Deja vu?


Interesting chart from ZeroHedge pointing out the similarities in two equity market corrections that we’ve seen in the past – 1929 and 1987 – vs today. Gluskin Sheff Chief Economist Dave Rosenberg tweeted at the start of March 2018,

Hmmm. Let’s see. Tariffs. Sharp bond selloff. Weak dollar policy. Massive twin deficits. New Fed Chairman. Cyclical inflationary pressures. Overvalued stock markets. Heightened volatility. Sounds eerily familiar (from someone who started his career on October 19th, 1987!).”

Several weeks ago CM wrote,

Perhaps the scariest claim in his report is a survey that showed 75% of asset managers have not experienced the tech bubble collapse in 2000. So their only reference point is one where central banks manipulated the outcome in 2007/8. S&P fell around 56% peak to trough.

“…Hickey cites an interview with Paul Tudor Jones who said that the new Fed Chairman Powell has a situation not unlike “General George Custer before the battle of the Little Bighorn” (aka Custer’s Last Stand). He spoke of $1.5 trillion in US Treasuries requiring refinancing this year. CM wrote that $8.4 trillion required refinancing in 4 years. In any event, with the Fed tapering (i.e. selling their bonds) couple with China and Japan feeling less willing to step up to the plate he conservatively sees 10yr rates hit 3.75% (now 2.8%) and 30 years rise above 4.5%. Now if we tally the $65 trillion public, private and corporate (worst average credit ratings in a decade) debt load in America and overlay that with a rising interest rate market things will get nasty. Not to mention the $9 trillion shortfall in public pensions…

Look at the state of delinquencies in consumer debt among all commercial banks. $36.4 billion or 2.79% of the $13 trillion in outstanding consumer debt.


Last week CM wrote on the blow up in credit card delinquency,

The St Louis Fed shows delinquency rates on credit cards among the smaller banks (above). Presumably the smaller banks have to chase less credit worthy customers because they lack the ultimate battleship marketing cannons of the bigger financial instititutions. We’re back at times worse than the highest levels seen during GFC. Among all banks, we are still away off the $40bn of delinqient credit card debts we’re back at levels higher than those before Lehman’s brought financial markets to a grinding halt.


It looks as though index options look dirt cheap relative to other asset classes. Out of the money short dated put options are trading at cents in the dollar. CM has invested in these products in recent months. With a market looking sicker by the day, risk on has yet to rattle cages of the option markets. A lot of cheap pick up in buying put options providing an easy way to short the market. Gold is also waking up.

Steve Smith should resign. If not he should be sacked


Cheating is cheating. Gaining an advantage outside the rules is cheating. Money and match fees are such nowadays that players seemingly will do anything to win. Cricket was so much better when it was an amateur sport. When a bad decision from an umpire couldn’t be reviewed. It was just part of the game. Sometimes it went with you and others against you. Cricket hasn’t often been about the “spirit” of the game. Not any more.

Of course modern technology can provide instant feedback on the correct decision but I’ve always viewed it as wrong to challenge authority when it suits. Really, what message do we send young kids who grow up to think they can protest any decision they disagree with? What lessons or values get taught? TV cameras are everywhere. How do these sportsmen think they’ll get away with claiming a catch they didn’t take? Now this.

While a full inquiry hasn’t commenced it is clear that the player caught tampering was the one fighting hardest to keep his seat, Cameron Bancroft. However team captain Steve Smith admitted he knew in the press conference. While adamant he won’t step down as captain because it will never happen again (Scout’s honour), if he is found implicated in this mess he should be sacked. Period. So should the coach Darren Lehman. I absolutely admire Smith’s crazy talent as a batsman but find such lapses in judgement no excuse and even less worthy of having the honour of leading a national team. If found guilty he should face a lengthy suspension.

Any board would call on their CEO in the corporate world to resign if he/she hadn’t already volunteered it. Yet sports stars, much like politicians, believe hollow promises that the incident won’t happen again should be punishment enough. Qantas should fly these cheats back economy.

Which brings about the ethics of the game. As Smith is the highest ranked batsman in the world will the authorities go weak and impose lighter sentencing to keep the turnstiles ticking? What message does that send? If Smith is in charge he should take the fall for this shocking behaviour and be fined in the $100,000s.

