cockroach Archives - The Automatic Earth

Julian first on his birthday. Here’s Nils Melzer’s response to the 200+ academics who didn’t like how he described the -empty- rape allegations against Assange. These are the last few paragraphs. A man of great integrity.

• Response to Open Letter of 1 July 2019 (Nils Melzer)

Beyond questions of law, you also take issue with my tone, which you deem to be “insensitive to victims”. Please let me assure you that, in two decades of work with victims of war and violence, sometimes under very difficult and dangerous circumstances, I have seen and suffered too much myself to be intellectually or emotionally capable of “mocking” potential victims. The countless testimonies I have collected in prisons, camps and villages throughout the world have marked me deeply, and some of them keep haunting me to this day. Whatever misunderstandings may have resulted from my article, they certainly do not warrant accusing me of “insensitivity to victims” or even a “profound lack of understanding that does a disservice to the mandate”.

Though the tone of my critique may be harsh, it does not aim at the women, but at the gross arbitrariness of the “rape” narrative, which has been wrongly imposed by zealous officials not only on Assange, but also on the two concerned women themselves, and on the general public. The State not only ignored the women’s own experience and interpretation of events, but also consistently declined to take the necessary measures which would have allowed advancing this matter beyond the stage of preliminary investigation, where it has been so conveniently left to simmer for almost a decade. As is well documented, both the two women and Assange fully cooperated with the police and the prosecution from the outset, he was questioned both in Sweden (2010) and in London (2016), and the only reason he refused to be extradited to Sweden was that Sweden declined to guarantee against further extradition to the United States, where I am convinced he would be exposed to serious violations of his human rights.

More generally, I fully share your concerns that sexual allegations against powerful men are often dismissed as attention-seeking or part of a conspiracy to bring them down. I would point out, however, that Assange is not a powerful man shielded by impunity, but an isolated and frail political prisoner persecuted for exposing war crimes and corruption. So, while we all work to safeguard the rights of victims of sexual abuse, let us not blindly dismiss well-founded doubts as to the veracity and / or appropriateness of rape allegations, where there are indications of duress or documented third party interests influencing the process. This holds particularly true in a highly politicized case which, in all involved jurisdictions, is plagued with a pervasive mix of grave and persistent due process violations, concerted public mobbing, humiliation and intimidation, and counterfactual accusations of hacking, spying and even causing death and injury.

Right. The EU nominates two women. One is accused of gross incompetence, the other was convicted of negligence in a case of misuse of public funds, but never sentenced, no criminal record. Highly doubtful she would be seen as “fit and proper” for a commercal bank job. The entire nomination process reminds us about Groucho Marx’ famous line “Those are my principles; if you don’t like them, I have others”. So we get: “Who needs a Spitzenkandidat when you can have a Homecoming Queen?”

• France And Germany Eye Lagarde For ECB and Von Der Leyen For EC President (R.)

German defense minister Ursula von der Leyen may end up as European Commission President while IMF head Christine Lagarde may become new president of the European Central Bank following an agreement between France and Germany, said sources. One diplomatic source with knowledge of the matter said French President Emmanuel Macron had proposed to his German counterpart Angela Merkel that Lagarde should get the top ECB job. The source added that Merkel was “very positive” on the idea of Lagarde heading the ECB.

“Von der Leyen is our weakest minister. That’s apparently enough to become Commission president..”

“..accusations that von der Leyen’s office circumvented public procurement rules in granting contracts worth millions of euros..”

• The Inconvenient Truth About Ursula Von Der Leyen (Pol.eu)

A polyglot Brussels native who reared seven children and earned a medical degree on the side before storming to the top of German politics. News that this Wunderfrau — aka German Defense Minister Ursula von der Leyen — could become the Commission’s next president left European capitals abuzz on Tuesday. “Finally some good news” was the general tenor. Who needs a Spitzenkandidat when you can have a Homecoming Queen? At first glance, the affable 60-year-old minister with a camera-ready smile looks to be a perfect fit, with the requisite experience, political pedigree and personality to handle the EU’s toughest job. And yet a nagging question remains: Is she too good to be true?

In the German capital, the answer is clear. “Von der Leyen is our weakest minister. That’s apparently enough to become Commission president,” former European Parliament President Martin Schulz seethed in a tweet Tuesday evening. Though Schulz is a Social Democrat, his analysis of the minister’s record is shared by many of von der Leyen’s fellow Christian Democrats, though most are reluctant to criticize her publicly. Instead, they point to the state of the German military. “The Bundeswehr’s condition is catastrophic,” Rupert Scholz, who served as defense minister under Helmut Kohl, wrote last week before von der Leyen was nominated to the EU’s top post. “The entire defense capability of the Federal Republic is suffering, which is totally irresponsible.”

[..] In addition to problems surrounding the German military’s readiness, von der Leyen’s ministry also faces an investigation into suspected wrongdoing surrounding its use of outside consultants, including Accenture and McKinsey. The Bundestag, the German parliament, is currently holding hearings into the affair, including accusations that von der Leyen’s office circumvented public procurement rules in granting contracts worth millions of euros to the firms. Those hearings have taken a dramatic turn in recent days as testimony from key witnesses appeared to confirm suspicions of systematic corruption at the ministry.

On our way to zero percent interest rates. Damn savings and pensions.

• Trump To Nominate Judy Shelton, Christopher Waller To The Fed (CNBC)

President Donald Trump intends to nominate Christopher Waller, executive vice president at the Federal Reserve Bank of St. Louis, and Judy Shelton, an economic adviser to the president during his 2016 campaign, to the Federal Reserve’s board. The announcements, in a pair of tweets late Tuesday, come after Trump’s earlier nominees, Stephen Moore and Herman Cain, both withdrew from consideration. Moore, a conservative pundit, dropped out of consideration in May, citing public scrutiny of his professional and personal lives. Cain, the businessman and former GOP presidential candidate, dropped out of contention for the Fed in late April. Shelton was earlier speculated to be a pick for the Federal Reserve board.

Shelton has previously said that if appointed, she would lower interest rates to 0% in one to two years, echoing calls from Trump to lower rates. Waller has worked at the Federal Reserve Bank of St. Louis since 2009, and previously was a chair of economics at the University of Notre Dame and a chair in macroeconomics and monetary theory at the University of Kentucky. He has written about the dangers of an inverted yield curve, in which short-term Treasury yields outpace long-term yields. The 3-month bond yield topped 10-year yields in May, the widest yield curve inversion since the financial crisis. Some economists and investors believe the curve sends a warning about economic growth. Both nominees will need Senate confirmation.

