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https://www.zerohedge.com/news/2019-...ops+to+zero%29

https://www.oftwominds.com/blog.html

https://seekingalpha.com/article/423...k-bonds-stocks

Gundlach Is Right About Junk Bonds And Stocks
Jan. 16, 2019 7:18 PM ET

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About: SPDR S&P 500 Trust ETF (SPY), QQQ, DIA, SH, IWM, TZA, SSO, TNA, VOO, SDS, IVV, SPXU, TQQQ, UPRO, PSQ, SPXL, UWM, RSP, SPXS, SQQQ, QID, DOG, QLD, DXD, UDOW, SDOW, VFINX, URTY, EPS, TWM, SCHX, VV, RWM, DDM, SRTY, VTWO, QQEW, QQQE, FEX, JKD, SPLX, EEH, EQL, SFLA, QQXT, SPUU, IWL, FWDD, SYE, SMLL, SPXE, UDPIX, JHML, OTPIX, RYARX, SPXN, HUSV, RYRSX, SCAP, SPDN, SPXT, SPXV
https://static1.seekingalpha.com/ima...61/big_pic.png


Gary Gordon
ETF investing, registered investment advisor, portfolio strategy, macro
Pacific Park Financial, Inc.

Summary
The average bear rally in history is approximately 11%. We stand at roughly 11.5% off of the correction lows right now.

Fed heads Powell and Clarida both invoked the word “patient” with respect to future rate hikes.

Balance sheet reduction (quantitative tightening) is still a significant tailwind.

Economic slowing is readily apparent in Europe and in Asia.

DoubleLine's founder, Jeffrey Gundlach, believes investors ought to be wary of stocks and high yield bonds in the first half of 2019.

Stock enthusiasts think the worst is behind us. Of course, they appear to be ignoring the fact that bear market rallies are quite common and that the current upswing may just fit the bill.

The average bear rally in history is approximately 11%. We stand at roughly 11.5% off of the correction lows right now. What's more, there's a fair amount of technical resistance in and around the S&P 500 range between 2625 and 2650.
https://static.seekingalpha.com/uplo...pload_2625.png


Credit key players in the Federal Reserve for the recent upturn. Indeed, the timeline for the correction that began three and a half months ago is worthy of review.

Back in October, when the Dow had hit an all-time record, Fed Chairman Powell stated that the rate range was a "long way from neutral." Stock sellers overwhelmed buyers through the start of the fourth quarter.


By November, however, Powell had changed his tune. He went form claiming that the range for the Fed Funds rate was a long way from neutral to a place that was "just below the neutral range."

A completely different outlook in a matter of weeks? Seriously?

Granted, the stock market does not care if Powell bowed to pressure from the Trump White House. The S&P 500 does not care if the head of the Fed listened to a financial celebrity like Jim Cramer. Nevertheless, Powell backtracked and stocks gained ground in November.

Then things became very interesting in December. Whereas risk asset investors had come to believe that the Fed might be "one and done" on rate hikes, Powell described a likelihood of two more occurrences in 2019.


More important? Buyers had hoped to hear a little something about an eventual end to balance sheet reduction known as quantitative tightening. No dice. Powell praised the $50 billion per month in QT. A December bloodbath across risk assets ensued.


Fed heads shifted yet again in early January. Chairman Powell said that the central bank would be "patient" with respect to any additional rate hikes. Vice Chairman Clarida invoked the word "patient" as well. Meanwhile, former chairwoman Janet Yellen said that she does not expect any more rate hikes in this cycle.


Translation? The Fed will do whatever it takes to support stocks. (Of course, that does not mean that the Fed will always be successful.)
Before breaking out the champagne, however, consider that the Fed has yet to suggest that it will slow its quantitative tightening. And if the Bank of Japan had stayed the tightening course - if the European Central Bank had truly ended its quantitative easing (QE) - the recent excitement for equities might have been more modest.
https://static.seekingalpha.com/uplo...tral-banks.jpg


It's going to be a significant challenge to identify net easing vs. net tightening across the world's central banks. When risk assets fall apart, monetary policy makers appear ready to step in. And yet, if the Fed and others do not back away from endless accommodation, they won't have the tools to help when economic contraction inevitably occurs.

We already are witnessing slowdowns across Europe and Asia. For instance, industrial orders for export dropped sharply in Germany. Similarly, German GDP contracted 0.2% in its most recent reading.
https://static.seekingalpha.com/uplo...ad_germany.png

What about England? Is the constant confusion over Brexit helping or hurting the U.K. economy?

Perhaps the biggest elephant in the room is China. In a traditional sense, one might not use the term "recession." Yet the GDP trend in China is most certainly not its friend.
https://static.seekingalpha.com/uplo..._China-GDP.png

From my vantage point, global central banks will be more of a headwind than a tailwind for stocks in 2019. Economic slowing around the world will serve as a headwind as well.

Still, the biggest trouble spot may be in corporate debt land. There has been a 64% increase to $9 trillion in debt since the financial crisis. Credit quality is now weakening. Marginal increases in the cost of borrowing from higher rates are making it more difficult for companies to manage their debt loads. And it's hardly far-fetched to anticipate a monumental chunk of the investment-grade universe losing its BBB standing and becoming high-yield (a.k.a. junk).


DoubleLine's enigmatic founder, Jeffrey Gundlach, believes investors ought to be wary of stocks and high yield bonds in the first half of 2019. He said, "Use the strength we've seen in junk bonds as a gift and get out of them… to survive the zigzag of 2019."

Balance sheet risk is real. In truth, default concerns and potential bankruptcy may even occur in higher-rated investment grade debtors. PG&E (NYSE:PCG) comes to mind.
https://static.seekingalpha.com/uplo...upload_PCG.png

Bottom line? A resurgent stock bull throughout 2019 is unlikely. For one thing, there are limitations on how much stimulus and how much "non-tightening" that central banks will commit to in the near term. Secondly, the global economy is slowing. And third, corporate debt is likely to drag on both earnings as well as stock prices.


If you missed an opportunity to lighten your allocation to risk assets like stock and high yield bonds when the S&P 500 was peaking near 2930-2940, you might want to tactically lower some risk during the current rally. Or as Gundlach implied, you might be wise to look away from the mouth of a gift horse.


Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.

https://www.zerohedge.com/news/2019-...ops+to+zero%29

By Greg Hunter’s USAWatchdog.com,
Best-selling author of “The Age of Anomaly,” economist Andrei Polgar, says the world is set up to be blindsided in the next financial disaster.
https://zh-prod-1cc738ca-7d3b-4a72-b...16_9-38-46.jpg

Polgar points out, “Right now, after so many years after the ‘Great Recession,’ not only are people comfortably unaware, but even worse yet, the entire idea of financial preparedness has been discredited..."


"I have noticed this because I have been on many shows promoting my book... People are not that interested in financial preparedness. A common element was always this: People have made predictions, and they didn’t pan out.Other analysts have made gloomy predictions, and they didn’t pan out. So now, the general public has essentially been numbed.


One of the big issues I talk about with my book is sustainable financial preparedness, and it’s a tough sell. It’s a tough sell because people are even worse than just ignorant in an uncomfortable way; they are downright dismissive with anything that has to do with financial preparedness. So, on top of all the problems with our economy, and on top of all the political issues you are well aware of, we also have this general state of not even apathy, even worse, contempt... of financial preparedness in general.”


Polgar says, “Market crashes are cyclical. Of course, we are going to have one, and I am not afraid of the idea of a market crash..."

"I am afraid of what happens when the chain is broken or, to put it differently, when the status quo no longer works....

Your readers comment about being comfortably ignorant. That makes perfect sense. People have in their mind, yeah, there is going to be a crash, but central banks and governments will have it all under control.”

Polgar predicts, “The next crash will be the worst the world has ever seen... because problems have kept accumulating."



"Now, we have come to accept the unsustainable as status quo. We look at the GDP ratio of Japan that is over 200% and we say it’s all fine. We look at Italy with 130% debt to GDP and say it’s fine. We look at France, Belgium and the United States with debt to GDP at around 100%, and we say it’s fine...they’re going to do more of the same and hopefully that’s going to work. That’s what keeps me up at night. What happens when that chain breaks?...

If things are this bad right now when, for better or worse, nothing is burning, what do you think is going to happen when we are going to have to deal with all our problems, when we have to deal with the unsustainable nature of our system? Things are already unbelievably bad here in Europe. We are buried under excessive bureaucracy. We have, for the most part, a pretty spoiled population, and this is true for other Western populations...

In Romania, at least we understand that sometimes systems fail, whereas in the Western world... way too many individuals are just getting by as it is. They are overly indebted. They are overly dependent on the system functioning flawlessly. If a small crack appears, then these people will not be able to cope with it.”

In closing, Polgar says, “The system will break from bottom to top..."

"As bad as things are in the Western world, I see much more pain initially in emerging markets...Developed countries like the United States will be the last to fall...

The baseline scenario I am afraid of is... having our usual market crash followed by a loss of confidence of central banks and governments to keep it under control. To simplify it, we will have deflation first followed by a loss of control that ultimately leads to an inflationary spiral.”
Join Greg Hunter as he goes One-on-One with economist Andrei Polgar, the best-selling author of “The Age of Anomaly.”


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You can find out about Andrei Polgar by going to his website AndreiPolgar.com. There you can buy his book from a variety of booksellers. You can also go to Polgar’s YouTube Channel and enjoy dozens and dozens of original economic videos for free.

https://moneymaven.io/mishtalk/econo...UeqiRKenQ3b3A/

May survived a vote of no confidence and the EU might extend Article 50, but only with conditions. Nothing's changed.
Today added no clarification to the Brexit process.
With the backing of DUP MPs, Theresa May Survived a Vote of No Confidence 325-306.
Most expected that result, as did I. However, Labour leader Jeremy Corbyn is free to repeat the maneuver down the road, and he is nearly certain to do so. Thus, today's vote changed nothing. If anything, the vote highlights the fragility of May's predicament.
If May agrees to do anything that DUP doesn't like, they will abandon her. At some point, a dozen or more Tories might decide the same thing for various reasons.
Corbyn Declines to Meet With May
Following the vote of no confidence, Theresa May declared a get together with all the parties to prepare a way forward. Corbyn rejected the invite unless May took hard Brexit off the table.
She couldn't do that even if she wanted to because enough Tories would then abandon her in the next motion of no confidence.
See where this is headed? Same impasse.
Brexit Delay
The Financial Times reports EU Indicates it Could Accept a Delay to Brexit - With Conditions.
Some interpret this as an indication there will be a delay forever until May gets her way.
There are numerous problems with the notion.
It requires unanimous consent from all EU member countries. France in particular is leery of allowing that. DUP is unlikely to allow that. A sufficient number of Tories might also get tired of the tactics.
Moreover, France wants a commitment that the UK honor the Irish backstop for the duration. The backstop is precisely the problem for DUP and many Tories.
Finally, there are European Parliament elections in May. Is the UK in or out? No one has worked out a solution yet. They will likely work out a fudge, but this is the least of the problems with perpetual delay.
Opposing Views, Same Place

1. Jeremy Warner says the Brexit dream is over, or so say the markets, and they are probably right
2. Tim Stanley says Why are Remainers so happy? Right now, Britain is on course for a no-deal Brexit

