Just how far behind the curve is the Fed?

As the Fed raised its Fed Funds Rate to 1.5~1.75% overnight, one has to question just how far behind is it? 3M Libor rates have surged from 0.5% in 2016, c.1% at the start of 2017 to 2.27% today, the highest levels since 2008.  Normally Libor minus Overnight Index Swap (OIS) rates don’t diverge so much without causing a credit issue. The gap is effectively the market price over and above the risk free rate. At the time of the GFC, the Libor-OIS spread hit 3.5%, with 1% being the detonator level. While it is currently at 0.54% spread, it has risen consecutively for the last 32 sessions.


As Libor drives corporate credit recycling, with corporate debt piles approaching record highs and average credit ratings the worst they’ve been in over a decade (chart below depicts Top tier as AAA and bottom tier as BBB-) we could see the Libor-OIS spread keep expanding.


What could be causing this? If we think logically the US Treasury has to refinance $1.5 trillion over the next 12 months and $8.4 trillion over the next 4 years. Add to that a Fed looking at quantative tapering and a less eager Japan and China as buyers of US$ federal debt then the corporate will undoubtedly get crowded out. The demands for refinancing are not being met with the supply of funds.


Of note, the St Louis Fed reports the YoY increase in inflation reported by the CPI in the US in Feb 2018 was 2.3%. The 10yr breakeven inflation rate is around 2.08%. CPI ex food items is still at 1.9%. In any event the US remains in a negative real yield environment.


The Fed can bang on all it wants about healthy growth, full employment but the depth of problems stored up is getting worse. $9 trillion in unfunded public pension liabilities, $67 trillion in combined public, private and corporate debt…

…many are recently talking of the huge pent-up profit boost to banks which have had such compressed spreads for so long. Indeed that all makes absolute sense from a theoretical (and to date practical) reasoning but banks like those in Australia up to their gills in mortgage debt, rising spreads have far nastier implications for blowing up balance sheets than boosting P&L accounts.

In a sense it is almost futile to call central banks as being behind the curve. The failure to take the harsh medicine of almost two decades ago is gathering momentum in so far as there is not much can left to kick down the road.

Trudeau pushes for more compelled speech


You can’t make this stuff up. The Trudeau government plans to ban front-line public service workers from saying Mr., Mrs., Mother, and Father. In what can only be seen as another push toward more compelled speech legislation,  the majority have to put up with more political correct nonsense for the benefit of peoplekind.

Seriously though, if someone is going to be so irreparably mentally damaged by the misuse of a pronoun that it requires legislation to protect he/she/xie, the victim has far bigger issues that require immediate help. How fragile can one be?

The beauty is that for the 99% of us that identity with our biological make-up must make way for the 1% of which it’s actually only 1% of that who would benefit from this legislation. Take the same sex marriage debate in Australia. The 2015 Census showed that only 0.03% of all couples identified as a traditional marriage and same sex. It isn’t questioning equal rights but most campaigners had next to no idea how many it truly impacted. Yet don’t step in the way, else be shot down as a bigot or homophobe.

To put the shoe on the other foot, shouldn’t our rights to be addressed Mr. or Mrs. be equal to that of those who don’t?  Like Bill C-16 the apparatchiks in charge of introducing these laws are by far and away the least appropriate people to enforce it. What are civil rights if legislation only applies in favour of certain groups? Surely Canada’s social service systems can field and burn in requests on which people wish to be called what without having to blanket ban language.

The laughable fact with respect to Bill-16 (which is designed to protect gender identity and expression), is that the Trudeau government did not consult transgender people widely. The sheer fact that they clump all transgender people as “one” distinct group just shows how ignorant Trudeau’s cabinet is. There aren’t individuals within the trans community who think differently from other trans? Who’d had thought?

Yet the left see that such legislation is all about positive outcomes which judged by the complaints by the transgender community show the opposite. Many transgender people do not want to have their identity widely advertised. Yet this legislation seeks to disrupt others into compelled speech many trans people aren’t calling for.

Welcome to the slippery slope. At least one thing is for sure, if the polls are right and  Trudeau gets booted in the 2019 election, Qantas will happily put him in charge of the political correctness department so as to make sure all of the aircraft safety videos address gender equality over the more important safety aspects.

Truth in advertising?


