By Tyler Durden
Late last Friday, we reported that in a troubling development for all Americans, Barack Obama sided with Saudi Arabia when he vetoed the Justice Against Sponsors of Terrorism Act , better known as the “Sept 11″ bill, allowing Americans to sue Saudi Arabia over its involvement in terrorism on US soil, passed previously in Congress, despite clear signs that the veto may be rejected by both the Senate and the House.

Moments ago, that is precisely what happened, when the Senate voted overwhelmingly 97 to 1, to override President Obama’s veto of a bill letting the victims of the 9/11 attacks sue Saudi Arabia, striking a blow to the president on foreign policy weeks before he leaves office. The vote marks the first time the Senate has mustered enough votes to overrule Obama’s veto pen.
Democratic Leader Harry Reid was the sole NO vote.

As the Hill reported, not a single Democrat came to the Senate floor before the vote to argue in favor of Obama’s position.
Obama has never had a veto overridden by Congress.
Ironically, the White House promptly called the veto the most embarrassing action by lawmakers in years. What it failed to comprehend is that it was Obama’s veto of the Sept 11 that was the most embarrassing action by a US president, perhaps ever.

By Tyler Durden
Time to toss yet another “conspiracy theory” on the composite heap of “theories that became fact.” A recurring theme we have pounded the table on over the past nearly 8 years is that central bank policy has been the primary driver leading to not only a record wealth and income divide, but to such manifestations of populist (and nationalist) fury as Brexit, the gradual collapse of the Eurozone and, of course, Trump.
Moments ago, ECB board member Benoit Coeure, speaking in Rome, said that “low forever” rates would risk tearing up the social fabric. Translated: if extended indefinitely, the ECB’s monetary policy risks the collapse of not only the Eurozone, but also could lead to social unrest, violence and even civil war.
Quoted by Bloomberg, Coeure said that “moving from interest rates being ‘low for long’ to being ‘low forever’ would severely limit the room for maneuver for conventional monetary policy tools, but even more worryingly, it would threaten the contract between generations as well as risk tearing up our social fabric.” Which is a more polite phrasing of what we have said all along: that it is central banks themselves, and their idiotic policies that have led the world to the current unstable state, when mass shootings and/or terrorist activity has become an almost daily event.

By Tyler Durden
On Friday, when we summarized why “It May Be Over For The BOJ” we presented a variety of sellside opinions, all of which were unanimously pessimistic on the BOJ’s latest policy, we observed that the weakest link for the BOJ’s latest incernation of QE, aka QQE with Yield Curve Control, or QQEWYCC (which even rhymes) would be if the 10Y JGB resumed its drift lower into negative territory, coupled with a return to curve flattening, two adverse side effects of its own prior policy which the BOJ is now explicitly trying to undo due to their adverse impact on the local banking and pension sectors.
However, as we noted overnight, in a very ominous development, or what already dubbed the BOJ’s “nightmare scenario” – for both the credibility of the BOJ and the return of VaR shocks first in Japan and soon elsewhere – the 10Y JGB did indeed resume sliding into deeper negative territory, away from Kuroda’s 0% price target, resulting immediately an a resumption in curve flattenting.

As RBC’s Charlie McElligott confirms, upon upon the reopening post-holiday late last week, “we saw the JGB curve ominously FLATTENING, despite the BoJ’s desired steepening message from its Wednesday meeting.

By Tyler Durden at ZeroHedge
In the first legal action brought by fired employees of America’s largest mortgage lender and Warren Buffett’s favorite bank – about whose criminal activity he was vowed not to say a word until after the election to avoid bringing attention to Hillary’s hypocrisy of slamming Wells’ illegal tactics even as she accepts support and money from Wells’ biggest shareholder – two former Wells Fargo employees filed a class action in California seeking $2.6 billion from managers who fueled the creation of fake accounts on behalf of workers who tried to meet aggressive sales quotas without engaging in fraud, and were then demoted, forced to resign or fired.
The lawsuit (Polonsky v. Wells Fargo Bank & Co., BC634475, California Superior Court, Los Angeles County )  filed on Thursday, alleged that “Wells Fargo fired or demoted employees who failed to meet unrealistic quotas while at the same time providing promotions to employees who met these quotas by opening fraudulent accounts.”
The lawsuit on behalf of people who worked for Wells Fargo in California over the past 10 years, including current employees, focuses on those who followed the rules and were penalized for not meeting sales quotas. It accuses Wells Fargo of wrongful termination, unlawful business practices and failure to pay wages, overtime, and penalties under California law.