Both articles are from the Telegraph, and both were posted today. They both cannot be correct.
I side with Stanley. And I posted numerous reasons yesterday.
No-Deal Odds Greater Than You May Think
Let's tune in to today's Eurointelligence report vs what I said yesterday in No-Deal Brexit is the Most Likely Outcome: 2nd Referendum the Least Likely
Eurointelligence: Looking at last night’s Brexit vote in the cold light of the morning, our first thought is that automatic departure from the EU on March 29 remains the law of the land. In that sense, yesterday’s vote has changed nothing. The financial markets concluded that the risks of a no-deal Brexit are reduced. We think the opposite is the case, but for reasons that may not be immediately obvious.
Mish: Forget about a 2nd referendum or an election saving the day. It's far more likely proponents of "remain" actually cause a no-deal Brexit by clinging to ridiculous hopes.
Eurointelligence: After the 230-vote defeat in the House of Commons, we picked up two important pieces of information. The first is that Jeremy Corbyn’s strategy will consist of piling on one confidence vote after another - as opposed to supporting a second referendum. He will do so hoping that one of those votes will eventually succeed as the Brexit deadline approaches. The confidence vote scheduled for today will almost certainly fail. Barring some new developments, this also means that he will not support a second referendum. Corbyn, not Theresa May, will run down the clock.
Mish: Corbyn tabled a motion of no confidence. Unlike motions from within the party, there is no limit to the number of times he may try that tactic. The UK "Remainers" are cheering today's vote as if they have a chance at a second referendum. It's theoretically possible, but it's the least likely outcome.
Reasons Against Second Referendum

1. People don't want it.
2. MPs don't want it.
3. The EU is highly unlikely to wait for one
4. Heck, no one even knows how to word it

Eurointelligence: The other piece of strategic information is that May will try to maintain her equidistance between no deal and no Brexit. If she were to rule out no Brexit and support no deal, her strategists fear a sufficient number of hardline Remain MPs might eventually support a no-confidence motion. At the same time, she cannot support a second referendum either. After yesterday’s crushing defeat, May's deal as it now stands is off the table. What about Norway-plus? There is no great merit in a Norway-style deal compared to what May has negotiated, except to give MPs an opportunity to support the withdrawal agreement without loss of face. But we doubt that Norway-plus is going to be acceptable to Corbyn. For all his tactical prevarications, the Labour leader has a clearly-stated Brexit preference - membership of the customs union. But there is almost no support for this option in the Tory party, as it would preclude the UK negotiating third-party trade agreements.
Mish: If at some point a majority for a Norway deal surfaced, DUP [or Tories] could scuttle it by siding with Labour in a motion of no confidence. Corbyn would likely chomp at the bit.
Eurointelligence: We see no parliamentary majorities for outright revocation, or for a second referendum either - not by a long shot. What about a request to extend Art. 50 without a deal - as a sheer act of desperation? If there really is a firm majority to stop a no-deal Brexit, then surely this majority could at the very least come together to extend and pretend, and possibly do so indefinitely. We look at the EU side of such a Faustian bargain below, but we should ask ourselves first why Corbyn would support a blind extension when he has May on the ropes. He wants elections, and the surest way to get there is a looming cliff edge. One Berlin correspondent quoted a German politician calling for an unconditional, not time-limited extension of the Brexit deadline. But that person seems not to have read Art. 50: it would be have to be requested by the UK first. And, from the perspective of the EU, it would be political madness to go down this path as it would have severe implications for the balance of power within the EU itself.
Mish: Given what happened today, and based on the above analysis, a no deal Brexit is the most likely state of affairs, one way or another.
Eurointelligence: We could see a scenario in which May’s deal may survive, but not May herself. Another leader, capable of reaching out to the opposition, might be needed. May has lost too much trust during the last two years to be able to negotiate a cross-party compromise.
Mish: The above complications all point to May being outed and replaced by [Boris] Johnson, who wants a hard Brexit.
Eurointelligence: Pro-Remain UK commentators have marveled at the unity of the EU during the negotiations, but this unity was critically premised on the assumption that the UK would never crash out of the EU without a deal. Once the realization sets in that this may not be so, expect divergent interests to come to the surface. From a simple perspective of political risk management, Germany has no interest in exposing its car industry to tariffs from the UK as well as to tariffs from the US, especially when the Germany economy may be on the verge of a recession.
Mish: No matter how one twists and turns, a no-deal Brexit is the default option. The only wildcard left is the EU. If the EU offered a hard guarantee there would be no permanent backstop, May's deal could potentially garner enough support. A no deal Brexit is the most likely state of affairs, one way or another. Many paths lead to a no-deal outcome. There are too many possibilities to say no-deal is likely. Rather, it's the most likely option of the bunch.
Standing With My Analysis
Counting of the financial markets to ascertain the outcome seems more than a bit silly. The Financial markets never thought people would vote for the referendum, but they did.
My comments in Mish vs. Eurointelligence were presented before the Eurointelligence report came out.
I am standing with my analysis and Eurointelligence reached a similar conclusion today. There may be an extension and an extension is needed, not to prevent Brexit but rather to better manage a WTO-Brexit.
Let's stop the absurd fearmongering, without which there would likely be overwhelming support for a managed WTO-Brexit. The extension is necessary only because May wasted two years negotiating the worst trade deal in history.
Mike "Mish" Shedlock

https://www.zerohedge.com/news/2019-...ops+to+zero%29

Authored by Jeff Thomas via InternationalMan.com,
We’re all familiar with the term, “quantitative easing.” It’s described as meaning, “A monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply.”
Well, that sounds reasonable… even beneficial. But, unfortunately, that’s not really the whole story.
https://zh-prod-1cc738ca-7d3b-4a72-b...government.png
When QE was implemented, the purchasing power was weak and both government and personal debt had become so great that further borrowing would not solve the problem; it would only postpone it and, in the end, exacerbate it. Effectively, QE is not a solution to an economic problem, it’s a bonus of epic proportions, given to banks by governments, at the expense of the taxpayer.
But, of course, we shouldn’t be surprised that governments have passed off a massive redistribution of wealth from the taxpayer to their pals in the banking sector with such clever terms. Governments of today have become extremely adept at creating euphemisms for their misdeeds in order to pull the wool over the eyes of the populace.
At this point, we cannot turn on the daily news without being fed a full meal of carefully- worded mumbo jumbo, designed to further overwhelm whatever small voices of truth may be out there.
Let’s put this in perspective for a moment.
For millennia, political leaders have been in the practice of altering, confusing and even obliterating the truth, when possible. And it’s probably safe to say that, for as long as there have been media, there have been political leaders doing their best to control them.
During times of war, political leaders have serially restricted the media from simply telling the truth. During the American civil war, President Lincoln shut down some 300 newspapers and arrested some 14,000 journalists who had the audacity to contradict his statements to the public.
As extreme as that may sound, this practice has been more the rule in history than the exception.
In most countries, in most eras, some publications go against the official story line and may very well pay a price for doing so. But, other publications go along with the official story line to a greater or lesser degree and are often rewarded for doing so.
It should come as no surprise, then, that media outlets often come to report the news in a less than accurate manner.
Mark Twain is claimed to have said, “If you don’t read the newspaper, you’re uninformed. If you do read the newspaper, you’re misinformed.” Quite so.
Still, only fifty years ago, much of the then “Free World” enjoyed a relatively objective Press. Even on television, reporters such as Walter Cronkite, Huntley and Brinkley, etc. presented the news in a bland manner. It wasn’t very exciting, but at least it was relatively balanced and, to this day, most people who were around then still have no idea as to whether reporters like Walter Cronkite were liberal or conservative. Although he was a committed Democrat, he never allowed that to significantly colour his reporting.
But today, we have a very different corporate structure as regards the media. The same six corporations hold the controlling interest of over 80% of the media. And those same corporations also own a controlling interest in the military industrial complex, Wall Street, the major banks, Big Pharma, etc.
What we’re witnessing today is media having been transformed into something more akin to a three-ring circus than journalism of old. This is no accident.
The present travesty that is the 21st century media, is journalism in name only.
So, why should this be so?
Well, as it happens, people tend not to like governments dominating their lives – simple as that.
And yet, the primary objective of any government is to increase its size and power as rapidly as the populace will tolerate it. The only reason that they rarely do this quickly, is that they can’t get away with it. Like boiling a frog, it takes time to lull the populace into submission, bit by bit.
Once having had enough time to do so, there comes a point at which the government becomes woefully top-heavy, as well as unworkably autocratic. At such times, all that’s necessary to make people rebel is an economic crisis.
Such is the case in much of the world today – the EU, the US, Canada, etc.. Even in their arrogance, the powers that be have to be aware that they’re right at the tipping point. An economic crisis would almost certainly push the situation over the edge.
When truth threatens to undermine machinations for self-aggrandizement, individuals tend to obfuscate in order to delay the inevitable fallout. Governments are no different.
So it was that, in 1999, the largest banks entered into a massive lending scam that would most certainly collapse within a decade. However, before putting the scam in place, they arranged for a “bailout” by the government, which would effectively pass the bill to the taxpayer, while the banks themselves simply increased their own wealth massively.
Of course, QE, as massive as it was, was a mere Band-Aid solution. All those involved (big business and the government) understood that it would hang like a sword of Damocles over the economy until it inevitably came crashing down – a fate far worse than if QE had never been implemented.
And so, for those entities to have invested into the domination of the media was, in fact, essential. Had they not done so, it’s entirely likely that, with a free press, the man on the street would, by now, have figured out that he’d been hoodwinked.
Thus do we see the journalistic equivalent of Quantitative Brainwashing, in which the inevitable realization is delayed for as long as possible.
And, in order to make sure that the public do not figure out what’s been done to them, the news reporting becomes Orwellian in its endless repetition of a false narrative.
It is, however, true that, “You can’t fool all of the people all of the time.” Eventually, the Band-Aid peels back to reveal an infection that’s far beyond what had been generally perceived. It then falls away in layers, as increasing numbers of people become aware that they’ve been scammed – that the media is entirely corrupt and that the media’s owners – big business - have, with the enthusiastic compliance of the government, robbed them on a wholesale basis.
Historically, that’s when the jig is up. What happens then is a matter of historic record.
* * *
Clearly, there are many strange things afoot in the world. Distortions of markets, distortions of culture. It’s wise to wonder what’s going to happen, and to take advantage of growth while also being prepared for crisis. How will you protect yourself in the next crisis? See our PDF guide that will show you exactly how. Click here to download it now.

