Welcome To The Hell Hole That Is Brussels

Authored by Drieu Godefridi via The Gatestone Institute,

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  Last month alone in Brussels, there were three separate outbreaks of rioting and looting on a major scale.

  
  


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  If you penetrate the thick cloud of professional indignation to scrutinize the reality of the "capital of Europe", what you see in many respects is actually a hell hole, one where socialism, Islamism, riots and looting are the new normal.

  
  

When then-candidate Donald Trump noted in January 2016 that, thanks to mass immigration, Brussels was turning into a hell hole, Belgian and European politicians presented a united front at the (media) barricades: How dare he say such a thing? Brussels, capital of the European Union, the very quintessence of the post-modern world, the avant-garde of the coming new "global civilization," a hell hole? Of course assimilating newcomers is not always easy, and there may be friction from time to time. But never mind, they said: Trump is a buffoon, and anyway, he has zero chance of getting elected. Such were the thoughts of those avid readers of The New York Times International Edition and regular watchers of CNN International.

However, Donald Trump, in his unmistakable, brash style, was quite simply right: Brussels is rapidly descending into chaos and anarchy. Exactly two months after that dramatic Trumpism, Brussels was eviscerated by a horrific Islamic terror attack that left 32 people dead. And that was only the tip of the monstrous iceberg that has built up over three decades of mass immigration and socialist madness.

Last month alone in Brussels, there were three separate outbreaks of rioting and looting on a major scale.

First, there was the qualification of the Moroccan team to the soccer World Cup: between 300 and 500 "youths" of foreign origin took to the streets of Brussels to "celebrate" the event in their own way, looting dozens of shops in the historical center of Brussels, wreaking havoc in the deserted avenues of the "capital of civilization" and, during their riot, injuring 22 police officers.

Riot police, backed by a water cannon, attempt to push back rioters in the center of Brussels, Belgium, on November 12. Hundreds of "youths" of foreign origin "celebrated" the World Cup qualification of Morocco"s soccer team by rioting and injuring 22 police officers. (Image source: Ruptly video screenshot)

Three days later, a social media rap music star nicknamed "Vargasss 92," who is a French citizen of foreign origin, decided to organize another unauthorized "celebration" in the center of Brussels, which quickly turned into another riot. Again, shops were destroyed and people assaulted for no other reason than being in the wrong place at the wrong time. Short clips of the event streamed onto the social networks, showing the world (and Belgians) the true face of Brussels without the politicians" makeover. No wonder the European political elite hate social media from the depths of their hearts; they prefer the sanitized (and, in both France and francophone Belgium, heavily subsidized) traditional press.

Finally, on November 25, the socialist authorities in charge of the City of Brussels had the bright idea of authorizing a demonstration against slavery in Libya, which quickly descended into yet another riot: shops were destroyed, cars set on fire, 71 people arrested.

This lawlessness, with not even the remotest political justification, is the new normal in Brussels. Politicians may not like that fact, which is the result of their lamentable failure, but it is nonetheless a massive and unavoidable fact. The new Brussels is characterized by riots and looting by people of foreign origin, as well as the ongoing heavily-armed military presence in the streets of Brussels, in place since March 22, 2016, the day that European Islamists murdered 32 and wounded 340 people in the worst-ever terrorist attack in Belgium.

One may wonder why these fine Belgian soldiers patrolling the streets do nothing to stop the rioters. For the simple reason that it is outside of their remit; should a soldier actually hurt a looter, he would probably be publicly chastised, pilloried by the media, put on trial and dishonorably discharged.

It would be funny if it were not so serious. After the first two recent riots, Belgian state television (RTBF) organized a debate with politicians and pundits from Brussels. Among the participants was Senator Alain Destexhe, from the center-right Reformist Movement (the party of Belgium"s Prime Minister).

Destexhe is an interesting figure in Belgian politics. In French-speaking Belgium, he has been among the few to say publicly that the mass-immigration Belgians are inflicting upon themselves is unsustainable, that Islam may not be such a peaceful religion, and that school classes in which 90% of the children are of foreign origin, who do not speak French or Dutch at home, are not a recipe for success. Such may be taken as a given in much of the Western world, but in the French-speaking part of Belgium, heavily influenced by the French worldview, he was considered right-wing, if not an extremist, a racist, and other such niceties the Left often utters.

When, during this debate, Destexhe tried to make his point -- that there is a connection between the non-integration of many people of foreign origin in Brussels and the decades-long high level of immigration -- the moderator literally yelled at him that "Migration is not the subject, Monsieur Destexhe! MIGRATION IS NOT THE SUBJECT, STOP!", before giving the word to a "slam poet", a young woman who explained that the problem was that women wearing the Islamic veil (such as herself) do not feel welcome in Brussels. The audience was then instructed to applaud her. Also on the set was a Green Party politician who affirmed that "nobody knows the origin of the rioters." Hint: they were, in their own idiosyncratic way, "celebrating" Morocco"s victory. A great moment of Belgian surrealism? No, just a typical political "debate" in French-speaking Belgium, except that normally Destexhe is not invited.

The picture would not be complete without mentioning that the very night that the first riot began, November 11, an association called MRAX (Mouvement contre le racisme, l"antisémitisme et la xénophobie) published on its Facebook page an appeal to report any case of "police provocation" or "police violence". The results of the riot? 22 police officers hurt, zero arrests. MRAX is not only a bunch of leftist Islamist sympathizers, they are heavily financed by taxpayers. Are movements from the right also financed by taxpayers? Simply put: No. In Brussels, the unemployment rate is a staggering 16.9%, a mind-boggling 90% of those on welfare have foreign origins, and although taxes are among the highest in the world, the public coffers are nonetheless bleeding. A sad snapshot of yet another socialist failure.

But there is hope. Brussels is not only Molenbeek and rioting, it has a robust tradition of entrepreneurship, and Belgium"s federal government, particularly its Flemish component, is extremely conscious of the challenges that need facing. But nothing is going to change if people do not recognize that in many respects Brussels has, from the opulent conservative and "bourgeois" city that it was 25 years ago, morphed into a hell hole.

Ironically, what Brussels now obviously needs is another Donald Trump.

Bank Of Japan Is Buying Bonds From Scandal-Hit Kobe Steel

Last week, the simmering scandal involving Japan"s third largest steel producer exploded, when following reports that Kobe Steel had falsified data about the quality of its steel, aluminum, copper, iron powder and other products it sold to customers across virtually every single industry, Japan"s Nikkei also reported that some Kobe Steel plants in Japan had been falsifying product quality data for decades, well beyond the roughly 10-year time frame given by the lying steelmaker. Worse, not only did the company, having already been caught, lie to shareholders and rule-abiding employees how long this illegal behavior had been going on, but - in a glaring example of corporate idiocy - had effectively enshrined and codified its fraudulent ways, as the cheating procedures eventually became institutionalized in what was a fraud manual, allowing the practice to continue as managers came and went.

As all this was taking place, not only did the stock price of Kobe Steel plunge, but its bonds tumbled sending its default probability sharply higher.

 

It now turns out that the rout would have been far worse, had it not been a direct intervention by the BOJ itself, which appears to have stepped in and bought Kobe bonds to arrest the plunge.

Posing a rhetorical question, "to buy or not to buy", the Nikkei reports that "the Bank of Japan appears to have chosen the former in considering whether to include debt issued by scandal-hit Kobe Steel in its bond-buying operations."

