Thursday, December 14, 2017

Bitcoin is not a Bubble

Bitcoin is not a Bubble

For the past three decades, i struggled to understand how we were going to resolve the looming difficulties brought on by the steady and persistent decline in interest rates.

You must first though understand that the value of all money is based on human demand for two things.  One of those happens to be ease of exchange and simple portability.  Cash does that admirably and back in the day bits of metal as well.  Thus the mythical adoration of gold.  Yet all this is based on human need.  Without it we are economically crippled.

The second need is as a convenient store of value.  It is here that our government issued currencies have become unraveled.  Negative interest rates tend to do that and it is becoming more and more widespread.  The fiat printing machine however disguised has saturated the market with a mountain of cash that now cannot be placed.

Add in that we have started the process of exiting the whole oil industry as well and huge amounts of money will come out of that sector of the economy.  This will take perhaps two decades at most but the trend will be abruptly apparent much sooner.

Then along comes Bitcoin.  Every bitcoin has a finite supply and a profitable cost of production that naturally produces a huge body of individual interest just like coinage.  That body of interest will slowly expand and the only way in which that demand can be satisfied is through either mining or price appreciation.

Thus we see today multiple bitcoin clones all been spun out to meet that demand for a store of value.  There remain any number of issues in terms of security and thieves have done the odd hit and run.  all irrelevant and those holes are been steadily been plugged..  Bitcoin essentially works and is slowly shaking off the obvious frauds as well.

That means that when we have surplus cash, we will dump it into a bitcoin clone or even Bitcoin itself secure that most of the time we will actually earn because of expanding demand.  That is a completely novel idea.

New Study Sheds Light On How Earliest Forms Of Life Evolved On Earth

No question that an active volcanic event interacting with the surface provides the massive laboratory for the fabrication of a replicating chemistry able to change the general environment.

I also observe that volcanic  ash is often containing solid crystalline acids which provides an immobile anvil for chemistry as well.  Thus acidic or alkaline pores act as natural test tubes.

Hydrogen peroxide is very small.  Thus it brings maximum mobility and reaction speed.

New Study Sheds Light On How Earliest Forms Of Life Evolved On Earth

A new study led by ANU has shed light on how the earliest forms of life evolved on Earth about four billion years ago.

In a major advance on previous work, the study found a compound commonly used in hair bleach, hydrogen peroxide, made the eventual emergence of life possible.

Lead researcher Associate Professor Rowena Ball from ANU said hydrogen peroxide was the vital ingredient in rock pores around underwater heat vents that set in train a sequence of chemical reactions that led to the first forms of life.

"The origin of life is one of the hardest problems in all of science, but it is also one of the most important," said Dr Ball from the Mathematical Sciences Institute and Research School of Chemistry at ANU.

The research team made a model using hydrogen peroxide and porous rock that simulated the dynamic, messy environment that hosted the origin of life.

"Hydrogen peroxide played multiple roles in the emergence of living systems, and this study investigated how it ensured the randomly fluctuating temperatures and pH levels necessary to energise the production of a chemical world that made life on Earth possible," Dr Ball said.

"Our simulations reveal the importance of long rock pores or lengthy, interconnected porous structures in enabling the creation of long, large molecules."

The research advances upon previous studies by modelling the flow of reactive species through porous rock rather than through a single pore.

Dr Ball said the high temperature fluctuations must not rise too high or occur too often.

"The system needs to spend enough time at higher temperatures to carry out essential synthetic reactions, but not so much that the reactants are totally consumed or destroyed. We call this the 'Goldilocks' distribution," she said.

"This effectively gives us the 'fundamental equation of life'. It says that for life to begin and persist, the habitat must exhibit a specific range of temperature fluctuations."

This result provides new and valuable guidelines in the search for extraterrestrial life.

Hydrogen peroxide also promoted the evolution of enzymes called catalases that prevented a second 'origin of life' event.

"The ubiquitous presence of life, and hence catalases, in all habitable environments prevent hydrogen peroxide from accumulating sufficiently anywhere to drive a second origin event," Dr Ball said.

"Evolution can be thought of as burning a succession of small bridges. But the first cellular life destroyed probably one of the most important bridges, the one that spanned the living and non-living molecular worlds.

"Any chance of rebuilding that bridge was permanently rubbed out by the persistence of catalases throughout subsequent evolution."

The study is published in the international journal Royal Society Open Science.


