11 Signs that Point to 2017 Being Worse than 2016 – M. Snyder

Andy’s Notes: More than anything, this same fellow pens an article every so often with similar indicators pointing to a gradual worsening of economic conditions. I’m inclined to believe this particular piece because I’ve seen some of this firsthand and heard about much more of it secondhand. In totality, it points to the ‘slow burn’ theory that we’ve supported on this blog for years, not the overnight crash theory promoted on so many others. While the overnight crash theory makes for great books and movies, observation has shown that we’ve been in a slow burn mode for 11 years now.

There is much debate about where the U.S. economy is ultimately heading, but what everybody should be able to agree on is that economic conditions are significantly worse this year than they were last year.  It is being projected that U.S. economic growth for the first quarter will be close to zero, thousands of retail stores are closing, factory output is falling, and restaurants and automakers have both fallen on very hard times.  As economic activity has slowed down, commercial and consumer bankruptcies are both rising at rates that we have not seen since the last financial crisis.  Everywhere you look there are echoes of 2008, and yet most people still seem to be in denial about what is happening.

The following are 11 facts that prove that the U.S. economy in 2017 is in far worse shape than it was in 2016…

#1 It is being projected that there will be more than 8,000 retail store closings in the United States in 2017, and that will far surpass the former peak of 6,163 store closings that we witnessed in 2008.

#2 The number of retailers that have filed for bankruptcy so far in 2017 has already surpassed the total for the entire year of 2016.

#3 So far in 2017, an astounding 49 million square feet of retail space has closed down in the United States.  At this pace, approximately 147 million square feet will be shut down by the end of the year, and that would absolutely shatter the all-time record of 115 million square feet that was shut down in 2001.

#4 The Atlanta Fed’s GDP Now model is projecting that U.S. economic growth for the first quarter of 2017 will come in at just 0.5 percent.  If that pace continues for the rest of the year, it will be the worst year for U.S. economic growth since the last recession.

#5 Restaurants are experiencing their toughest stretch since the last recession, and in March things continued to get even worse

 Foot traffic at chain restaurants in March dropped 3.4% from a year ago. Menu prices couldn’t be increased enough to make up for it, and same-store sales fell 1.1%. The least bad region was the Western US, where sales inched up 1.2% year-over-year and traffic fell only 1.7%, according to TDn2K’s Restaurant Industry Snapshot. The worst was the NY-NJ Region, where sales plunged 4.6% and foot traffic 6.3%.

This comes after a dismal February, when foot traffic had dropped 5% year-over-year, and same-store sales 3.7%.

#6 In March, U.S. factory output declined at the fastest pace in more than two years.

#7 According to the Bureau of Labor Statistics, not a single person is employed in nearly one out of every five U.S. families.

#8 U.S. government revenues just suffered their biggest drop since the last recession.

#9 Nearly all of the big automakers reported disappointing sales in March, and dealer inventories have now risen to the highest level that we have seen since the last recession.

#10 Used vehicle prices are absolutely crashing, and subprime auto loan losses have shot up to the highest level that we have seen since the last recession.

#11 At this point, most U.S. consumers are completely tapped out.  According to CNN, almost six out of every ten Americans do not have enough money saved to even cover a $500 emergency expense.

Just like in 2008, debts are going bad at a very alarming pace.  In fact, things have already gotten so bad that the IMF has issued a major warning about it

In America alone, bad debt held by companies could reach $4 trillion, “or almost a quarter of corporate assets considered,” according to the IMF. That debt “could undermine financial stability” if mishandled, the IMF says.

The percentage of “weak,” “vulnerable” or “challenged” debt held as assets by US firms has almost arrived at the same level it was right before the 2008 crisis.

We are seeing so many parallels to the last financial crisis, and many are hoping that our politicians in Washington can fix things before it is too late.

On Monday, the most critical week of Trump’s young presidency begins.  The administration will continue working on tax reform and a replacement for Obamacare, but of even greater importance is the fact that if a spending agreement is not passed by Friday a government shutdown will begin at the end of the week

Trump has indicated that he wants to tackle the repeal and replacement of Obamacare and introduce his “massive” tax plan in the next week, all while a shutdown of parts of federal government looms Friday.

By attempting three massive political undertakings in one week, investors will have a sense of whether or not Trump will be able to deliver on pro-growth policies that would be beneficial for markets.

If Trump can pull off the trifecta, it could restore faith that policy proposals like tax cuts and infrastructure spending are on the way. If not, look out.