Australia already has a shocking record for bad sportsmanship most infamously with the underarm delivery against NZ in 1981. This test series has been disgusting in many levels. Players mocking other players about the sexual antics of their wives and so on. Australia should forfeit the match and lose their fees. Cricket Australia should be forced to compensate the fans for this debacle and the players responsible fired. Just because Bancroft was fighting to save his career doesn’t excuse him from wrong doing. Sure, playing for one’s country is the highest accolade but any fan wants to see players reach and stay at the top through their hard efforts not through cheating.

What it does tell us is how terrible the governance is within the Australian team. Where were the whistleblowers?  Or do the millions they earn each year somehow cloud their judgement? How could the coach condone it? He was on TV admonishing fans for sledging players walking up the race after being dismissed. What a hypocrite if he knew what the team was up to. No excuse. South African Captain Hansie Cronje received a life ban for match fixing. While ball tampering is not quite as severe as throwing matches it is still cheating.

Fans will be judging the response by the authorities and Cricket Australia. Will CEO James Sutherland issue an apology and some harsh words to really clamp down on this? Or will he gloss over the sordid tour, hope time will heal and think of dollar signs only because  fans can be treated as mugs.

Ethics? A sign in society today of how little it means.

Domestic Violence & Child Abuse – a global issue


Domestic violence and child abuse – inextricably linked to the breakdown of families. Two distasteful topics to be sure and the stats seem to be getting much worse. In 2015 authorities in the US recorded 3.4mn child abuse investigations from 3.1mn in 2011. For 2015, a nationally estimated 1,670 children died of abuse and neglect, mostly at the hands of their mothers. Alcohol, drug and other substance abuse has been a contributing factor. DV hotlines in America receive approximately 20,800 calls a day according to the National Coalition Against Domestic Violence. In 2016, 57,335 URLs contained child sexual abuse imagery and 2,416 domain names worldwide were linked to this content. This is a 21% increase from 1,991 in 2015. Until recently, most child sexual abuse images were found in the US(57%), but Europe now hosts 60% of all material. 21,000 of these sites are run out of The Netherlands. Internet Watch Foundation (IWF) notes a 258% increase in new website domains being bought specifically to show the abuse of children.

Even in peace loving Japan, domestic violence (DV) has seen a very sharp upturn according to the National Police Agency this week. DV reached almost 70,000 recorded cases in 2016. Between 2010 and 2016, victims of DV have doubled and over 4x since 2005.  The Ministry for Health, Labor & Welfare (MHLW) has 208 child consultation centres which fielded over 88,000 cases in 2014, a 20.5%YoY increase or 22x the level of 20 years ago. Child pornography cases continue to rise in Japan too from 1,342 in 2010 to over 1,800 in 2014 . While a law was passed in July 2014 banning possession of child pornography, sentences only carry a maximum 1 year jail sentence or ¥1mn fine. Sexually explicit manga, anime and computer graphics which display child pornography are exempt because lawmakers view these as outside the scope of real children.

In Australia some 264,000 DV incidents were recorded in 2015.  In 2016–17, about 72,000 women, 34,000 children and 9,000 men seeking homelessness services reported that family and domestic violence caused or contributed to their homelessness according to the Australian Institute of Health and Welfare.

The number of children receiving child protection services in Australia has risen by about 20% over the past 4 years—from 135,000 in 2012/13 to 162,000 in 2015/16. Nationally, emotional abuse was the most common primary type of abuse or neglect substantiated for children (45%), followed by neglect (25%), physical (18%) and sexual abuse (12%). Overall, just over half (51%) of children who were the subject of substantiations were girls (23,000 compared with 22,200 boys). Girls were almost twice as likely to have a substantiation recorded for sexual abuse than boys (16% compared with 8.5%). Boys had slightly higher rates of physical abuse, emotional abuse and neglect than girls (19% compared with 18%, 46% compared with 43%, and 26% compared with 23%, respectively.

According to the American Society of  Positive Care of Children (ASPCC), 14% of all men in prison and 36% of women in prison were abused as children, about twice the frequency seen among the general population.

