China says it is "seriously concerned" after US President-elect Donald Trump expressed doubts about continuing to abide by the "One China" policy. - BBC

Taiwan is a raw nerve for China, the issue over which they reflexively threaten war. Beijing operates under the "One China principle," which regards Taiwan as a renegade province. This is subtly, but importantly, different to Washington’s "One China policy," which holds that there is only "One China," and that it is up to Beijing and Taipei to resolve the question of legitimate government between them. As a practical measure, the U.S. recognizes Beijing as legitimately representing the government of China, but does not accept Beijing's assertion of sovereignty over Taiwan. Indeed, the U.S. is pledged to defend Taiwan in the event that Beijing seeks to settle matters militarily. - Forbes


One China, Two China's, Three China's

Putin is less a problem than China. China is a problem. Putin and Trump - though I never expected to say the aforementioned in a presidential manner - can muscle China to break off Taiwan. The U.S. has pledged to back Taiwan irregardless in a conflict with Beijing. While the shake up may seem out of place, there are many Taiwanese nationals who want to be separate and wish to be recognized. Taiwan is not recognized as a separate nation by the major supra-national players.

I will not allow my funds to use Hong Kong based accounts, as I don't have faith in China and don't want red-tape or strange issues that could effect me as an international investor. Seoul, Korea is a safe haven for me. China is tough to trust.
Hong Kong and Taiwan need to be independent. I do not know if this is President Trump's plan, but it is not a bad one if he wants to make changes.

When I meet citizens from Taipei, they all mention they are from Taiwan.
Trump calling the President of Taiwan publicly the "President of Taiwan" is radical from a diplomatic perspective, but not radical from a business and economic perspective. Diplomats got us into this mess to begin with, perhaps they deserve to be shaken up a bit.

You can make a ton of assumptions by looking at this chart.
While prices are rising, jobs are vanishing (that is one).

Chart Link
The chart above shows the percentage change in non-farm payrolls with the percentage change in the consumer price index starting in January of 1939. The divide begins in 1970. What is non-farm? Outside of it not being payrolls from a farm "nonfarm payroll is a monthly report generated and reported by the U.S. Bureau of Labor Statistics intended to represent the total number of paid U.S. workers of any business" - Investopedia.
Nonfarm payroll employment is a compiled name for goods, construction and manufacturing companies in the US. It does not include farm workers, private household employees, or non-profit organization employees - Wikipedia

Modern assassinations are interesting, rather scary and in my personal opinion strange but they have not fallen out of favor for the insane or for toughies, unlike dueling or jousting. Adding the mere fact of the potential makes one wish to stay highly old fashioned and bolted up inside. The scare of being assassinated is pretty uncommon in America, and if one were to do a study on the statistics of assassinations I suspect you would see clusters of geographical hotbeds through the decades and crime trends. Regardless - assassinations - I have blogged about them before and one of my more popular posts is about an assassination via a pneumatic umbrella in London: See "Death By Umbrella"

Recent news:
An Ankara police officer dressed in a suit and tie shouted slogans about Syria’s civil war after he killed Russia’s ambassador to Turkey in front of stunned onlookers at a photo exhibition in the Turkish capital on Monday, according to officials and an Associated Press photographer who witnessed the shooting. Police later killed the assailant.

Russia & Turkey assured fellow envoys and grandee's that Russian-Turkish relations will not be affected. Here is a link to the video with the shooter, and live updated via The Independent.

Russian President Vladimir Putin has said the killing of the Russian ambassador to Ankara is designed to spoil Russo-Turkish ties. Mr Putin said the killing of Andrey Karlov in the Turksih capital was also intended to derail the Syria peace process.

Filene's Basement filed Chapter 11 three times in 12 years, essentially Chapter 33, before closing for good. The idea is that a company goes into Chapter 11, restructures and emerges ready to whether the current economic industry conditions, and packed full of long term plan after long term plan for success, or at least an event that leads to value.
Every investment banker appreciates a good loan. However, apparel companies in this day and age cannot afford debt with a premium.
American Apparel is currently liquidating assets and most of it has been sold to Gildan.

