VOICES

It is getting to be that time of year when nearly everyone will have an opinion on what markets will do in 2016. On the one hand it's pretty obvious what you have going on, as pointed out below, central banks pushing and pulling in opposite directions.

The three areas El-Erian mentions share certain commonalities. A drop off in demand affects all three. Much of emerging markets depends on what commodities do and vice versa. And when times are good, like the recent fracking frenzy, lots of high yield bonds get floated. So demand slowdowns don't go down easy in these sectors.

Allianz Chief Economic Adviser Mohamed El-Erian said Thursday the new paradigm for financial markets in 2016 is divergence.

 
"Are divergent central banks ... still able to repress the volatility that comes from geopolitics ... [and] economics? That is going to be the great question," the former Pimco co-CEO told CNBC's "Squawk Box.

"Central banks are no longer on the same side," El-Erian said. "The Fed is going to be easing its foot off the stimulus accelerator [while] the ECB, the Bank of Japan, and the People's Bank of China are going to be pressing harder on the stimulus accelerator."

The Federal Reserve next week is expected to deem the economy and job market strong enough to withstand the first hike in short-term interest rates in nine years. The fed funds overnight lending rate has been near-zero percent since December 2008 in the wake of the financial crisis. The Fed meets on Tuesday and Wednesday, followed by the release of a summary of economic projections and a news conference from central bank chief Janet Yellen.

In a separate interview, David Blitzer, chairman of the S&P Dow Jones index committee, told "Squawk Box" that a Fed rate hike would be "more relief than cataclysmic."
"It's got to be one of the most anticipated Fed rate increase in modern times," he said.
In recent years, El-Erian said, "central banks delivered the three things that investors like most: high returns, low volatility and favorable correlations." 

"[But] now that central bank effectiveness is in doubt, all three are moving," he said. "That's where the tactical opportunities come. But you have to be really, really nimble in this environment."


El-Erian was wary of the current investing climate because of what he calls "unhinged markets" in three areas: commodities, emerging markets currencies and high-yield bonds. 

cnbc.com/2015/12/10/heres-the-new-paradigm-for-2016-mohamed-el-erian. 

DON'T LOOK BACK LATER

Off the wall has a certain inherent stigma to it: quaint and different on the one hand, a loaded canon and dangerous on the other.

Reuters ran a story today about the Donald quoting a New Hampshire Republican describing Trump in those terms. In other words, not his personal cup of political Republican tea to occupy the White House.

The title of the story itself, "To some Republicans, Trump gives voice to what's on their minds," is purposely misleading. The suggestion is his message is limited to these people only. The truth--and this is what scares the hell out of them--it resonates across all kinds of lines, backgrounds and classes.
And it's growing especially given recent global events.

One must give it to these control zealots and their pathetic, predictable contempt for the anyone who disagrees with their MSM programming. Misunderstand not, however, their threat to your liberty, freedom and even your privacy.

Dare not to think for yourself, be independent enough to examine and question their canned prescriptions for your life. That's a gauntlet you cannot afford not to pick up.

There's a war going on all right. It's the age-old one for peoples' minds. Don't think you'll be able to look back later and claim no one tried to warn you.

It's your mind or theirs.

MSM CONTINUES ITS ASSASSINATION

Here's a classic example from the LA Times about MSM and Trump voters. This is a hatchet job vaguely disguised as reporting.

You won't find anyone protesting the implied racism here, white voter, basically uneducated, indirectly even stupid. A further insinuation is these are the profiles of the only kind of voter Trump can appeal to: "Men like Goacher are the main reason...."

As we've said before, think whatever you will, Trump is rattling lots of establishment cages. That should lead you to a few basic questions. Why are they trying so hard to assassinate his candidacy? Why are they so scared? If he's such a buffoon, a loaded cannon as they daily portray him,why is their opinion of the public so low they don't believe the masses can see through the charade without their diurnal interpretive frontal assault?

Trump's call for barring Muslims from entering the United States may have sparked an international uproar, but it only reinforced Goacher's support for the Republican Party's top contender for president.

“He says let's not bring nobody here until we get to the bottom of it,” Goacher said Tuesday over the rumble of the tow truck's engine. “I agree 100%.”

Men like Goacher are the main reason Trump has sustained his lead in the Republican presidential race for six months. Poll after poll has found that white men with no college degree are among the New York tycoon's most avid supporters.

You can bet your place at next November's ballot box this reporter took great journalistic pride and self-satisfaction to publish exactly Goacher's "let's not bring nobody here" comment. The implication is quite clear: See what we've been telling you, just a dumb, uneducated Iowa tow truck driver.