By Tyler Durden
Submitted by Brandon Smith via Alt-Market.com,
In numerous articles over the past several years I have made observations on a rule of life that I strictly adhere to: that all social conflicts can be boiled down to the reality of two opposing groups — those people who want to control the lives of others, and those people who simply want to be left alone.  You can read more about my philosophy on this in an article I published in 2014 titled ‘Why Is Independence So Frightening To Some People?’
The mainstream media and establishment institutions focused on propaganda will tell you that there are hundreds or thousands of dangerous cultural enclaves and ideologies out there that you should fear.  They will tell tales of rage and suspicion between the rich and the poor, haves and have-nots, whites and blacks, gays and straights, academics and working class, believers and atheists, Muslims and Christians, Republicans and Democrats, Eastern nations and Western nations, etc.  The establishment relies on these divisions as a rationale for the homogenization of cultures — they argue that if we erase borders, religion and sovereignty while enforcing multiculturalism and wealth redistribution, then these groups will have no reason to fight anymore and a Utopian fever orgy will be our inevitable reward.  Yes, it sounds quite magical.

By Tyler Durden
Submitted by Teddy Valle Via PerValle.com,

The market is materially mispricing the strength of the US consumer whose weakness will lead the US economy into a recession in Q117. The divergence is a result of the top 40% of earners who have accrued 84% of all new income and only 34% of new debt since 2013. This strength has driven headline sales figures and accounted for nearly all deleveraging since the financial crisis.
That said, the market has extrapolated the health of top 40% to all consumers, as it corresponds to the current narrative of low unemployment and rising average hourly earnings leading to higher rates of consumption and balance sheet strength.
Due to this misconception, we believe the market has overlooked the deterioration of lower and middle income households who have historically preceded the fall of the top. 
We see this disparity being corrected over the next 6-9 months, as a series of disappointing retail sales and consumption figures lead market participants to the realization that their thesis is imperfect.
This will drive yields lower and handcuff the Federal Reserve, which we see as a very supportive backdrop for gold.
We outline this thesis below.
The True Rate of Unemployment 
The consumer bull thesis has been predicated on robust job growth and declining unemployment leading to higher wages, in turn driving consumption and GDP.

By Tyler Durden
Some interesting, and accurate, thoughts in this morning’s edition of Bill Blain’s “Morning Porridge”, who – despite calling this website a “tabloid” in the past – now agrees with what we have claimed all along for the past 7 years.
* * *
Mint – Blain’s Morning Porridge  September 21st 2016
After a “comprehensive” review of monetary policy, The Bank of Japan has introduced a new package, including QQE – which boils down to managing the steepness of the yield curve.
My Japan Guru, Martin Malone, describes this morning’s news from Tokyo as an all-round WIN – promising inflation by expanding the monetary base to bring down currency, and with the option of lower rates if required. Keeping the curve steep will help banks’ margins as they borrow short and lend long.. BUT! Is it just me thinking that’s a recipe for banking disaster.. “Danger, Danger Will Robinson, Danger”!
It’s a fairly dramatic deep-dive focus from the BoJ – digging even deeper into what I always thought was the function of markets. The BoJ seeks to impose its vision on the Yield curve – which I mistakenly believed was a factor of inflationary expectations and market confidence… rather than government/central banking fiat.

By Tyler Durden
“It’s the greatest thing in the world,” exclaims Alex Sifakis – the 33 year old Florida ‘flipper’ – saying he has never raised this much money this fast (despite teh 14% cost of capital). As Bloomberg reports, house flippers and property developers are increasingly crowdfunding — tapping the virtual wallets of anonymous internet backers on various platforms – because “the amount of money you can raise isn’t limited by anything but their investor base.” As one of the ‘investors’ in this crowdfunded flipfest notes “if something goes bad, you have the asset to fall back on,” but, as Bloomberg rebukes, speed and property loans may not mix — remember 2008?
Bloomberg points out that the house flipper from Jacksonville, Florida, crowdfunded nine deals totaling more than $9 million through RealtyShares over the last two and a half years. A July deal for $1 million took him just 12 hours.