The Plague that brought down mighty empires is thousands of years older than thought

St Macarius of Ghent Giving Aid to the Plague Victims, 1673 painting by Jacob van Oost

That it was pervasive far back in time is a conformation that it needs ample travel opportunities in oreder to launch a pandemic.  Its actual elimination is mostly about sanitation.  That is why it has mostly disappeared.
Driving it to extinction will beyond our ability.
This still reminds us of our core vulnerability and that is travel from cocoon to cocoon.   Yet rigorous attention to sanitation makes it almost possible to see most disease off.

The Plague that brought down mighty empires is thousands of years older than thought

25 OCTOBER, 2015 - 03:09 MARK MILLER

The Plague is far older than previously known and later changed to become much more virulent—so virulent that it may have contributed to the decline of Classical Greece and the Roman and Byzantine empires and later killed off 30 to 50 percent of Europe’s population, a new study says.

The bacteria that causes the Plague, Yersinia pestis, diverged from the less-pathogenic Y. pseudotuberculosis bacterium about 5,783 year ago.
That divergence, and therefore the bacteria’s possibility of infecting humans, is much earlier than scholars previously estimated.

While the Plague would go on to kill tens of millions of people in Europe and Asia, researchers have found DNA of Y. pestis in the teeth of a Russian person who died 5,000 years ago. They say that although the plague doesn’t appear to have been as prevalent or as virulent in the Bronze Age, even then it may have triggered migrations of populations in Europe and Asia and caused population decreases.

Writing the in the journal Cell, biologist Simon Rasmussen of the University of Denmark and his team say: “Here, we report the oldest direct evidence of Yersinia pestis identified by ancient DNA in human teeth from Asia and Europe dating from 2,800 to 5,000 years ago. … We find the origins of the Yersinia pestis lineage to be at least two times older than previous estimates. … Our results show that plague infection was endemic in the human populations of Eurasia at least 3,000 years before any historical recordings of pandemics.”

The Plague, which can be transmitted from humans to humans or from fleas to humans, has broken out in three pandemics in history. They werexSee all ReferencesTreille and Yersin, 1894 the Plague of Justinian (541–544 AD), which continued intermittently until about 750 AD; the Black Death in Europe, which included the first pandemic from 1347–1351, the Great Plague from 1665–1666 and into the 18th century; and the Third Pandemic, which emerged in China in the 1850s and erupted into a major epidemic in 1894, then spread worldwide as a series of epidemics until the mid-20th century. Earlier plagues, from 430-427 BC in Athens and a plague in the Roman Empire from 165-180 AD may or may not have been caused by Y. pestis, the authors say.

Scanning electron micrograph of a flea, which carry disease, including the plague, that infect people when they bite them. (CDC photo/Wikimedia Commons)

By sequencing Y. pestis DNA, the researchers determined the bacterium underwent genetic changes that increased its virulence and led to far more deaths and catastrophic impacts on society that may even have contributed to the collapse of empires. The authors wrote in Cell:

The consequences of the plague pandemics have been well-documented and the demographic impacts were dramatic. The Black Death alone is estimated to have killed 30%–50% of the European population. Economic and political collapses have also been in part attributed to the devastating effects of the plague. The Plague of Justinian is thought to have played a major role in weakening the Byzantine Empire, and the earlier putative plagues have been associated with the decline of Classical Greece and likely undermined the strength of the Roman army.

They concluded in their article that plague was common 3,000 years earlier than historic texts indicate and may have caused die-offs of humans in the late fourth millennium BC and into the early third millennium BC across Eurasia.

“However, based on the absence of crucial virulence genes, unlike the later Y. pestis strains that were responsible for the first to third pandemics, these ancient ancestral Y. pestis strains likely did not have the ability to cause bubonic plague, only pneumonic and septicemic plague,” they wrote.

Bubonic plague is transmitted by fleas, so this means the Plague likely was transmitted solely by humans earlier in its epidemiology. Around the late second millennium and early first millennium BC, the plague began to be spread by fleas via rats—an extremely rapid mode of transmission. Pneumonic plague affects the lungs, and septicemic plague affects the blood., reporting on the new research, wrote that the Books of Samuel in the Old Testament of the Bible tell of a plague among the Philistines in 1320 BC. The people suffering from it had swellings in the groin. The World Health Organization says such swellings are consistent with bubonic plague. The authors say this may indicate that the highly lethal bubonic plague originated in the Middle East.

Featured image: St Macarius of Ghent Giving Aid to the Plague Victims, 1673 painting by Jacob van Oost (Wikimedia Commons)

By Mark Miller

New study: Massive Aluminum levels in Autism brains, is this the smoking gun for vaccines?