Note too the story's headline. And "poll after poll," unattributed. Let's see the names and numbers.

As we've said before we don't have a pony in this race. One of the first rules of engagement is know who the enemy is. There an old story told by many that if you're playing poker and after about an hour you don't know who the pasty is, you're it.

Never forget that rule, especially when dealing with MSM.

latimes.com/politics/la-na-trump-backer-20151209-story.

OLD NEWS

If you've been around long enough to be familiar with the Los Angeles Times, you know by the time they get around to printing the news it's old news.

The latest example is this recent piece about the disappearing, sunken middle class. There are lots of groups who eschew anecdotal evidence: economists, doctors, MSM, to name a few. But this story is another example of a condition many knew happened not just recently but several years ago.

The only people this is new to is the press.

The nation's middle class, long a pillar of the U.S. economy and foundation of the American dream, has shrunk to the point where it no longer constitutes the majority of the adult population, according to a new major study.

The Pew Research Center report released Wednesday put in sharp relief the nation's increasing income divide, which is certain to be a central issue in the 2016 presidential race. It also highlights how various economic and demographic forces have eroded long-held ideals about maintaining a strong, majority middle class.

Many analysts and policymakers regard the shift as worrisome for economic and social stability. Middle-income households have been the bedrock of consumer spending, and many liberals in particular view the declining middle as part of a troubling trend of skewed income gains among the nation's richest families. More:

http://latimes.com/nation/la-fi-middle-class-erosion-20151209-story.

SATISFACTION DOWN PER POLL

We just wrote about happiness and how it's no guarantee to longevity, It's Science, Jake, so if you're not finding much satisfaction today, you're not alone, according to the latest Gallup poll. Source cited below.

Although well above the 2008 low of 7%, Gallup reports After Terror Attacks, U.S. Satisfaction Falls to 13-Month Low of 20%.

After the recent terrorist attack in San Bernardino, California, Americans' satisfaction with the way things are going in the U.S. dropped seven percentage points to 20%. This is the lowest level of satisfaction recorded since November 2014, but still above the all-time low of 7% in October 2008.



A seven-point month-to-month drop in satisfaction is rare but not unprecedented. Satisfaction dropped seven points in 2013 during the October partial government shutdown. It plummeted 12 points in the fall of 2008 as the economy crumbled, falling to the all-time low of 7% in mid-October of that year.

The recent high point in satisfaction is 32% in January and February of this year, the highest since the end of 2012. Satisfaction levels have been lower for the rest of this year. But despite month-to-month fluctuations, at least 25% of Americans have been satisfied each month until the December reading.

globaleconomicanalysis.blogspot.com

OVERNIGHT

The WSJ reported Asian shares were mixed in light of the upcoming expected U.S. rate hike.

Asian stocks were mixed in morning trade Thursday as regional central banks came into focus with less than a week before the U.S. Federal Reserve decides whether to raise interest rates.

While Korea’s Kospi was flat as the Bank of Korea kept rates unchanged at 1.5%, New Zealand’s S&P/NZX 10 index fell 0.4% after the country’s central bank cut rates for the fourth time this year.

Chinese equities bucked the regional trend as the People’s Bank of China depreciated the yuan against the U.S. dollar for a fourth consecutive day. On Wednesday, it set its yuan reference rate at the weakest level in four years. In Hong Kong, the Hang Seng Index rose 0.2%, while the Hang Seng China Enterprises Index, a gauge of Chinese companies with listings in Hong Kong, was up 0.5%. In mainland China, the Shanghai Composite gained 0.6% while the smaller Shenzhen market rallied 0.5%.

Japan’s Nikkei Stock Average fell 1% and the S&P/ASX 200 was last down 1.3% after Australia added an unusually high number of jobs in November. Investors are taking positions in anticipation of the first rise in U.S. interest rates since 2006 when the Fed concludes its meeting on Dec. 16.

The downturn in regional equities this week reflects investors taking money off the table in case of any shocks after rates rise, analysts said. “The general sentiment is that they’re positioning for next week,” said Evan Lucas, market strategist at IG in Melbourne. “The market’s trying to get ahead of a possibly volatile reaction.”

Federal fund futures are pricing in an 87% probability of a rate increase next week, according to CME Group. The S&P 500 was down 0.77% on Wednesday.