Some companies never make it out of bankruptcy, and -- like Filene's -- end up liquidating. But for those that do emerge, and then tumble into bankruptcy again, it's a failure of everyone involved.

- Ed Altman, the Max L. Heine Professor of Finance at the Stern School of Business at New York University (Reuters 2012 Article Link)


Recent News: The retailer secured a $30 million financing package from post-bankruptcy lender Encina Business Credit LLC to fund the costs of its chapter 11 case prior to its November bankruptcy filing.

When all else fails, look to the east - the Middle East! London has been replaced by Asia, and now with a looming Sharia Standard taking place, Gold is still staying as vigilant as ever worldwide.

Gold is not a great investment. In modern times it has made many people money, but that is from volatility, market making and speculation. As for holding value, there are numerous out looks on that.

However, if Indian's continue to flock into the Middle East, and or if the Middle East deals gold out to India and South East Asia then it all makes sense. The funny thing is that gold seems to have lost its luster in English speaking countries. Gold is also a terrible inflation hedge. (See ZermattResearch.com & NBER Slide)

I think Gold is overweight. $700.00 per troy oz is where is should be.  - Chad Hagan


Sharia Gold Standard Link
As the Islamic financial services market grows in size and importance, so does the need for a greater understanding of the intricate matters of Islamic financial services and the application of Shariah guidance. The Islamic financial services industry is also witnessing greater implementation of internationally recognized and standardized Islamic finance guidance. - Shariah Standard on Gold

“Gold has motivated civilizations through the centuries to aim higher and strive harder. Gold is more than just a financial asset; it is an integral component of human life. "
-Dr. Hamed Hassen Merah, 
Secretary-General
Accounting and Auditing Organisation of Islamic Financial Institutions

This is on disposable - not discretionary. Disposable income is the amount of net income a household or individual has available to invest, save, or spend after income taxes.



source: tradingeconomics.com


More info on the topic without charts.

Hooked on (USA) inflation - Chad

The Financial Choice Act
http://www.slideshare.net/chaganomics/the-financial-choice-act

STOCK MARKET CONFIDENCE INDICES - UNITED STATES CRASH INDEX DATA - INSTITUTIONAL (Source: Yale Economic Research)

Date: 12/31/2016
Index Value: 24.74
Standard Error: 4.38

Date: 12/31/2015
Index Value: 40
Standard Error: 4.22

Date: 12/31/2014
Index Value: 28.14
Standard Error: 3.48

Date: 12/31/2013
Index Value: 37.5
Standard Error: 3.36

Date: 12/31/2012
Index Value: 31.34
Standard Error: 3.27

Date: 12/31/2011
Index Value: 22.03
Standard Error: 2.7

++

LABOR FORCE, TOTAL United States 

(Source: World Bank World Development Indicators)

Date: 12/31/2014
Value: 161074378

Date: 12/31/2013
Value: 159815818

Date: 12/31/2012
Value: 159324840

Date: 12/31/2011
Value: 157979096

A rollback of Dodd-Frank makes sense, but it must be limited.
I agree with many anti-inflation hawks that derivatives trading can create mega issues, and the risk from OTC derivatives requires higher capital requirements. 

Here are useful tidbits and articles from the last few months regarding the topic. 

"I think it would be very unfortunate if there is any significant rollback of the regulation which was introduced over the last five years," Adair Turner, who led Britain's Financial Services Authority during the financial crisis and was one of the architects of the new banking rules, said on Wednesday.

The United States "absolutely must" complete unfinished work ending the too-big-to-fail bank problem that helped plunge the global economy into recession eight years ago, an influential Federal Reserve policymaker said on Saturday.