The Department of Health & Human Services notes that child abuse reports in America involved 7.2 million children. More than one-half (54.1%) of perpetrators were women, 45% of perpetrators were men, and 0.9% were of unknown sex. The majority of victims consisted of three ethnicities—White (43.2%), Hispanic (23.6%), and African-American (21.4%).

According to the American Academy of Pediatrics, children born with fetal alcohol syndrome may develop learning and behavior problems including hyperactivity, poor concentration, and memory problems. The National Institute on Drug Abuse of the National Institutes of Health conducted a study on neonatal abstinence syndrome and determined babies suffering from opiate withdrawal were more likely to have low birth-weight and respiratory complications. 11,000 babies are born to crack dependent mothers each year and cost the state $750mn p.a. to treat. Victims reported with the alcohol abuse child risk factor during their first year, 87.9% of the victims were reported during their first month of life.

These trends are worrying. As an increasing number of countries make it easier to divorce by offering extra support to single parents, responsibility and accountability are being cast aside. The government essentially endorses families to split and get the single parent to marry the state. 40% of White and 70% of black households in America are now single parent. In Japan one quarter of families are now single parent. As we wrote last week, children that grow up in single parent households are far more likely to suffer emotional problems and issues with self-esteem.

Since 2007, the rate of suicide deaths among children between the ages of 10 and 14 in the US has doubled according to the Center for Disease Control Prevention(CDC). Most children under 13 who kill themselves are boys: 76% of those who died in 1999-2015 were male. Since 2014, suicide has become one of the leading causes of death in children aged 10-19 in Japan. 60% of the children and 46% of the young adolescents in the US who died from suicide had problems with friends or family members. School problems and recent crises were noted as common triggers.

Per our previous post, the police department that encouraged school kids to walk up to and communicate with outcast kids as opposed to walking out on school would have far more positive long term impacts. Yet authorities seem more keen on policing political correctness. Running school programs that reinforce ideals of celebrating identity politics that openly discourage traditional families.  Reading through the many years of warnings both school authorities and law enforcement/intelligence authorities had prior to the Parkland, Florida shooter, Nikolas Cruz, committing his schoolyard rampage the egg-shell culture of not tackling his issues head on led to a potentially avoidable tragedy. Yet in today’s culture shaming innocents, scapegoating unrelated organisations, vilifying corporations and pushing expedience after the fact take priority to taking responsibility and looking at ways of preventing the root cause rather than the method.

After reading through these depressing statistics, it is not too hard to envisage things going from bad to worse from here. It isn’t just an American issue but a global trend that only gets harder to treat the longer it festers.

Japanese elderly crime continues to soar


Almost 3 years ago, CM wrote a piece on elderly crime in Japan. It seems the stats are getting worse. The Japanese National Police Agency has reported in its latest report on crime that the elderly (65yo+) are now responsible for almost 40% of all shoplifting in 2016. This is almost double the rate of a decade ago. While much of it is petty crime, there seems a deliberate attempt to ‘break into prison’ as a way to survive. A roof over their head, three square meals a day, no utility bills and unlimited free health care. The only real negative being the harsh prison rules about when one can talk to fellow inmates. To the state, one inmate costs ¥3.8mn to incarcerate and we estimate around ¥300,000 in court and administration fees per incarceration.

Murder in Japan.png

Murder committed by the elderly is also crept up over the last decade to 18.9% of all murders. In absolute terms murders have fallen but for the elderly have remained relatively consistent. Burglary  rates have doubled.

Burglary in Japan.png

Rape statistics also point to a rapid rise in elderly perpetrators.

Rape in Japan

Assault committed by the elderly has also soared to over 4,000 cases with total rates also climbing to new records.

Assault in Japan.png

Intimidation has more than doubled among the elderly too.

Intimidation in Japan.png

Total theft (involving all types) saw elderly percentages jump from 17.5% to 29.4% of the total 115,462 committed that year.

Theft in Japan

Since 2001, the elderly’s representative percentage of the prison population has doubled to be the highest demographic. The Ministry of Justice has expanded prison capacity by 50% over the last decade. One wonders if this has been in preparation for soaring crime rates.