Imagine if Delta released an ad like this today? 45 years ago it offered military personnel cheap tickets. In an era where sex, drugs and rock’n’roll ruled, such a risqué advert (torn asunder all the promiscuous women are seemingly white) was one can only guess “in step with the times” back then.  Then again the same Delta Airlines has just cut off its association with law abiding NRA members for simply flying to see the inlaws. CM noticed that National Geographic has just issued a formal apology for its racist and bigoted articles from 100 years ago. The editor wrote, “For Decades, Our Coverage Was Racist. To Rise Above Our Past, We Must Acknowledge It.” One would imagine that all the editor did was raise an issue that a majority of its readers never thought about and hold present journalists and photographers to some sort of ‘Day One, Year Zero’ doctrine.

What is it with this “shaming” culture we live in today where corporates must make collective apologies for things that were done before people were born to people who are most likely dead on matters they had zero control over? Just spare the sanctimonious lectures and thought control. I can’t remember the last time I heard a wolf whistle but some want this made a ‘hate crime’. Not condoning it but a wolf whistle is generally viewed as a compliment not a slur. Just like those Hollywood actresses wearing three postage stamps held together by dental floss chanting #METOO all the while they kept quiet about mass sexual harassment because their careers were more important than principle. Spare us the hypocrisy.

Surely people’s sensitivities can’t be such that this should be a jailable offence? Even Qantas staff have been handed newspeak dictionaries on what they can and can’t say to customers to avoid the 0.00001% risk of offending someone. Where do we draw the line? Seems like the line is being drawn further to the point of endorsing a whole industry built on victim culture.

Instead of acknowledging humans have flaws, celebrating differences and accepting it we are being cornered into smaller and smaller ‘legal’ boxes of what is deemed ‘with the times’ and straying outside that risks an innocent person being labeled a bigot, racist, sexist or homophobe. Worse, more laws (like Canada’s M-103 or Australia’s 18-C) risk jail or massive fines for anyone that makes a factual statement. The worst part about it is that lives have been ruined based on trumped up charges willingly egged on by groups like the heavily biased Australian Human Rights Commission, a group that encourages people to lodge complaints but gladly tweets justices it self-serves on its own side  no impartiality

We can all look at the above advert from Delta 45 years later and see it doesn’t really fly (no pun intended) but most of us do not need some sort of state sanctioned manual to ensure we all are indoctrinated to know it is bad form with a law laced on top. Yet this is exactly the type of thing we are seeing day in and day out.

Stopping school massacres in the playground


While kids around America plan to walkout of school to protest for tighter gun control, one sensible police department is putting up this sign. Looking back over school massacres it should not have escaped anyone that the perpetrators are generally the ones that feel betrayed, left out, ignored, bullied or the subject of mockery on social media. In every school such things take place. We’ve all seen the bully and the weakling at play. The “Nigel no friends” taunts.

CM has pointed out the growing rate of single parent households (generally the father) is 40% in the white community and 70% in the black community. Psychological studies have shown boys seem to be more impacted by the lack of a father in the house than do girls. In many cases the perpetrators of these school massacres have had unstable family backgrounds. So these are the kids that are likely dealing with inner feelings of despair and struggling to understand how their place in the world works. Throw bullying on top of this and the feelings of revenge fester, sadly in ways that sometimes end up in Parkland tragedies.

Therefore as much as these kids feel aggrieved and angered enough to march and beat up on politicians, the NRA, it’s members and sponsors perhaps this meme of #walkupnotout is the real lesson that will go far further than banning guns outright to prevent such disasters in the future. These kids who are willing to make a plan over months and years to get their subjective justice won’t stop just because they can’t lay their hands on a firearm. Cars, knives, bomb making or any other means will still be available to them.

So to David Hogg and his fellow student activists don’t forget that to prevent further such atrocities perhaps the most powerful weapon to disarm is actually yourselves taking a step to befriend the outcasts you know exist.

Teachers with guns – 44% of Americans support it. Texas already does it


A CBS Newspoll showed 44% of people (68% of Republicans, 47% of Independents & 20% of Democrats) were in favour of arming teachers at school. In some schools it already exists. This sign is from Argyle High School in Texas. The teachers pack heat. They are required to go through thorough background checks, training which simulates armed attackers and carry permits. Officials at Argyle and other districts in Texas say the policies deter shooters and provide peace of mind, and that other schools should follow their lead by allowing teachers to carry arms. In Texas, school boards must approve the arming of teachers. 170 districts allow employees and in some cases board members to carry firearms, according to the Texas Association of School Boards which equates to 22% of the state’s public school districts allow staff to carry guns, according to the Texas School Safety Center at Texas State University.

