-haven debt to fall out of favour at the same time as stock markets, and few explanations on offer make sense.

We can all agree that oxygen is thinning as we enter the final phase of the economic cycle after 86 months of expansion. The MSCI world index of global equities has risen to a forward price-to-earnings ratio of 17, significantly higher than on the cusp of the Lehman crisis.
"We think that too much complacency has crept in," says Mislav Matejka, equity strategist for JP Morgan....

Yields on 10-year Treasuries - the benchmark borrowing cost for international finance - have jumped 19 basis points to 1.72pc since the middle of last week. The amount of global government debt trading at rates below zero has suddenly fallen from $10 trillion to $8.3 trillion, with parallel effects for corporate bonds.

Fed governor Lael Brainard clearly agrees. Far from capitulating to the hawks - as many expected - her speech on Monday night warned that business investment has been falling for the last three quarters, and now the housing market is softening too.

She said the real "neutral" rate of interest has fallen to zero, and that there is no margin for error. It would be very hard to extract the US economy from Japanese-style trap if the Fed ever allowed it to happen.  "This asymmetry in risk management in today's "new normal" counsels prudence in the removal of policy accommodation," she said....

Japan's Governor Haruhiko Kuroda has had his wings clipped by critics in the ruling party of Shinzo Abe, alarmed that the BoJ is swallowing up the financial system. They forced him to carry out a "comprehensive review" of his policies.  "Japan has reached an inflexion point. The BoJ is clearly cornered," said Stephen Jen from Eurizon SLJ Partners.

The bank already owns 12pc of Fast Retailing and 13pc of the technology group Advantest, and these holdings are heading for 20pc next year as a mathematical effect on current policy. Japan's market economy is being nationalised.
The BoJ will soon hold 50pc of all Japanese government bonds. It is monetising the entire budget deficit. Mr Jen says the central bank is nearing the fateful point where it will have no exit strategy if inflation ever does recover, a worry shared by officials at the International Monetary Fund....

We are entering dangerous waters. Markets are losing faith in the central bank "put", but governments are not yet willing to step into the breach with fiscal stimulus to keep the global show on the road. This is how accidents happen.

9---Take me instead: Wikileaks’ Assange asks Obama to pardon Manning

10--41% of Americans believe Clinton’s health is bad – poll

11--Russian-Iranian bank may ditch the US dollar

12--More lies from Washington:  Russia says US failing to deliver on Syria deal, wants details declassified

Russia says the US is not keeping its end of the bargain on the Syrian ceasefire and has continued its calls for Washington to make public all documents relating to the deal. The Russian military says Damascus is the only party observing the agreement.
“On the third day of the ceasefire only the Syrian Army is observing it. Meanwhile, the US-led ‘moderate rebels’ are intensifying the shelling of residential areas,” Russian Defense Ministry spokesman Igor Konashenkov said on Thursday.

The ministry said in a press briefing that government forces that "new conflict flashpoints are appearing" and that civilians had been shot at 45 times over the past 24 hours, without firing back.

The military added that the US failed to deliver on its promise to separate truce-observing moderates and truce-violating terrorists and is now “apparently trying to use a smoke-screen to cover up the violations of their part of the deal.”
The ministry called on the Pentagon to hand over up-to-date and detailed information about the location of the various factions in the conflict.

"Demarcating the areas belonging to Islamic State, Al Nusra Front, and moderate opposition forces is a priority," said senior Russian General Staff official Viktor Poznikhir in Moscow.
"So far, all we have received from the Pentagon is a list of units under their protection. It does not specify the locations, the number of fighters, or the field commanders of those battalions."...

“We know well how often documents get leaked to the media, and not by Russia but by our American colleagues,” Russian Foreign Ministry spokesperson Maria Zakharova said on Thursday. “Moscow suggests publishing [the documents] to avoid any erroneous interpretations, prevent an impact of such leaks on any party involved in the conflict or manipulation attempts by parties not familiar with details of the deal

13--You could spot that one a mile-off: 

"Europe's intervention in Libya, mostly by France and Britain and supported by the US, was certainly a very controversial operation. It was presented as a humanitarian necessity aimed at preventing bloodshed. Now we see that the death of Colonel Gaddafi led to the complete destabilization of Libya and the entire Sahara region," Dhuicq told Sputnik. ...

after Gaddafi was ousted, Libya descended into violence, with rival governments and the rise of hundreds of militias, including a local affiliate of Daesh.

An early 2016 NY Times article revealed that Hillary Clinton was instrumental in pushing the Obama administration to endorse the NATO bombing campaign, according to former US Secretary of Defense Robert Gates.

"As of the third day (of the truce), only the Syrian army is observing the regime of silence. At the same time, the [so-called] 'moderate opposition' led by the US is increasing the amount of attacks on residential districts," he added.
The Russian official also noted that Washington’s first and foremost task was to separate the so-called moderate opposition from terrorists.

15--US to 'Do Its Utmost' to Hinder Set-Up of Independent European Army; The urge to colonize continues

16--Pentagon openly challenges US-Russia ceasefire deal in Syria; Seven days in May?

The present divisions are far more ominous, however, pitting active duty US military commanders against the policy of the administration, implicitly posing a challenge to the constitutional principle of civilian control of the military.....

