Thursday, January 2, 2020

Helicopter Money Is Here: How The Fed Monetized Billions In Debt Sold Just Days Earlier

The Fed's charter prohibits its from directly purchasing bonds or bills issued by the US Treasury: that process is also known as monetization and various Fed chairs have repeatedly testified under oath to Congress that the Fed does not do it. Of course, the alternative is what is known as "Helicopter Money", when the central bank directly purchases bonds issued by the Treasury and forms the backbone of the MMT monetary cult.
But what if there is at a several day interval between Treasury issuance and subsequent purchase? Well, that's perfectly legal, and it's something the Fed has done not only during QE1, QE2 and QE3, but is continuing to do now as part of its "QE4/NOT QE." 
Here's how.
On December 16, the US Treasury sold $36 billion in T-Bills with a 182-day term, maturing on June 18, 2020, with CUSIP SV2. And, as shown in the Treasury Direct snapshot below, of the total $34.3 billion in competitive purchases, Dealers acquired $23.7 billion.
What happened next?
For the answer we go to the Fed's POMO page, which shows which specific T-Bill CUSIPs were purchased by its markets desk on any given POMO day when Dealers sell up to $7.5 billion in Bills to the Fed.
Exhibit 1: on December 19, just three days after the above T-Bill was issued and on the very day the issue settled (Dec 19), Dealers flipped the same Bills they bought from the Treasury back to the Fed for an unknown markup. Specifically, of the $7.5BN in total POMO, the SV2 CUSIP which had been issued earlier that week, represented the biggest bond "put" to the Fed, amounting to $3.9 billion, more than half of the total POMO on that day, and by far the most of any CUSIP sold to the NY Fed's markets desk on that day.
But wait, there's more.
Exhibit 2: during the next POMO conducted the very next day, or December 20, and just four days after the issuance of T-Bill SV2, which as a reminder saw $23.7 billion in Dealer purchase, those same Dealers flipped more of the same Bills they "bought" from the Treasury back to the Fed. Why? To once again pocket the unspecific markup the Fed generously provided to them just because they are Dealers. Of the $7.5BN in total POMO held on Dec 20, the SV2 CUSIP once again represented the single biggest bond "put" to the Fed, amounting to $1.6 billion, the most of any CUSIP sold to the NY Fed's markets desk on that day.
So what is going on? Well, for all those saying the US may soon unleash helicopter money, and/or MMT, we have some 'news': helicopter money is already here, and the Fed is now actively monetizing debt the Treasury sold just days earlier using Dealers as a conduit... a "conduit" which is generously rewarded by the Fed's market desk with its marked up purchase price.
In other words, the Fed is already conducting Helicopter Money (and MMT) in all but name. As shown above, the Fed monetized T-Bills that were issued just three days earlier - and just because it is circumventing the one hurdle that prevents it from directly purchasing securities sold outright by the Treasury, the Fed is providing the Dealers that made this legal debt circle-jerk possible with millions in profits, even as the outcome is identical if merely offset by a few days. 
Perhaps during Fed Chair Powell's next Congressional hearings, someone actually has the guts to ask the only question that matters: why is the Fed now monetizing US debt, and pretending it isn't doing so just because it grants Dealers a 3-day "holding" period, for which it then rewards them generously?