As foreign as the concept is to arm teachers , we must not forget that c.10% of schools in the US already have metal detectors to prevent weapons entering the classroom. Indeed a teacher being misidentified as a threat rather than a first responder by SWAT snipers because he or she was firing the weapon in a crisis is a real risk. Moreover many teachers just want to teach. If a student on a rampage knew certain teachers were locked and loaded perhaps they would make themselves initial targets. Surely teachers know this. Still we must assume any teacher bearing arms will do so willingly. Accepting an incentive bonus to do so is still an act of choice.

However it is worth considering that many schools (even schools in other countries) have armed guards at the gates. Schools are generally not fenced or walled in ways that allow singular access. Fire hazards would mean multiple entry/exit points are mandatory. So unless schools are prepared to put multiple guards at multiple access points, school safety will theoretically be compromised. So in order to protect school kids from the risk of future massacres, in the light of this strict adherence to the 2nd Amendment (despite the Democrats’ ability to amend it under Obama), solutions seem rather restricted to seemingly outlandish suggestions of arming teachers.

As written in earlier pieces, dealing with the cause of gun massacres is just as if not more important than outlawing guns themselves. The soaring incidence of broken homes, addiction to prescription drugs leading to narcotics abuse and antidepressants are elements of a decaying society. Merely banning weapons (as much as such programs have worked in Australia) won’t stop a growing problem of mentally unstable people who want to right their subjective view of injustices caused. The use of knives, bombs, cars or other means to perpetrate massacres will be found to replace guns. The other problem is that state laws are so different that navigating a common path is even more convoluted than calculus. Still, the idea that the media is pushing to say that arming teachers is widely rejected is patently untrue.

Gun makers or Drug makers? Who should we be more afraid of?


One by one, more of Corporate America is shunning the National Rifle Association (NRA). There is a touch of irony, perhaps hypocrisy about these moves. For a long time it has served rental car agencies, United Airlines and credit card companies to show their support for the NRA as its membership base was credibly large that it was ‘good for business.’ Despite dozens of massacres after the Columbine High School shooting in 1999 why did they not shun the NRA in the last 19 years? Why didn’t the 14 gun massacres under Obama where Democrats had a majority in the House and Senate cause them to ban guns or automatic rifles period? Now all of a sudden corporates have woken up from their wistful slumber to realize that supporting the NRA may no longer be appropriate “in moving with the times”, the very phrase which is used to silence debate. In the process these corporates pillory all members of an association that in the overwhelming majority of cases are law abiding citizens.

Let’s make it clear. CM is no fan of guns. CM is a fan of laws. A fan of democracy that lets people vote on issues such as this. Changing the constitution is in most countries a matter for the people to decide, not just the handful of politicians within the walls of law making. CM doesn’t need a gun. CM doesn’t want a gun. CM, like most reading this can’t understand why one would want to massacre innocent people with a gun. However we’ve stated clearly that banning guns won’t fix the problem in America. One could easily drive a car through a school campus and mow down dozens of kids during play time. Do we ban cars? The two students who carried out the Columbine massacre had handgrenades, pipe bombs and propane time bombs. While guns were the sole cause of the 15 deaths, these kids had intended to murder 100s in the commons area with the bombs (which were made from everyday off the shelf items).

Although when United Airlines starts taking the moral high ground with respect to the NRA after its own scandals of heavy handedly frog marching passengers off its aircraft it isn’t worth listening to. If these corporates could openly say that running NRA discounts was not worth it on economic grounds in terms of the administration in running such programs one could understand. If they made rational decisions that showed their business would fall of a cliff by supporting the NRA one could understand. It hasn’t happened in 20 years, so why now? If one chooses to fly United for whatever reason (convenience, price, family emergency) will they stop flying it in fear of association with the NRA might be bad for their image? Does the average American, where there are as many guns as people, think ill of the NRA? 32% of US households own guns. Are 32% of households unhinged lunatics? Granted the NRA does itself  little favors in the PR department after such tragedies.

As we’ve written in recent days, the growing incidence of broken homes and the surge in the dispensing of antidepressants to ‘tranquilize’ those who might be tempted into suicidal or homicidal tendencies is a worrying trend. Pharma companies are expected to mint $17bn in antidepressants by 2020.  Should we spurn Eli Lilly’s over-the-counter drugs because they are the evil corporates milking billions from Prozac?

To put it into perspective the total number of overdose deaths involving heroin from 2002 to 2015 jumped 6.2-fold in the US. Automobiles killed around 32,000 people last year or a little over 2x that of heroin overdoses. When adding non-methadone opioids (illicit fentanyl) overdose that number surged to 20,000, a 33% YoY jump on 2014 and 5.9x 2002. Why is it happening? The problem for many prescription painkiller users is that once their bottle ends, the addiction doesn’t stop meaning many switch to heroin to get the same ‘opioid’ hit.