https://www.zerohedge.com/news/2019-...ops+to+zero%29

In a letter to Nancy Pelosi, President Trump explains that he will be postponing her trip to various foreign countries due to the shutdown...
Dear Madame Speaker:
Due to the Shutdown, I am sorry to inform you that your trip to Brussels, Egypt, and Afghanistan has been postponed. We will reschedule this seven-day excursion when the Shutdown is over.
In light of the 800,000 great American workers not receiving pay, I am sure you would agree that postponing this public relations event is totally appropriate. I also feel that, during this period, it would be better if you were in Washington negotiating with me and joining the Strong Border Security movement to end the Shutdown.
Obviously, if you would like to make your journey by flying commercial, that would certainly be your prerogative.
I look forward to seeing you soon and even more forward to watching our open and dangerous Southern Border finally receive the attention, funding, and security it so desperately deserves!
Fox News reports that Speaker Pelosi was due to leave for her trip at 3pm

https://finviz.com/futures.ashx

https://finviz.com/news.ashx?v=2

http://theeconomiccollapseblog.com/a...ething-happens

Global economic activity has been slowing down dramatically in recent months, and now the mainstream media is filled with dire warnings that a global recession is dead ahead in 2019. And without a doubt, things do not look good right now as economic numbers from all over the globe just get bleaker and bleaker. China’s trade numbers are imploding, Germany is “careening towards recession”, and the government shutdown in the United States is taking a huge toll on the U.S. economy. In past years, the mainstream media usually tried to put a positive spin on any bad numbers, but now their mood seems completely different. For example, in a Daily Mail article that was just posted we are told that “the world economy is headed for a recession in 2019 unless something happens”…
Global growth is slowing and the world economy is headed for a recession in 2019 unless something happens to give it renewed momentum.
The OECD’s (Organisation for Economic Co-operation and Development) leading indicator fell to just 99.3 points in November, its lowest since October 2012, and down from a peak of 100.5 at the end of 2017.
It appears that we are at a critical level on that OECD index, because whenever that number has fallen under 99.3 a recession has almost always followed…
In the last 50 years, whenever the index has fallen below 99.3, there has almost always been a recession in the United States (1970, 1974, 1980, 1981, 1990, 2001 and 2008).
The one exception was the weakening of the index in 1998, when the United States continued to grow, despite the weakening global economy in the aftermath of the Asian financial crisis.
Will we beat the odds this time?
I wouldn’t bet on it.
Meanwhile, Morgan Stanley’s chief equity strategist is warning of a potential recession and telling us that we should “embrace it”. The following comes from CNN…
The S&P 500 will soon suffer a retest of the lows from Christmas Eve because of shrinking earnings estimates and mounting economic concerns, the investment bank warned in a Monday report titled “Don’t fear a potential recession; Embrace it.”
“Should the hard data deteriorate further, as we expect, we think the market will quickly return to pricing in a recession and rate cuts,” wrote Michael Wilson, Morgan Stanley’s chief US equity strategist.
When the “too big to fail” banks are warning that a recession is coming, you know that it is late in the game.
Also, a top economist at Moody’s Analytics just told Maryland’s Budget and Taxation Committee that they should be getting prepared for the coming recession…
An economist has warned Maryland Senators that a recession is coming and that they should begin to prepare for it. The economist said that the indicators point to the recession happening in mid-2020, perhaps sooner.
Dan White, director of government consulting and fiscal policy research for Moody’s Analytics, told members of the Senate’s Budget and Taxation Committee that there are financial indicators of an upcoming recession according to the Baltimore Sun.
And the latest housing numbers seem to confirm that a recession may be coming sooner rather than later. In the month of December, U.S. home sales were down 11 percent…
The median US home price rose 1.2% to $289,800 in December, the slowest monthly pace since March 2012, when the housing market was just beginning to climb out of the hole left by the collapse. Meanwhile, sales dropped by 11%, the biggest drop for any one month since 2016, according to a report released by real estate company Redfin said. This follows a drop in the hottest markets, like San Jose, California, where prices dropped 7.3%.
As BBG explains, the housing market is softening after years of rapidly rising prices as the shortage in homes is beginning to wane. With interest rates on the rise, mortgages are becoming more expensive, which is cutting in to demand.
But just because a recession is coming does not mean that we should be afraid.
You may have noticed that I write about a lot of hard things on The Economic Collapse Blog and End Of The American Dream. But my wife and I are not negative people at all. We are not down, we are not depressed, and we are not on any pills. We are excited about the future and we believe that our greatest days are still to come.
However, we are definitely realists. We are greatly saddened by what is happening to this country, but we also know that it is not going to be avoided. So we want to be in a position to make it through what is ahead, and we want to fulfill the purpose for why we were put on this planet.
Anxiety, fear and panic are for those that get their meaning in life from material possessions, that don’t understand what is happening, and that are going to totally freak out when everything falls apart. For example, the following comes from an article by a member of the Council on Foreign Relations named Christian H. Cooper…
My most recent annual salary was over $700,000. I am a Truman National Security Fellow and a term member at the Council on Foreign Relations. My publisher has just released my latest book series on quantitative finance in worldwide distribution.
None of it feels like enough. I feel as though I am wired for a permanent state of fight or flight, waiting for the other shoe to drop, or the metaphorical week when I don’t eat. I’ve chosen not to have children, partly because—despite any success—I still don’t feel I have a safety net. I have a huge minimum checking account balance in mind before I would ever consider having children. If you knew me personally, you might get glimpses of stress, self-doubt, anxiety, and depression.
People like that are not going to be able to handle what is coming.
But if we understand the changes that are taking place and we have our priorities in order, we will be in a much better position to respond calmly to a world that is becoming more chaotic with each passing day.
http://endoftheamericandream.com/wp-...epared-Now.pngAbout the author: Michael Snyder is a nationally-syndicated writer, media personality and political activist. He is the author of four books including Get Prepared Now, The Beginning Of The Endand Living A Life That Really Matters. His articles are originally published on The Economic Collapse Blog, End Of The American Dream and The Most Important News. From there, his articles are republished on dozens of other prominent websites. If you would like to republish his articles, please feel free to do so. The more people that see this information the better, and we need to wake more people up while there is still time.

https://action.larouchepac.com/?recruiter_id=139893

JOIN OUR CAMPAIGN FOR A NEW BRETTON WOODS
Don't be confused by the incoming Democratic House of Representatives and all of the things the mad media says they will do to the President while paralyzing government for the next two years or worse. The spirit of 2016, the revolt in the American population which led to Donald Trump’s election, remains alive and very well within the American population.

That is what LaRouche PAC found in our 2018 Campaign to Secure the Future, through our campaigns and our interactions with Americans on both coasts, throughout the Farm Belt, and in the Midwest. This remains true after billions of dollars have been spent in attempts to pacify the American rebels, cage or eliminate Donald Trump, and completely buy the Congress. It remains true after an angry and desperate media campaign that turned American icons—star athletes, most of Hollywood, and former leading political and media figures—into insane and frothing versions of their former selves, engaged 24 hours a day in attacking the American President. It remains true after the British and their allies from the former Obama White House directed a two-year coup against an American President and the people who voted for him, in which they attacked our country and fired the full propaganda and psychological warfare arsenal normally reserved for hostile regime change and small wars internationally.
https://d3n8a8pro7vhmx.cloudfront.ne...jpg?1542297994
If this movement succeeds in creating the conditions for an economic and cultural renaissance, the post-war British imperial system—the globalist “New World Order”—is finished, and they know it. That is what the ferocious battle taking place in the United States is all about: not coarse public discourse, not name-calling, not racism or homophobia, not authoritarianism, or any of the other ridiculous tags invented by bought politicians or the national media. We intend to recruit to our perspective the nation’s Republicans, Democrats, and independents—farmers, machinists, engineers, scientists, teachers, entrepreneurs, and classical artists—the entire sector of the economy presently engaged or wishing to be engaged in real productive activities. We intend, thus, to provide this President with the popular mandate to accomplish greatness.


NOW IS THE TIME TO KICK OVER THE WHOLE CHESSBOARD
That said, we can’t wait until 2020, as some dream, to finally sort this out with a final electoral drubbing of RESIST by an incensed American population. The time for a victory that kicks over the chessboard and flanks our enemy is now. If we can institute a full-scale economic recovery in the United States, the coup will suffer its most stunning defeat and the beleaguered and suffering population of this nation will win the day. That is why LaRouche PAC has announced the Campaign to Secure the Future 2018-2020. The fundamental platform remains the same: (1) Expose and end the coup against the President and (2) implement Lyndon LaRouche’s Four Laws for Economic Recovery, which are detailed below.
https://d3n8a8pro7vhmx.cloudfront.ne...jpg?1546549120However, we are now adding an indispensable additional element: an all-out drive for an agreement among Russia, China, India, and the United States, along with other major economic or strategic powers, like Japan, for a New Bretton Woods System, to stabilize the world financial system and provide the basis for massive world-wide economic development. This will provide the absolutely necessary jump start for a crash economic program to rebuild the physical economy of the United States, free of globalist currency and other manipulations, while creating the conditions for a world-wide economic renaissance. It will allow us to engage in new and massive productive activities here, like building a complete new and modern infrastructure platform for our economy. At the same time, as a result of the bilateral trade and treaty agreements between participating sovereign nation states now possible under this new stable system of currencies, large amounts of long-term low interest credit can be issued world-wide for technologically progressive projects. We can fully develop the entirety of planet Earth, nearby space, and the Moon, in joint ventures with other nation states, ending the twin scourges of poverty and colonialism, just as Franklin Roosevelt intended with his Bretton Woods system.


Conversely, the creation of a New Bretton Woods is urgent because the present system is about to collapse and everyone knows it. That is why the imperial globalists have begun putting forth their own versions of a new monetary system, the designs of which would keep these elites firmly in control of the world’s economies. Some involve Lord Keynes and his financial control mechanisms; others involve a new globalist institution totally dedicated to zero population growth and the green technologies appropriate to feudalism.


LAROUCHE’S FOUR LAWS FOR ECONOMIC RECOVERY AND THE FOUR POWERS AGREEMENT
Lyndon LaRouche has provided us with the Four Laws which can produce the economic recovery of the United States:

1. Re-enactment of the Glass Steagall Act separating commercial from speculative banking and ending public bailouts of Wall Street gambling debts;
2. A new national bank or other credit-issuing mechanism, such as Lincoln’s Greenbacks, capable of producing massive amounts of credit for long-term economic projects;
3. Use of this national banking mechanism to fund only such projects as will raise national productivity and create high-paying jobs in productive sectors of the economy; and
4. A crash program to develop fusion power, the energy source of the future, the energy flux density and power of which allows us to transform raw materials, power entire continents, and power space exploration and colonization.

The most obvious place to invest the financing available through this long-term credit mechanism and participating private banks is in building a modern infrastructure platform for the U.S. economy, while also creating crash programs to develop fusion and explore near space and the Moon. Since we have damaged our physical economy, and savaged our labor force in the last decades, a crash effort in this respect is urgent if we are to raise productivity and ensure long term growth. New programs in classical education and the sciences and programs drawing our youth into rebuilding the country, akin to the CCC, are necessary elements of this economic thrust. The optimism generated by such a national mission is the best antidote to the drug epidemic and mental instability presently haunting our country, although major rehabilitative and interdiction efforts must also be urgently and ruthlessly undertaken in this regard.


None of this is possible, however, if the present financial system is allowed to continue and suffers its inevitable crash. An uncontrolled collapse will mean the certain unnecessary death and suffering of millions throughout the world. Just like we know how to prevent the fires in California, we know what type of stable financial system will allow for a world-wide economic renaissance, namely, a revived Bretton Woods system among sovereign nation states trading between themselves to massively advance each and every economy and human being in the world.


Will you join us in making this the new reality?
PDF OF ABOVE TEXT OR READ OUR FULL STATEMENT HERE (PDF LINKED).

https://www.bnnbloomberg.ca/a-top-pe...anks-1.1200486




A top-performing U.S. hedge fund is shorting Canada's banks
Paula Sambo, Bloomberg News

https://www.bnnbloomberg.ca/polopoly...dian-banks.jpg
Bank of Montreal (BMO), Bank of Nova Scotia and Scotiabank Capital Trust offices stand on Bay Street in Toronto, Ontario, Canada, on Monday, Aug. 29, 2011. , Brent Lewin/Bloomberg


A small U.S. hedge fund that was a top performer last year is shorting Canadian banks.


