THE DISCUSSION DEEPENS

The discussion about world events deepens and, as such, there is no shortage of political, economic and academic hacks all too willing to define things for you.

Here's an interesting article from marctomarket.com.

It was the Fascists that first offered the "third way" between Bolshevism and Liberalism (capitalism).  None less than Hitler himself saw the linkages between socialism and Fascism.  He observed in 1942 that, “There is not much difference between the basic economic techniques of socialism and fascism.”     

However, when we first wrote about this a month after Lehman collapsed, some pushed back and noted that an essential part of Fascism was missing--some unifying hatred or racism. The refugee challenge coupled with the terrorist strike has exacerbated the xenophobia and Islamophobia that was bubbling near the surface in any event.

The refugee challenge alone prompted several countries (e.g., Germany, Sweden, Austria and Hungary) to suspend the free passage (passport-free travel).  However, in light of the terrorist attack on France, a more dramatic solution has been proposed.  The EU interior ministers met last week and were recommending a wider suspension of the Schengen Agreement that created a passport-free travel zone well before EMU was contemplated (Maastricht).  

One of the prices of greater security is less liberty.  The interior ministers also proposed the establishment of a passenger name record for planes, trains and ships.  It would be not only for travel in and out of the region but also intra-EU travel.  This appears to have been agreed upon back in 2008, but due to concern about privacy issues, it has not gone forward.  Now it likely will. 

Some observers think that without free mobility, the European project is over.  Of course, many of those that are sympathetic to this argument seem to be euro-skeptics in the first place.  Moreover, there are contingencies within the Schengen Agreement for precisely this. Just like in many sports, the violation of the rule are incorporated into the rules themselves, so too with many official agreements. 

The idea that people who want to protect themselves--since it's an admitted fact government can't protect them--is a form of hatred is a curious one for sure. About once every four years, we get a cold. Most colds are caused by viruses. Do we hate viruses, not at all. But we do want to and try to avoid the havoc they can bring.?  One of the ways even so-called medical experts, many of whom are government bureaucrats at non-legitimate government agencies like the CDC,recommend is isolation.

Don't go where the viruses might be and don't bring them home. Incidentally, from time to time, that becomes a government policy regarding international travel. We don't know about yours, but when we visit our health care provider one of the first questions they are still asking as recently as a week ago, is have you been to west Africa or out of the country lately?

It is also instructive to note this writer omits the chasm that exists between climate-change freaks and non-believers. It's a given in MSM that the philistines and the haters are the non-believers. Not the zealots pushing their propaganda to enforce their agenda. The stakes have now been ramped up so high, many non-believers who speak up are openly punished.

Like the old saying it depends on whose ox is getting gored, the definition of hatred and xenophobe apparently rests with who's defining it. And you can start with the government official PC policy of zero tolerance.

In a not so strange way, isn't that what those ISIS people are saying, zero tolerance? At the bottom line isn't that what most wars are about? What do you do when someone or some entity intrudes into your space too much? You can if possible avoid them, take it to the courts if you still have any faith left in them, or go to war. The point here is: war can be defined in many different ways.

With few exceptions, most of those we've interviewed who went through a nasty divorce described it as war. You might not like that definition but each side usually sees it as being about survival.

The so-called far right in France--whom we have no connection to--is making a statement no different from what their opponents are doing. The number of people in Europe opposed to the EMU is no secret. And it's growing. That rattles establishment cages big time.

THE MISSING HEARTWARMING

The holiday season is suppose to be a heartwarming one with visions of sugar plums, crackling fireplaces and hot chocolate. But the gloom and the doom of the oil patch continues and some say the outlook for next year isn't that heartwarming either.

Low oil prices for much longer will once again put the spotlight back on U.S. shale production, which has lost only about 300,000 barrels per day since peaking in April at 9.6 mb/d. The latest EIA data shows that output fell by just 20,000 barrels per day in September, a stubbornly small decline given how low oil prices are trading nowadays.

But OPEC members, mostly driven by state-backed production, won’t reduce their output. OPEC production is not driven by market forces; each individual country produces as much as possible. By failing to agree on a target cut, that trend will continue, if not increase. Iran has cleared just about all of the remaining hurdles to its comeback, and once sanctions are removed in January 2016, it could quickly increase output.

So, just as before, the contraction in supply will have to come from higher-cost production, notably U.S. shale. The financial pressure should increase on shale producers for a few reasons, all of which point to a sharper contraction in the months ahead.

nasdaq.com/article/2016-spells-more-gloom-for-oil-producers

THAT"S A GREAT IDEA

Given MSM's obsession with the Donald, here's a story you won't here about from MSM in any detail if at all. Our question is all those climate-change folks backing Hillary, do they know about it?

We're no experts on it, but deep sea mining sounds like it could hold environmental disasters within its depths, something akin to the deep secrets this lady holds within her. We came across it on a specialized, somewhat obscure mining website.

U.S. leading Democratic presidential candidate, Hillary Clinton, intervened in a request from her son-in-law on behalf of a deep-sea mining firm to meet with her or other agency officials while she was secretary of state, Associated Press reported.