Excessive use of pain relievers make up a large proportion of illicit drug use. Oxycodone is one of the more common type of opiate pain killer and it is highly addictive. In 2010, the US Food and Drug Administration (FDA) required the formulation of OxyContin be changed to make it harder to become addicted to. Talk about loading patients with too much ammunition.

As opioid overdoses rise, companies such as Adapt Pharma have seen sharp rises in the sales of products like Narcan (Naloxone) which basically revives victims from the dead. Narcan publicizes its price that is even insured meaning one can overdose and revive with a $10 co-payment.

94% of insured lives in the US have coverage for NARCAN® Nasal Spray*. According to IMS Health, nearly three quarters (74%) of prescriptions for NARCAN® Nasal Spray have a co-pay of $10 or less**. For those paying cash, ADAPT Pharma has partnered with retail pharmacies to reduce out of pocket costs (Retail is $62.50/dose)…To expand community access, NARCAN® Nasal Spray is available to all qualified group purchasers for $37.50 per 4mg dose ($75 per carton of 2 doses). This pricing is available for all Qualified Group Purchasers, such as first responders (EMS, Fire Department, Police), community organizations and Departments of Health, regardless of size. This pricing represents a 40% discount off the Wholesale Acquisition Cost (WAC) of $125 per carton.”

Price hikes have been a feature of naloxene. As of January 2015, Amphastar’s version of naloxone was up to $41 a dose, according to Fierce Pharma, a pharmaceutical industry news website. That follows a price increase from $17 to $33 a dose back in October 2014, according to data provided by Truven Health Analytics. So not only is volume spiking, so is price. Walgreens has expanded the availability of prescription-free naloxone to 33 states.

West Virginia health officials are responding to opioid overdoses by distributing more than 8,000 kits with Naloxone that can get people breathing again if administered in time. Money for the kits comes from a $1 million federal grant to West Virginia, which has had the nation’s highest rate of overdose deaths at 41.5/100,000 people.

Local emergency medical services agencies in West Virginia administered 4,186 doses of Naloxone in 2016, up from 3,351 the year before and 2,165 two years ago and that data doesn’t include uses by hospital emergency departments, urgent care centers, first responders and family members.

The gun industry in America is around $11 billion. 35,000 work in the manufacture of guns and ammo. There are 50,000 retailers in the US. 32% of American households possess a firearm. One-third. The federal government collects $132 million in taxes on guns. 17 million background checks for gun purchases are conducted annually.

By all means let’s have common sense debates on regulation surrounding guns. Sending memes of Republicans on the payroll of the NRA can be met with as many Democrats accepting fortunes from the pharmaceutical lobby so as to prevent price cuts being driven through Congress. While guns maybe noisy killers, pharmaceutical companies are  in a sense becoming (or already become) stealthy silent assassins. Their drugs causing patients to switch to harder substances. 13% of adolescents are on antidepressants. Thirteen percent. 68% of them have taken antidepressants for 2 years and a quarter for over a decade,

The tragedy of school shootings is awful in every conceivable way. How it tears families apart, destroys the lives of survivors who must cope with unspeakable trauma and creates a platform for such horrid knee jerk responses in all forms of media. How the loss of 17 lives takes a back seat to agendas which feed the very opposite of the intention they proclaim. Corporates joining the bandwagon only fuel mixed messaging. It is exactly the type of ‘shaming’ that was so prevalent at the time of the election.

Trying to get the NRA to come around to spreading the word amongst its members that banning bump stocks and certain weapons is feasible won’t occur when corporates and the media publicly kick them. It is never an easy discussion but it only makes members want to dig their trenches deeper. Do people honestly believe that all NRA members would reject common sense proposals about screening, age limits and certain weapons restrictions? Yet that is the picture that is painted. They’re lunatics to a man, woman and child. Let’s hope that United Airlines and others that have spurned the NRA now turn to the drugs list in the company health provider to ensure that those pharmaceutical companies behind so many of the deaths from the explosive concoctions they sell are dealt with in the same way. Here’s a prediction. That hasn’t crossed their minds. So much for pharma companies saving lives. They are cashing in as a growing number of patients check out.

Did you put on your bulletproof vest sweetheart?