Members of Congress are returning from their extended two week spring vacation, and now they will only have four working days to get something done.

And I don’t believe that they will be able to rush something through in just four days. 

The Republicans in Congress, the Democrats in Congress, and the Trump administration all want different things, and ironing out all of those differences is not going to be easy.

For example, the Trump administration is insisting on funding for a border wall, and the Democrats are saying no way.  The following comes from the Washington Post

President Trump and his top aides applied new pressure Sunday on lawmakers to include money for a wall on the U.S.-Mexico border in a must-pass government funding bill, raising the possibility of a federal government shutdown this week.

In a pair of tweets, Trump attacked Democrats for opposing the wall and insisted that Mexico would pay for it “at a later date,” despite his repeated campaign promises not including that qualifier. And top administration officials appeared on Sunday morning news shows to press for wall funding, including White House budget director Mick Mulvaney, who said Trump might refuse to sign a spending bill that does not include any.

And of course the border wall is just one of a whole host of controversial issues that are standing in the way of an agreement.  Those that are suggesting that all of these issues will be resolved in less than 100 hours are being completely unrealistic.  And even though the Trump administration is putting on a brave face, the truth is that quiet preparations for a government shutdown have already begun.

The stock market bubble is showing signs of being ready to burst, and an extended government shutdown would be more than enough to push things over the edge.

Let us hope that this government shutdown is only for a limited period of time, because an extended shutdown could potentially be catastrophic.  In the end, either the Trump administration or the Democrats are going to have to give in on issues such as funding for Obamacare, the border wall, Planned Parenthood, defense spending increases, etc.

It will be a test of the wills, and it will be absolutely fascinating to see who buckles under the pressure first.

Still not convinced? After climbing to its highest in 3 years earlier in 2017, Citi’s Economic Surprise index — which gauges how well data come in better than expected — has sagged badly lately. In fact, this week saw the biggest drop in US Macro data in 6 years (after poor readings on job creation, inflation, housing starts and car sales)

If Everything is So Great, What is the Deal with Treasuries?

Andy’s Notes: Easy answer – the stock market is well understood by the public to equal the health of the US Economy. The average person has no clue how the bond market works. This is not a slam; the bond market is a good deal more complex. I have talked to more than a few investment ‘professionals’ who did not have a solid grasp of the bond market. This is not the time to explain how it works; there are many Internet resources that do an excellent job. The point is that bond yields moving down are moving counter with the not-so-USFed’s desire to raise interest rates. In other words, the bond market is saying ‘Hey, the economy isn’t that great, use some caution’ while the not-so-USFed is saying ‘The economy is better than ever, we need to raise rates’. So which is it?

If everything’s so awesome, why are Treasuries so bid?

Heavy demand for Treasuries this morning after two notable data disappointments

Banks are ripping higher (though some context below may help), even as bond yields roll over…

And despite the collapse in VIX, stocks are flat since the open…

Stocks remain ebulient…

Schwab: Brokerage Accounts Rise by 44% in First Quarter

Andy’s Notes: This ‘signal’, in a traditional setting, would be more accurate than any technical indicator. It is a representation of the herd mentality and the mentality of small investors.. well, forever. They buy high and sell low. The exact opposite of what they should be doing. Today, however, we must be careful in analyzing because it has long been admitted and known that there are no more financial markets – they are momentum casinos. I could easily see this bit of news being incorporated into a ‘this time it’s different’ story line when the DOW crashes through 25,000 or whatever. This whole system is in continuous need of validation because it is intrinsically invalid. So before you go out and short the ‘market’ on this news, keep the above in mind. Simply put, the age of knee-jerk reactions is over regardless of how solid something appears.

A few days ago Charles Schwab, the investment brokerage firm, announced that the number of new brokerage accounts soared 44% during the first quarter of 2017.

More specifically, Schwab stated that individual investors are opening up stock trading accounts at the fastest pace the company has seen in 17 years.

17 years.

Anyone remember what happened 17 years ago?

Oh right. The Dot-com bubble burst.

After years of unbelievable gains in the 1990s, the NASDAQ Composite index peaked at 5,132.52 on March 10, 2000.

Simultaneously, during the first quarter of 2000, investors were rushing to open new brokerage accounts invest their savings in the stock market.

The NASDAQ Composite subsequently fell nearly 80% over the next 2 ½ years, wiping out trillions of dollars of wealth from retail investors.