The 2012 emails from an investor in Florida-based deep sea mining firm Neptune Minerals Inc. were forwarded to Clinton by her son-in-law and hedge fund partner Marc Mezvinsky.
According to AP, Clinton sent the request to Thomas Nides, a vice chairman at Morgan Stanley who at the time was a deputy secretary of state.

It is not known whether the meeting took place. Clinton's campaign declined to comment.

 http://www.mining.com/hillary-clintons-emails-reveal-pro-deep-sea-miner-move-after-request-from-son-in-law

BOND KING SPEAKS

Jeffery Grundlach, as Bill Gross of Pimco fame, once called the Lebron James of bonds, doesn't walk that softly or speak with a small tongue. In the bond world, Gross' description is not that far fetched.

Here's a sample from wolfstreet.com.

“We are looking at real carnage in the junk bond market,” Jeffrey Gundlach, the bond guru who runs DoubleLine Capital, announced in a webcast on Tuesday.

He blamed the Fed. It was “unthinkable” to raise rates, with junk bonds and leveraged loans having such a hard time, he said – as they’re now dragging down his firm’s $80 billion in assets under management.

“High-yield spreads have never been this high prior to a Fed rate hike,” he said – as the junk bond market is now in a precarious situation, after seven years of ZIRP and nearly as many years of QE, which made Grundlach a ton of money. When he talks, he wants the Fed to listen. He wants the Fed to move his multi-billion-dollar bets in the right direction.

But it’s not a measly quarter-point rate hike that’s the problem. Bond yields move more than that in a single day without breaking a sweat. The problem is the risk investors piled on over the past seven years, when they still believed in the Fed’s hype that risks didn’t matter, that they should be blindly taken in large quantities without compensation, and that rates would always remain at zero. Those risks that didn’t exist are now coming home to roost.

They’re affecting the riskiest parts of the credit spectrum first: lower-rated junk bonds and leveraged loans. Grundlach presumably has plenty of them in his portfolios. More:

wolfstreet.com/2015/12/09/bond-king-gets-antsy-as-junk-bonds-which-lead-stocks-spiral-to-heck

DISTORTIONS HAPPEN

We have spent a good deal of time writing about the downside of all the new regulations and government intrusions in life in general and the financial market in particular. No matter how it's wrapped or packaged, the usual excuse is labeled as well intentioned and necessary to clear up all the greed and corruption.

 But as Scottish poet Bobby Burn noted more than 100 years ago about the best plans of mice and men, distortions, like you know what, happen. Yes, greed and corruption exist. As long as their are humans it mostly will. We of late have seen an article or two even about the risk of robot's going haywire, just another way to say distortion.

Government interference by both central banks and regulators (the latter are desperately fighting the “last crisis”, bolting the barn door long after the horse has escaped, thereby putting into place the preconditions for the next crisis) has created an ever more fragile situation in both the global economy and the financial markets. As the below charts and data show, price distortions and dislocations have been moving from one market segment to the next and they keep growing, which indicates to us that there is considerable danger that a really big dislocation will eventually happen. Read:

http://www.zerohedge.com/news/2015-12-09/ever-greater-distortions-hint-rising-crash-probabilities

COMMODITIES ANYONE?

Around the time Goldman Sachs and other big Wall Street firms are cutting back on their commodity exposure we run into this interesting story.

Tuesday was another bleak day on commodity markets. The prices of crude oil, iron ore and industrial and precious metals all declined pushing a number of commodities to fresh multi-year lows.

The world's major mining companies were trading even weaker than their wares with stock valuations of the top tier reaching decade and sometimes record lows.The commodities market is a contrarian's dream at the moment, but so far few investors that trade on these principles have taken the plunge.

In fact over the past three years 12 commodity asset managers have closed up shop in addition to the big banks closing down their commodity trading arms.This week at least one high-profile hedge fund is sticking its neck out saying the metals market have lost touch with fundamentals. 

The $2 billion Orion Mine Finance Group announced it is launching a new hedge fund in January to trade industrial and precious metals (and eventually equities) Oskar Lewnowski, the founder and chief investment officer of Orion tells Bloomberg "there are three factors driving commodities: momentum-driven financial flows, physical fundamentals and macro events"

 "For a long time, metals were driven by financial flows, be it mining-orientated banks, commodity hedge funds, CTAs [Commodity Trading Advisor] and even retail equity investors," Lewnowski said in an interview in London.

"With those guys out, we are back to fundamentals. And that’s an environment in which we can do well."

Lewnowski, which spun Orion out of his Red Kite fund in 2013 to invest in junior mining firms, is also willing to put a date on a turnaround:

"The turnaround is going to come in 2018," Lewnowski said. "The peak price cycle was in 2011 and these cycles tend to last seven years."

His top pick? Nickel.

Which is perhaps not that surprising considering it's the second worst performing commodity after iron ore this year. And perhaps the one steelmaking raw material that has decoupled from fundamentals the most.

mining.com/this-guy-is-launching-a-new-hedge-fund-to-invest-in-metals/

OVERNIGHT

Markets in Asia trend lower, according to the WSJ, for the second day running as concerns about  China's weakness persist.