Here, it may come as a surprise to some that as part of its ultra-loose monetary easing policy, the Japanese central bank also holds roughly 3.2 trillion yen ($28.4 billion) in corporate debt, similar to the ECB"s CSPP program. The BOJ maintains that balance through purchasing operations held roughly once a month. This past Thursday"s operation was the bank"s first since Kobe Steel"s data tampering came to light earlier in October.

While the BOJ has previously avoided bonds from companies rocked by scandal, according to an official at a Japanese asset management company, this seems to no longer be the case. Whereas such avoidance has occurred even if the security otherwise meets credit ratings and other requirements set by the bank, when it comes to Kobe bonds, Kuroda decided to make an explicit exception.

And like the ECB, which provides only token transparency when it comes to its corporate bond purchases, the BOJ is likewise opaque about its open market operations. Investors who want to sell corporate bonds in a BOJ operation often do so via brokerages. These investors do not know whether the central bank bought the debt until results of the operation surface later that evening. And, as the Nikkei reports, it was learned later Thursday - to the relief of investors - that the bank purchased around 20 billion yen to 30 billion yen worth of corporate bonds, a major insurance provider estimated. About 170 billion yen worth of Kobe Steel bonds are circulating in the market, more than 40 billion yen of which fulfills BOJ requirements.

Since the BOJ does not break down the purchases by issuer, whether the central bank bought Kobe Steel bonds can be inferred by the average interest rate of corporate bonds accepted. A clue that the BOJ had indeed purchased Kobe steel bonds - the metric jumped from the prior operation in September, suggesting the steelmaker"s bonds likely were included in the purchases. Since only one company saw a dramatic spike in its bond yields - and default probability - it can be safely concluded that the BOJ did in fact purchase bonds from the distressed corporation.

Of course, having purchased Kobe Steel bonds means that the central bank has once again greenlighted an unprecedented moral hazard, encouraging bond traders to buy bonds issued by a company which according to some may be facing bankruptcy in the not too distant future. Indeed, even the Nikkei writes that the Bank of Japan finds itself in an awkward position:

"If it did buy Kobe Steel bonds, investors who normally would steer clear of such a company may purchase the asset anyway in anticipation of selling it to the BOJ. But if the bank blacklists Kobe Steel, investors might see the bonds as an even bigger risk."

An even better question: should Kobe Steel file for bankruptcy, and its debt be equitized in the form of post-reorg equity, just how will the BOJ act when, after buying billions in Kobe bonds, it finds itself a major equity stakeholder in the restructured company? While we don"t know the answer, it will certainly be a closely followed case study in central bank "activism", because after the next downturn, all eyes will be on the ECB which over the past 16 months has purchased over €110 billion in European corporate bonds with increasingly lower credit ratings. After the next European recession, many of these issuers will be bankrupt, leaving the ECB as one of the major equity stakeholders in an unknown number of upcoming restructuring processes, where it will ultimately end up owning post-reorg equity.

Or perhaps neither the BOJ nor ECB will allow any of the corporate names in its bond portfolio to default, bidding up bonds without relent, and resulting in the most bizarre zombie company world of all: one where bankrupt companies see their bonds trading at (or above) par, unable to file for bankruptcy - just like Greece - as the alternative would be the "new normal" financial equivalent of "crossing the streams."

Even Bartenders And Personal Trainers Can Receive Whistleblower Awards From The SEC

Authored by Jordan A. Thomas, chair of the whistleblower practice at the law firm of Labaton Sucharow

Crafted by an ad agency immediately following 9/11, the slogan “if you see something, say something” took hold with astonishing speed. The tagline reflected a tectonic cultural shift; the serious and growing need for public participation in the nation’s enforcement paradigm. In many ways, those six words have come to define a change in guard in which government has effectively deputized everyday citizens to be its eyes and ears.

The Securities and Exchange Commission sought a similar kind of cooperation with a revolutionary program that provides whistleblowers the ability to report anonymously and receive significant monetary awards and employment protections for tipping the agency to federal securities violations.  Its “deputies” are rewarded handsomely. Since its launch, the program has received tens of thousands of tips and has paid out approximately $158 million from a replenishing account funded by penalties, not taxpayer dollars.   

Remarkably, only about half of whistleblower award recipients were current or former employees of the subject companies, according to a 2015 report to Congress by the SEC. While that figure inched up in the subsequent year, even at our firm"s practice, over one-quarter of whistleblower clients were not employed by the companies on which they reported. So who are these outsiders and how are they changing the game?

Who Can Blow the Whistle?

Almost anyone can be an SEC whistleblower. Eligibility is more defined by the nature of the intelligence, than the source. That is, qualifying information provided by a tipster must be original and derived from either independent knowledge or independent analysis. Generally, where a whistleblower works does not factor into the eligibility calculus. Whistleblowers can be analysts, forensic accountants, secretaries, investors and even journalists. We have also met successful whistleblowers who gained their knowledge from a personal relationships with individuals at the subject companies. The net is wide; even bartenders, hair stylists and personal trainers could be eligible to receive a monetary award if they learn about possible securities violations from their clients.   

This broad eligibility also extends to outside advisors of the company in question. Pursuant to the SEC guidelines, so-called gatekeepers such as officers, directors, attorneys, accountants and compliance professionals can be whistleblowers, although they must satisfy special procedural requirements. For instance, lawyers must carefully navigate their professional responsibilities, such as the attorney-client privilege.

Outsiders In Action: Historical Awards

When it comes to shining a light on corporate wrongdoing outsiders play a vital role. Consider the case of medical device company Orthofix International NV, which earlier this year agreed to pay over $14 million to settle charges that it improperly booked revenues and made payments to Brazilian doctors in violation of the Foreign Corrupt Practices Act. Four former executives also agreed to pay penalties to settle cases related to the accounting failures.

The case is significant because my firm"s clients, the Orthofix whistleblowers, were two independent financial analysts who performed the extensive detective work that enabled the SEC to bring its case. The analysts initially had a hunch that something about the company’s financial performance looked “odd.” They examined publicly available financial information and compared Orthofix’s reported sales and inventory turnover data with that of its peers to unearth evidence of suspicious practices. The whistleblower submission, supported by work from our in-house investigative team, included extensive briefing documents and analysis, which armed the SEC for a successful enforcement action. The analysts will be well rewarded for their diligence and determination: their award is expected to total at least $2.5 million.

In a more recent example, on July 25, 2017, the SEC announced a whistleblower award of nearly $2.5 million to an employee of a domestic government agency. The related SEC order noted that, in general, an employee of a federal, state or local government agency can be a qualified whistleblower. There are some exceptions that apply to employees of certain regulatory agencies or law enforcement organizations, who are charged with uncovering legal violations as part of their responsibilities.

Last year, in announcing an award of more than $700,000 to an outsider who provided the SEC with a detailed analysis that led to a successful enforcement action, Andrew Ceresney, then Director of the SEC’s Enforcement Division, affirmed the important role of outsiders in the new enforcement paradigm: “The voluntary submission of high-quality analysis by industry experts can be every bit as valuable as first-hand knowledge of wrongdoing by company insiders.”

Finally, what was likely the first award issued to an outsider was also one of the largest SEC whistleblower awards ever made. In October 2013, the SEC awarded $14.7 million to an individual who provided key information to halt an ongoing scheme. Years later, in subsequent litigation with his partners, the whistleblower was identified as an investment fund manager who provided information regarding a visa-for-sale scam perpetrated by a Chicago man who raised $147 million from Chinese investors.

What’s A Outsider To Do?