“Generally, raising money takes so much time,’’ said Sifakis, 33. “This offers so much flexibility and time savings. It’s so much better than going to family offices, banks or Wall Street firms.’’
House flippers and property developers are increasingly crowdfunding — tapping the virtual wallets of anonymous internet backers on platforms such as RealtyShares, LendingHome, PeerStreet and Patch of Land.

By Tyler Durden
We find it surprising how, having covered the unprecedented growth in US corporate debt over the past few years, which has more than doubled from $2 trillion at around the time of the financial crisis to approximately $6 trillion currently…

… resulting in a debt/ETBIDA ratio that has never been higher…

… some are still amazed by what is taking place on corporate America’s balance sheets.
Overnight, one person warning how all this will end is TCW Group’s Tad Rivelle, who is the latest to observe that “corporate leverage, which has exceeded levels reached before the 2008 financial crisis, is a sign that investors should start preparing for the end of the credit cycle.”
Rivelle says that “the credit-fuelled expansion inevitably comes to a bad end,” Rivelle, chief investment officer for fixed income at TCW, said in a note sent to investors Tuesday. “We’ve lived this story before.”
He is, of course, right: corporate leverage in America continues to soar to new highs every month, and just in September sales of company bonds passed $1 trillion for the fifth consecutive year according to Bloomberg. Total company debt is at a record 2.4 times collective earnings as of June, according to a Sept. 9 estimate from Morgan Stanley. The ratio fell to 1.7 in 2010 when the U.S. economy started recovering from the Great Recession.

By Tyler Durden
Perhaps it was just a coincidence that one month ago, as we approached the anniversary of last year’s August 24 ETFlash Crash which showed just how broken ETfs can get in a coordinated market selloff during a liquidity vacuum, we previewed “What Would Prompt Another Blow Up Of Risk Parity Funds“, the same funds which suffered acute losses last August just after China devalued its currency and roiled global markets. One of the cataysts listed was a sharp spike in bond yields.
A few weeks later, with bullish positioning across the systematic investor universe (risk-parity, CTAs, etc) at all time, levered highs as JPM observed two weeks ago, that is precisely what happened, when none other than a central bank provided the spark to catalyze the latest episode of risk impairity, a technical term for a mass quant puke. Thanks to the relentless barrage of Bank of Japan trial balloons, which ultimately unleashed a dramatic steepening of the bond curve first in Japan and then everywhere else (as we first explained on September 8), the “risk-parity” rout indeed arrived.
This is what Goldman, which last week downgraded the S&P 500 and Stoxx 600 to a “sell” citing the spike in risk of systematic leverage as one of the reasons for its bearishness, said about the sharp hit to risk-parity.

By Tyler Durden
Authored by Antonius Aquinas,
Former Federal Reserve Chairman Alan Greenspan, who was once laudably referred to as “Maestro” for his supposed astute stewardship of U.S. monetary policy, commented last week on the nation’s current political and economic climate:

We’re not in a stable equilibrium.  I hope we can all find a way out because this too great a country to be undermined, by how should I say it, crazies.

Well, if there is anyone who knows how to “undermine” an economy, it is the Maestro, since it was his “crazed” policies that brought about the 2008 financial crisis which ushered in the Great Recession that continues to this very day.
In a demonstration of how truly clueless Greenspan is about economic conditions, he cautioned that the U.S. is “headed toward stagflation – a combination of weak demand and elevated inflation.” Memo to the Maestro: stagflation is already here and has been for quite a while, especially when real economic gauges are used instead of the phony baloney numbers routinely lied about by the BLS and other corrupt state agencies.
The “crazies” that Greenspan refers to are, of course, the “deplorable” Trump supporters and The Donald himself, who the Maestro contends is responsible for “the worst economic and political environment that I’ve ever been remotely related to.