After the Reserve Bank of New Zealand cut interest rates by 0.25% to 2.5%, the Kiwi dollar advanced 0.3% to 0.6734 against the U.S. dollar, despite the bank’s downbeat assessment of regional economic growth
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Come tomorrow you can look for: The US economic calendar today will see Jobless Claims, Import and Export Prices, and the Treasury Budget will be released. Overseas, the Swiss National Bank will announce their Rate Statement and the Bank of England will announce their Official Bank Rate which will directly impact the Great British Pound.

minyanville.com/special-features/daily-recap/articles/stocks-trading-economy-oil-kinder-morgan/12/9/2015/

IT'S SCIENCE, JAKE.

 
 It's little wonder that many people never tire of poking fun at the scientific community.

It's a community, like its economic brethren, that deserves much of the derision it gets. If someone came out with a study yesterday that vitamin F cures the common cold, a short while later someone else will come out with a study showing it causes polio.

Now we have the latest gem:"Sad News: Scientists say happiness won't extend your life after all."

Happy people live longer, a relationship that’s been documented in a variety of research studies.
But a new paper published in the medical journal Lancet comes to the sad conclusion that happiness isn’t responsible for this observed longevity. Instead, the things that make people happy, particularly their good health, are the same things that shield them from premature death.
 
“Happiness and related measures of well-being do not appear to have any direct effect on mortality,” the study authors wrote.

To get to the bottom of the relationship between happiness and a long life, researchers led by Dr. Bette Liu, an epidemiologist at the University of New South Wales in Sydney, examined data on 719,671 people who participated in the Million Women Study. All of the women joined the study from 1996 to 2001.

Happiness is overrated: It's better to be right, study finds

Three years after signing up, researchers asked them how often they felt happy. The 39% who answered “most of the time” and the 44% who answered “usually” were classified as happy people. The other 17%, who said they were “sometimes” or “rarely/never” happy, were deemed unhappy.
At the same time, the women were also asked to rate their health status as “excellent,” “good,” “fair” or “poor.” Then researchers kept track of them for nearly 10 years, on average. During that time, 31,531 (or 4%) of them died.

Curmudgeons, cranks and misanthropes beware: Dementia is more likely

In their first pass at the numbers that adjusted for age, the researchers found that women who said they were unhappy were 29% more likely to have died compared with their counterparts who were happy. But the women who were unhappy were also more likely to be in poor health. Once the researchers took that into account, the association between happiness and mortality disappeared. That held up after the team added in variables such as socioeconomic status, exercise and sleeping habits; whether they lived with a partner; and whether they were religious.

The 20% of women who rated their health as fair or poor at the start of the study were 67% more likely to die during the study period than the 80% of women who rated their health as excellent or good. But in each group, the women who said they were happy had the same odds of dying as the women who said they were unhappy.

When the researchers focused just on women who died of heart disease or cancer, the results were the same: Those who were happy at the start of the study were just as likely to die as their unhappy counterparts.

Finally, the researchers took a slight detour from happiness to see whether women who felt they were “in control, relaxed, or not stressed” had any protection against an early death. Among the women who said their health was excellent or good, these stress-related measures had no bearing on mortality risk, the researchers found.
“Our large prospective study shows no robust evidence that happiness itself reduces cardiac, cancer, or overall mortality,” they concluded.

So there you have it. If correct this study just killed off a large section of the pharmaceutical anti-stress, anti-anxiety community. Hopefully, someone will gently inform all those mad laboratory-chained scientists working on their synthetic concoctions. 

latimes.com/science/sciencenow/la-sci-sn-happiness-death-20151209-story.

FACEBOOK COMMENT TO MR. ZUCKERBERG

 
It is astounding how easily today disagreeing gets twisted into hate.

Mark Zuckerberg's recent comment is a case in point. He writes:

"Having a child has given us so much hope, but the hate of some can make it easy to succumb to cynicism," Zuckerberg wrote Wednesday. "We must not lose hope. As long as we stand together and see the good in each other, we can build a better world for all people." 

All of that is good and true. But in no way does it negate the right of people to protect themselves. There is a legitimate difference of opinion here about how to protect an obviously threatened populous from a determined, persistent enemy who has proved way beyond words it will do anything to succeed. This is not fear; this simple common sense.

Mr. Zuckerberg's kind and well-intentioned words are good as far as they go, but he has no right to speak for the rest of those who may differ with him on this issue or suggest without knowing them they are haters or in any way endanger them.

Congratulations and our best on being a new father, but perhaps you need to be reminded that you are not alone on this planet in enjoying that honor.

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