In some respects, outsiders are free from certain pressures that plague employee whistleblowers who anticipate workplace retaliation or may have executed secrecy agreements that attempt to bar the reporting of misconduct. While both are illegal, such instruments and behaviors force employee whistleblowers to operate from positions of fear. Outsiders, on the other hand, can stand up and speak out against wrongdoing from an entirely different platform. And there is no doubt that in crafting the guidelines, the SEC fully intended and expected that outsiders would play a key role in helping to detect and deter securities violations. Indeed, during my tenure at the SEC, I was a part of the small group that developed the statutory and regulatory provisions of the whistleblower program. Recognizing that a panoply of individuals outside of the defendant companies could have actionable intelligence, we designed a program that ensures that virtually all knowledgeable individuals can speak up about possible securities violations—regardless of whether they are insiders or outsiders.    

Nevertheless, it can be tricky for outsiders to move from hunch to knowledge and suspicion to proof. When information about potential violations is based on professional judgment rather than firsthand knowledge, it is mission critical to verify suspicions with in-depth analysis or other tangible (legally acquired) evidence. In our practice, our investigative team is led by a former FBI agent who calls upon seasoned investigators and financial analysts to support our clients’ submissions. This is particularly important for our clients outside the violating company, who want to confirm their suspicions or fill in any evidentiary gaps.

At the end of the day, whether an individual suspects fraud from a distance or is smack dab in the midst of its damaging spiral, law enforcement authorities need the public’s help and should haven’t to go it alone. Frauds are too complex, too far-reaching and our enforcers stretched too thin. This is a public-private partnership of the highest order and the greatest necessity. If tiplines and overt vigilance are the ‘new normal,’ those who report misconduct are the heroes of our generation. And the government will reward their courage.

So much for “tattletales.”

S&P On The Verge Of History

U.S. stocks have risen more in the past eight years than in almost any other post-World War II time of economic growth, as defined by the National Bureau of Economic Research.

The logic here is that economic expansions fuel bull markets and so it’s reasonable to measure market recoveries after a period of macro contraction ends.

Using that definition, let’s review how the S&P 500 has performed during the last ten economic recoveries. To be precise, the birth of the stock market’s bull market is dated as the first day after an NBER-defined recession has ended. The market run continues through the peak.

The S&P 500 Index jumped 172 percent from July 2009, when the current expansion started, through Wednesday. The biggest advance was about 300 percent and occurred from April 1991 to March 2001, when Internet-related stocks soared.

As Capital Speculator blog"s James Picerno notes, the question before the house: Will the momentum of late endure long enough to overtake the 1991-2001 record in duration and/or magnitude?

If so, the bull market in the here and now has to last another 463 trading days, which translates into a market rally that goes deep into 2019.

There"s just one thing wrong...

Remember - the "market" is not the "economy"... or maybe it is in the new normal?

For The First Time Since January 2016, The Market Volatility Regime Finally Snapped

• August 17 marked the first time since January 16 when global equity, rates, commodity and FX vols all moved in the same direction. 


• At the same time, short-dated cross asset correlation continued to rise reaching a level of 50%, its highest level in over 1y.

For months on end, traders, analysts and pundits have been pointing to record low implied vol as a sign of pervasive complacency (and in some cases, "trader paralysis") in response to a market that made no sense, and where the only permitted direction was "up." That may finally be ending, and not just based on references to seasonal patterns that have zero relevance in a "new normal" driven by central bank asset purchases, but because the market"s artificial sense of calm is finally starting to crack, as observed by the recent surge in 20-day S&P realized vol.

And when realized vol starts rising, implied vol promptly follows, and when implied vol rises, it creates a feedback loops in which vol sellers are forced to cover, raising realized vol even more, pushing implied vol higher, and so on, as the current cycle of unprecedented volatility selling eventually ends, with either a bang or a whimper (spoiler alert: the former).

Meanwhile, as both volatility metrics rise, cross-asset volatility - traditionally an indicator of latent market stress - follows. And in what may come as a surprise to some, while most have been lamenting the blanket of broad market complacency in the past year, which in recent months have been validated by near record low global cross-asset implied volatilities....

... Bank of America points out that short-dated cross asset correlation has been rising over the past few months and currently stands at 50%, its highest level in over a year. Meanwhile, the correlation of cross asset vols may have also reached a turning point: August has been the first month in over a year to witness a simultaneous rise in global equity, rates, commodity and FX volatility. In fact, August 2017 marked the first month since January 2016 in which all cross asset risk measures rose modestly over the month, even if they still remain in significantly benign territory.

To BofA"s derivatives strategist Benjamin Bowler, this suggests that various pockets of the market are finally beginning to agree on the presence of risk, albeit to varying extents.

More ominously, on a consolidated basis as noted above, in August short-dated (3-month) cross asset correlation continued to rise reaching a level of 50%, its highest level in over a year. Historically there have been 3 distinct cross asset correlation regimes since 1995.

Interestingly, the broad upward trend started in Oct-03, well before the Lehman bankruptcy in Sep-08. This is related to the liquidity driven crush in asset risk-premia that helped drive investment leverage higher. Long-term correlation established a new regime starting some time in 3Q13, similar to the ’03 to ‘08 correlation environment. With the recent surge in cross-asset vol, that regime may now be ending too.

The good news, as BofA also points out, is that the uptick in volatility and credit spreads in most cases was modest in magnitude, leaving global cross asset risk metrics well within benign territory amid a backdrop of rising geopolitical tensions on the Korean peninsula. This means that it is still historically cheap to purchase efficient hedges ahead of what is already proving to be a catalyst-rich fall.

As a final observation, BofA then lays out the cheapest derivatives across the entire global derivatives universe, in other words, those which have the highest upside in case of a crash.

The chart below shows crash returns of different assets during historical tail events per unit of current OTM option implied volatility. Ranked by the average, the screen shows that the hedges which are most underpricing historical drawdowns are: US & EU IG credit payers, Gold calls and RDXUSD (Russian equity) puts: US & European IG credit payers still rank as the best value hedges across all assets in our universe followed by Gold (and Gold ETF) calls. In equities, RDXUSD (Russia), NIFTY (India) and TWSE (Taiwan) puts screen as top hedges while puts on NASDAQ (US Tech), Top40 (S. Africa) and ASX200 (Australia) rank as the most expensive.

Finally, those who want to hedge against a crash may want to avoid buying USDJPY puts: USDJPY puts once again are at the very bottom of BofA"s screen (most expensive tail hedge) as the ongoing geopolitical risk flare on the Korean peninsula has likely increased demand for JPY as a risk-off asset. In contrast, Nikkei puts, while belonging to the same region, currently rank as the cheapest DM equity hedge.

Battlefield America Is The New Normal: We're Not In Mayberry Anymore

Authored by John Whitehead via The Rutherford Institute,

“If we’re training cops as soldiers, giving them equipment like soldiers, dressing them up as soldiers, when are they going to pick up the mentality of soldiers?”— Arthur Rizer, former police officer

America, you’ve been fooled again.

While the nation has been distracted by a media maelstrom dominated by news of white supremacists, Powerball jackpots, Hurricane Harvey, and a Mayweather v. McGregor fight, the American Police State has been carving its own path of devastation and destruction through what’s left of the Constitution.

We got sucker punched.

First, Congress overwhelmingly passed—and President Trump approved—a law allowing warrantless searches of private property for the purpose of “making inspections, investigations, examinations, and testing.”

For now, the scope of the law is geographically limited to property near the Washington DC Metro system, but mark my words, this is just a way of testing the waters. Under the pretext of ensuring public safety by “inspecting” property in the vicinity of anything that could be remotely classified as impacting public safety, the government could gain access to almost any private property in the country.