By Tyler Durden
Submitted by Aaron Chan via MacroVoices.com,
This week, Raoul Pal, founder of Real Vision TV and Global Macro Investor, joined the MacroVoices podcast for a full-length feature interview wherein he sweeps through a plethora of convergent global financial issues. In addition to his thoughts on his long U.S. dollar thesis, the recent sell-off in bonds, gold, central bank policy, and soft commodities, Pal explains why the crumbling European banking system, within a slumping global business cycle, is the biggest systemic risk yet.  This is an interview you don’t want to miss. The episode starts with a weekly market summary and the interview begins at 13:30, which is summarized below.
[embedded content]
Beginning with the U.S. dollar, Pal stands firm on his bullish view and sees a confluence of widening interest rate differentials and structural problems in U.S. dollar funding markets, thus catalyzing the dollar higher:

“There are interesting things happening in the LIBOR and Eurodollar funding markets, which means that U.S. interest rates have shot higher and the interest rate differential between the US and Europe would suggest that something like the Euro should go back to parity. I still think the balance of probabilities lies with the fact this is still a pause in the dollar rally and the dollar goes much higher over time.

By Tyler Durden
“This is stagflation: the Fed is increasingly f#*ked,” exclaimed one veteran trader as Core CPI – among The Fed’s favorite inflation indicators after PCE – surged to +2.3% YoY, the highest since Sept 2008. This is the 10th month in a row above the Fed’s mandated 2% ‘stable’ growth as shelter and healthcare costs continue to surge.
Core CPI growth above Fed mandate for 10th month in a row.

Healthcare and Rent are soaring (bottom right)…

As the cost of living under a roof at night continues to outpace headline inflation…

And Medical Services rose the most since Nov 1982 MoM…

The index for all items less food and energy increased 0.3 percent in August, following a 0.1-percent increase in July.

The shelter index continued to rise, increasing 0.3 percent after a 0.2-percent advance the prior month. The indexes for rent and owners’ equivalent rent both rose 0.3 percent in August, as they did in July. The index for lodging away from home turned up in August, increasing 2.0 percent after a 2.4-percent decline the prior month. The medical care index rose sharply in August, increasing 1.0 percent. The hospital services index rose 1.7 percent, and the index for prescription drugs advanced 1.3 percent. The index for motor vehicle insurance continued to rise in August, increasing 0.5 percent. The apparel index increased 0.2 percent, and the index for tobacco rose 0.

By Tyler Durden
Wondering why the stock and bond markets are tumbling simultaneously? Confused by the market’s apparent inability to follow the mainstream media’s narrative that higher rates are good for markets? Wonder no longer – the answer, as we have previously detailed – is the collapse in so-called “risk-parity” funds that force leveraged long positions in equity and bond markets to be unwound en masse.
The last few days have seen the biggest plunge in risk-parity funds since last August’s market crash…

Which forces the funds to dump bonds and stocks… and as volatility increases the selling is exacerbated in a vicious cycle…

And something yuuge is happening in the VIX complex…

As we previously explained, a generation of traders have grown up with the idea that stock prices and bond yields tend to rise and fall together, as what is good for stocks is bad for bonds (pushing the price down and yield up), and vice versa. However,as The Wall Street Journal reports, this summer, the relationship seems to have broken down in the U.S. Share prices and bond yields moved in the same direction in just 11 of the past 30 trading days, close to the lowest since the start of 2007.

This is far from unprecedented.

By Tyler Durden
A recent “undercover enrollment” investigation conducted by the Government Accountability Office (GAO) found that pretty much anyone can sign up for Obamacare and receive taxpayer funded incentives without having to worry about pesky little details like proving citizenship, identity or income-based needs.  In fact, the study found that every single one of its 15 fictitious Obamacare applications were actually approved for coverage despite intentional application omissions, fictitious identification and citizenship documentation, etc.  Moreover, all of the applications were also approved for federal subsidies which totaled $60,000 per year.
Per the GAO:

Our undercover testing for the 2016 coverage year found that the eligibility determination and enrollment processes of the federal and state marketplaces we reviewed remain vulnerable to fraud, as we previously reported for the 2014 and 2015 coverage years. For each of our 15 fictitious applications, the marketplaces approved coverage, including for 6 fictitious applicants who had previously obtained subsidized coverage but did not file the required federal income-tax returns.