Wednesday, January 1, 2020

The Leftist Cult vs. The Trump Cult: Similarities And Differences

From Alt- Market

Political demagoguery is a valuable and effective weapon in the arsenal of the establishment elites. As long as there is a wide ideological division between groups in society, biases and desires can be tapped and manipulated.  This allows those in power to direct vast portions of the public down one path or another. When fear of an enemy and the drive to “win” become more important than truth and evidence, the population has tied its own puppet strings and handed them over to the spin doctors.
This is why the false Left/Right paradigm has been so useful to the establishment for so long. Anytime the public starts to wake up to the web of control, all the elites have to do is push one or both sides of the political spectrum towards extremism and let the people rage at each other instead of picking up their torches and pitchforks and tearing down the oligarchy. This method of division and diversion keeps the masses occupied and feeling as though they are accomplishing something while actually accomplishing nothing.
As Carroll Quigley, globalist insider and mentor to Bill Clinton, admitted in his book 'Tragedy And Hope':
The argument that the two parties should represent opposed ideals and policies, one, perhaps, of the Right and the other of the Left, is a foolish idea acceptable only to doctrinaire and academic thinkers. Instead, the two parties should be almost identical, so that the American people can “throw the rascals out” at any election without leading to any profound or extensive shifts in policy....Then it should be possible to replace it, every four years if necessary, by the other party which will be none of these things but will still pursue, with new vigor, approximately the same basic policies.”
The false Left/Right tactic has become more and more exposed in the past decade to the wider public, and so the elites had to change their methods to adapt to the growing awareness. Conservatives in particular have started to leave the plantation, and something had to be done to drag them back. The liberty movement has become a force in western life with tens of millions of members. It is an unpredictable element that the establishment needs to lock down and redirect if they ever hope to achieve their goal of a “new world order”.
The elites have used two tandem strategies in this effort:
First, they pushed leftist indoctrination towards full bore cultism.
Second, they have attempted to co-opt the leadership of conservatives and the liberty movement using a political puppet figure in order to bottleneck our energy and momentum.
Leftist culture has become increasingly erratic and unhinged (even more so than usual), informed by elements of a new social justice fanaticism; a kind of religious fervor where faith in ideological gatekeepers is more important than facts. The majority of the left, while not necessarily part of this “woke” religion, is still influenced by SJW rhetoric. Delusional notions of “patriarchy” and “inherent racism” and “inherent sexism” are woven into the Democrat mindset today. They see oppression everywhere, and victim group status has become the social currency they use to acclimate to a fantasy world where big government and entitlements are the solutions to all the world's ills.
The conservative side of civilization doesn't participate in the oppression fantasies of the left. We don't even speak the same language, as the left's very vocabulary has shifted into an academic babble-language they simply made up to describe social dynamics that don't exist and gender politics that are biologically and scientifically absurd. Reconciling with leftists in any meaningful way has become nearly impossible, and fear of their fanaticism is causing conservatives to assume that whatever these people hate, must be good.
Enter Donald Trump, a kind of artificially created focal point machine, a figure that is designed to absorb liberty movement talking points and then regurgitate them in an alphabet soup puddle on Twitter. This rhetoric is relatively effective in that many conservatives recognize parts of the soup and find comfort that Trump “must be on their side”.
I have outlined in numerous articles Trump's dubious background and behavior. To summarize, we often hear lip service from Trump on anti-globalism and anti-elitism, even though it is an undeniable fact that he has saturated his cabinet with globalists and elitists.
We heard anti-banker talking points from Trump during his campaign, even though Trump has a longstanding relationship to the Rothschild family and works side-by-side with Rothschild and Goldman Sachs bankers in the White House. We heard lots of anti-Federal Reserve discussion from Trump and observations that the current economy is an explosive bubble engineered by them; yet he now openly demands that the Fed inflate the bubble further while he takes full credit for the fake stock market rally.  We also heard many promises that US troops would be coming home and the long wars in the Middle East would end for America; this has not happened and likely will not happen as tensions with Iran continue to grow.
In other words, Trump is a skin job. A robot. A false conservative and false prophet of the liberty movement. He tells us what we want to hear while his actions say something entirely different. Yet, a lot of conservatives still listen to him, because they despise the collectivist religion of the left, they desperately want mainstream recognition and representation, and because they want to believe that there is a white knight out there in Washington defending their interests and their future.
The establishment understands these desires and exploits them. They understand that the more extreme the left becomes, the more tempted conservatives will be to jump blindly on the Trump bandwagon.
Mainstream media outlets like CNN have taken to referring to Trump's base as a “cult” recently, which of course is the pot calling the kettle black; but it does not mean that the accusation is wrong. Trump's base is indeed acting more and more like a cult, but primarily in reaction to the cultism of leftists. The crazier the left gets, the more Trump becomes a folk hero to the right. The more the media promotes fabricated Russiagate nonsense or Ukrainian conspiracy narratives, the more conservatives assume that the establishment is “trying to take down” Trump.