The last phase of any bubble is almost invariably the euphoric shopping spree of an irrational public that buys stocks, real estate, etc. at record highs, foolishly believing that prices will keep rising indefinitely.

That’s what happened in 2000.

And that’s what seems to be happening today.

Investors are once again clamoring to buy expensive, popular stocks at price levels never before seen in the history of the stock market.

Company valuations are sky-high.

At 26.44, the S&P 500’s Price/Earnings ratio is the highest EVER, except for two occasions: the 2008 crash, and the 2000 crash.

At 28.93, the “Shiller P/E ratio”, which looks at company valuations over a longer-term, 10-year period and adjusts for inflation, is at the highest level EVER, except for two occasions: the 2000 crash, and the 1929 crash.

Price to sales ratios are near the highest levels in at least 50 years.

Price to book ratios haven’t been at this level since the 2008 crash.

And the stock market cap to GDP ratio is the highest since the 2000 crash.

(If you don’t understand those terms, I would highly encourage you to read this book. This small investment in your education might be the best you’ll ever make.)

Billionaire investor Paul Tudor Jones described these expensive stock market valuations as “terrifying” earlier this month at a closed-door asset management conference hosted by Goldman Sachs.

Yet for some reason individual retail investors still believe that stock prices will continue to rise.

According to Yale University’s Stock Market Confidence Index, for example, over 90% of individual investors believe that the stock market will rise in the next 12 months.

This sentiment isn’t actually based on any data; it’s simply how people -feel-.

These are classic bubble conditions: record-high prices, unsustainable valuations, baseless euphoria, and a surge in activity from retail investors.

In fairness, it’s possible that corporate profits surge by unimaginable rates; this would bring stock valuations back to reality.

But that’s unlikely.

Corporate profits are more or less tethered to the overall economy. If GDP growth is flat, corporate profits will be flat.

Real GDP growth in the US basically went flat in 2016 at just 1.6%.

And the Federal Reserve Bank of Atlanta estimates that the US economy grew at a pitiful 0.5% annualized rate in the first quarter of 2017.

Consumer spending, the mainstay of the US economy, slumped in the first three months of this year.

Plus, interest rates are starting to rise, which increases borrowing costs for both businesses and individuals.

Given such anemic conditions it seems a risky to bet everything on a sudden shock-and-awe surge in corporate profits.

So we’re right back where we started– an overvalued market exhibiting classic signs of a bubble.

I’m not suggesting that some major crash is imminent.

It’s entirely possible that this bubble can get even bigger; the stock market might rise another 10%, 20%, or more.

But it’s also possible we’ll see a drop of 40%+ from these levels. Remember, the NASDAQ Composite fell 78% from its peak in 2000.

Rational individuals always consider their downside first. Fear of loss should be far greater than the fear of missing out.

Quite simply if the reward isn’t worth the risk, don’t do it. Find something else. Or do nothing and simply wait on the sidelines.

The universe of options is a lot bigger than simply “US stocks”, and there’s an abundance of great opportunity outside of the mainstream.

Lately I’ve been involved in a number of secured lending deals where I’m able to earn between 10% to 12% per year with almost zero risk.

This strikes me as a great alternative to the stock market; I’d rather make a fixed 10% with minimal risk than potentially make 15% or 20%, but risk a 50% loss.

I’ve also been buying cash-producing royalties, which in my view is one of the most undervalued asset classes in the world. (More on that another time…)

Bottom line, there’s no sense in taking on enormous risks to make a few bucks.

The world is a big place. And with so much technology and connectivity at our disposal, there are plenty of safe, lucrative alternatives out there to consider.

Overdoses Taking Wartime Casualties – Natural News

Andy’s Notes: I chopped off the politicizing of this tragedy at the end of the article. Sorry Mike, great research, but we’re not going to make this out to be a good cop / bad cop issue. When it comes to US administrations, they’re all bad, differing only by degrees and in the techniques they use. That said, the overdose problem has reached epidemic proportions. The governor here in Pennsylvania has responded by handing out Narcan to school kids and everyone else, without even bothering to educate them on the drawbacks of the drug. The same is happening nationwide in an irrational response to a problem that requires an instant fix – no pun intended – despite taking decades to develop. All while politicians fiddled and did nothing.

(Natural News) For the last eight years, Democrats allowed drug smugglers and drug cartels to run rampant across the U.S. border, hoping to invite in a sufficient number of illegal aliens to make sure a Democrat could win the presidential election (through illegal voting, of course). The America-hating Democrats lost the election, but the social cost of their “open borders” lunacy will be felt for years to come. (See also The Left’s Descent to Fascism for more background on the deeper cost to society of the Left’s embrace of fascism and treason.)