Interpreting Putin’s words.

• The Death of the Liberal Idea (Dmitry Orlov)

The migrant crisis is a perfect example of how liberalism has outlived its usefulness. Liberalism offers two ways forward, both of which are fatal to it. One approach is distinctly illiberal: halt the influx of migrants by any means necessary; insist that the migrants already in the country either conform to a strict set of requirements, including demonstrated competency in the nation’s language, detailed knowledge of its laws and administrative systems, strict obedience to its laws and demonstrated preference and respect for the customs and culture of the native population—or be not so much deported as expelled. The other approach is liberal at first: allow the influx to continue, do not hinder the formation of foreign ghettos and enclaves which native citizens and officials dare not enter, and eventually surrender to Sharia law or other forms of foreign dictate—guaranteeing the eventual death of the liberal idea along with much of the native population.

Thus, the choice is between killing the liberal idea but saving the native population or letting the liberal idea die willy-nilly, taking the native population along with it. It offers no solution at all. “We all live in a world based on traditional Biblical values,” quoth Putin. “We don’t have to demonstrate them every day… but must have them in our hearts and our souls. In this way, traditional values are more stable and more important to millions of people than this liberal idea which, in my view, is ceasing to exist.” This is true not just of the believers—be they Christian, Moslem or Jewish—but of the atheists as well. To put it in terms that may shock and astound some of you, you don’t have to believe in God (although it helps if you do—to avoid cognitive dissonance) but if you aspire to any sort of social adequacy in a traditional society you have no choice but to sincerely think and act as if God exists, and that He is the God of the Bible—be He Yahweh, Elohim, Jesus and the Holy Trinity or Allah (that’s the Arabic word for “God”).

Putin capped off his argument by ever so gently and politely putting the boot in. He said that he has no clue about any of this “transformer-trans… whatever” stuff. How many genders are there? He has lost count. Not that he is against letting consenting adult members of various minority sexual groups do whatever they want among themselves—“Let everyone be happy!”—but they have no right to dictate to the rest. Specifically, Russian law makes homosexual propaganda among those who are under age illegal. Hollywood’s pro-LGBT mavens must be displeased: their choice is either to redact LGBT propaganda from the script, or to redact it from the finished film prior to its release in Russia (and China).

Fun with Bob.

• Stagecraft (Kunstler)

I can think of a few 90-mph sliders I’d like to pitch to Mr. Mueller, some of them already floated in the press: like, why did you allow the GI cell phones of Peter Strzok and Lisa Page to be destroyed shortly after you were informed about their unprofessional and compromising text exchanges, for which they were fired off your “team?” When did you learn that international men-of-mystery Stefan Halper and Josef Mifsud, whose operations spurred your prosecutions, were not Russian agents but rather in the employ of US and British government intel agencies? Your deputy, Andrew Weissmann, was informed by Deputy Attorney General Bruce Ohr in the summer of 2016, months before your appointment, that the predicating documents for your inquiry, known as the Steele Dossier, amounted to a Clinton campaign oppo research digest — when did he happen to tell you that?

You devoted nearly 20 pages of your report to the Trump Tower meeting between the president’s son, Donald, Jr., and two Russians, lawyer Natalia Veselnitskaya and lobbyist Rinat Akhmetshin. Why did you omit to mention that both Russians were in the employ of Glenn Simpson’s Fusion GPS company, candidate Clinton’s oppo research contractor, and met with Mr. Simpson both before and after the Trump Tower meeting? How did it happen that you hired attorney Jeannie Rhee for your team, knowing that she had previously worked as a lawyer for the Clinton Foundation? Under what legal standard did you pronounce Mr. Trump to be “not exonerated” in the obstruction of justice matter, considering you told the Attorney General, Mr. Barr, that it was not based on findings by the DOJ Office of Legal Counsel concerning presidential immunity from indictment?

[..] It’s just possible that Robert Mueller will not be reading chapter and verse from his sacred report, like an old-school Episcopal priest, but rather pleading the Fifth Amendment to avert his own potential prosecution.

Lawyers tell them not to, in case they’d say something stupid. But bordering on criminal behavior.

• Families Of 737 MAX Crash Victims Say Boeing Has Not Contacted Them (BI)

Families of those killed in two fatal crashes involving Boeing 737 Max planes say they have not received any contact from Boeing since the disasters, with no apology or offer of support from the manufacturer. The parents of a woman killed on one of the flights told Business Insider they had received “no condolences” and “no direct communication” from Boeing despite numerous public apologies by the plane maker and said Boeing CEO Dennis Muilenburg “talks to other people but not us, the victims’ families.” Nadia Milleron and Michael Stumo lost their 24-year-old daughter, Samya Stumo, when the Boeing 737 Max 8 jet operated by Ethiopian Airlines crashed in March, killing all 157 people on board.

It was the second crash of a 737 Max plane in five months after a Max 8 operated by the Indonesian carrier Lion Air crashed in the Java Sea in October, killing all 189 people on board. Investigations into both crashes have centered on a software issue that Boeing has since been working to fix, with all its Max aircraft grounded around the world in the meantime. Other attorneys representing more than 50 families of those killed in the crashes told Business Insider their clients’ experience was the same. The Chicago-based aviation attorney Joe Power, the Los-Angeles based attorney Brian Kabateck, and the Miami-based attorney Steve Marks said Boeing had not reached out to their clients.

Marks said that this response was not “unusual” from manufacturers after a crash, but he described Boeing’s reaction as “worse” than a typical response. He said Boeing “came out really quickly after the second tragedy, and said: ‘We own it, it’s our problem.'” But then, he said, the company “has since backed those comments off, in many different ways, which I think has only inflamed the situation, as far as the families are concerned.” Mike Danko, an aviation attorney who is not representing any families in the 737 Max crashes, told Business Insider that Boeing’s action in this case were “not unusual” and that manufacturers typically did not apologize or offer support after fatal plane crashes, but he noted its public apologies.

Not surprising.