By Tyler Durden
While there has been a plethora of calls by “fully invested” pundits and analysts, urging clients to do likewise, and stay invested in stocks or, better yet, BTFD, following the Friday selloff and the Monday rebound, we have also seen some more cautious recommendations, such as this one by FBN’s JC O’hara, warning clients “Buy the ‘Dead Cat’ Bounce at Your Own Risk.”

Accrdoing to O’Hara, there is simply not “enough convincing evidence to ‘buy the dip,” which follows his August 2 call, in which O’Hara warned not to take the bull market ‘bait’ as narrow ranges tend to end with negative volatility.
O’Hara also looks at the technicals and says that S&P 500’s longer-term momentum, as measured by weekly MACD, has “started to roll over, turning any counter attack by the Bulls into an uphill battle.”
He also writes that the percentage of of stocks making 4-week new lows, at 55%, is short of the +70% level that has been a good buy zone historically, and adds that “a heavy selling day near the start of each month sets the tone for the month.

By Tyler Durden
One month ago we last checked in to see how Goldman’s brand new FDIC-insured depositor operation was doing: we were surprised to find just how much of a success it had become. As we reported at the time, by mid-August, Goldman has netted $1.8 billion in new deposits thanks to its overly generous 1.05% interest rate which is among the highest on offer anywhere. Some 33,000 people who’ve opened accounts, although since Goldman does not have any retail branches or ATMs, these new depositors can’t write checks from their accounts or take cash out of ATMs.

The immediately following logical question was why does Goldman need this cash?  We put forth that “maybe Goldman is simply prudent, and realizes that if the Fed is forced to drain some $2.2 trillion in reserves, bank cash balances will collapse to just a few hundred billions, as we have shown in the below chart netting out excess reserves from bank cash balances.”
To be sure, the moment when the Fed begins selling down its balance sheet and withdrawing reserves is still years away, if it ever comes. Which took us back to the original question:

  “why tempt depositors with such abnormally high rates of interest? We ask, because the last time a “healthy” bank was such a substantial outlier to its peers (a JPM High Yield checking account currently yields about 0.

By Tyler Durden
By keeping interest rates low, the Fed has created a “false stock market,” Donald Trump argued in a wide-ranging CNBC interview, exclaiming that Fed Chair Janet Yellen and central bank policymakers are very political, and should be “ashamed” of what they’re doing to the country, “The Fed is not even close to being independent.”
[embedded content]
Trump said rates are being kept lower to bolster Obama’s legacy…

“Any increase at all will be a very, very small increase because they want to keep the market up so Obama goes out and let the new guy … raise interest rates … and watch what happens in the stock market.”

Doubting whether rates would change while Obama remains in office, Trump said: “[Obama] wants to go out. He wants to play golf for the rest of this life. And he doesn’t care what’s going to happen after January.”

“These crazy, low interest rates, they’re not always going to be this way…”
In response to Trump’s charges about politics influencing the central bank, CNBC reports, Minneapolis Fed President Neel Kashkari told CNBC in a separate interview on Monday there’s no truth to that notion.
And before you dismiss Trump’s commentary as ignorance, like Mark Cuban just did…

Dear Donald, if the @federalreserve is truly political they will announce that if you are elected there will be a HUGE rate increase.

By Tyler Durden
Ahead of this week’s big macro event, Thursday’s retail sales report, Bank of America has, as is customary, released its own internal credit and debit card data. It’s downright ugly.
As BofA’s new chief economist Michelle Meyer writes, “as we know from the choppiness of the monthly data, we are due for a partial payback in 3Q. We already saw a weakening in July retail sales based on both the BAC aggregated card data and Census Bureau figures. Based on the BAC aggregated card data, retail sales ex-autos fell 0.1% mom SA in August, a payback from 2Q strength.”
The details, as per BofA, reveal that “the BAC aggregated card data showed that retail sales ex-autos declined 0.1% mom SA in August. This follows the 0.3% mom decline in July and pushes the 3-month average down to -0.2% mom.” The number would have been even worse if BofA had not decided to adjust out data from the recently bankrupt Sports Authority. As BofA writes, “there is a special factor to account for — we adjusted our data to control for the bankruptcy of Sports Authority, which officially shut stores this month. We expect the Census Bureau will do the same.” In other words, if one did not “adjust” the data for this factor, it would have been an outright disaster.

