VOICES

There are lots of voices out there and-- though, as we always warn, you need to do your homework-- we try to bring ones we find interesting. Dire warnings are a staple of markets and the perennial war between the bulls and the bears.

Still, huge corrections happen and given the now way out-of-control global monetary policy we're witnessing, safe trumps sorry. So, again, do your homework.

Several noted economists and distinguished investors are warning of a 50% stock market crash.

Billionaire Carl Icahn, for example, recently threw up a red flag on national broadcast when he declared, “The public is walking into a trap again as they did in 2007.”

Unfortunately, Icahn’s warning is tame compared to his peers.

“U.S. stocks are now about 80% overvalued,” says Andrew Smithers, the chairman of Smithers & Co. He backs up his prediction using a ratio which proves that the only time in history stocks were this risky was 1929 and 1999. And we all know what happened next. Stocks fell by 89% and 50%, respectively.

This simple sandcastle analogy proves an economic collapse is imminent. Click here to see how…

Former congressman Ron Paul didn’t mince words either. He warns that the stock market’s “day of reckoning” is fast-approaching. When that day comes, he doesn’t think it’s just going to be a correction, it will be “stock market chaos.”

But there is one distinct warning that should send chills down your spine … that of James Dale Davidson.

As a renowned economist, best-selling author, and founder of Strategic Investment, Davidson makes the strongest case for a looming crisis — “Right  now, there are three key economic indicators screaming 

SELL. They don’t imply that a 50% collapse is looming, it’s already at our doorstep.” More:

thesovereigninvestor.com/exclusives/stocks-economy-on-verge-of-collapse

TROUBLE IN HIGH YIELD LAND

If your paradise was once the garden of high yield bonds, there's trouble in paradise.

Though those responsible naturally won't want to claim it, much of that trouble can be placed at the Fed's ZIRP doorstep. And if one can believe billionaire investor Carl Icahn it's just the first act. Here is a list of things the noted investment octogenarian says went wrong.

• Low rates and asset bubbles: Fed policy in the wake of the dot com collapse helped fuel the housing bubble and given what we know about how monetary policy is affecting the financial cycle (i.e. creating larger and larger booms and busts) we might fairly say that the Fed has become the bubble blower extraordinaire. See the price tag attached to Picasso’s Women of Algiers (Version O) for proof of this.
• Herding behavior: The quest for yield is pushing investors into risk in a frantic hunt for yield in an environment where risk free assets yield at best an inflation adjusted zero and at worst have a negative carrying cost. 
• Financial engineering: Icahn is supposedly concerned about the myopia displayed by corporate management teams who are of course issuing massive amounts of debt to fund EPS-inflating buybacks as well as M&A. We have of course been warning about debt fueled buybacks all year and make no mistake, there’s something a bit ironic about Carl Icahn criticizing companies for short-term thinking and buybacks as he hasn’t exactly been quiet about his opinion with regard to Apple’s buyback program (he does add that healthy companies with lots of cash should repurchases shares). 
• Fake earnings: Companies are being deceptive about their bottom lines.
• Ineffective leadership: Congress has demonstrated a remarkable inability to do what it was elected to do (i.e. legislate). To fix this we need someone in The White House who can help break intractable legislative stalemates. 
• Corporate taxes are too high: Inversions are costing the US jobs.

There is something labeled the spillover effect. Bill Gross, another serious investor, alluded to it recently when he twitted: "Who will get n if you can't get out? " That's more than just an oblique reference to the Third Avenue fund where they reportedly locked up funds for one year.

Where not baseball card collectors but just today it was reported a 1952 Mickey Mantle card went for $525,000. Sure it was a rare rookie card. As Icahn says, the Fed has become the "bubble lower extraordinaire."

And how many today really know who Mickey Mantle was?

http://www.zerohedge.com/news/2015-12-11/carl-icahn-warns-meltdown-high-yield-just-beginning

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.