Then President Trump, aided and abetted by his trusty Department of Justice henchman Jeff Sessions and to the delight of the nation’s powerful police unions, rolled back restrictions on the government’s military recycling program.

What this means is that police agencies, only minimally deterred by the Obama administration’s cosmetic ban on certain types of military gear, can now go hog-wild.

We’re talking Blackhawk helicopters, machine guns, grenade launchers, battering rams, explosives, chemical sprays, body armor, night vision, rappelling gear, armored vehicles, and tanks.

Clearly, we’re not in Mayberry anymore.

Or if this is Mayberry, it’s Mayberry in The Twilight Zone.

As journalist Benjamin Carlson stresses, “In today’s Mayberry, Andy Griffith and Barney Fife could be using grenade launchers and a tank to keep the peace.”

Contrast the idyllic Mayberry with the American police state of today, where local police—clad in jackboots, helmets and shields and wielding batons, pepper-spray, stun guns, and assault rifles—have increasingly come to resemble occupying forces in communities across the country.

As Alyssa Rosenberg writes for The Washington Post, “[The Andy Griffith Show] expressed an ideal that has leached out of American pop culture and public policy, to dangerous effect: that the police were part of the communities that they served and shared their fellow citizens’ interests. They were of their towns and cities, not at war with them.”

That’s really what this is about: a war on the American citizenry waged by local law enforcement armed to the teeth with weapons previously only seen on the battlefield

As investigative journalists Andrew Becker and G.W. Schulz reveal, “Many police, including beat cops, now routinely carry assault rifles. Combined with body armor and other apparel, many officers look more and more like combat troops serving in Iraq and Afghanistan.”

Thanks to Trump, this transformation of America into a battlefield is only going to get worse.

To be fair, Trump did not create this totalitarian nightmare. However, he has legitimized it and, in so doing, has also accelerated the pace at which we fall deeper into the clutches of outright tyranny.

In the hands of government agents, whether they are members of the military, law enforcement or some other government agency, these weapons of war have become accepted instruments of tyranny, routine parts of America’s day-to-day life, a byproduct of the rapid militarization of law enforcement over the past several decades.

It’s a modern-day Trojan Horse.

Although these federal programs that allow the military to “gift” battlefield-appropriate weapons, vehicles and equipment to domestic police departments at taxpayer expense are being sold to communities as a benefit, the real purpose is to keep the defense industry churning out profits, bring police departments in line with the military, and establish a standing army.

It’s a militarized approach to make-work programs, except in this case, instead of unnecessary busy work to keep people employed, communities across America are finding themselves “gifted” with unnecessary drones, tanks, grenade launchers and other military equipment better suited to the battlefield in order to fatten the bank accounts of the military industrial complex.

In addition to being an astounding waste of taxpayer money, this equipping of police with military-grade equipment and weapons also gives rise to a dangerous mindset in which police adopt a warrior-like, more aggressive approach to policing.

The results are deadly.

As a study by researchers at Stanford University makes clear, “When law enforcement receives more military materials — weapons, vehicles and tools — it becomes … more likely to jump into high-risk situations. Militarization makes every problem — even a car of teenagers driving away from a party — look like a nail that should be hit with an AR-15 hammer.”

The danger of giving police high-power toys and weapons is that they will feel compelled to use it in all kinds of situations that would never normally warrant battlefield gear, weapons or tactics.

Suffice it to say, change will not come easily.

As I make clear in my book Battlefield America: The War on the American People, the police unions are a powerful force and they will not relinquish their power easily. Connect the dots and you’ll find that most, if not all, attempts to cover up police misconduct or sidestep accountability can be traced back to police unions and the police lobby.

Just look at Trump: he’s been on the police unions’ payroll from the moment they endorsed him for president, and he’s paid them back generously by ensuring that police can kill, shoot, taser, abuse and steal from American citizens with impunity.

Still, the responsibility rests with “we the people.”

As author Ta-Nehisi Coates reminds us:

The truth is that the police reflect America in all of its will and fear, and whatever we might make of this country’s criminal justice policy, it cannot be said that it was imposed by a repressive minority. The abuses that have followed from these policies—the sprawling carceral state, the random detention of black people, the torture of suspects—are the product of democratic will. And so to challenge the police is to challenge the American people who send them into the ghettos armed with the same self-generated fears that compelled the people who think they are white to flee the cities and into the Dream. The problem with the police is not that they are fascist pigs but that our country is ruled by majoritarian pigs.

Bay Area TV Anchor: "I Experienced Hate First Hand Today In Berkeley" From Antifa

After the media lashed out at right-wing extremists in the aftermath of the tragic violence in Charlottesville, the tide now appears to be turning against the all-black-clad "Antifa."

For the first time since the campaigns began late last year and protests broke out, The Washington Post unleashed this shocking headline.

Their faces hidden behind black bandannas and hoodies, about 100 anarchists and antifa - “anti-fascist” - members barreled into a protest Sunday afternoon in Berkeley’s Martin Luther King Jr. Civic Center Park.

Jumping over plastic and concrete barriers, the group melted into a larger crowd of around 2,000 that had marched peacefully throughout the sunny afternoon for a “Rally Against Hate” gathering.

Shortly after, violence began to flare. A pepper-spray-wielding Trump supporter was smacked to the ground with homemade shields. Another was attacked by five black-clad antifa members, each windmilling kicks and punches into a man desperately trying to protect himself. A conservative group leader retreated for safety behind a line of riot police as marchers chucked water bottles, shot off pepper spray and screamed, “Fascist go home!”

All told, the Associated Press reported at least five individuals were attacked. An AP reporter witnessed the assaults.

Berkeley Police’s Lt. Joe Okies told The Washington Post the rally resulted in “13 arrests on a range of charges including assault with a deadly weapon, obstructing a police officer, and various Berkeley municipal code violations.”

But it"s not just WaPo that is exposing some truth. Well known Bay Area TV personality, Frank Somerville - KTVU anchor - took to Facebook this weekend to explain what happened to him when he took a day trip to Berkeley.

Before he starts, he notes...

"My wife told me I"m going to get crucified by posting this. I told her I didn"t care. This is what happened. This is what I saw. This is what I experienced. This is the truth. Period.

If people dont want to hear the truth thats not my problem. I have no agenda. Im just saying that this is what happened to me today, think about it. And make your own decision."

And judging by the 2800 comments and 10s of 1000s of "shares", Somerville"s report (below) struck more than a chord...

I experienced hate first hand today... It came from these people dressed in all black at a protest in Berkeley.

Ironically they were all chanting about NO hate.

Some had shields and gloves. Some had helmets. Some had gas masks.

I was watching them and taking it all in. I came there on my own time. Because I wanted to see things first hand. I was dressed in shorts and a tank top.

At one point I took out my phone to take a picture. And that"s when it all happened. (And just to be clear they were playing for the cameras in front but I was toward the back. And since there were already so many people taking their picture I didn"t think it would be an issue.)

I took these two pictures and afterward they started screaming at me. I thought for sure they were going to attack. I was just waiting for it. I wasn"t scared.

But I stayed calm even though I thought this may not end well for me. Here"s how the conversation went (and as you"re reading this keep in mind that they were yelling at me and their words were filled with venom, anger, hate and intolerance.)

There"s just no other way to describe it. I was stunned.

Them: Hey! No pictures or we"ll take your phone!!! (At that point I"d already taken these shots)

Me (In calm voice): You"re on public property and I can take a picture if I want to.