By Tyler Durden
It appears that Hillary’s pneumonia has spread to global capital markets.
Last Thursday, with the S&P trading just shy of all time highs, we warned readers to “Brace For VaR Shock“, and explained how the BOJ’s surprising intent to steepen its Japanese yield curve could unleash a global bond market selloff, as a result of record high correlations between bond and stock assets. The very next day, accelerated by further hawkish comments by the Fed’s Rosengren who saw a “reasonable case” for a rate hike, the S&P saw its biggest plunge since Brexit as fears about central bank “inaction”, coupled with the realization of the BOJ-driven VaR shock spread through the market, and topped off with news that the Fed’s Lael Brainard was set to deliver an unscheduled last minute speech in Chicago today around noon, which according to some could hint at a September rate hike by the legacy dove.
While it remains to be seen what Brainard will say, the market today is in a sell first, ask questions later mode, as the Friday bond liquidations that started in Japan and spread to the US, has now slammed Europe. Here are some recent indicative levels courtesy of Tradeweb:
SPAIN’S 10-YEAR BOND YIELD RISES TO 1.13 PERCENT, HIGHEST LEVEL SINCE LATE JULY AND UP 4.5 BPS ON DAY – TRADEWEBWEB
PORTUGAL’S 10-YEAR GOVERNMENT BOND YIELD RISES TO TWO-MONTH HIGH OF 3.

By Tyler Durden
In his latest webcast to DoubleLine investors and the general public, the “new bond king” Jeffrey Gundlach, who had taken a one month sabbatical from public appearances after warning (hyperbolically as he explained yesterday) to “Sell Everything, Nothing Here Looks Good“, said that the Fed is determined to show it is independent from market forces, and may hike rates even as investors bet they will not.
As a result, Gundlach said it’s time for fixed-income investors to prepare for rising rates and higher inflation by reducing the duration of their positions, moving money into cash and protecting against volatility. In his presentation titled appropriately “Turning Points” (presented below) Gundlach said that “this is a big, big moment,” predicting that “interest rates have bottomed. They may not rise in the near term as I’ve talked about for years. But I think it’s the beginning of something and you’re supposed to be defensive.”
“They want to show that they are not guided by the markets,” Gundlach told Reuters in a telephone interview following the DoubleLine webcast. “The Fed wants to show, at some point, that they can’t be replaced by WIRP (World Interest Rate Probability). The only way they can do that is to tighten when WIRP is below 50.”
However, by trying to prove its independence from the WIRP, the Fed might be “blowing itself up,” Gundlach warned.

For a long time when it came to Chinese loan creation, analysts would only look at the broadest reported aggregate: the so-called Total Social Financing. And, for a long time, it was sufficient – TSF showed that in under a decade, China had created over $20 trillion in new loans, vastly more than all the “developed market” QE, the proceeds of which were used to kickstart growth after the 2009 global depression, to fund the biggest capital misallocation bubble the world has ever seen and create trillions in nonperforming loans.
However, a problem emerged about a year ago, when it was revealed that not even China’s TSF statistic was sufficient to fully capture the grand total of total new loan creation in China. We profiled this three months ago in a post titled “China’s Debt Is Far Greater Than Anyone Thought“, where, according to Goldman, “a substantial amount of money was created last year, evidencing a very large supply of credit, to the tune of RMB 25tn (36% of 2015 GDP).” This massive number was 9% higher than the TSF data, which implied that “only” a quarter of China’s 2015 GDP was the result of new loans. As Goldman further noted, the “divergence from TSF has been particularly notable since Q2 last year after a major dovish shift in policy stance.