Here it is folks.  we always had the indicative meta statistics that showed a correlation between rising rates of autism and the application of vaccination.  We missed an understanding of the biological pathways.  Science was looking into the obvious though and we have hit pay dirt.  We now know exactly how this all works.

Add in our rising concerns regarding the validity of the whole vaccination meme as applied now for a century and the public health aspect is now a serious concern.  Recall that the alternate explanation for global disease suppression has been the steady rise of successful public sanitation more than anything else.

Then we have the promotion of nasty variants that somehow vaccination can address when that is very unlikely. Add in the plausible probability that the 1918 flue epidemic was caused by an end of war vaccination program used to blow of excess stocks and you really start looking for someone to hang.

 The whole meme is beginning to look like a commercial enterprise based mostly on junk science with scant ambassadress successes that are not seriously controversial...

New study: Massive Aluminum levels in Autism brains, is this the smoking gun for vaccines?

“These are some of the highest values for aluminium in human brain tissue yet recorded.” — Professor Chris Exley of Keele University, discussing new findings of Aluminum levels in the brains of people with autism

BY J.B. HANDLEY November 27, 2017

STAFFORDSHIRE, England — Professor Chris Exley is a formidable scientist, which is perhaps more important than you think, because a study he published today with his colleagues in the Journal of Trace Elements in Medicine and Biology may just be the “smoking gun” to prove that vaccines are triggering autism that we’ve all been waiting for. Professor Exley is a Professor of Bioinorganic Chemistry at Keele University in Staffordshire, England. He received a Ph.D. in a subject that makes him highly qualified to author this latest paper: “the ecotoxicology of aluminium.”

His biography explains how his career has been devoted to the topic of aluminum in the brain:


Professor Chris Exley

“My research career (1984-present) has focussed upon an intriguing paradox; ‘how come the third most abundant element of the Earth’s crust (aluminium) is non-essential and largely inimcal to life’. Investigating this mystery has required research in myriad fields from the basic inorganic chemistry of the reaction of aluminium and silicon to the potentially complex biological availability of aluminium in humans. I am also fascinated by the element silicon in relation to living things which, as the second most abundant element of the Earth’s crust, is also almost devoid of biological function. One possible function of silicon is to keep aluminium out of biology (biota) and this forms a large part of the research in our group. We are also interested in biological silicification.”

Brand new research: How Aluminum Triggers Autism

Back in February, I wrote an extensive article that detailed emerging research, most of it published since 2010, that appeared to explain exactly how, biologically, vaccines administered to babies could be causing Autism through something known as an “Immune Activation Event.” If you haven’t yet, I respectfully ask that you consider reading that article (more than 300,000 reads so far), because Professor Exley’s findings will make even more sense to you for how important this new paper really is:

Big picture, newly published research is demonstrating that the following process is involved with triggering autism (please see a much more extensive explanation of this process at the bottom of this post):


Source : Vaccine Papers

Looking at this chart for a moment, the point of my article was that new published science has provided us with clear, unassailable, scientific answers at EVERY STEP of this process. We know that aluminum adjuvant from vaccines goes straight to the brain, we know it triggers the production of a cytokine known as “IL-6” that has been implicated in autism, and we know it also triggers “Microglial Activation,” which also triggers autism.

I’ll review just a few of the most recent scientific studies that help paint the picture of how autism is created, and then explain how Professor Exley’s work takes things to a new level.

In 2015, a study from Université Paris Est Créteil (UPEC) in France bolstered our understanding that the aluminum adjuvant used in vaccines is a dangerous, biopersistent, and ultimately brain-injuring toxin. (The study demonstrated that aluminum adjuvant slowly makes its way to the brain, where it then stays, possibly forever.)


Click to read

The study explained that aluminum adjuvant can generate a long-term immune response because of its “biopersistence”, which basically means our body has no ability to rid itself of aluminum adjuvant, because its a man-made substance we have no natural designs to eliminate:

“Thus alum and other poorly biodegradable materials taken up at the periphery by phagocytes circulate in the lymphatic and blood circulation and can enter the brain using a Trojan horse mechanism similar to that used by infectious particles. Previous experiments have shown that alum administration can cause CNS dysfunction and damage, casting doubts on the exact level of alum safety.”

Last Fall in 2016, the most important and revealing study yet done on aluminum adjuvant provided more bad news, and more insight.