Them: Oh so you"re a big man with a camera?

Me: No I just wanted to take a picture and talk with you.

Them (rushing toward me): We outnumber you and we will take your camera!

Me: You"re not going to take my camera and you"re not going to tell me what to do. Why can"t we just have a respectful conversation. (I then touched one of them on her hand to say it"s okay I just want to talk)

Them: Don"t touch me!!

Me: I"m not trying to do anything. I just want to try to understand and have a respectful conversation.

Them: We"ll block your shot!!!

Me: That"s fine. All I wanted to do was have a conversation.

Them: Now is not the time. (In fairness he was the one person who was respectful)

Then as I started to walk away a woman started screaming at me saying: We"re not interested in talking to you!! We"re not interested in talking to you!!

I walked away stunned. I grew up in Berkeley. I marched in anti-war protests during the sixties.

Its one thing to read about HATE, It"s another thing to be right next to it.

In my opinion, these people dressed in black are just as hateful and intolerant as the people they are protesting against.

Afterward I was talking to several other protesters. (Not dressed in black)

One of them actually stood up for me as the people dressed in black were threatening me. I was touched. They were just as disappointed as I was. They said that the people dressed in black represent a small minority and that they "hijack" the protests.

And I agree. MOST of the people out there today in Berkeley were non-violent.

They were there for the cause. They just wanted to come out and stand up against hate. I totally support them. But I do not support extremists, whether they are on the right or the left.

Hate is hate. And I experienced it first hand today. It was sad to see.

The commenters, as one would imagine, were very diverse in their opinions about Somerville"s story, but the cognitive dissonance seems immense...

Niki D"Amore That"s not hate. They were prepared for battle. They"re fighting for your daughter"s rights, for my rights. They had a preconceived notion of the kind of man you are, based on your whiteness, and the way you were dressed. Is their presumption of you ok, absolutely not, but we"re in the midst of a revolution, at a turning point, and some people expect you to pick a side. This wasn"t hate. It was anger.

Mileen Nahon I wouldn"t be surprised if they were actually part of the Neo Nazi group and are dressed as counter-protestors to make the opposing side look bad. WHY wear so much disguise unless you are there to cause real damage? WHY are you there to cause damage if you are there to oppose these fascist morons?

Tommy Salami That"s it. I"m done with you, Frank. Did you see Inglorious Basterds? Schindler"s List? Hell, Indiana Jones? Were you confused about who the bad guy was? You wandered into a literal battlefield dressed like a Summer tourist and tried to have a conversation? What on Earth is wrong with you?

Bob Demello How do we know they were not far right hater"s there to make peaceful protesters look bad?

Eric Anderson Surprising to hear you taking a political position and agreeing with our President"s statement regarding violence from many sides. Equivocation between fascists and anti-fascists is a core strategy of the alt-right.

Somerville was careful to respond to each assertion, and summarized as follows...

What"s so interesting to me about all of this is that I actually went there becausee I wanted to see if I could talk to a white supremacist... i was wondering what it would be like to be standing next to someone hates... instead I experienced hate by finding finding myself standing next to extremists on the left...

There have been a lot of people leaving comments about me where they completely disagree with me. and that"s totally okay. to the discussion that"s so important. We all see life thru a different lens. What I described today was what I saw they MY lens. But I also want to see things thru your lens whether I agree or disagree with you. That"s how we learn. So thank you for your comments whether you argree with me or whether you vehemently disagree with me.

Sticking your neck out and reporting truth is anathema in this new normal, we hope, as his wife suggested, he is not crucified; however, we suspect, given the bias in the Bay Area, he may well be.

And as an aside, here is Somerville"s daughter with her two best friends...

A couple of final thoughts...

For all the media worries that Trump is inciting violence against journalists, the only group consistently assaulting reporters is Antifa

— Scott Greer (@ScottMGreer) August 27, 2017

Texas is showing us the best of America.

California is showing us its ass.

— EducatédHillbilly™ (@RobProvince) August 27, 2017

Man walking to grocery store in Berkeley mistaken for being a Nazi is beaten into a coma. pic.twitter.com/pFpHhSKasi

— Hector Morenco (@hectormorenco) August 27, 2017

Is Sweden A Failed State?

Authored by Judith Bergamn via The Gatestone Institute,

• The Swedish state, in true Orwellian style, fights those Swedish citizens who point out the obvious problems that migrants are causing.


• When police officer Peter Springare said in February that migrants were committing a disproportionate amount of crime in the suburbs, he was investigated for inciting "racial hatred".


• Currently, a 70-year-old Swedish pensioner is being prosecuted for "hate speech", for writing on Facebook that migrants "set fire to cars, and urinate and defecate on the streets".

The security situation in Sweden is now so critical that the national police chief, Dan Eliasson, has asked the public for help; the police are unable to solve the problems on their own. In June, the Swedish police released a new report, "Utsatta områden 2017", ("Vulnerable Areas 2017", commonly known as "no-go zones" or lawless areas). It shows that the 55 no-go zones of a year ago are now 61.

In September 2016, Prime Minister Stefan Löfven and Minister of Interior Anders Ygeman refused to see the warnings: in 2015, only 14% of all crimes in Sweden were solved, and in 2016, 80% of police officers were allegedly considering quitting the force. Both ministers refused to call it a crisis. According to Anders Ygeman:

"... we are in a very difficult position, but crisis is something completely different. ...we are in a very strained position and this is because we have done the biggest reorganization since the 1960s, while we have these very difficult external factors with the highest refugee reception since the Second World War. We have border controls for the first time in 20 years, and an increased terrorist threat".

A year later the Swedish national police chief is calling the situation "acute".

In 2015, only 14% of all crimes in Sweden were solved. In 2016, 80% of police officers were allegedly considering quitting the force. Nonetheless, Prime Minister Stefan Löfven (pictured above) refused to call it a crisis. (Photo by Michael Campanella/Getty Images)

Sweden increasingly resembles a failed state: In the 61 "no-go zones", there are 200 criminal networks with an estimated 5,000 criminals who are members. Twenty-three of those no-go zones are especially critical: children as young as 10 years old are involved in serious crimes there, including weapons and drugs, and are literally being trained to become hardened criminals.

The trouble, however, extends beyond organized crime. In June, Swedish police in the city of Trollhättan, during a riot in the Kronogården suburb, were attacked by approximately a hundred masked migrant youths, mainly Somalis. The rioting continued for two nights.

Violent riots, however, are just part of Sweden"s security problems. In 2010, according to the government, there were "only" 200 radical Islamists in Sweden. In June, the head of the Swedish Security Service (Säpo), Anders Thornberg, told the Swedish media that the country is experiencing a "historical" challenge in having to deal with thousands of "radical Islamists in Sweden". The jihadists and jihadist supporters are mainly concentrated in Stockholm, Gothenburg, Malmö and Örebro, according to Säpo. "This is the "new normal" ... It is an historic challenge that extremist circles are growing," Thornberg said.

The Swedish establishment has only itself to blame for it.

Thornberg said that Säpo now receives around 6,000 intelligence tips a month concerning terrorism and extremism, compared to an average of 2,000 a month in 2012.

Some of the reasons for the increase, according to terror expert Magnus Ranstorp of the Swedish Defense University, is due to segregation in Sweden"s no-go zones:

"... it has been easy for extremists to recruit undisturbed in those areas. ...the prevention measures have been pretty tame... if you compare Denmark and Sweden, Denmark is at university level and Sweden at kindergarten level".