Asian markets headed lower for a second day early Wednesday, with better-than-expected economic data from Japan and China failing to stem the selling.

But Chinese stocks made gains after the People’s Bank of China set the yuan reference rate—which determines the currency’s trading levels—at its weakest point against the dollar in four years.

As Chinese markets opened, the National Bureau of Statistics reported the 45th consecutive month of producer-price deflation. Factory-gate prices fell 5.9% from a year earlier, while consumer prices rose 1.5%. Both measures were slightly better than economists had expected in a Wall Street Journal poll.

After an initial selloff, mainland Chinese markets rallied, with the Shanghai Composite last up 0.7% and the smaller Shenzhen market gaining 0.3%. But Hong Kong’s Hang Seng Index fell 0.3% while the Hang Seng China Enterprises Index, a gauge of Chinese companies with listings offshore, sank 0.8%. Elsewhere in Asia, Japan’s Nikkei Stock Average extended declines into a second day, down 0.8% after a brief rally sparked by machinery orders data that sharply beat expectations.

Australia’s S&P/ASX 200 slipped 0.1% after consumer confidence for December deteriorated, while South Korea’s Kospi was flat. The U.S. dollar index, which tracks the greenback against a basket of currencies, was last down 0.1% at 98.32. Gold held steady, with bullion last up 0.2% at $1,076.90.

Some economists said the yuan’s depreciation below levels in August reflected underlying weakness in China’s economy.

Reuters reported falling Chinese factory producer prices continuing its trend and noted the ongoing weakness in commodities as shown in The Thomson Reuters Core Commodity index (TRJCB) Tuesday trading "at its lowest level since November 2002." 

WHAT YOU WISH FOR

Up to now there's been an almost celebratory mood in markets about the once weakening but apparently now tanking energy sector.

It was going to be good for everyone, cheaper gas pump prices, more greenbacks in consumer pockets and all the other perks the media talking heads sounded off  about. But a note of caution might be in store here as low becomes too low and we get the unexpected and unintended.

The collapse of the housing bubble sent the world spiraling into recession. The collapse of the energy and commodity bubble threatens to be just as damaging. That few are willing to even 
use the term "bubble" with regard to the boom and bust in the price of oil, copper, iron ore, and other materials tells how early we still are in the painful unwind phase. 

As with housing, there was a fundamental reason for these prices to soar. China has been on a historic commodities binge as it doubled the size of its economy in recent years to become one of the world's largest. Even so, those fundamentals begat—as they have so often throughout human history—a feeding frenzy.

That frenzy of financing, mining, fracking and dealmaking exacerbated the boom and now, the bust as China's growth and appetite for such raw materials has slowed dramatically. The collapse of this apparatus is already proving deeply painful for the world economy.

Be careful. What you wish or hope for might be getting ready to intrude.

 
cnbc.com/2015/12/08/the-real-danger-of-the-oil-collapse. 

OTHER VOICES

Mark Hulbert's been around awhile, tracking performance of newsletter writers. Here's an interesting piece from MarketWatch today about what the 2016 stock market might do.

It notes some of the pitfalls some investors fall prey to, past is not prologue, but more likely, to use a Zen idea, the market in any given year is what it is.

CHAPEL HILL, N.C. (MarketWatch) — There’s a 66.1% chance that the U.S. stock market will rise in 2016.

If you’re like most investors, you’re encouraged by those odds. After all, the current bull market can’t last forever, and, depending on how you count it, it’s already one of the longest in U.S. stock market history.

In fact, the odds of the stock market rising next year would be the same even if we currently were in a bear market. That’s because the market’s odds of rising in a given year have nothing to do with how it does in prior years. Historically, those odds have been very close to two out of three.

Investors who find this result hard to fathom are guilty of what statisticians call the “gambler’s fallacy.” A common instance of this fallacy comes when we think that, after a coin comes up heads in six consecutive coin flips, there are better-than-even odds that the next flip will be tails. A coin, of course, doesn’t remember whether its previous flip came out heads or tails, so the odds are 50-50.

The situation that applies to the stock market is remarkably similar. More;

marketwatch.com/story/here-are-the-odds-that-us-stocks-will-rise-in-2016-2015-12-08

MORE ON THE DONALD

We continue to stand by our assertions that MSM hates Donald Trump for obvious reasons: Like the Internet, he's their current worst nightmare.

You can do many things in this nation, borrow my car, drink my liquor from an old fruit jar and steal my significant other, but don't whatever you do try to question MSM. The cover picture from this newspaper, media rag or otherwise, says it all.

The higher echelons of MSM in normal times,whatever and whenever that is, might look down on such scribes but they will gladly let them front run, do the door-to-door nastiness when it comes to assassinations.That way they keep their long-time filthy hands seemingly clean.

zerohedge.com/news/2015-12-08/were-war-get-it-through-your-head-trump-doubles-down-during-combative-follow-interview