It’s safe to say that this study’s conclusions have revolutionized our understanding of aluminum adjuvant. From the journal Toxicology, the French study authors were very concerned about the widespread use of aluminum adjuvant:

“Concerns about its [aluminum adjuvant’s] safety emerged following recognition of its unexpectedly long-lasting biopersistence within immune cells in some individuals, and reports of chronic fatigue syndrome, cognitive dysfunction, myalgia, dysautonomia and autoimmune/inflammatory features temporally linked to multiple Al-containing vaccine administrations.”

They also discovered, through mouse-models, a deeply alarming unique characteristic of aluminum adjuvant: low, consistent doses were MORE neurotoxic than a single bolus dose:

“We conclude that Alhydrogel [aluminum adjuvant] injected at low dose in mouse muscle may selectively induce long-term Al cerebral accumulation and neurotoxic effects. To explain this unexpected result, an avenue that could be explored in the future relates to the adjuvant size since the injected suspensions corresponding to the lowest dose, but not to the highest doses, exclusively contained small agglomerates in the bacteria-size range known to favour capture and, presumably, transportation by monocyte-lineage cells. In any event, the view that Alhydrogel neurotoxicity obeys ‘the dose makes the poison’ rule of classical chemical toxicity appears overly simplistic.”

This is a confusing conclusion. The website Vaccine Papers provided further explanation:

“A new paper (Crepeaux et al.) by the Gherardi research group in France reports important results on the toxicity and transport of aluminum (Al) adjuvant in mice. This single study is especially valuable because it looked at many outcomes: behavioral effects, immune (microglial) activation in the brain, and Al transport into the brain. The study tested dosages of 200 , 400 and 800 mcg/Kg, injected intramuscularly (IM). The Al adjuvant used was AlOH (brand name Alhydrogel), the most common vaccine adjuvant in use today. It is used in the tetanus, Hep A, Hep B, HiB, pneumococcal, meningococcal, and anthrax vaccines.

Remarkably, the study found that the lowest dosage (200 mcg/Kg) was the most toxic! For many outcomes, the 400 and 800 mcg/Kg dosages had no observable adverse effects, but the 200 mcg/Kg dosage did.

The low toxicity of the higher dosages appears to be a consequence of dosage-dependent inflammation at the injection site. The high dosages caused intense inflammation at the injection site, forming “granulomas”. The 200 mcg/Kg dosage did not produce granulomas. Granulomas are hard nodules in tissue produced in response to injury, infection or foreign substances. Its a way the body “walls off” injured tissue and prevents the spread of infection or toxins. The granuloma appears to provide protection from Al adjuvant toxicity; apparently the granuloma prevented Al adjuvant particles from leaving the injection site. This explains why the 200 mcg/Kg dosage affected the brain and behavior, while the higher dosages did not. This suggests that it is more dangerous and harmful to administer numerous small injections of Al adjuvant, compared to a large single injection capable of inducing a granuloma.”

The study authors also disputed the way the FDA and CDC currently think about aluminum adjuvant toxicity, basically saying that the current approach is wrong:

“As a possible consequence, comparing vaccine adjuvant exposure to other non- relevant aluminium exposures, e.g. soluble aluminium and other routes of exposure, may not represent valid approaches.”

And, the French scientists finish with a conclusion that all parents should find very troubling:
“In the context of massive development of vaccine-based strategies worldwide, the present study may suggest that aluminium adjuvant toxicokinetics and safety require reevaluation.”

Meet Professor Romain K. Gherardi

There are some true heroes emerging as published research reaches scientific certainty about the vaccine-autism connection, and French researcher Romain K. Gherardi is certainly one of them. Not only were the two studies I just walked you through authored by him, but he appears ready, willing, and able to tell the truth in public, as this recent T.V. appearance demonstrates, just watch (in French with English subtitles):

I’m picturing a press conference with Professor Exley and Professor Gherardi, who’s with me?


Huge gratitude for your help.

2017: Aluminium in brain tissue in autism

The one thing missing from all the work done to date about aluminum and its possible role in autism? Actual brain tissue of people with autism. All the studies published that appeared to be demonstrating strong biological certainty of how the aluminum in vaccines could trigger autism were done with MICE, and Professor Exley and his colleagues’ new research studied the actual brains of people with autism. The conclusions should make you gasp.

Released today.

“The aluminium content of brain tissues from donors with a diagnosis of ASD [Autism] was extremely high…the mean aluminium content for each lobe across all 5 individuals was towards the higher end of all previous (historical) measurements of brain aluminium content, including iatrogenic disorders such as dialysis encephalopathy …We recorded some of the highest values for brain aluminium content ever measured in healthy or diseased tissues in these male ASD donors…Why, for example would a 15 year old boy have such a high content of aluminium in their brain tissues?”