While absolute crime rates are relatively low on an international level, the growing levels confirm a worrying trend.

NRA membership searches up 4900%


At the time media outlets went all guns blazing on the National Rifle Association (NRA), CM warned that it most likely would cause a knee jerk reaction in the opposite direction. We speculated that the hike in membership fee likely reflected a surge in members. As tragic as the Parkland shooting massacre was, CM said that ‘shaming’ NRA members en masse would only make them dig in deeper. As it turns out searches for NRA membership has surged 4900% since Feb 14. People are sick and tired of being bullied into feeling guilty about things they haven’t caused.

CM also mentioned that FedEx had the right approach by not giving in to open threats by student David Hogg calling people to boycott brands who supported the NRA. FedEx openly made their position on guns known but said they aren’t in the business of ramming their politics down the throats of others. Allowing individuals to make personal choices is always better than beating them into submission on any issue.

Many other corporates looked utterly hypocritical in cowtowing to this social pressure. The NRA members to date have undoubtedly served corporate interests well for all the right reasons of profitability. Is it any wonder honest members are upset to have sanctimonious corporate apparatchiks give them unsolicited lectures on responsibility?

Moves by sporting goods stores like Dick’s to ban AR sales and raise the age limit to 21yo looked sensible from the outside. However they had multiple massacres over decades to make that call. The current CEO has been in charge since 1984. Why the u-turn in his conscience? Indeed the company did temporarily suspend sales of ARs after Sandy Hook in 2012 but kept retailing them at the company’s Field & Stream outlets before selling them again at Dick’s. If one looks at its website one can still buy a pump-action shotgun. Not very consistent.

Surely  if Dick’s feels so strongly about gun control perhaps it should stop selling them period. 95% of firearm related murders are committed with handguns. Statistically they’d be better off banning sales of pistols.  There are 50,000 (mostly individual) gun stores in the US who will gladly sell ARs to customers. One seriously doubts that Bob’s Guns in West Virginia will cut off his nose to spite his face until the law forces him too!

According to the Crime Prevention Research Center, murders in US appear to be very concentrated: 54% of US counties (representing 11% of the population) in 2014 had zero murders, 2% of counties made up 51% of the murders, ironically in states with the strictest gun controls – Illinois, NY and California.

The failure to communicate is obvious. Progressives believe that pointing fingers will win the day. Shaming, boycotting and vilifying the very people they wish to convince to put in place more common sense gun laws are given no voice. So the deplorables exercise their voice by doing the exact opposite and signing up in droves to protect what they perceive is the open theft of their freedoms.

As mentioned in earlier posts, ignoring the state of kids growing up in broken homes, surging drug abuse and onerous political correctness being driven through the school system by creating a scapegoat in the NRA only reinforces the rift to reaching any workable solution.

So more hearty congratulations to the left. Until they begin to engage in the debate rather than shut it down look forward to yet further failures in pushing their agenda. God gave us two ears and one mouth so we would listen more and talk less. By thinking the gun debate would be a bullseye for control, they’ve inadvertently turned the weapon on themselves.

The 90th Oscars – viewership down 16%


The Oscars. Who actually takes the time to watch it? The irony is that these supposed social justice warriors think they pack significant political clout. On the one hand actresses still dress as scantily as possible while protesting sexual harassment and women’s rights while on the other stick it to the NRA when so many action or suspense movies glorify gun fights and blood shed. Trump bashing is a regular feature these days and the jokes are plain boring and the audience, what’s left of it, have tuned out.

They can’t have it both ways. In any event viewers voted with their eyes sending ratings down 16%. Perhaps The Oscars could take a lessson from 90 years ago and stick to silent movies!

From a Nielsen:

The 8 p.m.-11 p.m. portion of ABC’s telecast averaged an 18.9 household rating and 32 share in Nielsen’s metered market overnight ratings, which cover about 70% of U.S. TV households. That’s down about 16% from the 22.5/37 rating generated by the 2017 Oscars.

Hypocrisy and Hollywood go hand in hand. One wonders whether Leo DiCaprio flew his eyebrow groomer half way around the world on a private jet when climate change is the biggest problem we face  today.