One of the most devastating costs of the Democrats’ open borders policy is the widespread trafficking of illicit drugs across the U.S. border, effectively flooding the heartland with dangerous chemical substances that destroy lives. Those chemicals are now killing more Americans every year than the entire Vietnam War.

According to an analysis report published by the U.S. Centers for Disease Control, overdose deaths from illicit drugs have reached war-like levels of annual deaths:

  • 47,055 drug overdose deaths in 2014 (61% involving opioids)
  • 52,404 drug overdose deaths in 2015 (63% involving opioids)

(Data were not yet available for 2016.)

The drugs cited for causing the overdose deaths are many of the same drugs brought into the United States by Mexican drug cartels, using smuggling routes that were left largely undefended by the Obama administration, which sought to leave America’s borders wide open for political purposes:

  • natural/semisynthetic opioids
  • methadone
  • heroin
  • synthetic opioids

“A multifaceted, collaborative public health and law enforcement approach is urgently needed” to stem the growing epidemic, urges the CDC report, yet Democrats have systematically opposed any substantial support of police, Border Patrol or any law enforcement body that would substantially reduce the inflow of these addictive, dangerous substances into the United States. (Related: Find more news about drug addiction at Addiction.news.)

In other words, just to keep winning elections, the Democrats have allowed a deadly drug war to be waged on the American people by drug cartels that largely originate from South of the border. Just to get Hillary Clinton elected, the Democrats subjected America to Vietnam War levels of carnage, suffering and death. That’s how much the Democrats despise America (and are willing to do anything to attain political power).

Big Pharma’s chemical rampage of opioid deaths across America

“The ongoing epidemic of opioid deaths requires intense attention and action,” warns the CDC report, which also points out the role of Big Pharma and the overprescription of addictive opioids. Yet the Obama administration did absolutely nothing to reel in the domineering power of the “legal” drug cartels in America: the pharmaceutical industry. While Americans are dying by the tens of thousands, Big Pharma is reaping a windfall of profits from addictive opioids. Follow the saga of opioids at OPIOIDS.news.

For eight years under Obama, the Democrats sold out America to both the pharmaceutical giants and the Mexican drug cartels, and now we’re paying a devastating price across society. The loss of productive lives, the addiction treatment costs and the law enforcement burden are all adding enormous economic burdens to cities and states that are already drowning in debt.

At the same time, treasonous, lunatic Leftists declared their cities to be “sanctuary cities” to actually harbor violent criminals and drug dealers, further adding to the scourge of drug deaths now devastating Americans across the country. (Question: When will President Trump arrest the mayors who openly violate immigration law and harbor violent criminals under the treasonous scheme of “sanctuary?”)

The rest of the article was redacted due to shameful political posturing.

 

TIPS Auction ‘Validates’ Broken US Debt Scam

Graham’s Musings: What is more remarkable; the fact that anyone would still fall for the idea of inflation protected securities or that alleged ‘professionals’ and ‘experts’ in the financial community would continue to push the notion that the USGovernment can continue to rack up debt continuously without consequence? I have never in my entire career seen such delusion.

As RBC’s head of cross asset strategy remarked yesterday, a key validation of whether the reflation trade may be coming back, was the market’s response to today’s 5-Year TIPS auction, which priced at 1pm.

So those looking for confirmation that the reflation trade has at least another life left in it, will be glad to know that today $16.0 billion 5-year TIPS auction this afternoon went especially well, in line with all of last year’s TIPS auctions, and the cherry on top was a record buyside takedown suggesting that at least for now, bidders believe that reflationary forces remain.

The auction stopped at -0.049%, which was firmly through the 1:00 p.m. bid side of around -0.026%, resulting in a 1/8% coupon for the issue. The 2.52 bid/cover was also strong, and the buyside takedown figures were tremendous. Both the Indirect and Direct bidder takedown figures were strong, and the combined buyside takedown (Indirect + Direct bidders) was a record 83.3%.

Indirect bidders were also strong, in with a $14.745 billion bid for the issue today, which is the largest since August 2015, and that bid was also aggressive enough to generate a 74.2% Indirect bidder takedown. That is a record for new issues, and is the second largest overall, behind only the 76.4% takedown in August 2015. The strength of the Indirect bid correlates very strongly with the strength of investment fund demand.