The answer is pretty obvious

Where’s all this aluminum coming from that Professor Exley and his colleagues just found? What source may have experienced explosive growth in the last three decades, perfectly matching the autism epidemic?


Source: Aluminum in Childhood Vaccines Is Unsafe By Neil Z. Miller

I think the answer is fairly obvious. I think the CDC and public health officials from all over the world have some serious explaining to do.

(Please see below for some more background information.)

J.B. Handley is the father of a child with Autism. He and his wife co-founded Generation Rescue, a national autism charity. He spent his career in the private equity industry and received his undergraduate degree with honors from Stanford University. He is also the author of “Did Chinese scientists find autism’s missing puzzle piece?”, “The Only Vaccine Guide a New Parent Will Ever Need” , “An Angry Father’s Guide to Vaccine-Autism Science”, and “7 reasons CDC employees should be “crying in the hallways

Please find two slides developed by the website Vaccine Papers that help explain the aluminum-autism connection, you can get your own copy right HERE.

And another video from Professor Exley back in 2011 discussing aluminum toxicity:

Wednesday, December 13, 2017

Findings From 1960s Study Suggest Sugar Industry Cover Up

Essentially the industry has gotten a pass on sugar for decades.  It is only now with so many researchers in the field that these questions are been retested and those bad results replicated.

In fact a whole string of rackets have been run in the food industry often to dislodge safe well established competitors. Not least is the butter margarine bait and switch. for the past half century.

The science is catching up to all this and unfortunately it is never linked to an aggressive public relations campaign. Thus the actual push back will be slow.  However the increasing power of organic foods will soon reach a tipping point and turn into an avalanche of change.

Findings From 1960s Study Suggest Sugar Industry Cover Up
by Lori Ennis on November 22, 2017

New information from an old study is coming out, and it’s exactly what the sugar industry doesn’t want you to know about.

We share information from new studies all the time, so it’s unusual when an old study sheds ‘new’ light on things. Yet, that’s exactly what is happening now with a study from the 1960s that was sponsored by the sugar industry.

The study was never published, and would apparently seem to have disappeared until its resurrection recently. The study suggested a link between a high-sugar diet and cancer and high cholesterol levels, which is not necessarily new news, but shows that the sugar-industry was aware of issues as long as four decades ago.

Stanton Glantz is a professor of medicine at the University of California, and the co-author of a new paper that was published in the PLOS Biology journal recently. He says that the study was canceled, and nothing was ever published on any findings, and it’s not known whether the primary researcher did try to publish and was blocked, or didn’t even bother trying to publish the results at all, as they would not shine the best light on the sugar industry.

According to the paper’s authors, a group then-called the Sugar Research Foundation might have spun the research data in its favor, as a separate historical analysis of sugar industry-related studies and papers suggest that the Sugar Research Foundation was the sponsor of a program that actually showed that high-sugar diets were not necessarily bad for people, but fat was a dietary culprit instead.
Glantz says this is the kind of manipulation in science that the tobacco industry took part in when it came to manipulation of data that showed inaccurate results about the dangers of tobacco.
The association is now called the Sugar Association and has contested the new PLOS paper, saying that it isn’t actually research but perspective and assumptions about things that happened nearly fifty years ago. Essentially the Association says that the authors of the paper are known critics of the sugar industry, and their opinion is skewed.
Glantz disagrees, however, saying that while the Sugar Association says it was not published because the research was delayed and the budget went over, he doubts that would have been the case if the study had actually shown that sugar didn’t have the detrimental effect the Association knows it did.

Dentist Cristin Kearns was the lead author of the paper and said she learned about the lost study when she was looking at letters between Sugar Research Foundation executives and scientists from 1959-1971. According to Kearns, she was curious as to why the study wasn’t listed in a book of all their research projects, and she was curious about ‘Project 259.’
The preliminary results of Project 259 showed that rats fed high-sugar diets had higher levels of beta-glucuronidase than basic high-starch diets. Beta-glucuronidase has been shown to be linked to increasing risk of bladder cancer. Interestingly, in 1958, Congress passed the Delaney clause, which was to prohibit any food additives that have been shown to induce cancer in humans or animals.
Glantz said that the FDA should have kept any carcinogens out of foods, even if they were only shown to be carcinogenic to animals.

