OPEN LETTER TO RON PAUL

Mr. Ron Paul:

You say that a Trump victory would be horrible for the Republican Party and you cite the following. Knowing that this appeared on CNBC, I am assuming you were quoted correctly.

"It would be very bad if he was to get the nomination," Paul said in a Thursday interview with CNBC's "Futures Now." "The party would be severed in two pieces."

Further, said the libertarian former congressman from Texas said, "he wouldn't win, and it would be devastating to the markets, because then you'd have Hillary [Clinton]," whose tax policies would hurt the economy.

cnbc.com/2015/12/10/ron-paul-a-trump-win-would-sever-the-gop. 

First off, let me say I appreciate many of your views and applaud your long defense of liberty and the libertarian philosophy. Having noted that, however, I am somewhat surprised at your failure to see the Republican Party is already --and has long been--"severed" into several pieces not just two. In fact, one could argue that if this so-called political party that claims it offers a difference actually did so, a candidate like Trump would never enjoy the current traction he's obviously getting, a traction it is  just as obvious that is quite painful to many.

I say this never having been a member of either party. In fact, it's my fervent wish when I finally exit this dimension to enjoy the pride that comes with never having been a member. In our semi-free society we all still get some choice in how we choose to go bankrupt. Joining either these two shams isn't in our bankruptcy lexicon.

Now you and I know MSM is trying its best--par for their course--to write this off as a fringe thing. It isn't. Trump, like it or not, is rattling many establishment cages, one of which is big time MSM. We could name you numerous others, but we will spare you the boredom.. And you don't seriously think anyone other than a Clinton is going to be the next president. If you do I will respectfully lower my respect a notch for you and your political savvy.

Now if you're talking about the Democrat-Republican effect on the stock market, we all know those numbers. Trump is a breath of fresh air; he is the healthiest thing on the political horizon in years. He's saying things millions of Americans across all lines would like to voice publicly, but nearly all of them savvy quite well the definition of two words--ostracism and punishment.

This is a repressive administration in a growing repressive society, something one would think given your political history you would see the value of a character like Trump. So as we like to say around here: That's our opinion. We hope you still know yours.

JUNK BOND DISTRESS

The recent announcement by Third Avenue fund to close client redemptions on their high yield bond fund ruffled investor feathers and started necks craning  to look around for who might be next.

Here is an article on the matter from zerohedge citing a Morningstar list of best and worst junk bond funds. Keep in mind, however, what longtime distressed bond investor billionaire Howard Marks recently noted.

Marks, speaking Tuesday at Goldman Sachs Group Inc.’s U.S. financial services conference in New York, said he’s seen many bonds across industries slide to 60 cents on the dollar from 90 cents since September. Los Angeles-based Oaktree is spending a lot of time studying oil and gas companies, he said.

High-yield bonds tied to energy companies have slumped 25 percent since June of last year. Brent crude on Tuesday briefly fell below $40 a barrel for the first time in almost seven years after the Organization of Petroleum Exporting Countries effectively abandoned any limits on output.

“Hedges were in place that have worn off; companies will lose their credit lines,” Marks said of oil producers. “Some of the price declines and some of the weakness makes the prospective buyer very happy.”

zerohedge.com/news/2015-12-11/which-high-yield-fund-gates-next-after-third-avenue-here-are-unusual-suspects

THE OIL WOODSHED

The market took oil for another visit to the woodshed as the International Energy agency released it's latest report. World demand for next year, according the the report, will decline from 1.8 billion barrels a day to 1.2 billion.

Overnight in New York, West Texas Intermediate crude oil futures fell to a new low seven-year low of about $36.13 per barrel.

The International Energy Agency said in its monthly report that the decision of the Organization of the Petroleum Exporting Countries last week t o continue to pump crudeat record levels into an already oversupplied market is hurting producers outside the oil cartel, especially the shale industry in the U.S.

"As companies make further spending cuts in reaction to sub-$50/bbl oil, the impact on supplies…will be even more pronounced in the longer term," the Paris-based agency said. However, it added that "as inventories continue to swell into 2016, there will still be a lot of oil weighing on the market."

Brent crude, the global oil benchmark, fell 0.7% to $39.86 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.5% at $36.56 a barrel.

On Thursday, both benchmarks reached their lowest settlement value since Feb. 18, 2009.

The IEA, which advises the world's biggest economies on energy policies, also projected that world oil demand growth will slow to 1.2 million barrels a day in 2016 after surging to 1.8 million barrels a day this year, as support from sharply falling oil prices begins to fade.

.nasdaq.com/article/oil-falls-on-iea-report-20151211-00173

OVERNIGHT

Reuters reported that this is the first time time in four sessions Japanese equities saw some upward  light at the end of the tunnel. But the move ran counter to other Asian markets pretty much insuring stocks will end the week lower.

Part of the drawback hings on big events next week with the Fed set to bump up interest rates finally in what has become the most anticipated Wall Sreet theme in a long time. Many investors remain jittery ahead of the event.

Meanwhile, Business Insider reports:

Futures were sharply lower and crude oil fell to new lows on Friday morning. 

Near 7:40 a.m. ET in New York, Dow futures were down 196 points, S&P 500 futures were down 19 points, and Nasdaq futures were down 49 points — all about 1% lower, pointing to a lower open on Wall Street.

Overnight in New York, West Texas Intermediate crude oil futures fell to a new low seven-year low of about $36.13 per barrel.

On Thursday, crude slumped after OPEC's monthly report showed that the oil cartel pumped the most oil in three years in November. And then, the International Energy Agency's own report on Friday warned again that the global supply glut will worsen in 2016 as inventories continue to build.

On Thursday, the indexes closed slightly higher to break a three-day losing streak. 

Friday was a weak day for many global markets. Across Europe, indexes including Germany's DAX, the FTSE 10o in London, and Euro Stoxx 50 were all down by more than 1%. 

ECONOMIC SLOWDOWN IN OIL PATCH CONTINUES

 
Earlier it was the Chicago PMI raining on the economic recovery parade. Now it's Houston.

The pain of weak energy prices continues to take its toll. With the Fed set to hike interest rates next week in what many believe is a done deal, Yellen and her crew may be positioning themselves at exactly the right place and time to do exactly the wrong thing.

A current story making the rounds is Fed concern about what effect higher rates might have on auto sales.

Houston’s economy continued to struggle with oil industry layoffs and cutbacks in November, as well as losses in manufacturing and trade that have reversed recent gains in the energy capital of the world.

The Houston Purchasing Mangers Index, a closely watched predictor of the city’s economic health, slipped to 45 points in November, signaling a contraction in economic activity for the 11th straight month. Readings below 50 indicate contraction.

The oil and gas sector and related industries showed significant signs of weakness, with exploration and production firms and oil field service providers curtailing spending plans and paring back budgets to brace for a prolonged period of anemic crude prices.

“Our businesses continue to right-size in order to align with the prices of oil and gas, which are now expected to be these levels for longer term,” one respondent from the oil and gas sector said in the survey conducted by the Institute for Supply Management.

“Employment reductions are continuing,” another said.  

fuelfix.com/blog/2015/12/10/houstons-economy-stumbled-again-in-november-index-shows

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