• Chinese Border Guards Put Secret Surveillance App On Tourists’ Phones

Chinese border police are secretly installing surveillance apps on the phones of visitors and downloading personal information as part of the government’s intensive scrutiny of the remote Xinjiang region, the Guardian can reveal. The Chinese government has curbed freedoms in the province for the local Muslim population, installing facial recognition cameras on streets and in mosques and reportedly forcing residents to download software that searches their phones. An investigation by the Guardian and international partners has found that travellers are being targeted when they attempt to enter the region from neighbouring Kyrgyzstan.

Border guards are taking their phones and secretly installing an app that extracts emails, texts and contacts, as well as information about the handset itself. Tourists say they have not been warned by authorities in advance or told about what the software is looking for, or that their information is being taken.

Maritime law. Don’t play with it.

• Italian Judge Rules Sea Watch Captain Carried Out Duty To Protect Lives (EN)

An Italian judge ruled on Tuesday that the German captain of a rescue charity ship had not broken the law when she forced a naval blockade at the weekend, saying she had been carrying out her duty to protect human life. Carola Rackete, a 31-year-old German national, disobeyed Italian military orders and entered the port of Lampedusa on Saturday to bring some 41 African migrants to land in the Dutch-flagged Sea-Watch boat. She was immediately detained and placed under house arrest, but in a blow for Italy’s hardline interior minister, Matteo Salvini, Judge Alessandra Vella ruled that Rackete had been carrying out her duty and had not committed any act of violence.

Rackete still faces possible charges of helping illegal immigration, but Vella ordered her immediate release. Salvini said in a statement he had hoped for a tougher response from the Italian justice system and promised to expel Rackete as soon as possible. Rackete appeared before the Agrigento court on Monday and apologised for hitting the patrol boat, saying it had been an accident and explaining that her sole concern was the well-being of the migrants who had been at sea for more than two weeks.

Question is: can they, or does EU law prevail?

• Austria Becomes First EU Country To Ban Glyphosate (RT)

Austria has voted to ban glyphosate, the main ingredient in Bayer-Monsanto’s notorious Roundup weedkiller, becoming the first EU country to outlaw the chemical and creating a PR disaster for the troubled German company. “The scientific evidence of the plant poison’s carcinogenic effect is increasing. It is our responsibility to ban this poison from our environment,” Social Democratic Party leader Pamela Rendi-Wagner said in a statement on Tuesday. The resolution passed with the cooperation of her party, the right-wing Freedom Party and the liberal Neos Party, and remains only to be signed by President Alexander van der Bellen, a former Green Party leader, unless the upper house of Parliament objects.

“We want to be a role model for other countries in the EU and the world,” said Erwin Preiner, another Social Democrat MP who worked on the ban. Austria has embraced organic farming more than any other European country – nearly a quarter of its farmland is organic – and is thus not a major market for glyphosate-based herbicides, using only a few hundred tons per year. While a ban will have minimal direct impact on Bayer’s sales, the optics of the German company’s next-door neighbor nation exiling its flagship herbicide are likely to cause a few headaches at Bayer HQ.

Austria’s ministry for sustainability and tourism claims a total ban on glyphosate violates EU law, as the chemical is cleared for sale and use across the EU until 2022, but the bill’s backers have pointed to other examples of individual countries banning specific chemicals as proof of their right to legislate against the herbicide. France banned Roundup Pro 360, one type of Monsanto’s popular glyphosate weedkiller, earlier this year, and President Emmanuel Macron has pledged to phase out the use of glyphosate entirely within three years. “National bans on glyphosate-based plant protection products or restrictions on their use would be possible,” the European Commission declared in 2016, confirming that “the EU states do not have to hide behind the European Commission” in deciding whether or not to ban a particular formulation of an herbicide.

“..cockroaches who survived treatment with one insecticide developed immunity not just to that chemical, but to other chemicals they hadn’t even been exposed to – increasing their resistance “four- to six-fold in just one generation..”

• Cockroach ‘Superbugs’ Evolve To Resist Pesticides In One Generation (RT)

Cockroaches will soon be impossible to kill with standard pesticides, as they can develop cross-resistance to poisons they’ve never encountered within a single generation, an ominous new study has found.
German cockroaches – the small, quick-scurrying type whose traces can be found in 85 percent of US urban homes – are rapidly becoming impervious to pesticide chemicals, developing cross-resistance to a variety of insecticides within a single generation, a study published in Scientific Reports has demonstrated. And even the researchers who conducted the experiment are creeped out by the evolutionary capabilities of the ubiquitous six-legged pests. “We didn’t have a clue that something like that could happen this fast,” Michael Scharf, chair of the Entomology Department at Purdue University and co-author of the study, said in a statement last week.

“Cockroaches developing resistance to multiple classes of insecticides at once will make controlling these pests almost impossible with chemicals alone.” One experiment in which 10 percent of cockroaches started off resistant to a particular pesticide actually saw populations grow over the six months during which the researchers sprayed, a disconcerting result in itself. But it was the multi-chemical experimental groups that really caused a stir – cockroaches who survived treatment with one insecticide developed immunity not just to that chemical, but to other chemicals they hadn’t even been exposed to – increasing their resistance “four- to six-fold in just one generation,” Scharf marveled.

N’importe quoi: “The industry has said deep-sea mining is essential to extract the materials needed for a transition to a green economy..”

• Deep-Sea Mining To Turn Oceans Into ‘New Industrial Frontier’ (G.)

The world’s oceans are facing a “new industrial frontier” from a fledgling deep-sea mining industry as companies line up to extract metals and minerals from some of the most important ecosystems on the planet, a report has found. The study by Greenpeace revealed that although no mining had started on the ocean floor, 29 exploration licences had been issued covering an area five times bigger than the UK. Environmentalists said the proposed mining would threaten not only crucial ecosystems but the global fight against climate breakdown.

Louisa Casson, an ocean campaigner at Greenpeace, said: “The health of our oceans is closely linked to our own survival. Unless we act now to protect them, deep-sea mining could have devastating consequences for marine life and humankind.” The licences, issued by a United Nations body, the International Seabed Authority, have been granted to a handful of countries that sponsor private companies. They cover vast areas of the Pacific, Atlantic and Indian Oceans, totalling 1.3m sq km (500,000 sq miles). If the mining goes ahead, large machines will be lowered on to the seabed to excavate cobalt and other rare metals.