The Direct bid was also good this month. The $2.004 billion size of the bid wasn’t anything out of the ordinary, but it was a much more aggressive bid than typical, judging by the well above average hit ratio, leading to a 9.2% takedown. That is the largest Direct bidder takedown since December 2013. The strength of the Direct bid has a more mixed relationship with the strength of foreign demand.

The Dealer bid for the issue – as one would expect in a record buyside auction – was light, however. The $23.465 billion bid was the smallest for an original issue 5-year TIPS auction since April 2009, when the auction size was significantly smaller. The Dealer hit ratio was also very light due to the large and aggressive buyside demand, leaving Dealers with a record low 16.7% takedown.

In sum: based at least on the TIPS aution, the reflation trade is alive and well, even if other market indicators such as 2Y breakevens suggest otherwise.

Tensions Increase As China Moves Military Assets

Andy’s Notes: The war machine will get its way at all costs. Beware for any and all shenanigans necessary to push military conflict. Read yesterday’s piece for analysis and information regarding the various stalled military campaigns globally.

The US has seen evidence that the Chinese military is preparing “for a potential North Korea contingency“, CNN reports citing a US defense official, and adds that Chinese air force land-attack, cruise-missile-capable bombers were put “on high alert” on Wednesday.

The official added that the US has also seen an extraordinary number of Chinese military aircraft being brought up to full readiness through intensified maintenance.

The official said that these recent steps by the Chinese are assessed as part of an effort to “reduce the time to react to a North Korea contingency.”

Among the contingency options listed is the “risk of an armed conflict breaking out as tensions on the peninsula have risen in the wake of multiple North Korean missile tests.”

There has also been ratcheted up rhetoric from the US and Pyongyang, with the latter’s state media warning Thursday that a pre-emptive strike by North Korea would result in the US and South Korea being “completely destroyed in an instant.”

Beijing has long been concerned about potential instability in North Korea should the regime in Pyongyang collapse, fearing both an influx of refugees and the potential of reunification under a South Korean government closely allied to the US.

Meanwhile, China remains opposed to the US military’s presence in South Korea, protesting the recent US and South Korea decision to begin deploying elements of the THAAD missile defense system.

Given the close economic links between North Korea and China, US military officials have said that Beijing is critical to solving the North Korean situation, with President Donald Trump recently commending Chinese President Xi Jinping for Chinese efforts to curb Pyongyang’s activities.

Earlier on Thursday, Nikkei reported that as a form of ratcheting up pressure on North Korea, China may halt crude exports to North Korea should Pyongyang conduct its sixth nuclear test, “signalling a tougher attitude by Beijing.”

Meanwhile, with much confusion over the current whereabouts of the Carl Vinson aircraft carrier, and various other US naval forces around the globe, here is the latest map courtesy of Stratfor.

The Truth is a Dangerous Thing – My Two Cents

My Two Cents

Andy Sutton / Graham Mehl

4/19/2017 – “The Truth is a Dangerous Thing”

This time in history might be like no other – or at a minimum is on a much bigger scale. There is more access to information, analysis, and expert opinions than ever. Obviously, everyone claims to be telling ‘the truth’. A few psychopathic individuals notwithstanding, nobody sets out in the business of providing information, then says ‘But we’re going to lie like a rug, 24/7, how about them apples?’. Everyone is telling the truth. The odd thing about all this is that the stories that come out of these ‘truth telling’ outfits couldn’t be further apart from each other. That leaves the average person with a distinct problem – it is up to YOU to find the truth. To seek it, to think it, to try to live it.

At the end of the day, the truth is more about perception than anything else. It is amazing how ten different people can look at the same facts and come to 10 different conclusions. Perhaps that is a tribute to our ability to think and cogitate or perhaps it is simply the sum total of our biases and perceptions. This becomes insanely apparent when dealing with politics, and even economics. Since they’ve become inextricably linked, even the study of economics has become poisoned with normalcy bias, perceptions, and dogmatic stubbornness.

We are going to take a look at a couple of examples from economics – politics is a lost cause – and a place where people who seek to analyze have no business dabbling anyway. The good news is that in the case of America, economics does transcend politics because all of the negative (at least we see them that way based on history) trends extend for long periods of time and continue unaffected by changes in the political structure. This will undoubtedly annoy some people because they thought their political idols were just so smart and said all the right things, when in fact they were merely just part of a machine – again, in our opinion.

