“As Ye Sow…”

Submitted by Robert Gore via Straight Line Logic blog,
Our deranged world is a product of deranged minds.
Philosophy begins with invariably difficult questions. Why am I here? What is the purpose of life? Is there a god or gods? What is right and what …

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China Bonds, Stocks, Commodities Extend Gains As Yuan Tumbles To One-Month Lows After Renewed Liquidity Injection

As China got back to work after Golden Week, it appeared a renewed exuberance appeared in every orifice of liquidity provision (even as PBOC sucked up excess for 6 straight days). Stocks are up, bonds are up, and commodities are soaring (all as Yuan tu…

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The Rats Are Fleeing The Sinking Bond Ships


Glen Hubbard, George Bush Jr.’s economic adviser, was a candidate
to replace Alan Greenspan as Federal Reserve Chairman.  George Bush Jr. asked him if the economy
sputtered, what would he do.  As he
described the typical monetary policy tool of adjusting the overnight Federal
Funds Rate, he said the net result would be to boost GDP by a half of a percent
to percent.  I assume the same question
was asked to Ben Bernanke.  Helicopter
Ben didn’t disappoint and won the appointment.  As Chairman of the Federal Reserve, he got his
chance and threw everything including the kitchen sink at stimulating the
economy.  He lowered the Federal Funds
rate down to zero and purchased trillions of bonds to expand the monetary base.
 He unleashed the most excessively
accommodative monetary policy in history which was continued by current Federal
Reserve Chairman Janet Yellen.  Fast
forward to today and we are on the cusp of a 3+% GDP, core inflation running
above 2% and full employment.  However,
there are some perilous costs associated with such accommodative monetary
policy.  The cost that should be the most
worrying is the unwinding of the ultra-low bond yields in the US and globally
that has just begun.


Bond yields and market volatility are on the rise. This is
the result of more normalized growth and inflation levels, less perceived
global risks and hope for continued growth in the future. Fixed income investors
have just begun to adjust to the idea of more normal yields in the bond market.  It may seem tempting to dip a toe into the
bond market waters with this back-up in yields. But these are dangerous waters.
Don’t lose a toe.  After 10 years of bond
markets rallying the unwind is just beginning.


Normalized markets for longer dated government bonds places
yields around 2% to 3% above the rate of inflation.  And with inflation running at 2% and moving
higher, longer term bond yields should be greater than 5%, not the current 3%.  If bonds yields backed up to the longer term
averages, market losses could be 40% or more for the longest maturity bonds.


The trillions in bond purchases that drove yields to
all-time lows have abated and that’s bad news for bonds.  Banks have finished adding regulatory bond
purchases and central banks have ended or are close to ending bond purchases
for monetary policy purposes.  Government
bond purchases made to limit rising currencies have now turned into sales to
limit currency weakness.  And oil
producing nations are no longer looking to put their surplus dollars from oil
sales to work in the bond market.  They
are now selling bonds to fund the holes in their fiscal budgets stemming from
low oil prices.


The last big purchaser of bonds still remains some very
large and leveraged hedge funds.  Hedge
funds have been caught on the wrong side of the global bond trade and are now
trying to avoid selling their positions.  Fear and greed had helped keep bond yields at
these low levels for longer than most would have thought.  In fact, yields have been so low for so long,
anyone betting on higher yields has been fired, put out of business, or
probably has a laundry list of stress related health problems.


Whatever backup in yields we’ve seen, it’s just the first
movement it what is sure to be an unharmonious symphony.  The bond market has spent years below more
normal long-term yields while unprecedented accommodation was stuffed in the
system. It is highly probable and reasonable to believe that the bond market needs
to spend some time above the long run yield level.  That, by definition, is how an average is


Now that the fixed income market has begun to adjust, losses
are piling up and will soon be reported to investors.  The size of these losses are sure to shock the
investor community that has grown accustomed


to steady gains from fixed income.  In fact, when people open up their monthly account
statements and see excessive losses from bonds yielding low single digits, the
second movement in this symphony will begin.  Disappointed bond investors will soon put in
sell requests and leveraged bond managers who were the last marginal buyer of
bonds will have to turn into sellers. 
Market yields will have to adjust higher and find a level that attracts
the unlevered bond purchaser.  And that
yield level appears to be much higher.


So what is an investor to do?  Many hedge funds are trying to hold off
liquidating bond trades by offering fee rebates to limit redemptions.  This is always a leading indicator of more
pain to come. Just like rats that leave a sinking ship before it goes under,
redemptions are starting to line up at many bond hedge funds.  These hedge fund captains are offering cheese by
reducing fees which is sure to entice the fat rats. After 10 years of easy
money in the bond market, these fat rats are incapable of swimming and will
choose the cheese.   I remember when the over leveraged Long Term
Capital Management hedge fund first started to suffer losses in their bond
portfolio.  They incorrectly believed
that if needed, more investor capital would be available to stabilize losing
trades.  My advice to investors is to
take a lesson from history and don’t bet on this old proverbial dead cat
bouncing.  When markets turn, it’s best
to move back to cash and let the markets readjust.  After such a long period of low yields and
limited volatility, this market symphony will have many movements and we are
not even at intermission.