Campaigners said that, as well as destroying little understood regions of the ocean floor, the operations would deepen the climate emergency by disrupting carbon stores in seafloor sediments, reducing the ocean’s ability to store it. The industry has said deep-sea mining is essential to extract the materials needed for a transition to a green economy by supplying raw materials for key technologies including batteries, computers and phones. Its advocates say deep-sea mining is less harmful to the environment and workers than most existing mineral and mining operations.

“They want to send gigantic bulldozers, decked out with rotating grinders and mammoth drills straight out of Robot Wars, into the deepest parts of the ocean, disturbing the home of unique creatures and churning up vital stores of carbon. ”

• The Seabed Should Be Off-Limits To Mining Companies (Chris Packham)

When I was filming Blue Planet Live, I was struck by just how much of the ocean has been altered by humans. From industrial fisheries ensnaring ocean giants in kilometres-long lines, to finding our trash at some of the deepest parts of the ocean: it’s clear that however vast the seas are, we are causing profound harm. Yet at this point in history, when the oceans are facing more pressures than ever before, a secretive new industry is seeking to move into the deep sea, the largest ecosystem on the planet, to start mining for metals and minerals.

They want to send gigantic bulldozers, decked out with rotating grinders and mammoth drills straight out of Robot Wars, into the deepest parts of the ocean, disturbing the home of unique creatures and churning up vital stores of carbon. This is quite clearly an awful idea. As someone fascinated by weird and wonderful wildlife, the deep sea is a dream come true. Stoplight loosejaws, bearded sea-devils and vampire squid are just a few of the fantastically named creatures that make the deep ocean their home. On practically every mission down to the deep, scientists discover new species.

We know more about the surface of Mars and the moon than about the bottom of the ocean. Mining the deep sea sounds just as ludicrous as mining the moon. Far too often, industry has plundered the natural world before science has explored and understood its importance. Parts of the deep sea have already been ravaged by destructive fisheries. These ecosystems stand practically no chance of recovery if mining is allowed to start. Researchers who returned 30 years later to one mining test site on the Pacific sea floor could still see the wounds on the seabed – and warned of irreversible loss of some ecosystem functions.

A deep-sea blackdevil. Photograph: Alamy Stock Photo

Debt Rattle December 12 2015

Dec 122015

December 12, 2015 Posted by Raúl Ilargi Meijer at 10:17 am Finance Tagged with: antibiotics, bubble, cockroach, debt, Fed, junk bonds, loonie, refugees, stocks Comments Off

Banksy Steve Jobs, son of a Syrian immigrant 2015

• Russia Calls Saudi Bluff, Plans $40 Oil For Seven Years (AEP)

• December 16, 2015 – When The End Of The Bubble Begins (Stockman)

• Stocks Are More Overvalued Now Than At 2000 And 2007 Peaks (MarketWatch)

• As Commercial Real-Estate Prices Soar, Fed Weighs Consequences (WSJ)

• Why The Junk Bond Selloff Is Getting Very Scary (MarketWatch)

• Carl Icahn: Junk Bond Market A ‘Keg Of Dynamite’ (CNBC)

• It Starts: Junk-Bond Fund Implodes, Investors Stuck (WS)

• Gundlach Says ‘Never Just One Cockroach’ In Any Credit Meltdown (Reuters)

• Third Avenue Redemption Freeze Sends Chill Through Credit Market (BBG)

• Stone Lion Capital Partners Suspends Redemptions in Credit Hedge Funds (WSJ)

• Bank of Canada Crushes Loonie, Creates Mother of All Shorts (WS)

• China Property Firms’ Debt Issuance Jumps, More To Come (Reuters)

• Even the Mafia Wants Out of Italy’s South (BBG)

• New Superbug Resistant To All Antibiotics Linked To Imported Meat (Forbes)

• Banksy Uses Steve Jobs Artwork To Highlight Refugee Crisis (Guardian)

It’s not a bluff, it’s desperation on all sides.

• Russia Calls Saudi Bluff, Plans $40 Oil For Seven Years (AEP)

Russia is battening down the hatches for a Biblical collapse in oil revenues, warning that crude prices could stay as low as $40 a barrel for another seven years. Maxim Oreshkin, the deputy finance minister, said the country is drawing up plans based on a price band fluctuating between $40 to $60 as far out as 2022, a scenario that would have devastating implications for Opec. It would also spell disaster for the North Sea producers, Brazil’s off-shore projects, and heavily indebted Western producers. “We will live in a different reality,” he told a breakfast forum hosted by Russian newspaper Vedomosti. The cold blast from Moscow came as US crude plunged to $35.56, pummelled by continuing fall-out from the acrimonious OPEC meeting last week. Record short positions by hedge funds have amplified the effect.

Bank of America said there was now the risk of “full-blown price war” within Opec itself as Saudi Arabia and Iran fight out a bitter strategic rivalry through the oil market. Brent crude fell to $37.41, even though demand is growing briskly. It is the lowest since the depths of the Lehman crisis in early 2009. But this time it is a ‘positive supply shock’, and therefore beneficial for the world economy as a whole. The International Energy Agency said in its monthly market report that Opec has stopped operating as a cartel and is “pumping at will”, aiming to drive out rivals at whatever cost to its own members. Opec revenues will fall to $400bn (£263bn) this year if current prices persist, down from $1.2 trillion in 2012. This is a massive shift in global wealth.

The IEA said global oil stocks were already at nose-bleed levels of 2,971m barrels, and were likely to increase by another 300m over the next six months as “free-wheeling Opec policy” floods the market. The watchdog played down fears that the world was running out of sites to store the glut, citing 230m barrels of new storage coming on stream. Inventories in the US are still only at 70pc capacity. But this could change once Iranian crude comes on stream later next year. Russia’s $40 warning is the latest escalation in a game of strategic brinkmanship between the Kremlin and Saudi Arabia, already at daggers drawn over Syria. The Russian contingency plans convey a clear message to Riyadh and to Opec’s high command that the country can withstand very low oil prices indefinitely, thanks to a floating rouble that protects the internal budget.

Saudi Arabia is trapped by a fixed exchange peg, forcing it to bleed foreign reserves to cover a budget deficit running at 20pc of GDP. Russia claims to have the strategic depth to sit out a long siege. It is pursuing an import-substitution policy to revive its industrial and engineering core. It can ultimately feed itself. The Gulf Opec states are one-trick ponies by comparison. The deputy premier, Arkady Dvorkovich, told The Telegraph in September that Opec will be forced to change tack. “At some point it is likely that they are going to have to change policy. They can last a few months, to a couple of years,” he said. Kremlin officials suspect that the aim of Saudi policy is to force Russia to the negotiating table, compelling it to join Opec in a super-cartel controlling half the world’s production.