By Tyler Durden
In a post that in retrospect was timed perfectly, yesterday we first warned that the BOJ may be about to unleash a bond “VaR shock”, one that would promptly lead to a global asset contagion, as a result of Kuroda’s surprising eagerness to steepen the yield curve, a move which would lead to an accelerated selling of the long end first in Japan, then across the entire world where some $13 trillion in bonds trade at negative yields. We also explained how “with cross asset correlation soaring, not to mention with risk-party and CTA funds approaching record leverage, the risk is that investors frontrunning a perceived change in the BOJ’s policy in two weeks time could lead to a dramatic selloff in JGBs, which then spreads across to global fixed income markets, all of which trade like connected vessels.”
The warning did not stop there: as we explained previously, in early June, Goldman warned that a sharp 1% spike in rates across the curve in the US alone, would result in MTM losses of $2.4 trillion. That excludes the crossover impact into stocks, as a selloff in bonds
leads to a correlated liquidation across equities, as a result of record leverage for Risk-Parity and other quant funds…

… for whom coordinated selling in both asset classes could lead to dramatic deleveraging, and a positive feedback loop of even more selling.

By Tyler Durden
After what is set to be six consecutive quarters of annual earnings declines – consensus now sees Q3 EPS dropping -2.1% according to Facset when as recently as the end of March, analysts were expecting EPS growth of 3.2% for the quarter – Wall Street has decided that it will take no more of this negativism, and expects S&P500 earnings to soar in the half, as shown in the following Deutsche Bank chart.

There is just one problem: contrary to the cheerful narrative of an earnings recovery, companies have been slashing H2 earnings, and as MarketWatch reports, at least 10 companies this week alone have lowered outlooks for the second half of the year.
Indeed, as we have been warning for months, and as Jeff Gundlach cautioned on his presentation last night…

… the EPS “hockeystick” has been once again indefinitely postponed; in fact what happens next will be a steep drop in forward EPS.
MW admits as much, saying that “Investors expecting the earnings picture to improve significantly in the year’s second half may want to keep an eye on a wave of sales and profit warnings from some large- and small-cap companies this week.” Some examples: Ford Motor, Barnes & Noble, Tractor Supply, SuperValu, Sprout’s Farmers Market,  Pier 1 Imports, General Mills, HD Supply Holdings, EnQuest and Dave & Buster’s are among the companies tempering expectations for their second half.

By Tyler Durden
While his recent warnings about a return to market turbulence may have fizzled as a result of another unprecedented recent round of central bank intervention, by both the BOE and BOJ, who expanded their asset purchase programs to corporate bonds and doubling ETF monetizations, respectively while scapegoating Brexit, the period of calm is ending, and moments ago JPM’s head quant Marko Kolanovic has released a new report, according to which the recent period of eerie, record calm across asset classes is about to end, warning that “we expect a significant increase in realized volatility, correlations and tail risk in September and October.”
According to Kolanovic while a driver of the recent market stability the “relatively stable macro data and a seasonal decline in trading activity” he explains that “a significant driver of the volatility collapse was derivatives hedging effects, also known as pinning”, as well as the near all-time high leverage for Volatility Targeting and Risk Parity strategies. However, “this is all about to change as a number of important catalysts materialize this month (ECB, BOJ, Fed meetings), seasonals push market volatility higher, and leverage in systematic strategies and option positioning provide fuel for volatility.

By Tyler Durden
Last week we posted a chart from Deutsche Bank, showing that with a “global recovery” supposedly taking hold again, central banks are injecting a record amount of liquidity in the form of $2.5+ trillion in annual asset purchases by all central banks (more than $200 billion per month). And while this once again confirms that the “recovery” is once again on artificial foundations, built up entirely from the money created by central bankers, it has at least managed to push the US stock market back to all time highs. 

Today, we show this global domination by central banks from the perspective of Citi, whose Hans Lorenzen has put together a fantastic, Matt King-inspired presentation, asking simply “Where is the utility in marginal QE.” A broad criticism of monetary policy, the presentation carries an amusing footnote: “This presentation does not change any of Citi’s existing, published views on the actual future path of monetary policy. It is merely intended as a contribution to the ongoing debate about the efficacy of available policy tools.” After all, the last thing the market wants is to get a sense that even banks no longer have faith in the central planners.