NEW YORK, Dec 3 ― Federal Reserve Bank of New York President William Dudley said US regulators, despite having made the financial system safer and less prone to panics, still had not eliminated the threat posed by institutions considered “too big to fail.” “This is work that we absolutely must complete,” he said in prepared remarks he’s scheduled to deliver Saturday at a conference on financial regulation in New York. “Without a well-functioning resolution process, the consequences of such a failure could still be catastrophic.” Dudley’s comments come amid uncertainty over how far the incoming administration of President-elect Donald Trump will go in dismantling rules designed to prevent a recurrence of the financial crisis of 2007-2009. Republicans in Congress are preparing legislation that would roll back much of the 2010 Dodd-Frank Act that included regulations designed to prevent a repeat of the meltdown. Dudley said the US financial system was “much more resilient” than it was before the crisis, as reforms had made banks better able to absorb shocks and had removed structural issues that made the system more vulnerable. ‘Big problems’ Still, banks had not yet done enough to allow for their own orderly resolution in an emergency, he said. “This requires having clean parent holding company structures, less corporate complexity, and essential service and support operations that are able to continue to operate even when the parent company becomes non-viable,” he said. Dudley also said banks had not done enough to encourage whistle-blowing to expose wrongdoing at an early stage. “Big problems can be nipped in the bud when people speak up and senior management responds appropriately,” he said. Dudley didn’t talk about his economic outlook or monetary policy. Fed officials are set to enter a quiet period on Tuesday ahead of their Dec. 13-14 meeting, when analysts and traders widely expect them to raise their benchmark interest rate for the first time since late last year. Other US central bankers in recent days have signalled their willingness to tighten monetary policy this month, as the jobs market shows signs of improvement and inflation moves closer to the Fed’s target. A Labour Department report yesterday showed hiring increased in November and unemployment fell to a nine-year low of 4.6 per cent. Bloomberg/ Malay

Free Lunch Is Opportunity Cost In Economics - https://en.wikipedia.org/wiki/Opportunity_cost

Just saying: there is such thing as a free lunch, it usually involves a trade off (free lunch at a bar if you order a muinimum of drinks).

TINSTAAFL - There is no such thing as a free lunch. 

The above only makes sense in reference to equity speculators who expect no risk. I do not agree that the comment, acronym, or that the phrase replaces opportunity cost in economics. It is also my opinion that the phrase is dated and out of touch with modern economics.

The Securities Law Blog: Finra fines Lincoln Financial broker-dealer $650,0...: Didn't we do this already? FINRA fined Lincoln Financial last week for failing to secure client data. But 5 years ago, FINRA fined Lin...

Good read. Love this blog. - Chad Hagan

Full Article, Reprint From Lexology 

On November 17, 2016, the Internal Revenue Service (IRS) filed a Petition for Leave to Serve a John Doe Summons (subpoena) on Coinbase in the in U.S. District Court for the Northern District of California. The IRS's position is that a large number of taxpayers, many of them holding Coinbase accounts, have not paid tax on gains from trading in virtual currencies, defined as property by the IRS (IR-2014-36, March 25, 2014). The subpoena requests all records of virtual currency transactions by U.S. persons from January 1, 2013 to December 31, 2015. Coinbase reports to have 4.9 million users worldwide. The petition is based on the authority granted to the IRS in 26 U.S.C. 7609(f). This allows the IRS to request a court to issue a subpoena to third parties for information relating to an unknown individual (John Doe) or unknown class of individuals. In order to prevail, the IRS must establish that: The summons relates to the investigation of a particular . . . group or class of persons; There is a reasonable basis for believing that the group may fail or may have failed to comply with "any internal revenue law"; and The information sought is not readily available from other sources. The IRS's petition is supported by a declaration by Senior Revenue Agent David Utzke that focuses on meeting each of the IRS's three burdens. The declaration is a primer on virtual currencies, how they are bought and sold, tax compliance requirements, and Coinbase. This is all before Agent Utzke explains how the John Doe summons requirements are met: The particular class of persons are "particularized from the general public" by being U.S. "persons who transacted in a convertible virtual currency"; The IRS's "reasonable basis for believing that the group may fail . . . to comply" with IRS laws is grounded on three lines of reasoning: Tax noncompliance increases in the absence of third-party information reporting, which is the case here; In Agent Utzke's experience with virtual currency in IRS cases, each taxpayer has concealed the existence of a virtual currency account; and The information and experience of the IRS "suggests that many unknown U.S. taxpayers engage in virtual currency transaction or structures." The requested materials are not readily available from other sources because, although the blockchain on which the virtual currency transactions take place is public, the blockchain does not record information that identifies the parties to the transactions. In this case, only Coinbase has that information. The petition to issue the subpoena follows the release of a report by the Treasury Inspector General for Tax Administration (TIGTA) calling for additional action to ensure taxpayer compliance with regard to virtual currencies. (TIGTA, As the Use of Virtual Currencies in Taxable Transactions Becomes More Common, Additional Actions Are Needed to Ensure Taxpayer Compliance, Reference Number 2016-30-083, Sept. 21, 2016) Coinbase has responded that it will oppose the petition in court. The statistical evidence, however, indicates that the IRS is likely to prevail...
END ++