The US secretary of state “thinks” the Pentagon is prepared to abide by an agreement approved by the US president, while stressing that he is not asking the military brass to “abrogate their standards.” Kerry’s remarks express the real relations within the US state apparatus, the overriding influence of the vast military and intelligence apparatus and its ability to exercise what amounts to veto power over the country’s elected civilian officials.

If Kerry and the military are at loggerheads, it is bound up with the conflicting priorities in the prosecution of US imperialist policy on a global scale. The support of Kerry and others for the ceasefire is driven not by any humanitarian concern over bloodshed in Syria, but by their desire to use collaboration with Russia as a means of salvaging at least some of the proxy forces that they have backed, which are on the verge of a complete rout by Russian-backed government forces. They hope that they can employ a combination of diplomacy and military threats to pressure Moscow into acquiescing to some form of the regime change that Washington has pursued through its bloody intervention in Syria over the past five years....

(The pentagon refuses to agree to a deal that was made by the civilian leadership) Asked in a press teleconference if the military would abide by the terms of the agreement and share information with the Russians after the completion of the seven-day ceasefire, Lt. Gen. Jeffrey Harrigian, the commander of the US Air Forces Central Command, which is directing the bombing campaign in Iraq and Syria, responded: “I would be premature to say we're going to jump right into it. And I'm not saying yes or no.” The military’s decision, he indicated, is “going to depend on what the plan ends up being.”...

“Well, the president of the United States is ready and I think the military therefore will be ready,” he said. “Nobody’s asking people to abrogate our standards, but it is important for us to keep our part of the bargain.”

The US secretary of state “thinks” the Pentagon is prepared to abide by an agreement approved by the US president, while stressing that he is not asking the military brass to “abrogate their standards.” Kerry’s remarks express the real relations within the US state apparatus, the overriding influence of the vast military and intelligence apparatus and its ability to exercise what amounts to veto power over the country’s elected civilian officials....

the decisive layers within the US military command are focused increasingly on the preparation for direct military conflict with Russia. Concrete reservations have been raised about sharing targeting information against ISIS and the Nusra Front—aside from their being the main fighters for US-backed regime change—that it could provide Russia with intelligence on US military protocols that it could used to defend itself against air strikes on or within its own borders.
Under conditions in which the US is building up its forces from Eastern Europe and the former Baltic States to the Black Sea in an increasingly aggressive encirclement of Russia, this has become a major concern.

The anti-Russian hysteria that has been generated by the US corporate media—led by the New York Times—over an alleged Kremlin hand in the hacking of the Democratic Party and allegations that Donald Trump is “dupe” of Putin is entirely bound up with these war preparations.

The emergence of divisions between the military and the Obama administration over the Syria agreement with Moscow constitute an urgent warning that the danger of far bloodier wars and even a nuclear conflagration are steadily growing.

17--The 2008 crisis and the lessons of history

Facts and figures confirm the analysis made by the World Socialist Web Site at the time that the financial crisis was not a conjunctural economic event but a breakdown in the very foundations of the global capitalist economy.
The immediate form was a financial meltdown. But as is almost invariably the case, its appearance-form was the outer expression of deeper processes, rooted in the very foundations of the capitalist economy itself....

One of the most significant features of any crisis is what emerges out of it. And here the outcome is clear. In every country the working class faces an unending assault on its living standards and social conditions to pay for the bankruptcy of the profit system.
The financial system has not been repaired, parasitism and speculation have become even more pronounced, the same criminal practices that helped spark the 2008 meltdown are continuing and the policies of the financial elites are creating the conditions for another disaster.

18--Further considerations on the household income report: Poverty and inequality in America

In 2015, the poorest 20 percent (quintile) of the US population received only 3.1 percent of total income. The richest 20 percent raked in 51.1 percent....
A similar permanence is displayed in the share of national income going to the top 5 percent, those genuinely wealthy: 21.0 percent in 1995, 22.2 percent in 2005, virtually the 22.1 percent in 2015.
Despite the propaganda distortions of Obama, the Democrats and the media, what the Census report actually documents is the social reality of American capitalism in its death agony: mass poverty, stagnant incomes, increased low-wage exploitation, and the unbridgeable gulf between a tiny minority of the rich and super-rich and the working population.

The statistical data is not fabricated, but it has been packaged in the light most favorable to the Democrats in the final two months of a hotly contested presidential election.
The 5.2 percent increase in household income from 2014 to 2015, celebrated in media headlines around the country, was the first annual increase in median household income since 2007, before the Wall Street Crash. However, median household income remained 1.6 percent below the 2007 figure, and 2.4 percent below the all-time high, reached in 1999....

median household income may rise significantly through an increase in working hours rather than an increase in hourly pay. Given that real wages have remained stagnant or risen only slightly in recent years, that appears to be what happened in 2015. Low-paid workers worked more hours, and most new jobs taken by previously unemployed workers were in the low-pay service sectors, like healthcare, restaurants and bars, nursing homes, retail outlets, etc.....

These omissions suggest that the report’s findings on declining poverty should be taken with a large grain of salt. What is happening to that section of the population too poor, too sick, too old or too desperate to be covered by the survey of households? Nearly all of these people are of low income, and the vast majority would be added to the total number of people living in poverty, bringing that figure closer to 50 million Americans.

That said, the poverty figures actually reported by the Census are themselves quite grim.
The Current Population Survey found: “During the 4-year period from 2009 to 2012, 34.5 percent of the population had at least one spell of poverty lasting 2 or more months.” The number is staggering: about 110 million people

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