It is rather rudimentary reverse psychology – If the establishment media attacks Trump, then he must be "anti-establishment". If the leftists hate Trump, then he must be good for conservatives. Nothing could be further from the truth, but if anyone points this out they will be immediately attacked as disinformation agents and purveyors of CNN talking points.
A common argument in defense of Trump is to ignore his associations and behavior entirely and focus on the prevailing circus surrounding him instead. People state indignantly that:
Trump is under attack! They are trying to impeach him! How can he be working with the globalists if they are trying to get rid of him...?”
I would point out that there is a usefulness to political theater that goes far beyond trying to remove a president from office. Again, the media viciously attacked Trump during his election campaign, but if one understands that public trust in the mainstream media has collapsed in the past ten years, then one also understands that media attacks on Trump would only cause more people to like him and vote for him. The question then needs to be asked: Does the establishment understand this inverse relationship in public psychology? Or, did they completely overlook it?
I seriously doubt they are overlooking it.
If this is the case, then the frothing leftist rage against Trump, while partially real, is also 4th Generation warfare designed to trick conservatives into developing their own cult-like fantasy that Trump is our fearless leader fighting the good fight even though his presidency is tightly intertwined with global elitists. The impeachment itself comes at a time when a large portion of the liberty movement is waking up to the Trump con game and is questioning many of his activities and associations.
The establishment has put a lot of effort into creating the Trump versus Leftist circus, and they really hate the idea that a number of people are refusing to pick a side.  For them, there is nothing worse than free thinkers who organize their own side separate from the false paradigm.
The impeachment, like Russiagate, is not designed to get Trump out of office. It is a Hail Mary attempt to pull liberty minded conservatives back into the Trump fold; to keep us predictable and under control. It is also designed to keep leftists feeling justified in their insanity. Remember, the crazier the left acts, the more fearful and malleable conservatives become.
The establishment likes Trump right where he is, and he will not be going anywhere, at least not until he has completely served his purpose. Whether that will be in the next year, or in another four years, it's hard to say at this time. Obviously, the elites have to keep the left/right sideshow going at full volume until they are done using Trump as a distraction. They will “attack” him as often as needed to create the illusion that he is anti-establishment, and Trump will continue to play along to please his masters, many of them standing over his shoulder everyday in the White House.
The Leftist Cult and the Trump Cult are similar in their refusal to accept facts and reality, as well as their ability to double and triple down on delusions that are consistently debunked.
I have witnessed people on the Trump-train dismiss every blatant piece of evidence of Trump's collusion with globalists on the basis that he is "keeping his enemies close".  I have seen them ignore his support for Red Flag gun laws, his refusal to pull US forces out of Syria, Iraq, Afghanistan and Yemen, his hostility towards Iran, his support for totalitarian governments like Saudi Arabia, etc.  They call it "4D chess" and simply move on.  I have seen them shrug off endless data showing economic decline and proclaim instead an "economic boom".  I have seen them completely absorbed and distracted by the trade war and China while forgetting all about the banking elites that engineer most of the calamity in our society.
They act this way because they are afraid.  The political left frightens them, they are searching for a hero to save them, and they are willing to overlook almost any skeleton in Trump's closet in order to make their fantasy version of him real.  But, the leftists are nothing more than a symptom - They are useful idiots, not the source of the disease.  And, Trump is not the hero conservatives are looking for anyway.  In terms of the liberty movement, Trump is irrelevant.  He's a footnote.  The real work is being done by millions of activists breaking through decades of propaganda and exposing the truth.
The difference between the Leftist Cult and the Trump Cult is mostly intent: Leftists double and triple down on their lies because they are infatuated with collective power and they see the truth as an obstacle to the "greater good". The Trump cult ignores facts and evidence on Trump because they are hyperfocused on collective defense. Leftists are seeking to micromanage the thoughts and behavior of the world while conservatives are seeking to solidify enough political protection to ensure they are left alone. The Leftist Cult wants to burn everything to the ground, erase history and rebuild the world in their image. The Trump Cult is trying to keep the last structures of American heritage alive; they have simply put their faith in the wrong champion.
The sad reality is, leftists and conservatives are likely far too alien to each other now to ever come to a diplomatic solution. The division in society is very real; it's the division at the top that's Kabuki theater. The liberty movement is the key to everything, as we are the constant target of establishment 4th Gen propaganda. If we didn't matter, then the elites would not be spending so much time, money and energy trying to keep us in line. They need us to buy into the theater, otherwise we become an unknown element, a third party, a time bomb that could explode unexpectedly on them at any given moment.