“Wall Street margined the Fed’s gift of collateral, and did so over and over in an endless chain of rehypothecation.”

• December 16, 2015 – When The End Of The Bubble Begins (Stockman)

They are going to layer their post-meeting statement with a steaming pile of if, ands & buts. It will exude an abundance of caution and a dearth of clarity. Having judged that a 25 bps pinprick is warranted, the FOMC will then plant itself firmly in front of the great flickering dashboard in the Eccles Building. There it will repose to a regimen of “watchful waiting”, scouring the entrails of the “incoming data” to divine its next move. Perhaps the waiting won’t be so watchful as all that, however. What is actually coming down the pike is something that may put the reader, at least those who have already been invited to join AARP, more in mind of that once a year hour-long special broadcast by Saturday morning TV back in the days of yesteryear; it explained how the Lone Ranger got his mask.

Memory fails, but either 12 or 19 Texas Rangers rode high in the saddle into a box canyon, confident they knew what was around the bend. Soon there was a lot of gunfire and then there was just one, and that was only because Tonto’s pony needed to stop for a drink. Yellen and her posse better pray for a monetary Tonto because they are riding headlong into an ambush in the canyons of Wall Street. To wit, they cannot possibly raise money market interest rates—-even by 75 bps—-without massively draining liquidity from the casino. Don’t they know what happened to the $3.5 trillion of central bank credit they have digitally printed since September 2008? Do they really think that fully $2.8 trillion of it just recycled right back to the New York Fed as excess bank reserves?

That is, no harm, no foul and no inflation? The monetary equivalent of a tree falling in an empty forest? To the contrary, how about recognizing the letter “f” for fungibility. What all that “excess” is about is collateral, not idle money. The $2.8 trillion needed an accounting domicile—so “excess reserves” was as good as any. But from a financial point of view it amounted to a Big Fat Bid for existing inventories of stocks and bonds. Stated more directly, Wall Street margined the Fed’s gift of collateral, and did so over and over in an endless chain of rehypothecation. So that’s why December 16th will be the beginning of the end of the bubble. If the Fed were to actually raise money market rates the honest way, and in the manner employed by central banks for a century or two, it would have to drain cash from the system; and it would have to do so in the trillions in order to levitate the vast sea of money it has pinned to the zero bound.

What excess money will buy you.

• Stocks Are More Overvalued Now Than At 2000 And 2007 Peaks (MarketWatch)

The stock market currently is even more overvalued than it was at the bull market peaks of both March 2000 and October 2007 — according to not just one, but two, valuation measures. That at least is the message of an analysis released earlier this week by Ned Davis Research, the quantitative research firm. What caught my eye in the firm’s analysis was that, unlike virtually all others that conclude that stocks are overvalued, this one was not based on the Shiller P/E — the cyclically-adjusted P/E ratio championed by Nobel laureate Robert Shiller. That’s noteworthy, since there would be nothing new in reporting that Shiller’s P/E shows stocks to be overvalued. That ratio has been giving this same message for several years now, and skeptics have found many ways of wriggling out from underneath its bearish implications.

But Ned Davis’s latest report focuses on something different: the median stock’s price/earnings and price/sales ratios. The median stock, of course, is the one for which exactly half have higher ratios and half have lower. By focusing on the median, Davis’s findings are immune from the charge that they are being skewed by outliers — such as the terrible earnings among energy companies. The chart at the top of this column summarizes what Davis found. Currently, according to his firm’s research, the median NYSE-listed stock has a price/earnings ratio of 25.6, when calculated based on trailing 12-month earnings. At the bull market peak in October 2007, for example, the comparable ratio was below 20; at the top of the Internet bubble in March 2000, it was even lower. In fact, according to Davis, the price/earnings ratio currently for the median NYSE stock is the highest it’s ever been since his data series began in 1980 — except for the bear-market lows of October 2002 and March 2009, when earnings were depressed by recessions.

Fed mouthpiece Hilsenrath with an pretty astonishing tale: After creating the biggest bubble ever, “the central bank remained ill-equipped to quell [..] dangerous asset bubbles..”

• As Commercial Real-Estate Prices Soar, Fed Weighs Consequences (WSJ)

Federal Reserve officials participating in a “war game” exercise this year came to a disturbing conclusion: Six years after the financial crisis ended, the central bank remained ill-equipped to quell the kind of dangerous asset bubbles that destabilized the savings-and-loan industry during the late 1980s, tech stocks in the 1990s and housing in the mid-2000s. The five officials—gathered at a conference table in Charlotte, N. C.—had to determine if hypothetical booms in commercial real estate and corporate borrowing risked collapse and damaging fallout for the broader economy. The group was asked what to do about it. Fed officials said afterward they saw they lacked clear-cut tools or a proper road map of regulatory measures to help stem the simulated booms.

They also disagreed on whether to use higher interest rates to stop bubbles, a blunt instrument affecting the entire economy. “I walked away more sure about the discomfort I originally had,” said Esther George, president of the Federal Reserve Bank of Kansas City and a participant in the June exercise. She and others believe the Fed’s low-rate policies might have played a role in booming asset prices. The worry has turned more concrete. Commercial real-estate prices are soaring and Fed officials face the conundrum of what, if anything, to do. “Signs of valuation pressures are emerging in commercial real-estate markets, where prices have been rising at a solid clip and lending standards have deteriorated, although debt growth has not yet accelerated notably,” Stanley Fischer, vice chairman of the Fed, said in a speech Thursday.

Central bank officials would feel an urgency to act only if they believed the commercial real-estate market could suffer a sharp reversal that destabilizes the financial system or hurts the U.S. economy. That isn’t clear. Commercial real estate is a relatively small segment of the overall economy, and unsustainable debt hasn’t emerged as a problem. But financial bubbles have been root causes of the past three recessions and is a consideration as the Fed nears a decision on interest rates. Officials have signaled they will raise short-term interest rates from near zero at their policy meeting next week with the economy and job market improving. For some officials, the commercial real estate boom—and other financial sector froth—could be an added incentive.