Crescat Capital sees the Canadian economy heading for recession as the housing market buckles. That might be bad enough for the banks but they face an added strain: outside the financial sector, more than 80 per cent of Canadian companies aren’t generating enough cash to support their businesses, the highest in the world, according to Crescat.


“Canadian banks will be left holding the bag and the ones to suffer from what is likely to be a major economic recession,” Tavi Costa, a global macro analyst at Denver-based Crescat, said by phone.


Crescat has only US$55 million under management, but it returned 41 percent in its Global Macro Fund last year and 32 per cent in its Long/Short Fund, bolstered by a short wager on China, according to its website. That put the company among the top performers in a year in which the industry saw its biggest loss since 2011, declining 4.1 per cent, according to Hedge Fund Research Inc.


The country’s biggest lenders are Royal Bank of Canada and Toronto-Dominion Bank, along with Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada. Costa declined to name the banks Crescat was shorting. Representatives for Canada’s six biggest banks didn’t immediately comment or declined to comment.

Crescat’s short comes amid long-standing warnings from economists, investors and even the Bank of Canada about elevated consumer debt, which was driven higher by a decades-long housing boom. Canada’s ratio of household debt to income has been hovering at about 175 per cent for the past two years, compared with a peak of about 134 per cent in the U.S. at the height of its housing bubble in 2007.
https://www.bnnbloomberg.ca/polopoly...rio-canada.png
Now Canada’s housing market is beginning to cool. Sales plunged 32 per cent in Vancouver last year and 16 percent in Toronto amid rising interest rates, stricter mortgage rules and new taxes.


“China is in the process of reversing its key role as a driver of global economic growth,” the 29-year-old Costa said. “Countries like Canada and Australia, and their respective housing markets, are the economies most vulnerable in this scenario.”

Meanwhile, Crescat calculates that about 80 percent of Canadian non-financial stocks have been cash-flow negative in the past 12 months, which he measures as cash flow from operations minus capital expenditures.


That may be inflated by the the large numbers of “zombie” companies on Canadian stock exchanges, which the Organisation for Economic Co-operation and Development defines as those 10 years and older and whose earnings aren’t high enough to cover interest payments on their debts. In a September study, Deloitte found 16 percent of public companies on the Toronto Stock Exchange and its sister Venture Exchange are considered zombies, compared with 10 percent globally.


Cash flow in the energy sector may have been hammered by a slump in crude prices in the past year.

But Costa said even if he excludes energy and materials stocks, 70 percent of Canadian stocks have still lost money on a free cash-flow basis. If you consider only non-financial stocks with a market value of more than $100 million, the share is still more than 50 percent, he said.

“How is it sustainable for companies that generate no cash continue to employ people?" Costa said. "Many of these troubled companies would be bankrupt under tighter monetary conditions.”


Previous Shorts
The country’s biggest lenders could face troubles on both the housing and corporate fronts, according to Costa.

At their peak last year, the six largest banks, traded at an average of 1.9 times book value, a similar valuation to U.S. banks prior to the global financial crisis in 2008, according to Costa. He expects that to drop to 0.7 times book value or so, where U.S. banks were trading post-financial crisis.

Other investors have recommended shorting Canadian financials on a looming housing correction in the past, including Steve Eisman, who predicted the U.S. subprime mortgage collapse.

And Canadians bank stocks have largely defied naysayers as the country’s unemployment rate has hovered near records lows amid steady growth -- until recently. The S&P/TSX Composite Commercial Banks Index slumped 11 percent last year amid market global volatility, the biggest decline since 2008.


"Most of these banks are off their highs and have just started to break down," Costa said.
--With assistance from Doug Alexander and Brandon Kochkodin.

http://kunstler.com/what-is-liminali...gl-dEB9tn1zNxk

What is Liminality? Guest Essay by Jasun Horsley
White Male Edgeman
Radical changes of identity, happening suddenly and in very brief intervals of time, have proved more deadly and destructive of human values than wars fought with hardware weapons.
—Marshall McLuhan, Laws of Media: The New Science


Probably most people reading this—especially if they spend a lot of time on the Internet—are aware of the growing phenomenon of “social justice warriors” with hair-trigger mouths and clicking mice, fiercely practicing intolerance in the name of tolerance.


Earlier this year, in the small (pop: 6000) Canadian town where I live, a group called Culture Guard were scheduled to speak at the local Royal Canadian Legion. The subject was a nationwide, multi-leveled educational program called SOGI (Sexual Orientation Gender Identification), ostensibly directed towards encouraging “tolerance.” Culture Guard is a conservative organization whose mission is to uphold citizen-driven democracy and community values and expose what they call the “tyranny of politically correct idiotology.”

The event was cancelled after the Legion received 900+ email complaints, including threats. Much to my surprise, the reaction on Facebook to this was mostly gushing gratitude that this diabolical hate group had been righteously silenced. Two fairly typical comments: “Hope we’ve run these poisonous haters out of town” and “No bible thumping flatlander would dare show their face because hate has a weak foundation.”

Apparently, nothing is more immoral to the new moralists than old-style moralism, and if you aren’t in a state of fear or loathing these days—possibly both—you probably aren’t participating in “the debate.” We have entered a liminal zone in which up can become down, right turn left, and virtue trades places with vice in the time it takes to say “What’s your pronoun?”


Legions of Unreason (The Outer Limits of Liminality)
The attributes of liminality are necessarily ambiguous. . . Liminal entities are neither here nor there; they are betwixt and between the positions assigned and arrayed by law, custom, convention and ceremonial.”
—Victor Turner, The Ritual Process: Structure and Anti-Structure (95)


When the town hall is overrun by legions of unreason, the desire to map the exits can be overwhelming. The problem is that, nine times out of ten, the proposed solutions only compound the problem. This has become ever more apparent to anyone paying attention to the evolution of progressivism and identity politics, with its endlessly replicating contortions and contradictions.


One concept I have found invaluable for navigating the increasingly incoherent—and explosive—social landscape is that of liminality. This is an anthropological term (coined in the early twentieth century by folklorist Arnold van Gennep) that refers to the quality of ambiguity or disorientation in the middle stage of religious rites. Later on, anthropologist Victor Turner used it to describe how ceremony masters usher ritual participants from one state to another, as in a coming of age ritual. The liminal stage is the intermediary one in which the initiate is on the threshold (l?men) between his or her old status and a new, as-yet unknown one. More recently, the philosopher Rene Girard (among others), applied the term to sociopolitical and cultural conditions. And not a moment too soon, since we have now entered a time in history when ambiguity and disorientation have assumed epic proportions.


A few examples from the anthropological database: People trapped in a liminal situation are increasingly unable to act rationally, because the structures upon which their rationality is based have disappeared. (Check.) Being in a liminal state spells crisis for most people. Emotions run wild, making clear thinking all but impossible. (Check.) This leads to “mimetic” (imitative) behavior by those trapped in the liminal space. (Check. 4 out of 4.)


In the politics of liminality, the future is unknown; since no one has gone through the process before, there is no one to lead people out of it. This allows for false ceremony masters—politicians, pundits, sophists, and general snake oil salesmen—to fill the void and offer bogus solutions or ways out of the liminal state, to alleviate the disorientation and helplessness of others, thereby perpetuating liminality indefinitely. (Check. Check. Check. Check.)


Conditions of permanent liminality can be maintained by schismogenesis—literally, the creation of a split, a polarity that, if unchecked, pushes the poles further and further apart. (Check!!)

The problem that isn’t being addressed by the snake oil salesmen is that the problems underlying liminality are not primarily social problems but psychological ones. This means they can’t be addressed with social reforms or new ideologies. In fact, those social reforms, policies, and “new” ideologies are, as Freud said of religion, symptoms of the problem itself. And multiplication of symptoms does not indicate that a cure is underway.


Rene Girard, Mimetic Violence & Scapegoating
Everybody tends to merge his identity with other people at the speed of light. It’s called being mass man.
— Marshall McLuhan, Understanding Me: Lectures and Interviews (p. 268)


In periods of sustained liminality, as now, the structures we rely on become by their nature unreliable. This makes most people extremely anxious, hence highly susceptible to influence and manipulation. A single Tweet can set us off; even a Tweet that fails to get retweeted becomes proof that the world is going to Hell—or that we are. In a liminal zone of “fluid” identities permeated by multiculturalism and pansexuality, the ideological snake oil business booms.


These kinds of interpersonal flame-wars seem like a distorted case of what Turner called “rites of status reversal,” when “the underling comes uppermost.” Turner writes: “at certain culturally defined points in the seasonal cycle, groups or categories of persons who habitually occupy low status positions in the social structure are positively enjoined to exercise ritual authority over their superiors; and they, in their turn, must accept with good will their ritual degradation” (Turner, 102, 167). This exact scenario played out recently at Evergreen College. Even the fact this article is written by a “privileged” white man and depends on the works of other white men as primary sources makes it ipso facto offensive to some people.


Which way is up and which way is down? What is acceptable behavior? What constitutes maleness or femaleness? What’s a paraphilia and what’s a sexual orientation? When does pride become narcissism? Everything is suddenly “up for grabs” (sometimes literally, cf. #MeToo movement). In “Violence in the media,” media prophet Marshall McLuhan wrote, “Violence, whether spiritual or physical, is a quest for identity and the meaningful. The less identity, the more violence.”

The primary consequence of liminality is increased mimesis or imitation (c.f. Girard) because, when old values no longer hold good, no one knows how to act without referring to others. This creates a free-for-all—a climate of social contagion—in which mimetic violence potentially escalates; this in turn creates the corresponding need for a scapegoat—an other—to unify the attention of the group and stabilize the community. Within larger communities such as a nation, an individual scapegoat is not enough, so entire groups are targeted.


This potential for mimetic violence in every community is why the idea of universal values (morality) is fundamental to social stabilization—to the extent that, in Adam Smith’s days, “social” and “moral” were often interchangeable (see Steven Hitlin 2013). In order to provide the guidance, support, and reassurance of stability, a societal system—the institutions it creates and the values it upholds—must give the impression of being unchanging, solid, and fundamental. They can’t be merely the products of human minds trying to work out the best way to organize a community; they must assume the status of holy writ, natural law, or scientific fact.

As above, so below: ideologically-oriented individuals depend on developing convictions and feeling-opinions that assume the solidity, inflexibility, and force of metaphysical beliefs. This is especially so when the beliefs run counter to previously accepted or established beliefs. Witness the secular metaphysics of gender identification, which proposes an empirical—and invisible—“reality” that transcends not just social conventions but biological truths—rendering them obsolete artifacts of an oppressive former regime.

“Let us be willing to remold society by redefining what it means to be a human being in the 20th century, moving into a new millennium.” (Hillary Clinton)


The Mass Man: Collective Negative Identity & the Abolition of Individuality
When the whole world is globalized, you’re going to be able to set fire to the whole thing with a single match.
—Rene Girard

In times of artificially perpetuated liminality, as now, a particular kind of collective identity arises as a compensatory mechanism, a negative identity that affirms itself by negating what it is “not.” When the other is identified as not merely a single individual but a large, somewhat amorphous group of individuals, it becomes unclear where exactly the line between the community-identity being affirmed and the “other” being negated lies.