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Canada’s Problem? US Refugee Crossings “Epidemic” Amid Fear, Distrust Of Trump

In what some might call a ‘win’ for President Trump, Canadian immigration officials warn they are experiencing a “big surge [of refugees] coming across the border” with many of them proclaiming their distrust and fear of President Trump.

Sherali and Sarah Shah took in three asylum seekers who had been trying to get into Canada through the Emerson, Man., border Tuesday.

In the first official report of a group of “asylum seekers” who are malcontent refugees in the U.S. trying to become refugees in Canada being apprehended, U.S. border security guards and a local sheriff caught three Somali nationals trying to sneak across an open stretch of the U.S.-Canada border on Tuesday, according to CBC News.

Kris Grogan, a public affairs officer for U.S. Customs and Border Protection, said border officials on the U.S. side are becoming increasingly worried about asylum seekers trying to get into Canada.


“It is extremely dangerous to be putting yourself out into these elements where you could end up dying,” he said.


As CBC News first reported in January, hundreds of asylum seekers have walked into Canada through fields near the Emerson border.



The issue came into the spotlight after two refugees from Ghana were hospitalized in Winnipeg after suffering frostbite on Christmas Eve while lost on Highway 75, near the Canada-U.S. border.


The refugees were so badly frostbitten, they lost fingers and toes. Since the story of the two men became public, dozens of other asylum seekers, including a mother and two-year-old child, have crossed into Manitoba.

As AFP reports, Farhan Ahmed hoped to find refuge in the United States after fleeing death threats in Somalia, but fear over a US crackdown on immigration sent him on another perilous journey — to Canada.

The 36-year-old was among nearly two dozen asylum seekers who braved bone-chilling cold on a February weekend to walk across the border, trudging through snow-covered prairies in the dead of night to make a claim in this country.



It was a record number of arrivals for a single weekend in the small border town of Emerson, and Canadian officials said Thursday they are bracing for more.

An agreement with the US prevents asylum seekers from lodging claims in Canada if they first landed stateside, but it only applies to arrivals at border checkpoints, airports and train stations.

Rita Chahal, executive director of the Manitoba Interfaith Immigration Council, described a “big surge coming across the border.” According to Canada’s Border Services Agency, numbers have roughly doubled in each of the last four years to 321 cases in fiscal 2015-2016. Since April, there have been 403 cases.


People often come from Djibouti, Ghana, Nigeria and Somalia, said Chahal, whose agency works out of a building designed by a top Canadian architect who was once himself a refugee.


The numbers are high, but the risky routes asylum seekers take are also alarming. “They’re crossing through farmers’ fields. Many of them are getting lost,” Chahal said. The recent arrivals, she said, tell a common story: “‘We’re afraid of what’s happening in the United States, we’re not sure what’s going to happen if I get sent back to my country.'”


Samatar Adam, 30, from Djibouti, arrived last month. Asked why he did not file a refugee claim in the US, he replied: “Donald Trump.” He left soon after the inauguration. “It saddens me to see refugees flee not only their country but also a safe, democratic country like the United States,” said the Immigration Partnership Winnipeg’s Hani Al-Ubeady, himself an Iraqi refugee who now helps resettle others.


“They have to take another risky journey to make it to another safe place — Canada.”

As a reminder, Canadian Prime Minister Justin Trudeau responded to Donald Trump’s immigration ban by saying Canada welcomes refugees who have been rejected from the US.

“To those fleeing persecution, terror & war, Canadians will welcome you, regardless of your faith. Diversity is our strength #WelcomeToCanada,” he tweeted.

And now it’s Canada’s problem? Will protesters blockade the northern border demanding US refugees stay in America? Will virtue-signaling have to be turned up to ’11’? For now it seems Canada’s “safe spaces” are safer than America’s “safe spaces.”

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Washington Post Admits Shutting Down ‘Fake News’ Will Move Us Closer To A Modern-Day ‘1984’

Submitted by Flemming Rose and Jacob Mchangama via The Washington Post,
Remember George Orwell’s Ministry of Truth? In his dystopian novel “1984,” its purpose was to dictate and protect the government’s version of reality. Durin…

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Trump, Bannon Said To Weigh Firing Mike Flynn Over Russian Phone Calls Scandal

Top White House aide and policy adviser, Stephen Miller, sidestepped repeated chances during Sunday news shows to publicly defend embattled National Security Adviser Michael Flynn following reports that he engaged in conversations with Russian diplomat(s) about U.S. sanctions before Trump’s inauguration. The uncertainty came as Trump was dealing with North Korea’s apparent first missile launch of the year and his presidency, along with visits this week from the leaders of Israel and Canada.