“High-yield bonds have led previous big reversals in S&P 500..”

• Why The Junk Bond Selloff Is Getting Very Scary (MarketWatch)

The junk bond market is looking more and more like the boogeyman for stock market investors. The iShares iBoxx $ High Yield Corporate Bond exchange-traded fund dropped 2% on Friday to close at the lowest price since July 17, 2009. Volume 54.1 million shares, or nearly six times the 30-day average of 9.5 million shares, according to FactSet. While weakness in the junk bonds – bonds with credit ratings below investment grade – is nothing new, fears of meltdown have increased after high-yield mutual fund Third Avenue Focused Credit Fund on Thursday blocked investors from withdrawing their money amid a flood of redemption requests and reduced liquidity. This chart shows why stock market investors should care:

The MainStay High Yield Corporate Bond Fund was used in the chart instead of the iShares iBoxx ETF (HYG), because HYG started trading in April 2007. When investors start scaling back, and market liquidity starts to dry up, the riskiest investments tend to get hurt first. And when money starts flowing again, and investors start feeling safe, bottom-pickers tend to look at the hardest hit sectors first. So it’s no coincidence that when the junk bond market and the stock market diverged, it was the junk bond market that proved prescient.

There’s still no reason to believe the run on the junk bond market is nearing an end. As Jason Goepfert, president of Sundial Capital Research, points out, he hasn’t seen any sign of panic selling in the HYG, which has been associated with previous short-term bottoms. “Looking at one-month and three-month lows [in the HYG] over the past six years, almost all of them saw more extreme sentiment than we’re seeing now,” Goepfert wrote in a note to clients.

Icahn likes Trump to ‘shake up the system’.

• Carl Icahn: Junk Bond Market A ‘Keg Of Dynamite’ (CNBC)

Activist investor Carl Icahn renewed his warnings about the high-yield debt market Friday, criticizing a perceived lack of liquidity in junk bond funds. “The high-yield market is just a keg of dynamite that sooner or later will blow up,” he said on CNBC’s “Fast Money: Halftime Report.” Icahn’s comments echoed remarks he has made in recent months about the dangers of high-yield debt. They come as Third Avenue Management looked to block investors from withdrawing money from a nearly $1 billion junk bond fund that it is trying to liquidate. Third Avenue’s troubles could fuel concerns as markets await an interest rate decision next week from the Federal Reserve, another frequent Icahn target.

High-yield funds look perilous because “there’s no liquidity” behind them, Icahn contended. He voiced similar criticism of BlackRock this summer, saying some of its bond funds create an “extremely dangerous situation.” “The average person that goes into this should basically be warned,” he said Friday. Icahn stressed that financial support for some high-yield funds may prove shaky, and investors should be better informed about the risks. He noted that, while he does not support more government intervention, regulators may want to put increased attention on risks in the junk bond market.

Video from Icahn’s website, Sep 2015

Wille the Fed end up bailing out junk bonds?

• It Starts: Junk-Bond Fund Implodes, Investors Stuck (WS)

We have warned about “open-end” bond mutual funds, particularly those with a lot of high-yield bonds. We know some folks who got burned when Charles Schwab’s $13-billion bond fund SWYSX blew up during the financial crisis and lost 60% or so of its value before its data went offline. Schwab settled all kinds of class-action and individual lawsuits for cents on the dollar. It got in trouble over other bond funds. And other purveyors of bond funds got in trouble too. It works like this: When an “open-end” bond fund starts losing money, investors begin to sell it. Fund managers first use all available cash to pay investors. When the cash is gone, they sell the most liquid securities that haven’t lost much money yet, such as Treasuries. When they’re gone, they sell the most liquid corporate paper.

As they go down the line, they sell bonds that have already lost a lot of value. By now the smart money is betting against the fund, having figured out what’s happening. They’re shorting the very bonds these folks are trying to sell. The longer this goes on, the more money investors lose and the more spooked they get. It turns into a run. And people who still have that fund in their retirement account are getting cleaned out. Bond funds can be treacherous – especially if they hold dubious paper, which is never dubious until it suddenly is. And when they get in trouble, you want to be among the first out the door. The $1.8-trillion or so of US junk bonds are everywhere. Investors loved them because they have discernible yields in the Fed-designed zero-interest-rate environment. Junk bonds were hot, and so were the funds.

People went for them, with no idea that they were putting their nest egg in a fund larded with explosives. A significant part of Corporate America is junk rated, well-known names like Chrysler, Valeant Pharmaceuticals, or iHart Communications, yup, the LBO wunderkind owned by private equity firms and weighed down by $8.9 billion in debt that is now “distressed.” They issue debt because they’re cash-flow negative and need new money, or because they gorge on M&A, or have to fund share-buybacks and special billion-dollar dividends back to the private equity firms that own them. During the boom years of the credit bubble, nothing could go wrong. And now, as ever more junk bonds wither, crash, default, and cause their owners to tear out their hair – just then, a bond fund implodes. And the next crisis hasn’t even started yet.

Gundlach stands to lose big.

• Gundlach Says ‘Never Just One Cockroach’ In Any Credit Meltdown (Reuters)

Jeffrey Gundlach, the widely followed investor who runs DoubleLine Capital, warned Friday that crumbling credit markets could expose more fund debacles such as Third Avenue Management’s junk bond portfolio and the Federal Reserve should take note of deteriorating financial conditions. “I’d have to believe that if they met today that they wouldn’t raise rates,” Gundlach told Reuters in a telephone interview. “I mean, Wow. Look at the chart of JNK (The SPDR® Barclays High Yield Bond ETF). It’s accelerating to the downside.” Thursday, Martin Whitman’s Third Avenue Management said it was barring investor withdrawals while it liquidated its high-yield bond fund, an unusual move that highlights the dangers of loading up on risky assets that are hard to trade even in good times.

“There’s never just one cockroach” in any kind of credit meltdown, said Gundlach, who oversees $80 billion at the Los Angeles-based DoubleLine Capital. Investors have been on “credit overload,” in a reach for yield, Gundlach said. “People are too long credit and the credit is melting down and the stock market is whistling through the graveyard. It is so similar to 2007, it’s scary.” The junk-bond fund blowup comes ahead of next week’s Federal Reserve’s Open Market Committee meeting on December 15 and 16, at which time policy makers are expected to raise rates from near-zero levels for the first time in nearly a decade. Gundlach, who has been warning that the U.S. Federal Reserve should not tighten monetary policy next week, said: “They’re just hell-bent on raising rates. They talked that they would do it and they want to do it – and yet nominal GDP is lower than it was in September of 2012.” “Yet they did QE3 in September 2012,” Gundlach said.