The surest way to avoid becoming the other—to avoid being negated by one’s community—is to participate in the negation of the designated other. To refuse to do so is to implicitly affirm the other, which is to negate one’s own identity—i.e., affiliation with one’s group. Witness the piece of ritual theater that played out at Evergreen State College, when participants at a 2016 Equity Council meeting were enjoined to get in an imaginary canoe—representing the Sate Equity Plan—as a way to signal their solidarity with the campus activists. While an Indian drumbeat and a recording of crashing surf played in the background, the audience was warned there was a “binary choice” between being allies of the State Equity Plan or “becoming enemies.”


So how exactly do we end up with a total intolerance of difference in the name of tolerating diversity? It is not easy to map a burning building while trapped inside it, but what seems to be occurring now is the growing substitution of (rightist) conservative morality with (leftist) ideological correctness. In a kind of funhouse mirror opposition to “the Right,” “the Left” has gradually assumed a position of anti-authoritarian authoritarianism. Girard described this as “mimetic rivalry” and it’s starkly observable in the form of “SJW” progressives looking more and more like “Alt-Right trolls.” The message—and the admonishment—of “The Left,” lest we forget, is all about inclusivity.


Inclusivity demands that all the marginals (what Turner called “the edgemen”) be ushered into the mainstream by creating a mono/multiculture with equality for all—not counting the deplorables, of course, who are ideologically unfit for inclusion. Ironically, and inescapably, this Borgian Prime Directive subtly or not so subtly endorses, and eventually enforces, homogeneity. Like the Starship Enterprise boldly going where no sane society ever went before, individualism is magnanimously imposed upon the collective.


We see this in how socially marginalized people—usually following a period of perceived or actual persecution—are encouraged to identify and take pride in their marginalized status (gay pride, black pride, transgender pride, etc.), and to assert their right to exist separately from the larger social community, as individuals. This leads to their being incorporated into the larger collective, integrated, or assimilated into the multi/monoculture. The right to be different is asserted, then, not as an end in itself, but as the means of becoming the same.


As this homogenization-in-the-name-of-individuality agenda advances, the potential for mimetic violence increases. In Turner’s “status reversal” rituals, taboo-breaking and totem-smashing was consciously enacted in a kind of Community Theater (which is what ritual is). Today, the performance appears to have gone beyond method, into unconscious voluntary possession—hence the legions of mutually-combusting contradictions that sizzle like matchheads beneath the kindling of every ideological identification.


All this is symptomatic of unconscious, divided, behavior, or schismogenesis. The progressives in my town guarding the culture from its former guardians didn’t realize that the SOGI agenda is self-devouring because sexual orientation is cancelled out, negated, by gender identification. They might be appalled to know, for example, that gender reassignment surgery is booming in the notoriously “homophobic” Iran [ref]—because changing “sex” is a practical, no-nonsense (and irreversible) way to eradicate homosexuality. Or by the fact that the supposedly radical trans-agenda is both ideologically and financially supported by most, if not all, the major corporations (PDF) and government institutions in the world. [ref] The progressives have joined the patriarchy party and don’t even know it.


Right-wing libertarianism advocates the primacy of the individual; Left-wing socialism speaks for the primacy of the collective. Liminality is the collapse of categories, however, and as the category of “individualized sameness” expands to include more and more orientations and identifications, things like biological facts—and eventually any kind of fact, since facts, like numbers, tend to assert the reality of difference—become scapegoats sacrificed on the altar of oneness for all. The old values become the expendable “deplorables,” because the ideology of equality can only extend its assimilation agenda by erasing all differences between people. The final ritual sacrifice is the idea of individuality itself—or possibly the individual him- or herself, if Girard is right about human sacrifice being “the revelatory yet menacing dynamic that animates the whole of this civilization” (Things Hidden Since the Foundation of the World, p. 138).

All this goes a way to explaining why every disagreement has started to feel like a battle—not just for our sanity, but for our very existence, and why the feeling of being in an unsafe space is contagious. As a white male “edgeman” mostly content to be condemned to the margins, I am starting to feel like an endangered minority, myself, caught inside an electronic effigy of McLuhan’s mass-man, waiting for that fatal spark.

http://www.whatdoesitmean.com/index2765.htm

January 18, 2019
Russia Estimates Over 5,000 American Troops Will Be Killed In Opening Minutes Of Looming “Pistachio War”
By: Sorcha Faal, and as reported to her Western Subscribers
A grimly worded new Ministry of Defense (MoD) report circulating in the Kremlin today states that just weeks after Israel told its citizens to get their bomb shelters ready, a major conflict between the West and Iranappears to now be unavoidable after the Iranians defied both the United States and European Union with satellite launches—with Iranian Revolutionary Guard Corps (IRGC) commander Major General Mohammad Ali Jafari directly threatening these Western powers by his declaring “you should be afraid of the day that our precision-guided missiles roar and fall on your head”—the first of whom they fall upon being the nearly 8,000 US troops stationed in Bahrain just minutes away from Iranian missile launch sites, 5,000 of who are estimated will be killed—but none of whose grieving wives, children, parents or loved ones will know that these needless deaths were due to a commercial dispute known as the “Pistachio War”. [Note: Some words and/or phrases appearing in quotes in this report are English language approximations of Russian words/phrases having no exact counterpart.]

http://www.whatdoesitmean.com/nuty1.png

Hillary Clinton and Democrat Party multi-billionaire mega-donors Stewart and Lynda Resnick (above) launch war against Iran so they can control global pistachio market

According to this report, the pistachio is a member of the cashew family that's produced by a small tree originating from Central Asia and the Middle East and widely consumed as food—and whose production of is 1.1 million tonnes, with the United States and Iran as its leading producers, and who together account for 68% of the total global market.
Where in Iran pistachios are produced by thousands of small farmers, however, this report notes, its entire production in the United States is controlled by the husband and wife team of Stewart Resnick and Lynda Resnick—both of whom are multi-billionaires in their own right, are mega-donors to Hillary Clinton and the Democrat Party--operate the largest pistachio and almond growing and processing operation in the world on their more than 115,000 acre plantation in Kern County-California that’s the size of four San Franciscos—were able to successfully manipulate California’s Democrat Party-led political system to privatize its water supply for their own financial benefit that now sees them consuming more water than the entire city of Los Angeles in what is called “a heist of epic proportions” that “will put family farms out of business, and push life in the biggest river estuary on the west coast of America towards mass extinction”—and who, most gravely, have corrupted their nation’s political system in their push to force the United States into war against their main global competitor Iran.

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Multi-billionaire oligarchs Stewart and Lynda Resnick hire rabidly anti-Trump “Deep State” mouthpiece Stephen Colbert (above) to promote pistachios and war on Iran

Not being told to the American people by their leftist mainstream propaganda media establishment as to how their nation is able to be manipulated into war by Hillary Clinton and Democrat Party aligned multi-billionaires like Stewart and Lynda Resnick, this report explains, is due to their nation, long ago, having ceased to be a democracy—and as documented by scholars and researchers at Princeton University who, in 2014, warned that the United States had become an oligarchy—which is a country that’s ruled by a small group of wealthy elites, not its citizens.
The apocalyptic and devastating power these oligarchs now ruling America have, this report details, is best evidenced by multi-billionaire Richard Sackler—who after giving Hillary Clinton and her Democrat Partytens-of-millions of dollars, was able to flood the United States with opioid drugs that, in 2017 alone, killed over 72,000 people—and is a genocide these oligarchs allowed to happen because this mass death mainly affected young white men and women living in America’s rural areas—with it being revealed in court documents that Sackler himself celebrated this coming genocide by telling his closest associates to “imagine a series of natural disasters: an earthquake, volcanic eruption, hurricane” and warning them to prepare for a “opioid prescription blizzard that will be deep, dense, and white”.

http://www.whatdoesitmean.com/nuty3.jpg

Hillary Clinton and Democrat Party oligarch backer Richard Sackler stands to make billions for curing genocidal opioid crisis he singlehandedly caused in the first place

With these Hillary Clinton and Democrat Party supporting oligarchs able to commit genocide and start wars now setting their sights on destroying Christian churches throughout America, so much so that, yesterday, Republican Party US Senator Ben Sasse had to race to the floor of the US Senate to lead the fight against Democrat Party anti-Catholic tests being placed on Trump’s nominees, this report concludes, left alone to fight against these oligarch monsters is President Trump—whom new research shows the American people came to by the tens-of-millions in their seeking to find what they had lost because these leftists had destroyed their churches, families and communities—and whose faith in Trump to save them, this week alone, saw his appointed judges on the US Federal Court Fifth Circuit Court of Appeals ruling against abortionists—and, most shockingly, his approval rating among Latino voters skyrocketing 19% since he began fighting to build a wall to protect his nation barely a month ago.

http://www.whatdoesitmean.com/nuty4.jpg

January 18, 2019 EU and US all rights reserved. Permission to use this report in its entirety is granted under the condition it is linked back to its original source at WhatDoesItMean.Com. Freebase content licensed under CC-BY and GFDL.

http://www.whatdoesitmean.com/nuty4.jpg

https://www.hussmanfunds.com/comment/mc190118/

John P. Hussman, Ph.D.
President, Hussman Investment Trust
January 2019

While we don’t presently observe conditions to look for a ‘buying opportunity’ or a ‘bottom’ from a full-cycle standpoint, we do observe conditions that are permissive of a scorching market rebound, even if it only turns out to be the ‘fast, furious, prone to failure’ variety. We wouldn’t dream of removing our safety nets against a market decline that I continue to expect to draw the S&P 500 toward the 1000 level by the completion of this cycle. Still, we’ve prepared for the possibility of unusual volatility here, most likely including one or more daily moves in the range of 4-6%, potentially to the upside. Yes, that means one or more daily moves on the order of 100-150 points on the S&P 500 and 900-1300 points on the Dow. You think I’m kidding.”
– John P. Hussman, Ph.D., Interim comment, Pre-open, 12/26/18


In recent days, we’ve heard a number of analysts gushing that the S&P 500 is vastly cheaper than it was only a few months ago. It’s worth noting that they’re actually referring to an index that is now less than 10% below the steepest speculative extreme in history. The chart below puts current valuations into perspective, using our Margin-Adjusted P/E, which is better correlated with actual subsequent 10-12 year market returns than the price/forward operating earnings ratio, the Shiller CAPE, the Fed Model, and a wide range of alternative valuation measures that Wall Street uses to reassure investors that valuations are anything less than obscene.
https://www.hussmanfunds.com/wp-cont.../mc190118a.png


As market conditions currently stand, valuations remain extreme and market internals remain negative. So aside from the likelihood of a knee-jerk market spike on any variant of the word “deal,” we continue to be in a trap-door situation with respect to market risk. Though we did take the edge off of our negative outlook to allow for a scorching relief rally, my present view is that the overall function of that relief rally has been served.


Still, it’s important to be clear – and this point is central to the adaptation that we made to our approach back in 2017 – if our measures of market internals were to improve, signaling a shift of investor psychology away from risk-aversion and toward speculation, we would expect to adopt a constructive market outlook, though undoubtedly with a safety net given present valuation extremes. There’s still too much divergence across individual securities, industries, sectors, and security-types to identify that sort of shift here, but we can’t rule it out. We’ll take that evidence as it comes.