Asked what the increase in people supporting extremist ideologies indicated about Sweden"s work to combat radicalism, Interior Minister Anders Ygeman told the Swedish news outlet TT:

"I think it says little. This is a development we have seen in a number of countries in Europe. On the other hand, it shows that it was right to take those measures we have. A permanent centre against violent extremism, that we have increased the budget to work against violent extremism, that we have increased the security police"s budget for three years."

There may be even more jihadists than Säpo thinks. In 2015, at the height of the migrant crisis, when Sweden received over 160,000 migrants, 14,000 of them who were told that they were going to be deported disappeared inside Sweden without a trace. As late as April 2017, Sweden was still looking for 10,000 of them. Sweden, however, has only 200 border police staff at its disposal to look for them. One "disappeared migrant" was Rakhmat Akilov, from Uzbekistan. He drove a truck into a department store in Stockholm, killing four people and wounding many others. He later said he did it for the Islamic State (ISIS).

Meanwhile, Sweden continues to receive returning ISIS fighters from Syria, a courtesy that hardly improves the security situation. Sweden, so far, has received 150 returning ISIS fighters. There are still 112 who remain abroad -- considered the most hardcore of all -- and Sweden expects many of those to return as well. Astonishingly, the Swedish government has given several of the ISIS returnees protected identities to prevent local Swedes from finding out who they are. Two Swedish ISIS fighters who returned to Europe, Osama Krayem and Mohamed Belkaid, went on to help commit the terror attacks at Brussels airport and the Maelbeek metro station in the center of Brussels, on March 22, 2016. Thirty-one people were killed; 300 were wounded.

Swedish news outlets have reported that the Swedish towns that receive the returnees do not even know they are returning ISIS fighters. One coordinator of the work against violent Islamist extremism in Stockholm, Christina Kiernan, says that "...at the moment there is no control over those returning from ISIS-controlled areas in the Middle East".

Kiernan explains that there are rules that prevent the passing of information about returning jihadists from Säpo to the local municipalities, so that the people who are in charge in the municipal authorities, including the police, have no information about who and how many returned ISIS fighters there are in their area. It is therefore impossible to monitor them -- and this at a time when Säpo estimates the number of violent Islamist extremists in Sweden in the thousands.

Even after all this, the Swedish state, in true Orwellian style, fights those Swedish citizens who point out the obvious problems that migrants are causing. When police officer Peter Springare said in February that migrants were committing a disproportionate amount of crime in the suburbs, he was investigated for inciting "racial hatred".

Currently, a 70-year-old Swedish pensioner is being prosecuted for "hate speech", for writing on Facebook that migrants "set fire to cars, and urinate and defecate on the streets".

With thousands of jihadists all over Sweden, what could be more important than prosecuting a Swedish pensioner for writing on Facebook?

Is 'Oil God' Andy Hall The Latest Victim Of "Fake News"?

Raymond James" J. Marshall Adkins invoked one of President Trump"s favorite phrases to explain oil"s plunge, and to excuse his bullish bias (that crude can rise to as much as $65 a barrel).

As Bloomberg notes, conventional wisdom holds that resilient U.S. shale drilling, underwhelming progress towards OPEC’s goal in slimming global oil inventories, and output recoveries from nations exempt from the deal to curb production helped push crude down more than 20 percent from recent peaks. But according to Adkins - a noted oil bull - the bad times for oil can be chalked up to “fake news” that amplified the downside.

“The recent collapse in oil prices was triggered by a breakdown in the technical charts but fueled by the ‘negative feedback loop’ of bearish headlines that usually follow price declines,” the analysts wrote in a July 3 note to investors.

“Some oil price headlines have been misleading, or outright wrong, and they have distracted investors from what we believe is fundamentally a bullish overall picture.”

Concerns have been overblown, the Raymond James analysts argued, saying trends pertaining to U.S. inventories, production and gasoline demand have been misinterpreted. They put out a list of “myths” that explain the downturn and set out to debunk them in arguing that crude can rise about 45 percent from current levels.

The analysts neglect to bring up one of their own old calls: that West Texas Intermediate would touch $80 per barrel this year.

“While increasingly lonely in our bullish oil price view, we are still convinced that oil prices are on track to set cyclical highs over the next six to 12 months, and we encourage our readers to stay focused on the real fundamentals and not get caught up in the day-to-day torrent of noise,” the analysts conclude.

So with all that said, it appears that uber oil guru and perma-bull Andy Hall of Astenbeck Capital has "fallen" for this "fake news" as he has finally changed his mind on the general direction of oil prices.

Since the beginning of 2015, when oil prices first started to slide, Hall’s belief that the decline is only temporary has been unwavering, and as other oil bulls have thrown in the towel, Hall has continued to try to justify his bullish stance.

However, as ValueWalk"s Rupert Hargreaves notes, it now looks as if Hall has become the latest oil bull to capitulate. In a July 3rd letter to investors of Hall’s oil-focused hedge fund, Astenbeck Capital, a copy of which has been reviewed by ValueWalk, the fund manager strikes a downbeat note and seems to finally admit that OPEC is no longer in control of the market and shale’s dominance now means $50 oil is the new normal.

Hall starts his letter by acknowledging that oil fundamentals have only deteriorated over the past six months as “demand growth seems to be somewhat less than anticipated while supply keeps surprising to the upside.” Meanwhile, “the expected acceleration in inventory drawdowns has not materialized – at least as evidenced by available high-frequency data.”

There are two main driving forces behind these fundamental changes, one long-term, the other short-term.

The long-term factor is “it is becoming increasingly evident that, under most reasonable scenarios, U.S. shale oil will be the marginal source of supply, at least until 2020” Hall writes. The most significant contributor to this is that the “cost of this oil is significantly lower than was believed to be the case even a few months ago,” and as a result “the long-term price anchor for oil has moved lower.” According to Hall’s letter, the price anchor has now fallen to $50 a barrel, down from $60 at the start of the year. Specifically, Hall writes:

“Technological advances have continued to drive down well breakevens as well as expand the shale oil resource base in the U.S. In a recent report, PIRA estimated that there are now 80 billion barrels, or half of the recoverable U.S. shale oil resource base, that is economic at $50 Brent (say $48 WTI) or less. This represents some 215,000 well locations. Each of these on average can produce around 300 bpd in its first year on stream. The current horizontal oil rig count is 650 and has been growing at a rate that would bring the count to close to 800 by the end of the year. 800 rigs can drill about 15,000 wells per annum which means potentially 4.5 million bpd of gross new production.

...

A recent Goldman Sachs analysis posits continued productivity growth for years ahead. This will be driven by higher rates of recovery of initial oil in place through the application of artificial intelligence and big data analytics. Goldman argues that this could eventually reduce breakevens to $45 and below. The best operators in the Permian like EOG already have well breakevens at, or even below, $40 WTI. As the rest of the pack catches up with the leaders, average breakevens are likely to fall further if Goldman is correct.”

The second, short-term factor is an apparent deterioration in the supply and demand balances for 2017. While many analysts were expecting OPEC’s actions to curb supply to reduce the inventory overhang, the expected supply deficit has not materialized. Hall writes that based demand in 2017 should be growing by around 1.7 million bpd, if not more. Actual growth, however, “seems to be closer to 1.4 to 1.5 million bpd for reasons that are not yet clear.” As demand comes in lower than expected, supply is building faster than expected with growth in non-OPEC supply revised progressively higher by 0.3 million bpd and OPEC additional supply increasing by 0.2 million bpd.