Cockroach no. 1. Or is it no. 2?

• Third Avenue Redemption Freeze Sends Chill Through Credit Market (BBG)

Investors who piled into the riskiest corners of the credit markets during seven years of rock-bottom interest rates are getting a reminder of how hard it can be to cash out. With outflows from U.S. high-yield bond funds running at the fastest pace in more than a year, Martin Whitman’s Third Avenue Management took the rare step of freezing withdrawals from a $788 million credit mutual fund on Dec. 9. The firm’s assessment that meeting redemptions would be impossible without resorting to fire sales has put a spotlight on the dangers for junk-bond investors as the Federal Reserve prepares to lift interest rates as soon as next week. “It’s definitely a dark cloud over the market,” said Anthony Valeri at LPL Financial. Investor withdrawals “are driving the high yield market now more than anything.

Institutions – hedge funds and mutual funds – are being forced to get out and unfortunately that’s pressuring the entire market.” The selloff in riskier debt, fueled by tepid global economic growth and a collapse in earnings at commodity companies, deepened on Thursday as news of Third Avenue’s decision rattled investors. Yields on U.S. high-yield debt climbed to the highest in almost four years, putting the market on pace for its first annual loss since 2008, a Bank of America Merrill Lynch index shows. Growing tumult in credit markets comes eight years after BNP Paribas helped spark a global financial crisis by freezing withdrawals from three investment funds because it couldn’t “fairly” value their mortgage holdings.

While Third Avenue said its positions have the potential to deliver returns over a longer investment horizon, Berwyn Income Fund’s George Cipolloni said the similarities between today’s markets and those before the crisis are getting too big to ignore. “A lot of this looks like late 2007 or early 2008,” when the credit crunch began to take root, said Cipolloni, whose fund has outperformed 72% of peers tracked by Bloomberg over the past five years. “But instead of housing and mortgages, it’s energy and materials leading the decline.”

Losers. Big losers.

• Stone Lion Capital Partners Suspends Redemptions in Credit Hedge Funds (WSJ)

Stone Lion Capital Partners said it suspended redemptions in its credit hedge funds after many investors asked for their money back. The move, nearly unprecedented in the hedge-fund industry since the financial crisis, is the latest example of the sudden crunch facing traders across Wall Street looking to sell beaten-down positions. On Thursday, Third Avenue stunned investors with the announcement it was barring withdrawals while it liquidates a high-yield bond mutual fund, a move that intensified a selloff sweeping the junk-bond world. Stone Lion, founded in 2008 by Bear Stearns veterans Gregory Hanley and Alan Mintz, is in a similar malaise, facing heavy losses on so-called distressed investments including junk bonds, post reorganization equities and other special situations, people familiar with the matter said.

Its oldest set of credit funds, which manage $400 million altogether, received “substantial redemption requests,” precipitating the decision, the firm said in a statement. The firm didn’t give a time frame for when the money would be returned. A Stone Lion spokesman said suspending redemptions was the only way to “ensure fair and equitable treatment for all” investors. The firm continues to operate several other funds, including one that bets on Puerto Rico’s economic recovery. Stone Lion’s hedge funds were down about 7% through the end of July, when it cut off many prospective investors from receiving updates, people familiar said. In a midyear letter to investors, Messrs. Hanley and Mintz professed optimism in the “ultimate recovery figures underpinning our investment theses.” But the funds have suffered significant losses since then, the people said; investor documents indicate the funds manage 24% less now than they did at the end of July.

Beggar thy neighbor. And thyself?

• Bank of Canada Crushes Loonie, Creates Mother of All Shorts (WS)

The Canadian dollar swooned 1% against the US dollar on Friday, to US$0.7270, after having gotten hammered for the past six of seven trading days. It’s down 5% in November so far, 15.5% year-to-date, and 31% from its post-Financial Crisis peak of $1.06 in April 2011. It hit the lowest level since June 2004. The commodities rout would have been bad enough. Given the importance of commodities to the Canadian economy, the multi-year decline in the prices of metals, minerals, and natural gas, and then starting in mid-2014, the devastating plunge of the price of oil, would have been sufficient in driving down the loonie. That the Fed has tapered QE out of existence last year and has been waffling and flip-flopping about rate hikes ever since made the until then beaten-down US dollar, at the time the most despised currency in the universe, less despicable – at the expense of the loonie.

Those factors would have been enough to knock down the loonie. But it wasn’t enough, not for the ambitious Bank of Canada Governor Stephen Poloz. The man’s got a plan. He is in an all-out currency war. He’s out to crush the loonie beyond what other forces are already accomplishing. He’s out to pulverize it, and no one knows how far he’ll go, or where he’ll stop, or if he’ll ever stop. He has singlehandedly created the short of a lifetime. It should spook every Canadian with income and assets denominated in Canadian dollars and those wanting to buy a home in Canada (we’ll get to that bitter irony in a moment). Poloz has been in office since June 2013, and this is what he has accomplished so far:

One reason for pulverizing the Canadian dollar is to boost revenues and earnings of exporters. They get to translate their foreign-currency revenues into Canadian dollars on their financial statements. And analysts love that. It doesn’t matter how the bigger numbers got there, whether by inflation or devaluation, as long as they’re bigger. And Canadian stocks could use some help. Despite the destruction of the loonie, the Toronto Stock Exchange index TSX has plunged 18% since its peak in June 2014 and is now back where it had been in September 2013.

So Poloz is trying to get Canadian workers to be able to compete with workers in Mexico and China and Bangladesh, and with those beaten-down wages in the US. His tool is to pulverize the currency. Alas, the Mexican peso too has gotten crushed. But ironically, the Bank of Mexico is spinning in circles to halt the decline. It’s selling its limited dollar reserves and buying pesos to prop up its currency, even as Canadians watch helplessly as their own currency descends into banana-republic status – something the US dollar used to excel at when the Fed was on its path of total dollar destruction.

Of course, more debt will solve everyhting.