What I can say, unequivocally, is that at points where our measures of market internals become favorable, we will not adopt or amplify a negative market outlook, regardless of how extreme market valuations may be. We learned the hard way in this half-cycle that we can no longer rely on any limit the recklessness of Wall Street once speculators get the bit in their teeth. Again, safety nets would be essential in any event, but if internals shift, so will our outlook.

As market conditions currently stand, valuations remain extreme and market internals remain negative. So aside from the likelihood of a knee-jerk market spike on any variant of the word “deal,” we continue to be in a trap-door situation with respect to market risk. Though we did take the edge off of our negative outlook to allow for a scorching relief rally, my present view is that the overall function of that relief rally has been served.


As a side-note, I’ve renamed the measure above to the Margin-Adjusted P/E (MAPE) rather than the Margin-Adjusted CAPE. The reason is that it seems to be confused for Robert Shiller’s cyclically-adjusted P/E (CAPE). So MAPE it is.

Notably, the MAPE also avoids certain statistical artifacts, such as the fixed 10-year window that will bump Shiller’s CAPE down by about 10% as depressed earnings from the 2008-2010 period roll off, making the CAPE look “cheaper.” This seemingly “cheaper” Shiller CAPE will emerge only by virtue of restricting the denominator to earnings achieved purely during an economic expansion that, at 114 months, is now only marginally shorter than the 120-month expansion that peaked in March 2001.

On a related note, for those waiting for a recession as a signal to become more conservative about market risk, recall that by the economic peak in March 2001, the S&P 500 was already a year into a bear market that had taken the index down by -27%, and would, by October 2002, take the index down by another -30% from there.

Pricing stocks on peak earnings
The fact is that in market cycles across history, margin-adjusted measures are far better correlated with actual subsequent market returns than unadjusted price/earnings measures. On that subject, it’s useful to remember the words of the legendary Benjamin Graham, who warned about pricing stocks based on earnings figures at the peak of an economic cycle: “The purchasers view the good current earnings as equivalent to ‘earning power’ and assume that prosperity is equivalent to safety.”

Say what you like about using margin-adjusted measures as an improved “sufficient statistic” for the very long-term cash flows that U.S. equities deliver over time. These measures are far better correlated with actual subsequent market returns than alternative earnings-based measures like price/forward operating earnings. In over a century of data, these measures are also far better correlated with the discounted sum of actual subsequent cash distributions that the S&P 500 has delivered to investors over time.

Even when we see periodic divergences between actual S&P 500 total returns and those one would have projected 10-12 years earlier, those divergences are correlated with the level of consumer confidence at the end of the period, which is another way of saying that while valuations drive long-term returns, temporary extremes in valuation are generally related to cyclical extremes in investor psychology.
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One of the more cringe-worthy features of the behavior of investment professionals here is the spectacle of Wall Street analysts touting the “reasonableness” of valuations on the basis of year-ahead earnings expectations that they themselves are responsible for fabricating. Just as in 2000 and 2007, instead of the investment profession acting as a historically-informed buffer to defend investors against reckless speculation, extrapolative projections like these are actually endorsed and encouraged by the very people who should know better. The chart below is thanks to TopDownCharts.
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So-called “long-term” earnings projections of this magnitude are particularly offensive given the fact that, measured from the peak of the economic cycle in 2007 to the current peak, actual S&P 500 reported GAAP earnings have grown at an average rate of just 3.8% annually, with revenues growing at just 2.7%.
Measuring from the economic cycle peak of 2000 to the present gets you an average peak-to-peak earnings growth rate of just 5.1% annually, with revenue growth of 3.4%. Notably, those figures fully include the impact of stock repurchases (which reduce the S&P 500 divisor), as well as the record profit margins of recent years.

If anything, future earnings growth is likely to fall short of even what we’ve observed over the past couple of decades. The reason, as I’ve noted previously, is that the real structural growth rate of the U.S. economy – the sum of demographic labor force growth and trend productivity growth – is now down to just 1.4%. The faster growth rate of real GDP in recent years has been entirely the result of a decline in the rate of unemployment, which now stands at just 3.9%.
Barring a further persistent decline in unemployment, we’re likely to observe a slowing of real GDP growth toward 1.4%, even if the economy avoids a recession. Add 2% inflation, and earnings growth is likely to slow to less than 4% annually even if profit margins remain near recent highs. By contrast, an economic contraction of any magnitude at all is likely to produce a “surprising” plunge in S&P 500 index earnings.


Though we constantly hear that recent reductions in corporate tax rates will justify permanentlyhigher corporate profit margins, the historical fact is that U.S. corporations have generally competed on the basis of after-tax profit margins. Specifically, in data since 1947, reductions in nonfinancial corporate tax rates have been accompanied by similar reductions in nonfinancial pre-tax profits, so that after-tax profit margins have increased by far less than one might have expected as a result of those tax cuts.


On the subject of errors, it’s one thing to err because something happens that violates all evidence from history, but it’s another to repeatedly make the same mistake as a result of ignoring history altogether. It seems to me that ignoring extreme valuations – and pricing stocks based on earnings projections that have no link to the way earnings have behaved across history – is an error of the second type.


I regularly admit my own error in the recent advancing half-cycle, particularly because I hope it can be instructive. Despite anticipating the 2000-2002 and 2007-2009 collapses, and admirably navigating decades of complete market cycles prior to 2009, I made a very specific error in the recent half-cycle that was detrimental. The error was my bearish response to severe “overvalued, overbought, overbullish” syndromes that had regularly been followed by air-pockets, panics, and crashes in market cycles across history, but failed to place any limit on speculation in the face of zero interest rate policies.


In late-2017, I finally threw up my hands and abandoned the idea that we could rely on anyhistorically-defined “limit” to speculative recklessness. Instead, I resolved that whenever our measures of market internals are uniformly favorable (which we use to gauge speculative pressures, because speculators tend to be indiscriminate), we would rule out adopting or amplifying any bearish outlook in the future. No exceptions. Period. Sufficiently extreme conditions can push us to a flat, neutral outlook, but never to a bearish one unless ragged and divergent internals indicate that investor psychology has shifted from speculation to risk-aversion.


The role of history and evidence is to provide us with something we can learn, and apply in the future. There’s no question that the world can change in ways that violate past experience and offer new learning. But my sense is that the best kind of learning is coherent – you take the new evidence to shift your understanding in a way that makes it consistent with the entirety of experience again. You don’t just abandon everything you know and shrug, “well, it’s a brand new world.” For our part, prioritizing market internals is sufficient to make things coherent again – the fact is that the entire total return of the S&P 500 from the 2007 peak to today occurred during periods where our measures of market internals were favorable, while nearly all of the 2007-2009 collapse (as well as the recent market weakness) occurred when they were not.


On the “competition” between stocks and bonds
Another danger for investors here is the willingness to accept offensively speculative valuations on the argument that bond yields are low. The empirical fact is that bond yields are tightly correlated with nominal GDP growth. But as one can demonstrate using any discounted cash flow model, if interest rates are low because growth rates are also low, no valuation premium is “justified” by the low interest rates at all. Long-term returns will already be lower, commensurate with the lower interest rates, by virtue of the lower growth rate itself. A valuation premium then just adds insult to injury.


To the extent that prospective returns on stocks are dismal, yet the yields on bonds barely provide a term premium over-and-above Treasury bills, the appropriate response is not to argue in favor of stocks, but instead to argue in favor of cash and alternatives like hedged-equity, particularly while market internals remain ragged and divergent.


Even when analysts recognize that rich market valuations will likely be associated with poor long-term returns for stocks, the observation is often coupled with a phrase like “but these expected stock market returns remain competitive with bonds.”

Two responses to that. First, no. Given the choice between stocks and Treasury bonds, even with their presently depressed yields, we would still expect higher returns and smaller downside risks from bonds.
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Second, to the extent that prospective returns on stocks are dismal, yet the yields on bonds barely provide a term premium over-and-above Treasury bills, the appropriate response is not to argue in favor of stocks, but instead to argue in favor of cash and alternatives like hedged-equity, particularly while market internals remain ragged and divergent.

There are points in every market cycle when a material retreat in valuations is joined by an improvement in measures of market action and internals. It’s at that point that one should make a vigorous case for stock market exposure. Doing so just 10% below the steepest valuation extreme in history, in a market where investors remain inclined toward risk-aversion (which we read from the behavior of internals) is a measure of both 1) impatience with the market cycle and 2) a misguided sense of entitlement with respect to market gains that occurred as a result of speculative pressures that are no longer present.


The New Economy
While some analysts have argued that the current batch of glamour technology companies has boosted profit margins permanently, they seem wholly unware of the regularity with which this argument has been made across history. The argument is recurrently applied to a rotating group of companies that invariably become associated with the New Economy, as opposed to the defunct Old Economy upon which traditional valuation measures have been defined.

Here’s the problem. As any new technology advances from a small base, new product adoption by consumers can create astoundingly high growth rates and profit margins. But as market share approaches saturation, these “logistic growth” curves begin to plateau, and growth predictably slows toward zero. We observed exactly the same profile from the leading companies that dominated the 2000 market peak.
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As I observed back in August 2000, and as is likely to unfold in rather the same way this time, “One of the hard lessons that investors will learn in the coming quarters is that technology stocks are actually cyclicals. Modest changes in economic growth and overall corporate profitability have a highly leveraged impact on the revenue growth and profitability of technology companies. Though economic growth is likely to slow only modestly, we are anticipating a plunge of 20% or more in the earnings of S&P 500 technology stocks in the coming quarters.”


On recession risk
The next question, then, is whether the U.S. is nearing an economic recession. On that subject, we’re probably a bit less committal than one might imagine, because we’re still monitoring a few components of our Recession Warning Composite. Specifically, we’d be inclined to wait until we observe a decline in the ISM Purchasing Managers Index below 50, coupled with an uptick to an unemployment rate of anything above 4%, and a slowdown in year-over-year job growth to 1.4% from the current 1.8%.
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With regard to confirming measures, we’d also pay close attention to the “consumer confidence spread,” as the “future expectations” index has been falling much more sharply than the “present situation” index. This measure typically precedes recessions. Once consumer confidence drops by more than about 20 points below its 12-month average, a recession has typically started. A decline in aggregate hours worked, compared with 3-4 months earlier, is also a useful confirmation.
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While I was one of the few observers that correctly anticipated the recessions that accompanied the 2000-2002 and 2007-2009 market collapses, my reliance on data that was subsequently revised produced false signals earlier in this recovery. So I’m inclined to be a bit conservative about identifying recession risk here. Moreover, given that valuations and market action already encourage a defensive market outlook, there’s really nothing to gain from a recession signal, since it wouldn’t really alter our investment stance.

Still, though we’re inclined to wait for more data, and to look for greater deterioration before identifying a recession, it’s important to remember how quickly the data can shift. The amount of time between the peak in economic confidence and the beginning of a recession is usually very short. In general, a uniform deterioration in financial, employment and economic confidence measures, even compared with 6 months earlier, strongly amplifies the risk of a recession, and there’s not much lead time at all. Put simply, we want to have a reliable set of confirming evidence, but it’s also important to remember how quickly that evidence can emerge.
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Questions we hear a lot
Given the volatility of the financial markets in recent months, my sense is that the best comments to offer are those that relate to these questions:
Bull market or bear market?