After decades of digital disruption Hollywood still pushes the idea that they are important enough for us to make an appointment for when Netflix and Fox allow us to watch whatever, whenever On demand in our own living rooms. Times have changed and Hollywood needs to get with them and keep their mouths shut when it comes to thinking they’re remotely living in the real world.

If the status quo is so good why would we vote out the incumbents?


Almost everywhere we look, we’re told by the political class how good our lot is. Our blessed Aussie PM told us, “It has never been a better time to be an Australian.” Boosted asset prices, low unemployment and tepid inflation gives the illusion of real wealth for everyone. As an electorate, if all of that were true, why wouldn’t we be going out of our way to make sure the status quo gets voted back in with similar if not greater majorities? As it stands, more and more incumbent parties are hanging on by their finger nails, being forced to create alliances to stay in power rather than stick to the principles their parties were founded on. The irony is that these grand coalitions are formed on the tenets of ignorant ‘un-populism.’

The latest election cycle shows us that a growing number of people aren’t buying mediocrity. They’re sick of incumbent politicians ignoring them. The current crop of leaders seem to think that being less worse than the opposition is a virtue to be proud of. Yet poverty levels continue to rise and wealth is not trickling down to the masses. Even rising state entitlements have a finite life and the electorate knows it. Being married to the government is not seen as a desirable strategy long term. Deficits keep rising and look increasingly hard to pay down.

Searching through the St Louis Fed database, civilian employment under Obama managed to grow 2.5% on pre-crash levels. So the US loaded up on $9 trillion in short term debt to create 4 million net new jobs. That works out at $2.25 million per worker. Hardly an achievement. Yet despite that economic growth has dithered at the lowest post recession rates ever. As much as we might want to celebrate record low unemployment these are not proud statistics. The quality of jobs keeps going down. $8.4 trillion of this federal debt load needs to be refinanced inside 4 years. $12.3 trillion inside 10 years. While politicians can call the average voter stupid, the daily struggles of the average punter shows how out of touch the law makers are. This was the grand mistake made by Clinton. While she hung out with her elite mates at $1,000 plate dinners in Democrat strongholds in LA, NY and Chicago expecting a coronation, Trump hit the little people and had crowds flocking to see him.

While Trump’s trade tariffs seem daft on the face of it, it was done for the forgotten people who voted for him. He is not concerned about the consequences. That’s the point. So much of his platform appears abhorrent but he is the only politician in danger of being raked over coals for keeping his promises. That’s why he was elected. The status quo had failed to deliver over decades. 80% of the population didn’t benefit from the asset bubble post GFC. The 1% took 42% of those gains. The average Joe and Joanne see this. While they might not fully comprehend it they know enough to see their situation is not much better.

Take a look at Trudeau’s India debacle. Apart from the embarrassing wardrobe saga, the bigger problems came when he blamed the Indians for letting a known terrorist attend a state dinner. The Indians, unsurprisingly, were most unhappy at the accusation. Many look to Trudeau as the posterchild of the left, pushing peoplekind. Telling Canadians that he will convert returning ISIS fighters with haiku poetry, podcasts and comparing them to Italian migrants at the end of WW2 is utterly preposterous to his constituents. Telling his veterans they’re asking for too much flies in the face of love of one’s country. No wonder his popularity continues to dive. His speech to the UN – where he rattled off how Canada was ticking all the UN diversity boxes – was only a quarter full. Not even his own liberal mates rallied to show unity in numbers. It was telling that virtue signalling is all about appearing to do good rather than doing it.  Yet the day before Trudeau presented, Trump spoke of America First and the audience was packed. They might have hated every word that dripped from his tongue but they didn’t miss it for the world. It is hard talk. Not carefully prepared politically correct nonsense.

Take the recent European elections. Germany gave Merkel the worst ever performance of the CDU post WW2. The SPD was even worse. The anti-immigrant AfD stormed to 16%. Is it any wonder that when Merkel’s misguided altruism  showed up on Election Day even she finally conceded we have a problem with “no go zones”. Some may wish to look at the Merkel miracle of growth and low unemployment but the public service in Germany has exploded from 9% pre 2008 crash to 16% today. Not private sector growth but public sector.