• China Property Firms’ Debt Issuance Jumps, More To Come (Reuters)

China’s real estate companies have sharply increased the amount of funds raised from debt so far this year compared with 2014 as borrowing costs hit historical lows, and they are planning to borrow more. Property developers have raised 495 billion yuan ($77 billion) from domestic Chinese bonds, almost double 2014 levels, Barclays Capital estimates. Goldman Sachs suggests property companies have issued more than 400 billion yuan ($62.5 billion) in domestic bonds, over seven times total issuance in 2014. It uses a different set of companies as the basis of its estimate. “Conditions are great for these developers who should take this opportunity to strengthen their balance sheets and deleverage in a disciplined manner, rather than leverage up,” said Dhiraj Bajaj at Lombard Odier Singapore.

After tightening regulations in recent years to dampen a hot property market, regulators have moved this year to make it easier for developers to raise debt in the hope a lift for the real estate market will boost the wider economy. The property sector drives about 15% of gross domestic product and could help support an economy that many analysts predict will grow this year at its slowest pace in more than two decades. Historically low interest rates are helping to fuel the rush. The central bank has cut its benchmark interest rates six times since November by 1.65%age points and reduced banks’ reserve requirements three times this year.

Two nations under the same flag.

• Even the Mafia Wants Out of Italy’s South (BBG)

A large portion of Italy is being left behind. The economic gap between Italy’s prosperous north and its depressed south has widened so much that the difference between Lombardy near the Swiss Alps and Calabria in the toe of the boot-shaped peninsula is wider than that between Germany and Greece. “With the latest recession, a whole chunk of the south’s productive structure has disappeared,” said Stefano Prezioso, head of forecasts at research institute Svimez, which seeks to promote industry in the south. “The process of decoupling that began in 2001 has quickened and it may now take many years to get back to a growth pace similar to the north.”

Italy has suffered through two recessions in seven years and its recovery is lagging behind other euro-area countries. That means a large part of the country’s population living in the south, known as Mezzogiorno, may not even see an improvement in economic conditions. Bank of Italy Director General Salvatore Rossi, who comes from the southern city of Bari, highlighted the issue in a Dec. 3 speech by saying the regional disparity is at a record and widening. Successful companies in northern Italy were increasingly subjected to “contamination” by organized-crime groups, including those from the south, as the businesses tried to weather the effects of the nation’s recession, Milan-based Assolombarda, the Lombardy industrialists’ association, said earlier this year. Prosecutors have also said the Mafia and other organized crime gangs are moving more of their operations to the north.

“We’re One Giant Step Closer To The End Of Antibiotics..”

• New Superbug Resistant To All Antibiotics Linked To Imported Meat (Forbes)

Just last month, Yi-Yun Liu’s team discovered the mcr-1 gene, which conveys resistance to colistin, an antibiotic of last resort. They were doing a surveillance project on E. coli bacteria from food animals in China. A whopping 15% of meat samples and 21% of animals tested between 2011 and 2014 also had bacteria that carried this gene. The researchers from South China also found this resistance gene in E. coli and Klebsiella pneumonia isolates from 16 hospitalized patients’ blood, urine or other sites. The isolates were all very resistant ESBL bacteria to begin with, so now were resistant to all antibiotics. It gets worse. This week, Frank Aarestrup’s team, from the Danish National Food Institute, reported that they also searched their collection of bacteria, looking for this new gene.

They found the mcr-1 gene in the blood of a patient and in 5 poultry samples that originated in Germany between 2012-14. The patient had not left the country and was believed to have become infected by eating contaminated meat. The genes found in the poultry were identical to those from the Danish patient and from China. Why is this important? The mcr-1 gene transfers resistance to E. coli, Klebsiella, Pseudomonas—common bacteria—by plasmids, small bits of DNA that can be transferred to different types of bacteria. Previously, colistin resistance was transferred on chromosomes, and therefore affected only those bacteria and their descendants. Plasmid-borne resistance genes are more likely to be rapidly spread widely, and can spread between species of bacteria. According to George Washington University’s Dr. Lance Price, it’s a bit less likely to be a problem with Salmonella for now, as “we don’t have those bordering on pan-resistance like E. coli.”

One of the problems is that colistin is widely used in China’s agriculture industry. Co-author Professor Jianzhong Shen explains, “The selective pressure imposed by increasingly heavy use of colistin in agriculture in China could have led to the acquisition of mcr-1 by E. coli.” The WHO called for limiting the use of colistin in 2012, calling it a critically important antibiotic. Yet most of the 12,000 tons of colistin fed to livestock each year is in China. In Europe, polymyxins (the colistin class) were the 5th most heavily used type of antibiotic in agricultural use in 2013. Colistin is not widely used in the U.S., but it is not prohibited either. Colistin is a nasty antibiotic. Until the past few years, when we were desperate for options for treating carbapenem resistant bacteria (CRE), it was not used due to its toxicity. I’ve had to use it a rarely, resulting in inevitable renal failure in the patients receiving it.

Interesting artist.

• Banksy Uses Steve Jobs Artwork To Highlight Refugee Crisis (Guardian)

Banksy has revealed a new artwork, sprayed on a wall in the Calais refugee camp called “the Jungle”, intended to address negative attitudes towards the thousands of people living there. The work depicts the late Steve Jobs, the founder of Apple, with a black bin bag thrown over one shoulder and an original Apple computer in his hand. The work is a pointed reference to Jobs’s background as the son of a Syrian migrant who went to America after the second world war. In a rare statement accompanying the work, Banksy said: “We’re often led to believe migration is a drain on the country’s resources but Steve Jobs was the son of a Syrian migrant. Apple is the world’s most profitable company, it pays over $7bn (£4.6bn) a year in taxes – and it only exists because they allowed in a young man from Homs.”

The graffiti is one of a series of works Banksy has created in response to the refugee crisis. During his trip to Calais, the artist covered several walls across the French port with related graffiti, including a riff on Theodore Gericault’s Raft of the Medusa, featuring a luxury yacht. This summer, his temporary “bemusement” park in Weston-Super-Mare featured an installation of boats filled with bodies. On the closing night of Dismaland, Banksy also invited Pussy Riot to debut their song criticising the global failure to help the migrants entering Europe. Since the park closed in September, the artist has been shipping leftover infrastructure from Dismaland to help build emergency housing for the 7,000 migrants, mainly from Syria, Eritrea and Afghanistan, now living on the site of a former rubbish tip in Calais.