Additionally, the study showed that rats who were given high-sugar diets had elevated triglycerides in their blood, but according to Kearns, only when the rats were stripped of bacteria in their guts, or their microbiomes. Kearns said that that information even then was fascinating due to its relevance about the role of the microbiome that far back.
And while the study only suggests these findings for rats, and not humans, Kearns says that knowing this information would change the way future studies were organized and what they searched for.
That all said, The Sugar Association says the authors of the perspective paper did not even reach out to The Sugar Association, and that there were other reasons the findings were never published, such as budget and time constraints.
Kearns says that’s interesting, as other overlapping studies were continued, but for whatever reason, that one that shed a poor light on sugar was stopped.

Dr. Sanjay Basu is an assistant professor of Medicine at Stanford University and he says that because sugar was not considered a concerning substance years ago, many dietary changes were made (with regard to reducing fats, but not limiting sugars) that actually correspond now to a rise in type 2 diabetes and obesity.

Had this study not been suppressed, who knows what dietary cautions may have been employed, and subsequently, health benefits gained?

Army General Exposes Brutal Truth About What Obama Did For Terrorists

The winning strategy for the military is clear.  Train up local forces to the point that they become highly effective.  Behave as if time does not matter.   That is how the British did it. Afghanistan became the advanced combat school for young officers and soldiers for the British Empire. 

 That meant that no one was terribly inclined to start something anywhere else when anywhere else encompassed  a quarter of the world's surface and perhaps as much of its population..  This is all about establishing your will.

An Empire is sustained through will combined with ample dollops of bullshit.  Loss of will is why it ended.  The American Empire has been slow to learn this and has produced too many fiascos mostly caused by hesitancy.

We now have at least eight years to get it right and Trump is certainly up to it.  The last year has seen the military tighten their grip where needed.  All this encourages our natural allies to up their game...

Army General Exposes Brutal Truth About What Obama Did For Terrorists

-November 27, 2017

The military tends to be very circumspect and adhering to protocol. One doesn’t criticize the current President, the commander-in-chief and it’s rare even to see criticism of a former President.

That’s why it’s pretty significant when one makes a public comment. Especially when a general says that former President Barack Obama gave a psychological advantage to terrorists.

U.S. Army Gen. John Nicholson slammed former President Barack Obama on Monday and said that Obama led jihadists to believe the U.S. military had lost their will.

Gen. Nicholson made that statement in a public video, CNS News reported.

Nicholson did not hold back.

As a result, the Taliban saw U.S. forces as weak and believed they had “lost (their) will.”

“From 2011 to 2016, we telegraphed to the enemy that we were leaving,” Nicholson said in the video.

“We drew down our forces steadily – I’d say too far and too fast – and so the enemy believed that in this contest of wills, we had lost our will,” he continued.

“Number one, I’m concerned about international will, and international will to succeed.”

Nicholson said that previously he had been “very concerned about the level of losses” in Afghanistan.

Under the Obama administration between November 2015 and November 2016, the Afghani government lost control of about 15 percent of the country’s districts.

But all that changed with President Donald Trump.

Citi's Shocking Admission


I am more amazed that they had such an illusion.  What is happening is that the whole world is steadily adjusting to a zero interest monetary situation.  It has never happened before.  If you can borrow all the money you want and pay almost zero interest, you obviously buy hard assets even if they barely earn.  Thus we get the million dollar shack.   

Curiously, in the aftermath of the 2008 silliness the USA lost access to all that cheap money. Housing prices remain low in comparison to Canada.  By that measure the USA has a long way to go in terms of asset appreciation.

The real question is just what does a crash look like in a low interest world?  I do not know.  Lenders have actually lost the incentive to ever sell an asset at a loss when Apache money means they can rotate the asset profitably to another fence post able to accept a loan.. 

Cash flow is also now expanding so demand will easily expand for some time in the USA. 

Citi's Shocking Admission: "There Is A Growing Fear Among Central Bankers They've Lost Control"

Earlier we showed a variation on a VIX chart from Citi's Hans Lorenzen which, if it doesn't impress, or scare you, then nothing probably will.

However, leaving readers unimpressed - and unscared - will not satisfy Lorenzen, which is why the credit strategist who works together with the godfather of rational doom, Matt King, and has been warning for weeks that now is the time to sell credit, unloads in one of the more effusive missives of dripping negativity to hit during this holiday week when one after another equity sellside analyst has been desperate to outgun each other with their ridiculous 2018 year end S&P forecasts.
And while Lorenzen touches on many things, at its core, his warning is straight out of Shumpeter: the longer nothing changes, the greater the crash will ultimately be, a topic which DB's Aleksandar Kocic dissected over the summer, even defining an entirely new term in the process: metastability.