The Italian election showed over 60% of the vote went to eurosceptic parties. While volatility has always been a feature of Italian politics, this results showed the discontent underbelly of Italy which has seen poverty jump 50% to one third of the population since Lehman collapsed. While M5S said it wouldn’t form a coalition, all bets are off if it tied up with League. There are plenty of overlaps on the party platforms but the M5S would have to insist on the PM role. The EU would go into a tailspin on such news.

Austria voted in a wunderkind who put the right wing anti immigrant FPO in charge of immigration. Holland saw Wilders claw more seats. Nationalist Marine LePen in France doubled the number of seats ever attained by the Front National. Even Macron is changing his spots looking to introduce national service and take a harder line against migrant crime.

Whether the real statistics of migrant crime are wholly accurate or not is beside the point. It is increasingly seen as an election issue and more EU countries have had enough. They feel their lot is getting worse and view forking out billions in aid for people to settle here is pennies out of their pocket. If the stats are as the government sugar coats them to be in terms of the prevailing prosperity surely the citizens would overwhelmingly back them. Sadly the opposite is true meaning politicians aren’t selling their “compassion” effectively. Too many examples of gagging the police and muzzling the press have surfaced.

That is the thing. If the economy was rosy and bullish and more people felt secure there is a likelihood they would look at the immigration debate in a more positive light. All they see now is millions flocking to Europe as poverty is on the rise and the economy is on the back foot at ground zero. European EU-28 GDP hasn’t grown since Q4 2015. Despite a quadrupling of ECB assets net jobs created post GFC numbers 4 million, labour force participation remains below the peak. However we should not forget that Romania and Bulgaria joined in Jan 2007 and Croatia in 2013 which would add (at a 50% employment ratio) c.20mn meaning that employment in the EU on a like for like basis as a whole is down 16mn jobs ceteris paribus. Even if only Croatia was included then net jobs creation in EU-28 would be a paltry 2mn, or a smidgen above 1%. Anemic.

Yet the political class still doesn’t seem to be learning, especially the EU. Poland and Hungary have formed a pact to reject proposed quotas on migrants. The EU has failed to address the most important question. The wishes of the migrants themselves. It is one thing for the EU to appeal to voters as saving asylum seekers from war torn lands (when 80% are economic migrants by the EU’s own numbers), it is another to forcibly send them to countries that flat out don’t want them. Ask for a show of hands of asylum seekers looking to stay in Germany or head off to Hungary to settle and the likelihood is 100:0. Trying to make Hungarians or Poles feel guilty for being incompassionate is a price they’re clearly willing to pay with losing EU membership. Would we take kindly to a neighbor telling us how to arrange our furniture in the living room or sign a petition to prevent us building extensions even though it is not even in their way? Of course not. Still wagging fingers in disapproval is only likely to steel their resolve.

Flip to the Southern Hemisphere and Australian politics is also exposing the sordid state of the swamp. 5 PMs in 10 years. Now the Deputy PM has had to resign to the back bench and in a last ditched effort to claim some sort of moral high ground with the staffer he was having an affair with. He claimed he would still look after her even though a paternity test might show the kid wasn’t his. What a grub and a slap in the face for his partner to imply she may have been promiscuous. Once again the popularity of the incumbent parties in Australia continues to sink to all time lows. The Labor Party looks to have the next election in the bag but even then the popularity of the opposition leader is woefully tiny.

While the world seems to be in this state of blissful tranquility on the outside, we needn’t probe too deep before seeing how bad things continue to be on the inside. The little people may not have any financial fire power but at the ballot box they have an equal opportunity to stuff those that aren’t listening. Once again Italy shows us it wants change. Call it populism if you must but it is truly a reflection of just how bad things really are and how little ammunition to deal with any future crises remains. The little people are raising their voices. Best heed their words. It is the same reason why as zero chance as Trump looks in 2020, don’t bet against another 4 years in the White House. If the Dems hope that celebrities that talk of #METOO and gun control (all the while they attend Oscars semi-naked and collect their millions doing action films full of explosions and automatic weapons fire) will sway them to a return to the swamp they’re sorely mistaken.