By Tyler Durden
Just days after the news hit that ISIS’ main propaganda officer, Mohammad al-Adnani, one of the Islamic State’s most prominent leaders, the second in command of Abu Bakr al-Baghdadi, as well as the unofficial spokesman of the terrorist organization, was killed (with a scandal promptly erupting between the US and Russia over who had taken him out), the power vacuum that formed at the top of the Islamic State has been promptly filled, after former Tajik Special Forces colonel Gulmurod Khalimov became the top ISIS battlefield commander in Iraq, after defecting last year and swearing jihad against the West.

Gulmurod Khalimov 
Khalimov is set to take the position vacated by Abu Omar al-Shishani, also known as Omar the Chechen, who was killed in the Iraqi city of Shirqat, south of Mosul. in early July and whom the Pentagon described as Islamic State’s “minister of war.”
What makes the ascent of Khalimov particularly embarrassing for the US is that The former paramilitary unit commander of the Tajikistan armed forces received his battlefield training from American advisors and even came to the United States on several occasions to receive special counterterrorism training through the US State Department’s Diplomatic Security/Anti-Terrorism Assistance program.

By Tyler Durden
Submitted by Michael Shedlock via MishTalk.com,
Hillary Clinton’s approval rating has plunged in the past few weeks to an all-time low.
56% have an unfavorable opinion of Hillary and only 41% have a favorable opinion.
Among registered voters, 59% hold an unfavorable opinion. That’s neck-and-neck with Trump at 60%.

The Washington Post reports A record number of Americans now dislike Hillary Clinton.

Hillary Clinton hit her stride after the Democratic National Convention, riding to a double-digit lead over Donald Trump in some national and swing-state polls — her highest of the year. As of today, though, Americans’ views of her just hit a record low.
A new Washington Post-ABC News poll shows 41 percent of Americans have a favorable impression of Clinton, while 56 percent have an unfavorable one. That’s the worst image Clinton has had in her quarter-century in national public life.
Interestingly, Clinton’s numbers appear to have dropped since that early August poll mostly in groups that have been very supportive of her:
Her favorable rating among women dropped from 54 percent to just 45 percent.
Among Hispanics, it went from 71 percent to 55 percent.
Among liberals, it went from 76 percent to 63 percent.
It’s not clear quite what might have caused Clinton to fall further than ever before.

By Tyler Durden
When we reported on the stunning collapse of South Korea’s Hanjin Shipping, the country’s largest shipping firm and the world’s seventh-biggest container carrier, which earlier today was granted court receivership after losing the support of its banks, we speculated that “the global implications from the bankruptcy are unknown: if, as expected, the company’s ships remain “frozen” and inaccessible for weeks if not months, the impact on global supply chains will be devastating, potentially resulting in a cascading waterfall effect, whose impact on global economies could be severe as a result of the worldwide logistics chaos.”

We did not have long to wait for the aftershocks to emerge. As we first reported last night, just hours after the insolvency news hit the tape, three Hanjin ships promptly found themselves stranded off the California coast, stuck – together with the hundreds of tons of cargo – in legal and financial limbo.
That was just the beginning and as Reuters updates this morning, more Hanjin vessels have been seized at Chinese ports, “further roiling the industry as freight rates jump and manufacturers scramble for alternatives.”

The Korea International Trade Association said on Thursday that about 10 Hanjin vessels in China have been either seized or were expected to seized by charterers, port authorities or other parties.

By Tyler Durden
One month ago, when the first Q2 GDP estimate was released, we reported that if one strips away the consumer part of the economy, the US was already in a recession. 

Overnight, In his latest letter SocGen’s Albert Edwards picks up on this topic, but first dispenses with the usual warning, saying that “the US economy is on crutches, and they are about to be kicked away” adding that “US economic growth is weak yet the labour market is tight. This juxtaposition is keeping the Fed in a quandary on whether to raise interest rates. As it stands it probably will, or will not, depending on which way the wind (data) is blowing that day!”
After the requisite “flip-flop Fed watching”, Albert then proceeds to agree with what we said recently, namely that “the only thing keeping the US out of recession is the US consumer (see chart below). It is difficult to say consumption is driving the economy forward – rather it is like a woodwormridden crutch creaking under the strain of holding up a deadweight economy. This recovery ? the fourth longest in history – is surely nearing its end.