So without further ado, here is Lorenzen explaining why "embellishing the status quo will be the market’s undoing.
Ultimately, extreme valuations, the lack of risk premia, and a lack of responsiveness to tail risks are merely symptoms. The real question is what the skewed incentive structure resulting from that backstop has done to the fabric of markets after so many years. To our minds the answer is that trades and strategies which explicitly or implicitly rely on the low-vol environment continuing, are becoming more and more ubiquitous.

Realised historic vol is de facto an exogenous input to much of the risk management framework that underpins modern finance. With lookbacks extending a few years, an extended period of market stability reduces VaR measures and improves Sharpe ratios. Both allow / encourage investors to take more risk – driving valuations higher and vol lower still, creating a self-reinforcing dynamic. Intuitively, returns should follow flows – money is deployed and the asset price goes up. But in the real world the causation works the other way.
What this means in real-world terms:
Long periods of one-way markets breed survivor biases. The fund manager with lots of beta outperforms, the cautious fund manager underperforms. Either the latter gets on the bandwagon or soon enough outflows from the fund will ensue. Over time, fewer and fewer “critics of the regime” are left standing.

In an asset class where the upside is constrained, like in credit, that dynamic is further reinforced by the fact that a fund manager has to take more and more beta relative to benchmark in order to sustain the level of excess carry that will merely cover costs. The lack of volatility and the super high correlations between credits and the index (Figure 24), leave precious little scope for alpha (Figure 25).

Here we can add another piece to the short vol conundrum, because the closer spreads get to the lower bound, the more explicitly being long credit in itself becomes a short-vol position. With less and less upside remaining, owning credit risk become a question of generating a small amount of carry (or premium) for taking future downside risk – essentially, akin to selling a put option.
Meanwhile, as spreads collapse, as dol implied and realized vol, we are all “happily” ignoring that more risk is being issued into the market than ever before (Figure 26) and that the credit quality of the market keeps slipping – for the first time ever the market cap of the BBBs is about to overtake the rest of the € IG index (Figure 27).

What happens next should be familiar from the last financial crisis: the infamous step up in risk:
When the conventional asset class of choice no longer offers a “decent” return potential, money looks to the next one on the quality spectrum for a pickup. IG funds holding BBs and AT1. DM funds buying EM debt. European and Asian funds holding more and more $ fixed income. Corporates moving their liquidity from money markets to short-dated IG credit funds. Mandate creep in the investment criteria. Even synthetic structured credit is making something of a comeback. The list of tourist trades goes on and on. Most of these too are predicated on the status quo - if volatility and risk premia were to rise, retrenchment back towards the original / natural asset allocation would be swift and uncompromising.

And then, one day, the market will finally discount that the central banks are no longer set to injection trillions in liquidity: that's the moment the public finally begins to admit the emperor is not wearing any clothes.
You could rightly argue that many of these factors are generic to every bull market. The fact that volatility clusters is exactly because of these (and other) selfreinforcing dynamics. But the implicit ceiling on vol / cap on downside from the central bank backstops has, in our view, allowed them to run for much, much longer than would have been possible in a market operating on its own devices.

You could argue that there is nothing to worry about as long as fundamentals remain strong. But those looking at the economic data, corporate earnings or leverage trends to indicate the next turn in markets are looking in the wrong place, if you ask us. Over the last 50 years, only 2 out of 19 corrections in US credit were led by a recession. 12 had no overlap with a  recession at all. In half the corrections, there wasn’t even a discernible turn in the leading economic indicator beforehand. Plainly, there is a long history of market corrections being triggered by other factors than fundamentals – Black Monday in 1987 and the correlation crisis in 2005 are two obvious examples.
Still, judging by the current state of the market, Citi writes that traders "evidently don’t expect a sharp market correction to happen tomorrow."
While the probability of a next-day loss still feels quite low there is an obvious temptation to stay invested a little bit longer for professional investors, tasked not with delivering a return of money, but a return on money and with high frequency. The process of judging that near-term probability manifests itself in the frenzied search for “triggers”. Surely, if one could just get a slightly better call on the next trigger, then it’d be possible to get out just in time before everyone else jams the exit? We don’t dismiss the importance of triggers. Indeed,  when you look back at the last fifty years, nearly every major correction in credit can be associated with a triggering event (Figure 28). With hindsight everything is easy.