“Together,” Hall reports “these changes amount to a 0.9 million bpd deterioration in the supply and demand balance for 2017 and an initially expected supply shortfall for the year of 1.4 million bpd now looks like it will be closer to 0.5 million bpd.”

These figures are before shale contributions. “At the rate at which oil drilling rigs have been added in the U.S., non-OPEC production has been on a path to grow by as much as 2 million bpd in 2018.”

Thanks to all of the above-mentioned factors, Astenbeck Capital Management, now giving up on his long-term bullish oil for oil prices. Instead, it seems as if the trader is going back to his roots, adopting a short-term strategy to profit from volatility.

“These developments call for a more opportunistic approach to the oil market than hitherto. Whereas it once seemed positions could be held with an eye to a longer-term secular appreciation, that is no longer the case. Indeed, the evidence is now in plain sight. Over the past year, the front month WTI futures contract has moved by double digits in percentage terms 10 times within a $40 - $55 band. This volatility has been accentuated by large financial flows into and out of the market by non-traditional investors and algorithmic trading systems. Attempting to capture just a percentage of those moves makes more sense than trying to ride what has turned out to be a non-existent trend, especially when contango inflicts a negative roll return on investors. The extreme volatility within a rangebound environment also argues for a more tactical and conservative approach to portfolio management.”

Hall concludes:

“At the start of the year, the anchor was thought to be about $60 [for Brent] and rising over time... Today, it appears to be closer to $50 (and possibly still falling.)"

So is "fake news" the new "dog ate my homework?"

JPMorgan's Head Quant Doubles Down On His "Market Turmoil" Forecast: Here's Why

After getting virtually every market inflection point in 2015, and early 2016, so far 2017 has not been Marko Kolanovic"s year, whose increasingly more bearish forecasts have so far been foiled repeatedly by the market, and the same systematic traders that he periodically warns about. As a reminder, his most recent warning came last week, when he cautioned that even a modest rebound in VIX could lead to dramatic losses for vol sellers. As a reminder, here is the punchline from his latest note:

Days like May 17th and similar events "bring substantial risk for short volatility strategies. Given the low starting point of the VIX, these strategies are at risk of catastrophic losses. For some strategies, this would happen if the VIX increases from ~10 to only ~20 (not far from the historical average level for VIX). While historically such an increase never happened, we think that this time may be different and sudden increases of that magnitude are possible. One scenario would be of e.g. VIX increasing from ~10 to ~15, followed by a collapse in liquidity given the market’s knowledge that certain structures need to cover short positions.

So in light of a market that refuses to post even the smallest of drawdowns (we are not sure if the words "selling", "correction" or "crash" have been made illegal yet), has Kolanovic thrown in the towel and declared smooth seas ahead? To the contrary: in a note released late last night, he echoes warnings made recently by both Citi and BofA, and predicts that receding monetary accommodation from ECB and BOJ will likely lead to "market turmoil, and a rise in volatility and tail risks" and just in case there is some confusion, he reiterates what he said last week, namely that the "key risk of option selling programs is market crash risk."

In terms of near-term catalysts, what is Kolanovic most worried about? The same thing that Matt King warned about this week when he explained why he believes "markets will flounder as central banks try to exit" and showed the following chart:

Now it"s Kolanovic" turn to make essentially the same warning:

Equity Volatility has been suppressed by relentless supply via yield generating strategies, macro decorrelation and inflow into passive and quantitative strategies....  Risky assets have been rallying for years, and market volatility is near record lows. Valuations are high, arguably supported by low interest rates and record pace of central bank monetary expansion. However, this may change in the near future. In the US rates are rising and monetary accommodation from the ECB and BOJ is expected to recede. Medium term, this is likely to lead to market turmoil, and a rise in  volatility and tail risks.

Indeed, and by now we can only assume that the rest of the actively trading community is well aware of these very risks. And yet, stocks refuse to budge, which either confirms what Kolanovic said recently, namely that only 10% of all market decisions are made by human traders, or that as King speculated, the market is now so broken it can no longer discount the future, especially if the event to be discounted is precisely the one that broke it in the first place.

Below are some additional excerpts from Kolanovic"s latest note, explaining why he is doubling down on his "market turmoil" call:

The landscape: Volatility is low across the board

Volatility across asset classes is near all-time lows. We have written extensively about the drivers of current low volatility which we summarize below.

Current pace of the Global recovery does not warrant a high volatility regime. Global growth is tracking ~3%, with disinflationary drag receding. In the US, slow and steady growth have alleviated fears of imminent US recession and China hard landing risk has been contained by PBOC easing and large Government stimulus. Medium term, as rates in the US rise and balance sheets of global central banks recede, this positive growth narrative will likely increasingly come under pressure.

While fundamentally volatility should not be high, it is clear to us that the current macro environment does not warrant all-time low volatility either. For instance, our analyses point that in equities, implied and realized volatility may be suppressed by 4-8 points by various structural drivers.

Selling of volatility across asset classes is one of the key parts of risk premia/smart beta programs. Selling of volatility is a yield generating strategy that can be benchmarked against bond yields. The key risk of option selling programs is market crash risk. Global central banks have helped in both aspects by lowering yields and reducing crash risks, increasingly inviting strategies that sell volatility outright or implicitly.

Figure 2 below shows changes in global central banks’ assets (6-month change), and volatility of global equity markets (6-month volatility of MSCI World). One can see that in the 2007-2013 time period, central bank asset purchases leaned against major increases of market volatility and thus reduced market tail risk (see here). The current wide gap – with a near record pace of central bank balance sheet expansion (highest since 2011) and record low levels of market volatility – poses significant market risk. This risk is likely to materialize as the balance sheets of global central banks are pared in 2018 as described below.

G4 Central Banks have resorted to “unconventional” policy measures to stoke the global economy in the wake of the 2008 financial crisis. Various QE programs from the Fed, BoE, BoJ and ECB resulted in central bank balance sheets ballooning from $6Tr in 2009 to $14Tr at the end of 2016. G4 QE should expand by a further $2Tr this year. However, 2018 will mark a major shift in this dynamic according to our Economic team’s forecast, as G4 QE programs should fall off a “cliff” (Figure 2). This will notably be due to the ECB and BoJ scaling down their large scale asset purchases (by $950Bn and $500Bn, respectively), and the Fed actually shrinking the size of its UST/MBS holding (by $330Bn). Such a disengagement from central banks could facilitate disruptive market moves.

We think that the current low levels of volatility are not a new normal and will not last very long given the amount of leverage, rising rates, and the approaching reduction of central bank balance sheets. While we don’t know when the next recession will happen, every Fed hike is bringing us closer to it. Increasing allocation to hedges, specifically tail hedges, may be prudent.

One day, Marko"s magic will return. For now, however, the relentless drift higher continues.

Accept Islamic Terror As The New Normal?

Authored by Nonia Darwish via The Gatestone Institute,

• "The use of terror under this doctrine [Targhib wal tarhib, "luring and terrorizing"] is a legitimate sharia obligation." — Salman Al Awda, mainstream Muslim sheikh, on the Al Jazeera television show "Sharia and Life".


• Part of the tarhib or "terrorizing" side of this doctrine is to make a cruel example of those who do not comply with the requirements of Islam. That is the reason Muslim countries such as Saudi Arabia and Iran, and entities such as ISIS, intentionally hold ceremonial public beheadings, floggings, and amputation of limbs.


• Islamic jihad has always counted on people in conquered lands eventually to yield, give up and accept terrorism as part of life, similar to natural disasters, earthquakes and floods.