We also believe that pretty much everyone has made up their minds one way or the other about all this. People fall in to one of several groups. First, there is the group that will naively believe whatever the television/media has to offer, question nothing, and accept whatever the clowns in Washington, their state capitol, or county have to say. The same is true of economics. Then you have the folks at the opposite end of the continuum. They reject virtually all of what they are told by government ‘officials’ and the media. They aren’t buying it.

Then you have a group that knows there is something wrong, but just can’t believe that such wickedness could take place in America. They’ve bought into the Hollywood version of America. We’re the good guys; everyone else is wrong about everything and there’s always a happy ending. This all must be someone else’s fault. These are the dangerous people – again, in our opinion, because it doesn’t take much to get their attention and not too much beyond that to get their finger pointed directly at you.

Finally, there is a tiny slice of America and the world who is still undecided. They’ve heard some parts from the various sides, but they haven’t come to a conclusion yet. These are the people we mostly write for. We try to provide information rather than subliminally telling them how to think. It is difficult and we certainly fail on occasion. We admit that. We also write for the people who understand as we do; to provide them with information and analysis that their busy lives don’t permit them time to gather on their own.

Why is Syria Such a BIG Deal?

With all that said, let’s look at the economics of the situation with regards to Syria. We know that in 2013, Exxon Mobil, headed by now Secy of State Rex Tillerson cut a deal with tiny Qatar to pipeline Qatar’s natural gas to the Mediterranean Sea, thereby putting a crimp on Russia’s monopoly on European gas markets. Nobody likes to lose a good monopoly. US companies are constantly fighting to maintain monopoly status whether it is Microsoft’s landmark battle in the 1990s or Pfizer’s battle to keep its blockbuster drug Lyrica under patent protection for just a little longer. It’s all about monopoly. So let’s keep that in mind before we intellectually string up Putin, Medvedev, and the Russians. We do the same thing here.

Pushing ahead, the deal between Exxon and Qatar was to construct a pipeline. The House of Saud declined (at the time) to have a pipeline running through their country. If they’d agreed, there is an outside chance the pipeline could have avoided Syria, although there would have been some interesting maneuvering required to make that happen. The easiest option was to swing the pipeline through the already US-controlled Iraq and then West through Syria. Unfortunately, the Syrians also declined.

Houston, We Have a Problem

The May 2013 deal between Exxon and Qatar, evidence of which has been scrubbed from Exxon’s corporate website, was followed just a few months later by war drum rhetoric against Assad from the USGovt. Assad’s government is the entity who refused US access to Syria for the pipeline. Everyone following? The Russians, who realized how critical Syria was had already buddied up with Assad and they’d formed an alliance, which actually dates back to the 1950s. America was a little late to the party – at least publicly. Within a few weeks of the rhetoric ramping up, suddenly Assad was accused of attacking his own people with chemical weapons; something he’d never been accused of before. Odd that he waits until the attention of the world is focused on him to pull such a ridiculous stunt. Unfortunately for the military-industrial complex, the issue never got any momentum, the Russians dug in with regards to supporting Assad and his government, and the issue got pushed to the back burner. It was later determined that Assad hadn’t done anything wrong with regards to any chemical weapons attack.

We are sure that Assad is no angel; you can’t be a leader of a country in today’s world without being a psycho/sociopath at some level. Let’s keep that in mind. However, it’s a big leap from being a garden variety egomaniac to a new low by perpetrating a chemical weapons attack on your own people. Thinking people came to this conclusion and the issue was never advanced. We wrote at the time that Russia would never leave Syria due to the strategic nature of their relationship. Assad needs the Russians to protect him and his government from the military-industrial complex and the Russians need Assad’s government to remain in place so they can hold their monopoly.  It’s a purely symbiotic relationship. Economics is morphed into geopolitical strategy before our eyes based on the age-old principle of coincidence of wants.

What Happens Now?

Nothing has really changed. There is still a deal in play. The Russians are still in Syria and aren’t going anywhere. The USGovt is trying to move the rhetoric forward again, this time with ANOTHER chemical weapons attack allegedly perpetrated by Assad on his own people. There have already been some rather prominent experts in this particular field who claim that there was no way Assad could have done this; that in fact it isn’t even possible. The military industrial complex responded rapidly; before the dust had settled, and flew 5 dozen Tomahawks into a sovereign nation.