Tuesday, December 31, 2019

How to Make Money: Buy Companies That Are Worthless

Mish
by
1 day-edited
Companies with tangible net value of less than zero have increasingly outperformed the market for decades.
Some 40% of public stocks quoted in the U.S. have negative tangible book value, meaning that their tangible assets aren’t worth enough to repay all their debt. Two decades ago, this was only true of 15% of companies, according to Vincent Deluard of INTL FCStone Inc., who has carried out intensive research on the subject.
Such companies sound dreadful. In tangible, material terms their share certificates aren’t even worth the paper they are written on. And yet, incredibly, a “negative-value” fund, composed of the shares of companies with negative tangible book value, would have beaten the main U.S. stock market, represented by the Russell 3000 Index, by 24% over the last 20 years. That outperformance has almost all happened since the financial crisis — before that, the negative-value fund had roughly tracked the benchmark.
Extreme Zombification
This is of course a result of Fed-sponsored zombification by keeping real interest rates negative for most of the last decade.

Real Interest Rates
Real means inflation-adjusted.
I created the above chart by subtracting year-over-year Consumer Price Index (CPI) from the Effective Fed Funds Rate.
Yet, the CPI is a fatally-flawed measure of inflation.
It fails to factor in housing prices and dramatically understates the rising cost of medical care.
Yet, even though inflation is hugely understated, real interest rates have been mostly negative since 2002.
This encouraged speculation in spades.
Meanwhile, thanks to Fed bubble-blowing policies, companies that have no tangible value can keep rolling over debt and even adding to it to pay the bills.
Mike "Mish" Shedlock

INSIGHT: Bad Guys Use Tech to Defraud Companies; Legal Investigation Teams Need It, Too

As companies develop digitally-connected ecosystems and extended networks of third parties, the challenge to recognize and solve deeper or broader problems becomes increasingly difficult. Often in larger and more complex organizations, the mechanisms to fight fraud and misconduct effectively can lag considerably.
Companies have yet to take full advantage of their three greatest assets: available organizational corporate data, technologies that can sense and read signals within vast data populations, and the legal department’s investigative professionals. If bad actors can take advantage of technology to defraud your organization, legal teams trying to stop them must too.
To combat fraud using an enterprise-wide, tech-enabled approach that combines the power of the computer with the business–and tech–savviness of legal team investigators, consider the below.

Get Investigator Groups Out of Silos

While legal teams typically lead investigations, some also involve human resources, compliance, security or internal audit. And, as more functions get involved, coordination and communication between them often seems to disappear, usually for confidentiality reasons. Unfortunately, this can result in disjointed efforts that can lead to potential fraud risks being missed, improperly identified, and under analyzed.
For example, while supporting a corporate investigation into employee-vendor corruption, we later discovered earlier risk assessments by the organization’s internal audit team had identified similar types of issues elsewhere across the organization at different points in time.
If the company had created a process or leveraged shared case management technology to communicate issues and analyze them through a broader lens, internal investigators might have developed a better understanding of the true nature and scope of a larger corruption scheme, as we later did.