Pressed repeatedly, Stephen Miller said it wasn’t up to him to say whether the president retains confidence in Flynn. “It’s not for me to tell you what’s in the president’s mind,” he said on NBC. “That’s a question for the president.”

While Trump has yet to comment on the allegations against Flynn, the White House said in an anonymous statement Friday the president had full confidence in Flynn. But officials have been mum since then amid fallout from reports that Flynn addressed U.S. sanctions against Russia in a phone call late last year. The report, which first appeared in The Washington Post, contradicted both Flynn’s previous denials, as well as those made by Vice President Mike Pence in a televised interview.

Now we know why the administration has been so quiet about the fate of Flynn. As the WSJ reports, the White House is reviewing “whether to retain Flynn amid a furor over his contacts with Russian officials before President Donald Trump took office, an administration official said Sunday.” Flynn has apologized to White House colleagues over the episode, which has created a rift with Vice President Mike Pence and diverted attention from the administration’s message to his own dealings, the official said.

“He’s apologized to everyone,” the official said of Mr. Flynn.

Still, the WSJ concedes that Trump’s views toward the matter aren’t clear. In recent days, he has privately told people the controversy surrounding Mr. Flynn is unwelcome, after he told reporters on Friday he would “look into” the disclosures.  At the same time, Trump also has said he has confidence in Mr. Flynn and wants to “keep moving forward,” a person familiar with his thinking said. Close Trump adviser Steve Bannon had dinner with Mr. Flynn over the weekend, according to another senior administration official, and Bannon’s view is to keep him in the position but “be ready” to let him go, the first administration official said.

The paper also adds that Jard Kushner, Trump’s son-in-law and senior adviser, hadn’t yet weighed in on Flynn’s future yet as of Sunday evening.

For those who may not have followed the story, Flynn initially said that in a conversation Dec. 29 with the Russian ambassador, Sergey Kislyak, he didn’t discuss sanctions imposed that day by the outgoing Obama administration, which were levied in retaliation for alleged Russian interference in the 2016 presidential election. Flynn now concedes that he did, administration officials said, after transcripts of his phone calls show as much. He also admits he spoke with the ambassador more than once on Dec. 29, despite weeks of the Trump team’s insisting it was just one phone call, officials said.

If Flynn had promised any easing of sanctions once Mr. Trump took office, he may have violated a law that prohibits private citizens from engaging in foreign policy, legal experts have said. That would mark the first instance of a person close to Mr. Trump found to have inappropriate links to Russia, a subject U.S. officials have been investigating for months.

U.S. intelligence services routinely intercept and monitor conversations with Russian diplomats, officials have said. While the transcripts of the conversations don’t show Mr. Flynn made any sort of promise to lift the sanctions once Mr. Trump took office, they show Flynn making more general comments about relations between the two countries improving under Mr. Trump, people familiar with them said.

Flynn’s alleged lies have angered VP Mike Pence, who in television interviews vouched for Flynn, administration officials said. Pence and Flynn spoke twice on Friday, one official said quoted by the WSJ.

Reince Priebus is leading the Trump administration’s review of Flynn.

Some administration officials are hopeful Mr. Flynn would resign on his own, a person familiar with the matter said. Some people close to Mr. Trump already are speculating on possible successors, including retired Lt. Gen. Keith Kellogg, who advised Mr. Trump during the campaign and who is chief of staff of the National Security Council.


Jettisoning Mr. Flynn might end one controversy, but would potentially feed perceptions of a disorganized White House, some people close to Mr. Trump said. That’s one reason the White House might be hesitant to cut ties to Mr. Flynn, they added.

Meanwhile, Democrats smell blood and want Flynn out immediately.

As pressure built on White House officials, Democrats on Sunday pressed for an independent investigation into Mr. Flynn’s conversations with Russia’s ambassador.


“Either he was lying about discussing it or he forgot,” said Sen. Al Franken (D., Minn.), speaking Sunday on CNN. ”You don’t want a guy in either of those scenarios to be in that position.”

Franken has also called for an independent investigation into the Trump campaign’s and the administration’s ties to Russia, citing allegations of Kremlin interference in the 2016 U.S. election and Mr. Trump’s refusal to release his tax returns, as candidates have done since the 1970s. “We don’t know what [Mr. Trump] owes Russia,” Mr. Franken said. “We don’t know how many Russian oligarchs have invested in his business.” At the same time Lindsey Graham (R., S.C.) and Sheldon Whitehouse (D., R.I.), who lead the Senate Judiciary Committee’s subpanel on crime and terrorism, already have launched an investigation of Russia’s efforts to influence the U.S. election.

While the situation remains liquid, two things are certain: Trump will have a “kneejerk response” tweet momentarily, and the market will interpret this latest tremor inside the White House as even more bullish.

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