Before anyone pipes up what a dirt bag Assad is, we want to ask you where the military industrial complex is vis a vis the USGoverment while atrocities and human rights violations take place in many countries in Africa, among other places. These are well documented cases by groups such as Doctors without Borders and others. Where are the mighty Tomahawks to crush these tinpot dictators and aggressors? Answer: these countries aren’t strategic, aren’t part of the big plan and therefore don’t matter. America cannot claim the moral high ground on this issue. The ONLY reason we are interested in Syria is because of its strategic value. Let’s not pretend it is about human rights violations.

This, Not That… That, Not This

Last week the focus shifted suddenly to North Korea. Syria has been forgotten. The Tomahawk attack was a joke, lacked the intended effect (unless the intent was to put on a really expensive fireworks show), and again, the issue failed to collect the momentum necessary to achieve critical mass. The saber rattling was intense but it didn’t work. Russia didn’t back down, made some threats of its own and all of a sudden the gears were switched to North Korea. We don’t know of any pipeline deals involving North Korea, but we do know that they don’t have an IMF/World Bank controlled central bank. That was enough to get a bunch of Middle Eastern countries turned into parking lots after George W. Bush made his ‘Axis of Evil’ declaration. The one thing all those countries had in common was the lack of participation in the IMF/Central Banking system. Of those, Iran and North Korea, and Syria are three of the few remaining nations that are not fully given over to the IMF/Central Banking system. Iran has been on the hotlist forever, but again, lack of momentum has kept war at bay.

In 2000, the Project for a New American Century released a whitepaper entitled ‘Rebuilding America’s Defenses’ stating that ‘catalyzing events’ were necessary in order to achieve America’s overseas agenda in any kind of reasonable timeline. These ‘catalyzing events’ were discussed as events that would be similar to Pearl Harbor and would provide instantaneous momentum and justification for swift military action. The white paper in question was called ‘Rebuilding America’s Defenses’.

Actions in the geopolitical realm ALWAYS come back to economics. Figure out who is going to benefit from any action or proposed action and you are halfway to the truth. Benefit might mean monetarily or in the form of leverage, which can be converted to a monetary benefit later. However, it is often necessary to deceive in order to achieve such ends. This, not that… That, not this. Syria, not North Korea, North Korea, not Syria.

There are many people who look at the Project for a New American Century’s whitepaper as a blueprint for global domination. After all, 10 of the think-tank’s original signees went on to serve in the Bush Administration. We don’t know what their intent was, and stating an opinion would be essentially blind speculation on our part. Whatever PNAC might or might not have been, sometimes even innocuous things provide great windows into the great beyond of geopolitical engineering.

The description of a ‘catastrophic, catalyzing event’ is what gives us great pause. The think-tank realized that there wasn’t enough momentum to propel the US into the battles the think tank believed necessary minus some type of catastrophe. As we close, we point to the many stalled ‘initiatives’ that currently exist. Syria, North Korea, and Iran, just to name a few. It would seem that these initiatives are going nowhere, minus another catastrophic, catalyzing event. This reality might be something for people in all the aforementioned groups above to consider.

Graham Mehl is a pseudonym. He currently works for a hedge fund and is responsible for economic forecasting and modeling. His current work has pinpointed at least half a dozen fracture points in the global economy, three of which have yet to receive mention – even in the alternative media. He has a graduate degree with honors from The Wharton School of the University of Pennsylvania among his educational achievements. Prior to his current position, he served as an economic research associate for a G7 central bank.

Andy Sutton is the former Chief Market Strategist for Sutton & Associates. While no longer involved in the investment community, Andy continues to perform his own research and acts as a freelance writer, publishing occasional ‘My Two Cents’ articles. Andy and Graham also maintain a blog called ‘Extemporania’ at http://www.andysutton.com/blog.

 

 

Ron Paul Weighs in on Latest Syria Chemical Weapons Attack

Andy’s Notes: This a smart man who has the market pretty much cornered on critical thinking as far as being a part of the media goes. Dr. Paul is an excellent analyst and the free world is very fortunate to have him. Listen as he breaks down the latest attempt to horse-collar Assad in Syria. Unlike our government, which has resorted to shooting first, then maybe asking a few questions, Dr. Paul gathers information and intel, analyzes it, then draws conclusions. It’s what thinking people do.

Pension Plans Still Grossly Underfunded Despite Market Surge

Andy’s Notes: Good question. What will ‘they’ do about the pensions. My guess is nationalize them. If a full throttle stock market can’t put humpty dumpty back together, then it is time for the government to fix it right (sarcasm mine). I’m not a betting man, but I’d be willing to point long and hard in the direction of nationalization of specific troubled pension plans. Not the whole thing at once. At least not at the beginning. Just a couple of get everyone used to the idea.