Try a Tech-Enabled Portfolio Approach

The Association of Certified Fraud Examiners found that 40% of investigations can take a month or longer to close using traditional methods. But a tech-enabled approach wielded by investigative specialists can often generate results in a fraction of that time, offering better efficiency and more effective insights.
Applying a diverse portfolio of tech-enabled investigative techniques and approaches guided by experienced investigators and other professionals well-versed in business can help unearth wrongdoing hiding in ever-increasing data sets.
For example, investigators—along with any data scientists or business specialists they involve—can discern how outlier activities compare to other similar activities, effectively performing a form of behavioral analytics on actions that may or may not be fraudulent.
In another example, using advanced eDiscovery tools, companies now have the ability to mine volumes of unstructured data in fractions of the time it took in the past to get through this information.
Why rely only on traditional approaches like keyword searches and manual review of large volumes of documents when machine learning and other cognitive capabilities can generate insights humans may never have detected? It’s now possible to get eyes on the right documents more quickly and advance investigations with better insights.
Tech-enabled approaches are also being deployed for public record and social media data as well. Depending on the jurisdictions involved and privacy settings, investigators may be able to collect public source-based information—including corporate registries; litigation, tax and criminal records; news media, social media platforms and internet searches—to create visual links between seemingly unrelated information.
The ability to turn information into insights using visual data tools and data mining tools, again, enables investigators to advance at a pace unlike what they could accomplish manually.
Technology is making it easier for investigators to better assemble puzzle pieces that show the full fraud “picture.” Many times, we’ve seen the presentation of such investigative results to subjects lead to admissions of guilt and subsequent issue resolution.

Use Predictive Capabilities of Tech-Enabled Investigation Programs

Once a tech-enabled investigation structure is in place, legal teams can reverse-engineer them by developing algorithms to predict, detect and help prevent “bad behavior.”
For example, in the previously mentioned corporate corruption investigation, we helped the organization build a predictive model to classify expenses into categories (e.g. airline tickets were travel expenses, restaurant charges were meal expenses). Going forward, the categorizations of expenses helped the company identify employees who were misclassifying expenses to distort aggregated totals.
The tech-enabled investigation capabilities that legal teams develop can also be used to create value for other parts of the organization, such as supply chain or finance.
For example, we’ve assisted in corruption investigations where purchasing and shipping information was ultimately used to identify the perpetrators of fraud schemes. The same data and investigation insights may also be useful to the company’s supply chain or finance teams to identify inefficiencies, opportunities to improve margins, and eliminate duplication of vendors preventing the company from taking advantage of pricing discounts through consolidation.

Adopting a Tech-Enabled Approach

The future of internal investigations will include a tech-enabled approach, but adoption of the approach will vary. Where you start will likely be dependent on internal capabilities, investments in technology, and a willingness to recognize the importance technology and analytics can play in investigations.
Regulators are already using advanced technologies to conduct their own investigations. Investors, the public and other stakeholders expect ever-better risk management for allegations of bad acts. As such, without embracing the future, organizations may be ignorant of new industry fraud schemes as they go undetected longer, giving bad actors time to target a broader swath of organizations. Now is the time to consider jump starting a tech-enabled investigation program.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Samantha Parish is a Deloitte Risk & Financial Advisory principal in the San Francisco office of Deloitte Financial Advisory Services LLP and Deloitte’s Global Financial Advisory Technology, Media, and Telecommunications industry leader. She specializes in complex domestic and cross-border forensic investigations, corruption investigations and related proactive compliance programs.
Bill Pollard is a Deloitte Risk & Financial Advisory partner in the Chicago office of Deloitte Financial Advisory Services LLP. He specializes in complex forensic investigations including government investigations, accounting restatements and is a leader in delivering technology enabled data driven solutions for investigations.