My impression is that the recent bull market peaked on September 20, 2018, which is also when we observed the largest preponderance of historically useful top signals we’ve ever seen. As I noted at the time, the only other point that came close was March 24, 2000, the date of the 2000 bubble peak. Still, the primary usefulness of a bull/bear label is to emphasize the potential for steep market losses over the completion of the cycle. As long as one recognizes that risk, there’s no need for labels.


It’s probably better to recognize that the market remains hypervalued and that market internals remain unfavorable. If internals improve at high valuations, our outlook is likely to shift to something that might be described as “constructive with a safety net.” If they improve at substantially lower valuations, we’re likely to move to an unhedged or aggressive stance. For now, there’s so much downside risk that we’d view an improvement in internals as a “bear market rally,” but whatever one might call it, we’d likely be constructive with a safety net. Even that, I suspect, is likely to emerge from lower levels.


Buy stocks or buy bonds?
My impression is that neither provides much prospect for meaningful returns, and 10% off the most obscene valuations in U.S. history isn’t what I’d call a “bargain.” With the yield curve as flat as we currently observe, the main reason to own bonds is based on the likelihood of a decline in yields in the event of economic weakness. There’s some potential for that, but I’d lean toward a mix of Treasury bills, modest bond market durations, high credit-quality, and hedged equity. Our estimated return/risk profile for precious metals shares is also fairly strong here, but given the volatility of those shares, I’d characterize that as a constructive situation rather than an aggressive one. None of these is without risk.


Recession or continued expansion?
We’re seeing a good deal of weakness in our leading measures, and a lot of the regional purchasing managers indices and Fed surveys are deteriorating as well, but we don’t have a sufficient basis for an outright recession warning. This expansion is very long in the tooth, unemployment is quite low, and the underlying structural growth factors are dismal. So my sense is we’re far closer to a recession than to 4% real GDP growth “as far as the eye can see.” Given the other factors already in place, be particularly watchful for an ISM Purchasing Managers Index below 50, a move above 4% in unemployment, and a slowdown in employment growth below about 1.4% year-over-year. A decline in aggregate hours worked versus 3-months earlier along with a steep drop in consumer confidence, particularly about 20 points below its 12-month average, would all be strong confirming evidence of an economic downturn.


More rate hikes or a new round of QE?
On December 19, Fed Chair Jerome Powell observed “We’ve reached the bottom end of the range of what the Committee believes might be neutral.” I think that is exactly right. As I observed in the December comment, the combination of low structural economic growth and modest inflation pressure is fairly consistent with the current level of short-term interest rates. Long-term rates would normally be higher in the context of current data, but given the deterioration in leading economic measures (remember, payroll employment and the unemployment rate are two of the most lagging economic measures available), there’s little compelling upward pressure.


Don’t take hope in Fed intervention to support the market, other than knee-jerk reactions. First, remember that the Fed eased persistently throughout the 2000-2002 and 2007-2009 collapses with no effect. When investors are inclined toward risk-aversion, safe liquidity is a desirable asset, not an inferior one. My view is that it’s essential to monitor market internals directly. We don’t disclose the details of our own measures, but I’ve discussed uniformity, divergence, breadth, leadership, price-volume sponsorship, credit spreads, and other factors often enough that the central concept should be clear: when investors are inclined toward speculation, they tend to be indiscriminate about it.


If and when internals improve, virtually anything the Fed does will likely be associated with market gains. If internals continue to indicate risk-aversion among investors, then those knee-jerk “clearing rallies” would best be used as opportunities to sell marginal stock holdings and tighten up hedges.

My impression is that Jerome Powell is highly aware of how loose the cause-and-effect links are between monetary policy and the real economy. But apart from noting that the Fed’s workhorse economic model estimates only a 0.2% change in the unemployment rate after 3 years in response to each $500 billion in asset purchases, there’s nothing in his past speeches that indicates an intellectual opposition to QE. It’s not at all clear that the Fed recognizes its role in creating repeated cycles of bubble and collapse. So we have to allow for another round of QE in response to the next recession. Again, the appropriate response on our part will be to align ourselves with market internals. A favorable shift would likely encourage a constructive or aggressive investment outlook, particularly if valuations have retreated substantially at that point.


Inflation or deflation?
One of the key features of the recent speculative episode has been yield-seeking speculation by investors starved for safe yields. In response, Wall Street and corporate America provided more “product” in the form of low-grade covenant-lite debt. Indeed, the median rating on U.S. corporate debt now stands just one notch above junk. In an economic decline, one should expect a disruptive wave of defaults, with far lower recovery rates than in previous economic cycles.


Now, defaults tend to be deflationary, so what you tend to see is an upward spike in the yields on junk bonds and corporate debt but a downward trend in the yields of securities viewed as being without credit risk, which has historically included Treasury securities. The question is what happens when we begin to run trillion dollar deficits.


In the event of a deflationary economic decline, even one where defaults are higher as a result of all the yield-seeking and low-grade debt issuance of recent years, another round of QE seems likely. Our response to that prospect is simple – we’ll take our cue from market internals, particularly given that the entire net total return of the S&P 500 since 2007 occurred when our measures of internals have been favorable, and most of the 2007-2009 collapse occurred when they were not. As I’ve regularly noted, our problem during the recent half-cycle had nothing to do with valuations or market internals, but with our bearish response to “overvalued, overbought, overbullish” syndromes.


Meanwhile, it’s also important to allow for an inflationary economic decline, which would result from a public loss of faith in the ability of the government to run a stable debt/GDP relationship. In that event, all bets on QE are off, and the country will just face a difficult situation, as it has periodically faced before.


The best indicator of inflation is inflation. It’s difficult to forecast inflation with macroeconomic variables, because large shifts in inflation are typically linked to discrete events that provoke a loss of confidence in price stability itself, like the trifecta of Great Society deficits, Nixon closing the gold window, and an oil embargo, or the combination of money printing and a supply shock, like using deficit finance to pay striking workers in the Ruhr. Not surprisingly, we’ll infer that shift in confidence from uniformity in the behavior of inflation-sensitive asset prices.


There’s no economic factor that predicts the rate of inflation better than the rate of inflation itself (and related uniformity in the behavior of inflation-sensitive securities including precious metals, exchange rates, bond prices, commodities, TIPS, and related securities). Just like a shift in market internals, it may be difficult to predict, but it’s fairly easy to align yourself with it.


I know that many observers are quietly repeating Milton Friedman’s phrase that “inflation is always and everywhere a monetary phenomenon.” The problem is, you won’t reliably see that in the data. As a former economics professor, I get it. The quiet job of the economics profession is to indoctrinate teenagers with purely theoretical models by showing them line-drawings. Nobody ever asks them to spend time staring at actual numbers.


So they become adults – and sometimes even Fed governors – who take theoretical diagrams as reality, for example, the notion that the Phillips curve is a relationship between unemployment and general price inflation, when there’s utterly no evidence for it. In fact, as I’ve regularly argued, when you actually look at A.W. Phillips’ data (a century of British unemployment and wage data during a period of stable general prices under the gold standard), the Phillips Curve is actually a relationship between unemployment and real wage inflation.


Of course, money creation and general price inflation are undoubtedly linked when money creation hits the pace of the Weimar Republic or Zimbabwe. But for the U.S., there’s no economic factor that predicts the rate of inflation better than the rate of inflation itself (and related uniformity in the behavior of inflation-sensitive securities including precious metals, exchange rates, bond prices, commodities, TIPS, and related securities). Just like a shift in market internals, it may be difficult to predict, but it’s fairly easy to align yourself with it.


Finally, I’ve been asked why my January comment didn’t come out earlier in the month. It’s because this last section is important to me…


In Honor and Remembrance of Dr. Martin Luther King, Jr.

Dr. King noted that he tried to speak on the subject below at least once a year. Preserving that tradition has always seemed an appropriate way to honor him.

If you’ve never read Dr. King’s writings, this talk is a good place to start. I don’t think it’s possible to read his words without coming away better for it.

Loving Your Enemies

November 17 1957
“I want to use as a subject from which to preach this morning a very familiar subject, and it is familiar to you because I have preached from this subject twice before to my knowing in this pulpit. I try to make it a, something of a custom or tradition to preach from this passage of Scripture at least once a year, adding new insights that I develop along the way out of new experiences as I give these messages. Although the content is, the basic content is the same, new insights and new experiences naturally make for new illustrations.


“So I want to turn your attention to this subject: “Loving Your Enemies.” It’s so basic to me because it is a part of my basic philosophical and theological orientation – the whole idea of love, the whole philosophy of love. In the fifth chapter of the gospel as recorded by Saint Matthew, we read these very arresting words flowing from the lips of our Lord and Master: “Ye have heard that it has been said, ‘Thou shall love thy neighbor, and hate thine enemy.’ But I say unto you, Love your enemies, bless them that curse you, do good to them that hate you, and pray for them that despitefully use you; that ye may be the children of your Father which is in heaven.”


“Over the centuries, many persons have argued that this is an extremely difficult command. Many would go so far as to say that it just isn’t possible to move out into the actual practice of this glorious command. But far from being an impractical idealist, Jesus has become the practical realist. The words of this text glitter in our eyes with a new urgency. Far from being the pious injunction of a utopian dreamer, this command is an absolute necessity for the survival of our civilization. Yes, it is love that will save our world and our civilization, love even for enemies.


“Now let me hasten to say that Jesus was very serious when he gave this command; he wasn’t playing. He realized that it’s hard to love your enemies. He realized that it’s difficult to love those persons who seek to defeat you, those persons who say evil things about you. He realized that it was painfully hard, pressingly hard. But he wasn’t playing. We have the Christian and moral responsibility to seek to discover the meaning of these words, and to discover how we can live out this command, and why we should live by this command.


So this morning, as I look into your eyes, and into the eyes of all of my brothers in Alabama and all over America and over the world, I say to you, ‘I love you. I would rather die than hate you.’ And I’m foolish enough to believe that through the power of this love somewhere, men of the most recalcitrant bent will be transformed.

– Reverend Dr. Martin Luther King, Jr.

“Now first let us deal with this question, which is the practical question: How do you go about loving your enemies? I think the first thing is this: In order to love your enemies, you must begin by analyzing self. And I’m sure that seems strange to you, that I start out telling you this morning that you love your enemies by beginning with a look at self. It seems to me that that is the first and foremost way to come to an adequate discovery to the how of this situation.

“Now, I’m aware of the fact that some people will not like you, not because of something you have done to them, but they just won’t like you. But after looking at these things and admitting these things, we must face the fact that an individual might dislike us because of something that we’ve done deep down in the past, some personality attribute that we possess, something that we’ve done deep down in the past and we’ve forgotten about it; but it was that something that aroused the hate response within the individual. That is why I say, begin with yourself. There might be something within you that arouses the tragic hate response in the other individual.


“This is true in our international struggle. Democracy is the greatest form of government to my mind that man has ever conceived, but the weakness is that we have never touched it. We must face the fact that the rhythmic beat of the deep rumblings of discontent from Asia and Africa is at bottom a revolt against the imperialism and colonialism perpetuated by Western civilization all these many years.

“And this is what Jesus means when he said: “How is it that you can see the mote in your brother’s eye and not see the beam in your own eye?” And this is one of the tragedies of human nature. So we begin to love our enemies and love those persons that hate us whether in collective life or individual life by looking at ourselves.