We have been busy crunching some very interesting data on pension funds from the most recent Federal Reserve’s,  Flow of Funds Accounts.    Check out the charts below.

Interestingly,  the last time Private and State & Local Government Pensions were fully funded was at the end of the stock market bubble in 2000.  Pensions were 25 percent over-funded in 1999.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

However,  even with stocks making new highs,  these pensions remain $2.33 trillion, or 27 percent of their assets,  underfunded at the end of 2016.   Surprising.

One would think the slope should be headed south as stocks rise, no?  Just as it was from 1995 to 2000.   On the contrary,   unfunded entitlements are heading parabolic north.

 

 

 

 

 

 

 

 

 

 

 

 

Could be a combination of an under-allocation to equities since the dot.com and financial crash (see charts) and rising pension entitlements,  mainly in state and local government retirement funds.   Probably more the result of the later.

 

 

 

 

 

 

 

 

 

 

 

The Upshot?   It seems the only way out of the pension mess — other than massive contributions, tax increases, or defaults — is a humungous equity bull market with pensions appropriately positioned.   In aggregate, they seem to be gun shy after the financial crisis with their average aggregate equity allocation only about 50 percent of what it was at the start and first few years of the new millennium.

One caveat is the allocation data can be distorted and deceiving as equities are measured at their market value where some of the other assets are not.

The question is:  Will Janet Yellen and President Trump do “whatever it takes to preserve” the pensions?   And will it be enough?

‘Inaccurate’ News Headline Nearly Starts War in Korea?

Andy’s Notes: There’s a shock – Bloomberg. The cesspool of the media, irresponsibly posting inaccurate, FAKE news once again. Sure it was an accident. Of course it was. These things happen, right? It’s always good to go right to the edge when the entire world is on the precipice of coming unglued. Instead of trying to hack this site, maybe the Gestapo should take down Bloomberg instead. They don’t produce anything beneficial or useful anyway. Of course they blame the Chinese, saying the Chinese reported it first, but who bothers to check sources? We don’t need no stinkin’ sources!

As expected – and feared – during the annual “Day of the Sun” celebration parade (celebrating the birth of the nation’s founder), Bloomberg blasted a headline that Chinese news agency Xinhua reported that North Korea has fired a projectile.

  • NORTH KOREA FIRES PROJECTILE, MEDIA SAYS: XINHUA

On its website, Bloomberg immediately picked up the story, and ran with “North Korea Fires Projectile Media, Says Xinhua” (at a url which still reads: “https://www.bloomberg.com/news/articles/2017-04-15/north-korea-fires-projectile-media-says-xinhua“)

However, it appears that the headline scanning algos made a collosal error, and that Xinhua interpreted events quite incorrectly as it was, as CBC and Reuters reports, the appearance of a new submarine-launched missile at the parade for the first time:

  • NORTH KOREA SUBMARINE-LAUNCHED BALLISTIC MISSILE SEEN AT MILITARY PARADE FOR FIRST TIME: RTRS

North Korea displayed its submarine-launched ballistic missiles (SLBM) for the first time on Saturday ahead of a massive military parade in the capital, Pyongyang.

State TV showed images of the Pukkuksong-2 SLBMs on trucks waiting to be paraded in front of leader Kim Jong-un.

Immediately after, Xinhua – and Bloomberg – rushed to issue a clarification to avoid what may be a military confrontation.

  • XINHUA CLARIFIES HEADLINE ON NORTH KOREAN MISSILE
  • N.KOREA DISPLAYS BALLISTIC MISSILE AT MILITARY PARADE: XINHUA

As a result, the BBG headline – with a URL that still says that “North Korea fires a projectile” – now reads the following:

And that’s how World War 3 almost occurred.

As CNN reports, a military parade in the heart of Pyongyang is underway where it’s expected the North Korean regime will show off some of its latest arsenal. Pictures on state television showed thousands of soldiers marching in formation alongside tanks, balloons and enormous crowds. Leader Kim Jong Un was shown clapping and smiling from a reviewing box.

At one point, the soldiers directed a chant toward him. “We will die for you!” they yelled, CNN’s Will Ripley, who was at the event, reported. For North Koreans, April 15 is an auspicious date that sees millions celebrate the birth of the nation’s founder.