Hedge Fund Hotel: $2 Billion A Day Keeps The Punters In Pay

In our new risk free market, party like it’s 1999 environment with imbalances running wild and S&P 500 price targets being raised almost daily it may be silly to speak of any corrective activity to come in stocks. After all the Fed looks to continue printing until June.
Yet extreme one sided market actions have consequences and those can be found in the technicals and in history.
Hence I wanted to take a closer look at $AAPL today, by far the biggest behemoth in the US market universe now having run over 100% since the January 2019 lows, adding over $500B in market cap. Be it buybacks, be it the Fed, be it 5G hopes, be it the benefits of passive indexing, be it all of these factors in some combination, they all have contributed to the single largest market cap expansion in an individual stock in a single year in history.
Due to its size the stock has also been the single largest contributor to index gains, predominantly in the $NDX where $AAPL has contributed nearly 20% to the index’s gain alone:
Too big to fail indeed. With 5 stocks alone now controlling 50% of the $NDX gain in 2019 alone any of these stocks facing a technical correction could well dampen investor expectations looking for further market gains in 2020.
After all we live in a world where 2 companies have a market cap exceeding the entire market cap of Germany, only the 4th largest economy in the world:
Just to put things into perspective: Combined mkt cap of and $250bn higher than the entire mkt cap of the German stock market.
View image on Twitter
578 people are talking about this
So let’s look at the technicals here and the readings it has produced.
Let’s start with a basic daily chart:
Following the 2018 rout $AAPL bottomed in early 2019 when it issued a revenue warning. It build a rising wedge which peaked in early May on a negative divergence and a larger correction ensued. This correction ended in June when, like the broader market, it began to rally on Jay Powell’s ‘ready for rate cuts’ comments. Into the summer and fall it produced marginal new highs on the Fed’s rate cuts, but then, like the rest of the market, the stock went on a tear in Q4 as the Fed went wild on balance sheet expansion and repo. In process it has formed a very large channel and has now reached the top of this channel along with vast overbought readings on the RSI and a negative divergence.
How steep this channel really is can be appreciated when viewed through the lens of a weekly chart:
Here we can note a weekly RSI reading above 85. Historically speaking these kind of RSI readings have produced either a larger correction or a smaller pullback. These readings themselves are not indicative of a major top although they can lead to one.
More often high RSI readings have led to a pullback to the .236 fib or .382 fib before another rally then produced a new high on a negative divergence which then leads to a much larger correction of size. Recent examples:
But in context of the massive size of this rally even a pullback to the .236 fib would constitute a larger move lower.
The monthly chart also reveals a larger channel which $AAPL has just reached and looks to be slightly extending above:
Note here though that a large negative divergence already exists, between the 2018 and the 2019 highs. This leaves room to the interpretation that $AAPL is at risk of making a larger top perhaps even in Q1 of 2020.
How much further can $AAPL extend higher at this stage? Risk reward is screaming massive caution here. Why? Because $AAPL is not only pressing against key trend lines, but the stock is far extended above key Bollinger bands, extension of which history shows are not sustainable.
Here’s the monthly linear view which highlights the point quite clearly:
Past extensions above the monthly Bollinger bands have produced rejections, some leading to new highs, some not. The last example being 2018 which led to a massive correction.
But it’s the quarterly chart which reveals a more concerning historical perspective:
Since 2007 $AAPL has poked hard above its quarterly Bollinger band, four times prior to this occasion. In each case it ended up producing a move to the quarterly 15 MA. That’s a four in four track record. The quarterly 15MA is currently at $167 and is rising and will be higher in 2020, but that’s the appointment $AAPL has based on history.
What this chart also shows is that these quarterly pokes above the Bollinger band can take 2-3 quarters, in 2012 it was 4 quarters. Given the earlier chart history it suggests $AAPL can see a sizable pullback in Q1, then race off to make new highs still, but then face the technical judgement of history.

Bottomline: Chasing $AAPL here on the long side is extremely dangerous. Rather it is likely to see a sizable pullback early in Q1 2020 ($236-$250 based on fibs) hence selling strength may be the right call. That first larger pullback may then offer a long trade opportunity for another potential run higher, but then $AAPL may be at risk of  a much larger correction or even bear market later into 2020 and 2021. Given its size and contribution to the overall market and index performance $AAPL will be key to watch next year.