Here Citi has some advice: don't look for triggers; instead focus on the big picture.
We are sceptical that hunting for the next trigger is worth the effort. If a trigger seems obvious, then it’s probably obvious to everyone and chances are it will be too late. Triggers are often latent – the long-term problem is obvious, but it is ignored until suddenly it explodes without much warning (think the Greek sovereign debt crisis). Multiple factors often have to  combine to create a triggering event – the GFC wasn’t just about sub-prime, it was about excessive leverage, inadequate regulation, unchecked financial innovation, misaligned rating methodologies, inadequate backstops and a host of other things. The last couple of years have seen several widely peddled “triggering events” crystallise with remarkably little shake out.
So what about the big picture? Here one can argue that in recent years the market simply wasn’t vulnerable with so much central bank money behind it. However, Lorenzen believes that "2018 is different." As we see it, it is now increasingly vulnerable to a mid-cycle, “technical” correction, based on what we have discussed above:
  • Central bank asset purchases are set to be the smallest in a decade (Figure 29). A $1tn of incremental demand versus 2017 is needed from private sources.
  • At least in the US, the opportunity cost of not being invested in credit (i.e. the yield differential to 3m LIBOR) is likely to be the smallest since 2007.
  • The perception of a backstop has facilitated a multitude of trades and strategies that are contingent on a low level of volatility in an increasingly crowded space. Now that backstop is moving “out the money”.
  • Vol is near historic lows and has been so for longer than ever before. More risk than ever before is being issued into a credit market where spreads, on a like-forlike basis, are close to the 2007 tights and where breakevens are wafer thin.
Lorenzen then branches into some chaos theory for good measure:
In the context of a self-reinforcing, herding market, the pivot point where the marginal investor is indifferent between putting more money back into risk assets and holding cash instead is fluid. But when the herd suddenly changes direction, the result is a sharp non-linear shift in asset prices. That is a problem not only for us  trying to call the market, but also for central bankers trying to remove policy accommodation at the right pace without setting off a chain reaction – especially because the longer current market dynamics run, the more energy will eventually be released.
And while not intended to be a conclusion, or even a punchline, the next line from the Citi strategist should scare the living daylights out of anyone: it is a direct admission that central bankers have now lost control.
That seems to be a growing fear among a number of central bankers that we have spoken to recently. In our experience, they too are somewhat baffled by the lack of volatility and concerned about the lack of response to negative headlines.... Our guess is that sooner or later in the process of retrenchment they
will end up going too far – though that will only be obvious with
Frankly, that's about the scariest admission from one of the world's biggest banks that we have read in a long time.
* * *
As for how this period of cataclysmic metastability ends, here is Lorenzen's dire conclusion:
In a fairy tale, turning points come suddenly and unexpectedly. Everything that has long been taken for granted is suddenly in pieces. In that sense markets are not all that different. People have gotten used to the paradigm that has been built up since the Great Financial Crisis. It has been tested on several occasions – 2011, 2012 and 2015 – and on each occasion central banks have overcome the challenge, thus ultimately reinforcing the regime.

The emperor in Andersen’s story was only able to parade around naked because the social norms, customs, conventions and vested interests that had built up over time were so strong that even the blatantly obvious was better left unspoken.

Similarly, the low risk premia, the low level of volatility, the lack of responsiveness to tail risk and spillover of systemic events, the reluctance to sell etc. to us are all indications that the market now has an almost Pavlovian response to central bank liquidity. The mere thought of it is enough to still leave us salivating, even when it is patently in the process of being turned off. Yes, excess liquidity will remain in the system even after central bank net asset purchases fall to zero, but as we have argued, if that money has chosen to stay out of the securities  market now, then why should it seamlessly come flowing in at these valuations when the backstop is moving out the money?

While our conviction in the exact timing and magnitude of the paradigm shift is admittedly low – hence the deliberately very wide range in the scenario forecasts – it is unwavering  when it comes to the broader point that central bank asset purchases will remain the key driver of markets. Exactly because trades and strategies have been built up around an assumption of the status quo, we fear that the inflection point, if / when it comes will be anything but smooth and linear. Indeed, the longer we remain in the current paradigm, the greater the chance that it  ends up being both sharp and painful.

One of our favourite quotes pertains as much to markets as it does to economics:

“In economics, things take longer to happen than you think they will, and then they  happen faster than you thought they could.”
     Rudiger Dornbusch

Surely, that is a sentiment which the emperor who had his vanity and pride shattered so abruptly from the least likely angle would recognise all too well?
We end with one of our favorite pictures: the one we call Yellen's moment of epiphany how it all ends.
No wonder the Fed chair can't wait to get the hell out...


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