After terror attacks, we often hear from Western media and politicians that we must accept terrorist attacks as the "new normal."

For Western citizens, this phrase is dangerous.

Islam"s doctrine of jihad, expansion and dawah (Islamic outreach, proselytizing) rely heavily on the use of both terror and luring. Targhib wal tarhib is an Islamic doctrine that means "seducing (luring) and terrorizing" as a tool for dawah, to conquer nations and force citizens to submit to Islamic law, sharia. It amounts to manipulating the instinctive parts of the human brain with extreme opposing pressures of pleasure and pain -- rewarding, then severely punishing -- to brainwash people into complying with Islam.

Most ordinary Muslims are not even aware of this doctrine, but Islamic books have been written about it. Mainstream Muslim sheikhs such as Salman Al Awda have discussed it on Al Jazeera TV. On a show called "Sharia and Life," Al Awda recommended using extremes "to exaggerate... reward and punishment, morally and materially... in both directions". "The use of terror under this doctrine,"" he said, "is a legitimate sharia obligation."

People in the West think of terror as something that Islamic jihadists inflict on non-Muslims, and it is. But terror is also the mechanism for ensuring compliance within Islam. Under Islamic law, jihadists who evade performing jihad are to be killed. Terror is thus the threat that keeps jihadists on their missions, and that make ordinary Muslims obey sharia.

An online course for recruiting jihadists contains this description:

"Individual Dawa depends on eliciting emotional responses from recruits (and building a personal relationship). Abu "Amr"s approach illustrates a recruitment concept called al-targhib wa"l-tarhib, which is a carrot-and-stick technique of extolling the benefits of action while explaining the frightening costs of inaction. The concept was introduced in the Qur"an and is discussed by many Islamic thinkers exploring the best way to call people to Islam (several scholars, for example, have written books titled al-targhib wa"l-tarhib). According to Abu "Amr, recruiters should apply the concept throughout the recruitment process, but emphasize the benefits of action early in the process and the costs of inaction later."

In other words, recruiters of jihadists should start by emphasizing the "good stuff" first, the "lure" -- the future glory, supremacy and fulfillment of every lustful wish, such as virgins in heaven. Later, they should threaten the recruits with "terror" and shame -- the consequence if they fail to participate in jihad.

Part of the tarhib or "terrorizing" side of this doctrine is to make a cruel example of those who do not comply with the requirements of Islam. That is the reason Muslim countries such as Saudi Arabia and Iran, and entities such as ISIS, intentionally hold ceremonial public beheadings, floggings, and amputation of limbs. Countries such as Egypt, Jordan, and Turkey are more discrete, but they tolerate and support honor killings; killing apostates; beating women and children, and torture and murder in their jails. The doctrine of targhib and tarhib is alive and well, not just in Islamic theocracies but also in the so-called "moderate" Muslim countries.

Islam has been using these "pleasure and pain" brainwashing techniques, and cruel and unusual punishment, from its inception and until today. While the Bible -- the Western Judeo-Christian tradition -- is in harmony with, and nurtures, kindness in human nature, Islam does the opposite: it uses the human instincts for self-preservation and survival to break the people"s will and brainwash them into slavish obedience.

Like the majority of Muslims, I never heard of this foundational Islamic doctrine when I was growing up in Egypt, but have felt the impact of this doctrine on my life -- in every aspect of Islamic culture; in Islamic preaching, in my Islamic family relations; in how Islamic governments operate and how people of authority, in general, treat the people under them.

The Islamic doctrine of "lure and terror" has produced a culture of toxic extremes: distrust and fear, pride and shame, permission to lie ("taqiyya"), and rejecting taking responsibility for one"s actions.

Having lived most of my life under Islam, I am sad to say that people the West calls "moderate Muslims" are frequently, in fact, citizens who have learned to live with and accept terror as normal. For centuries, many have made excuses for terror, condemned victims of terror, remained silent or equivocal, and have even compromised with the terrorists to survive. The Islamic culture in which I lived looked the other way when women were beaten. When girls were honor-murdered, the question was "what did she do?" instead of "how could that be?" When Christians were killed and persecuted, many blamed the Christians for their own persecution at the hands of Muslims. The normal Islamic response to terror became: "None of my business."

And now the Islamic doctrine of Targhib wal Tarhib, has moved to the West and aims at changing Western humanistic culture. It would replace respect for human rights, caring for one"s neighbor and the values of freedom and peace, with the values of bondage, terror, tyranny and fear.

Islamic jihad has always counted on people in conquered lands eventually to yield, give up and accept terrorism as part of life, similar to natural disasters, earthquakes and floods.

It did not take long for the Islamic doctrine of Targhib wal Tarhib to work on the psyche of Western leaders and media, who are now telling us to live with it as the "new normal." Islam counts on turning everyone into "moderate" Muslims who will eventually look the other way when terror happens to the person next to you.

The new normal? Police help survivors of the terrorist attack on London Bridge, June 4, 2017. (Photo by Carl Court/Getty Images)

American Exceptionalism: Decelerating Population Growth, Accelerating Money Growth

Authored by Chris Hamilton via Econimica blog,

Since 1971, and the disconnection of the dollar from a finite gold backing, the value of money (the dollar) has been determined by it"s purchasing power versus the inflation of the assets to be purchased.  Thus printing more money has not necessarily created "wealth" if the assets to be purchased are rising as fast or faster than the purchasing power of the "money".  The Fed touts it"s dual mandate of full employment and stable prices...but the result in prices; not so stable.

The primary global asset purchasable only in US dollars, crude oil, has told a story of wildly gyrating prices.  Since the end of Bretton Woods and the subsequent Congressionally dual mandated roles bestowed on the Fed...crude oil prices have gone bezerk, twice climbing nearly 10x"s within a decade.  This is the opposite of stable (particularly compared to the price stability from WWII"s end until the?Fed took over).

Soooo, theoretically the growth of  "money" should be linked to the growth of the population, to ensure an adequate and stable money supply exists for the growing population.  In a moment I"ll show you anything but a stable money supply.  But first, the chart below shows the total 25-54yr/old US population, those employed among them, and the value in dollars of all publicly traded US stocks (represented by the Wilshire 5000).  Something far beyond population growth or employment growth is pushing up the value of dollar based assets, gauging by US stock markets accelerating appreciation.

With that in mind, the chart below shows the growth of M3 money (the broadest measure of US "money") and the broader 15-64yr/old US population since 1971.  The money supply has grown in excess of 20x"s (2,000%) vs. the working age population (15-64yr/olds) which has grown less than 1x (nearly 70% increase).

This results in a rising ratio of "money" on a per capita of the core population basis, as the chart below details.  The total amount of "money" rose from approximately $5 thousand dollars per working age adult to todays $65 thousand dollars per adult...an increase of  13x"s (1.300%).

The annual growth of the 15-64yr/old core US population peaked in 2003 and annual core population growth has decelerated by 90% since...while annual M3 growth has doubled over the same time period.  The chart below shows the annual changes from 1980 into 2017.

The chart below from 2000 into 2017 shows the change in both core population and M3 money supply, showing the year over year change on a monthly basis...and the current fall in core population growth will continue downward, likely turning negative at times over the next year (yet another first for America).

The final chart is the growth in M3 money supply per the growth in the adult, working age population.  I"m not an economist or expert on much of anything...but that doesn"t look particularly good to me (something to do with "hyper-monetization" or some such thing).

All I can say is the appearance of hockey sticks typically aren"t a good or stable sign but their appearance, just like those of black swans, has become the "new normal".