“A second thing that an individual must do in seeking to love his enemy is to discover the element of good in his enemy, and every time you begin to hate that person and think of hating that person, realize that there is some good there and look at those good points which will over-balance the bad points.


“Somehow the “isness” of our present nature is out of harmony with the eternal “oughtness” that forever confronts us. And this simply means this: That within the best of us, there is some evil, and within the worst of us, there is some good. When we come to see this, we take a different attitude toward individuals.

The person who hates you most has some good in him; even the nation that hates you most has some good in it; even the race that hates you most has some good in it. And when you come to the point that you look in the face of every man and see deep down within him what religion calls “the image of God,” you begin to love him in spite of. No matter what he does, you see God’s image there.

There is an element of goodness that he can never slough off. Discover the element of good in your enemy. And as you seek to hate him, find the center of goodness and place your attention there and you will take a new attitude.

“Another way that you love your enemy is this: When the opportunity presents itself for you to defeat your enemy, that is the time which you must not do it.

There will come a time, in many instances, when the person who hates you most, the person who has misused you most, the person who has gossiped about you most, the person who has spread false rumors about you most, there will come a time when you will have an opportunity to defeat that person. It might be in terms of a recommendation for a job; it might be in terms of helping that person to make some move in life. That’s the time you must do it. That is the meaning of love. In the final analysis, love is not this sentimental something that we talk about. It’s not merely an emotional something. Love is creative, understanding goodwill for all men. It is the refusal to defeat any individual. When you rise to the level of love, of its great beauty and power, you seek only to defeat evil systems. Individuals who happen to be caught up in that system, you love, but you seek to defeat the system.

Within the best of us, there is some evil, and within the worst of us, there is some good. The person who hates you most has some good in him; even the nation that hates you most has some good in it; even the race that hates you most has some good in it… No matter what he does, you see God’s image there. There is an element of goodness that he can never slough off.

“The Greek language, as I’ve said so often before, is very powerful at this point. It comes to our aid beautifully in giving us the real meaning and depth of the whole philosophy of love. And I think it is quite apropos at this point, for you see the Greek language has three words for love, interestingly enough. It talks about love as eros. That’s one word for love. Eros is a sort of, aesthetic love. Plato talks about it a great deal in his dialogues, a sort of yearning of the soul for the realm of the gods. And it’s come to us to be a sort of romantic love, though it’s a beautiful love. Everybody has experienced eros in all of its beauty when you find some individual that is attractive to you and that you pour out all of your like and your love on that individual.

That is eros, you see, and it’s a powerful, beautiful love that is given to us through all of the beauty of literature; we read about it.


“Then the Greek language talks about philia, and that’s another type of love that’s also beautiful. It is a sort of intimate affection between personal friends.

And this is the type of love that you have for those persons that you’re friendly with, your intimate friends, or people that you call on the telephone and you go by to have dinner with, and your roommate in college and that type of thing. It’s a sort of reciprocal love. On this level, you like a person because that person likes you. You love on this level, because you are loved. You love on this level, because there’s something about the person you love that is likeable to you.

This too is a beautiful love. You can communicate with a person; you have certain things in common; you like to do things together. This is philia.

“The Greek language comes out with another word for love. It is the word agape. And agape is more than eros; agape is more than philia; agape is something of the understanding, creative, redemptive goodwill for all men. It is a love that seeks nothing in return. It is an overflowing love; it’s what theologians would call the love of God working in the lives of men. And when you rise to love on this level, you begin to love men, not because they are likeable, but because God loves them. You look at every man, and you love him because you know God loves him. And he might be the worst person you’ve ever seen.

“And this is what Jesus means, I think, in this very passage when he says, “Love your enemy.” And it’s significant that he does not say, “Like your enemy.” Like is a sentimental something, an affectionate something. There are a lot of people that I find it difficult to like. I don’t like what they do to me. I don’t like what they say about me and other people. I don’t like their attitudes. I don’t like some of the things they’re doing. I don’t like them. But Jesus says love them. And love is greater than like. Love is understanding, redemptive goodwill for all men, so that you love everybody, because God loves them. You refuse to do anything that will defeat an individual, because you have agape in your soul. And here you come to the point that you love the individual who does the evil deed, while hating the deed that the person does. This is what Jesus means when he says, “Love your enemy.” This is the way to do it. When the opportunity presents itself when you can defeat your enemy, you must not do it.


“Now for the few moments left, let us move from the practical how to the theoretical why. It’s not only necessary to know how to go about loving your enemies, but also to go down into the question of why we should love our enemies. I think the first reason that we should love our enemies, and I think this was at the very center of Jesus’ thinking, is this: that hate for hate only intensifies the existence of hate and evil in the universe.

If I hit you and you hit me and I hit you back and you hit me back and go on, you see, that goes on ad infinitum. It just never ends. Somewhere somebody must have a little sense, and that’s the strong person. The strong person is the person who can cut off the chain of hate, the chain of evil. And that is the tragedy of hate – that it doesn’t cut it off. It only intensifies the existence of hate and evil in the universe. Somebody must have religion enough and morality enough to cut it off and inject within the very structure of the universe that strong and powerful element of love.


“I think I mentioned before that sometime ago my brother and I were driving one evening to Chattanooga, Tennessee, from Atlanta. He was driving the car. And for some reason the drivers were very discourteous that night. They didn’t dim their lights; hardly any driver that passed by dimmed his lights. And I remember very vividly, my brother A. D. looked over and in a tone of anger said: “I know what I’m going to do. The next car that comes along here and refuses to dim the lights, I’m going to fail to dim mine and pour them on in all of their power.” And I looked at him right quick and said: “Oh no, don’t do that. There’d be too much light on this highway, and it will end up in mutual destruction for all. Somebody got to have some sense on this highway.”


“Somebody must have sense enough to dim the lights, and that is the trouble, isn’t it? That as all of the civilizations of the world move up the highway of history, so many civilizations, having looked at other civilizations that refused to dim the lights, and they decided to refuse to dim theirs. And Toynbee tells that out of the twenty-two civilizations that have risen up, all but about seven have found themselves in the junk heap of destruction. It is because civilizations fail to have sense enough to dim the lights. And if somebody doesn’t have sense enough to turn on the dim and beautiful and powerful lights of love in this world, the whole of our civilization will be plunged into the abyss of destruction. And we will all end up destroyed because nobody had any sense on the highway of history.


The strong person is the person who can cut off the chain of hate, the chain of evil. And that is the tragedy of hate – that it doesn’t cut it off. It only intensifies the existence of hate and evil in the universe. Somebody must have religion enough and morality enough to cut it off and inject within the very structure of the universe that strong and powerful element of love.


“Somewhere somebody must have some sense. Men must see that force begets force, hate begets hate, toughness begets toughness. And it is all a descending spiral, ultimately ending in destruction for all and everybody. Somebody must have sense enough and morality enough to cut off the chain of hate and the chain of evil in the universe. And you do that by love.


“There’s another reason why you should love your enemies, and that is because hate distorts the personality of the hater. We usually think of what hate does for the individual hated or the individuals hated or the groups hated. But it is even more tragic, it is even more ruinous and injurious to the individual who hates. You just begin hating somebody, and you will begin to do irrational things. You can’t see straight when you hate. You can’t walk straight when you hate.

You can’t stand upright. Your vision is distorted. There is nothing more tragic than to see an individual whose heart is filled with hate. He comes to the point that he becomes a pathological case. For the person who hates, you can stand up and see a person and that person can be beautiful, and you will call them ugly. For the person who hates, the beautiful becomes ugly and the ugly becomes beautiful. For the person who hates, the good becomes bad and the bad becomes good. For the person who hates, the true becomes false and the false becomes true. That’s what hate does. You can’t see right. The symbol of objectivity is lost. Hate destroys the very structure of the personality of the hater.


“The way to be integrated with yourself is be sure that you meet every situation of life with an abounding love. Never hate, because it ends up in tragic, neurotic responses. Psychologists and psychiatrists are telling us today that the more we hate, the more we develop guilt feelings and we begin to subconsciously repress or consciously suppress certain emotions, and they all stack up in our subconscious selves and make for tragic, neurotic responses. And may this not be the neuroses of many individuals as they confront life that that is an element of hate there.

And modern psychology is calling on us now to love. But long before modern psychology came into being, the world’s greatest psychologist who walked around the hills of Galilee told us to love. He looked at men and said: “Love your enemies; don’t hate anybody.” It’s not enough – to love your friends – because when you start hating anybody, it destroys the very center of your creative response to life and the universe; so love everybody. Hate at any point is a cancer that gnaws away at the very vital center of your life and your existence. It is like eroding acid that eats away the best and the objective center of your life. So Jesus says love, because hate destroys the hater as well as the hated.


“Now there is a final reason I think that Jesus says, “Love your enemies.” It is this: that love has within it a redemptive power. And there is a power there that eventually transforms individuals. That’s why Jesus says, “Love your enemies.” Because if you hate your enemies, you have no way to redeem and to transform your enemies. But if you love your enemies, you will discover that at the very root of love is the power of redemption. You just keep loving people and keep loving them, even though they’re mistreating you. Here’s the person who is a neighbor, and this person is doing something wrong to you and all of that. Just keep being friendly to that person. Keep loving them. Don’t do anything to embarrass them. Just keep loving them, and they can’t stand it too long.

Oh, they react in many ways in the beginning. They react with bitterness because they’re mad because you love them like that. They react with guilt feelings, and sometimes they’ll hate you a little more at that transition period, but just keep loving them. And by the power of your love they will break down under the load. That’s love, you see. It is redemptive, and this is why Jesus says love. There’s something about love that builds up and is creative. There is something about hate that tears down and is destructive. So love your enemies.


“There is a power in love that our world has not discovered yet. Jesus discovered it centuries ago. Mahatma Gandhi of India discovered it a few years ago, but most men and most women never discover it. For they believe in hitting for hitting; they believe in an eye for an eye and a tooth for a tooth; they believe in hating for hating; but Jesus comes to us and says, “This isn’t the way.”

“As we look out across the years and across the generations, let us develop and move right here. We must discover the power of love, the power, the redemptive power of love. And when we discover that we will be able to make of this old world a new world. We will be able to make men better. Love is the only way. Jesus discovered that.


“And our civilization must discover that. Individuals must discover that as they deal with other individuals. There is a little tree planted on a little hill and on that tree hangs the most influential character that ever came in this world. But never feel that that tree is a meaningless drama that took place on the stages of history. Oh no, it is a telescope through which we look out into the long vista of eternity, and see the love of God breaking forth into time. It is an eternal reminder to a power-drunk generation that love is the only way.

It is an eternal reminder to a generation depending on nuclear and atomic energy, a generation depending on physical violence, that love is the only creative, redemptive, transforming power in the universe.


“So this morning, as I look into your eyes, and into the eyes of all of my brothers in Alabama and all over America and over the world, I say to you, “I love you.

I would rather die than hate you.” And I’m foolish enough to believe that through the power of this love somewhere, men of the most recalcitrant bent will be transformed. And then we will be in God’s kingdom.”

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COMMENTS FROM BENJAMINIS: Powerful Comments From a JEW and a Man of G-D...

G-D Bless and Shabbot Shalom !!!