Is this the next school uniform? As written yesterday, gun violence in US schools has been a problem for decades. Metal detectors have been installed at certain schools since the 1990s. Gun massacres have still occurred. The problem stems from a growing tide of broken homes and kids venting out. The Zero Hour documentary on the Columbine massacre reveals in chilling details how premeditated and well prepared (not to mention preventable) the attack was – propane bombs, pipe bombs, machine guns, pistols and even handgrenades. Perpetrator Eric Harris’s father called up the police on hearing of the shooting fearing his son maybe behind it. The police had received multiple enquiries from concerned parents over death threats Harris had made online to students yet chose to do nothing. Harris and Klebold openly documented their intent in videos and diaries. It is patently clear they wanted revenge for their subjective feelings of having had their esteem crushed by society, especially by more popular class mates. It is clear there were no role models trying to pull them back from the brink.

Still the ‘banning guns will solve it all’ solutions still avoid dealing with the real problem. The psychology of kids lost in a world where they feel outcasts. Feelings of rejection, loss and trodden on self esteem are shown to be time and time again to be a leading factor in kids picking up a weapon and seeking to right perceived wrongs. Many American high school kids drive to school. Can we envisage one deciding to drive a car on campus mowing down students at lunch time? Will banning cars be a solution?

What next? Will parents be decking out kids in bulletproof vests and hoping teachers who are incentived to arm themselves in the class room step up if all hell breaks loose? One wonders whether kids like Harris & Klebold would have been deterred by teachers packing heat. Even worse, SWAT snipers at a distance of 500 meters may not be able to determine at the time who are the ‘bad guys’. Even worse, how terrible it would be for a teacher to be tasked with ‘offing’ a student who he or she teaches in remedial maths class. One would hope the motivation of teachers is to want to educate students to get ahead rather than aim at their head. Or have things got so bad in some schools that such a remedy gets leant a sympathetic ear. Having armed security at schools is less and less a rare occurrence.

In 2015, about 3,000,000 teens ages 12 to 17 had had at least one major depressive episode over the year according to the Department of Health and Human Services. More than 2 million admitted they were experiencing depression in ways that impair daily function. The National Institute of Mental Health reported about 30% of girls and 20% of boys– some 6.3 million teens–have had an anxiety disorder.

A Seattle Children’s Hospital study tracked hashtags people use on Instagram to talk about self-harm. It noted a dramatic increase over the past two years. In 2014 researchers got 1.7 million search results for “#selfharmmm”. By 2015 that number had surged to over 2.4 million.

The American Psychological Association (APA) released a report several years ago during the school year saying that teens report their stress level is higher than levels reported by adults in the past month. Many teens admitted feeling overwhelmed (31%) and depressed or sad (30%) as a result of stress. More than one-third of teens report fatigue or feeling tired (36%).

Sales of antidepressant drugs is expected to be a $17bn industry in the US in 2020, up $3bn from 2015. The National Center of Health Statistics reports the prevalence of teenagers taking such drugs has grown to 13%, in 2015 up from 11% in 2008. 68% of people ages 12 and up said they had been taking their antidepressant for two years or more. A quarter who took antidepressants reported taking them for 10 years or more. Clinical depression affects about 16mn people in the U.S. and is estimated to cost the U.S. about $210 billion a year in productivity loss and health care.

Is this honestly seen as the best way to tackle a mental health crisis? Just dope up teenagers and hope they are comfortably numb so as to not want to do harm to themselves or others? It was shown that Harris had switched antidepressants which could have fueled not quelled his homicidal and suicidal tendencies. This isn’t about guns. It is about ignoring the elephant in the room – stressed out kids with no mentors or role models to coax them out of their problems.

In some respects, schools are only making it worse by pandering to safe spaces and enforcing trigger warnings. Instead of dealing with the psychological problems at source and proactively targeting attention starved kids growing up in broken homes by counselling them in ways to build self esteem and how to get on in the “real” world, the problem will only fester because irrational feelings of hopelessness will get reinforced by ignoring the real issue.

Tranquilizing people with mental issues by molly-coddling them is also the mantra in the world of identity politics. By muzzling people from speaking truths we only build barriers around effective solutions. That regulations around hurting people’s feelings are increasingly being enforced, is it any wonder we are growing a generation of victims who can pin the blame on irrelevant and unrelated things? Healing comes through listening and understanding by open and transparent dialogue. Not by banning it.

Will an hypothetical ban on guns prevent the growing trend of kids growing up in single-parent households (and all of the psychological data which shows clear evidence of a higher rate of delinquency in children) from committing  such terrible acts of violence because they have no access to firearms? Feelings of desperation will only lead them to find other ways of seeking their distorted view of attaining inner peace. More kids will die and at the end the exact same problems will manifest themselves again – what lead to the act? At least in this case, Parkland, Florida shooter Nikolas Cruz survived. Perhaps we will learn much more about the psychological timeline of him if the press can wake up for 5 minutes and stop trying to link the act purely to white supremacy because it fits a narrative.