Link w/ Data & Image


The above charts shows a forecast.
The RED line is the Fed's 5 Year Forward Rate, the BLUE line shows a forcast of .5% inflationary growth per year over the next few years, begining next year. This is NOT a stretch (2011-2012 inflation rate increased from 1.94 to 2.45% alone). In June, consumer prices increased 1.7% over the previous month alone in Nigeria, according to the National Bureau of Statistics. Granted, the US does not have such inflation volatility.

Here are a few factors to think about:

1. A crack down on illegal workers will (or could) stress the hourly wage index
2. Infrastructure Spending (To be frank: Multi-Trillion Dollar Infrastructure Spending)
3. Trade Isolationism, Increased Import Tariffs, Export Losses

The above situations are already on the agenda. Of course a level of inflation is always there, but I am curious if the above chart is coservative. The chart below has an exponential trendline (in green) showing the uptick from the CPI time series monthly data.

Let us not forget the great inflation of the 1970s, which lasted late 1972 - the early 1980s. Professor Jeremy Sigel, called it: the greatest failure of American macroeconomic policy in the postwar period.



 


From November 14th, 2016 - We’ve had a sentiment shift in the bond market. We’ve seen it, too. People have already started reallocating out of bonds and into stocks.  - Jeffrey Gundlach, CEO of DoubleLine Capital.
See link - Trump Thump whacks bond market for $1 trillion loss.

From an economic perspective, ending trade and "making" corporations stay in the country is not the right move. Nor is printing more money. This is slowest US recovery on record...But we don't need to become ethno-nationalistic isolationists.

What will continue to create more disposable income and more jobs for the middle class?

In this new era of slower growth and political change what is the next proposal? Reaganomics alone will not do it.

To stimulate the economy, the United States and governments worldwide have pursued economic policies, including low interest rates, that have increased the possibility of higher inflation. Like stock prices and interest rates, future inflation is unknown. Therefore, positioning your portfolio to weather various inflation scenarios is a smart move. Although there are effective strategies to counter its corrosive effects, no single investment serves as a reliable hedge in every inflation environment because other powerful forces such as interest rates are simultaneously at work. - John SpotoRead More From The Lowell Sun - http://www.lowellsun.com/business/ci_30608423/protectinginvestments-from-inflation#ixzz4REJjbU1w

Trumpism Has Dealt Economics A Fatal Blow:
https://www.ineteconomics.org/perspectives/blog/trumpism-has-dealt-a-mortal-blow-to-orthodox-economics-and-social-science

Slowest US Recovery On Record: http://www.fool.com/investing/2016/11/27/yes-this-is-the-slowest-economic-recovery-and-that.aspx?source=iedfolrf0000001

Link to chart image published to Google - https://docs.google.com/spreadsheets/d/e/2PACX-1vS3MLwX_pw6TjT6LJCdtl2onqXLVKCufwbXNdo8lvJIohhrM0Y5Q8MVip2HYeHnvSLu2DMtz5Mt9H74/pubchart?oid=1349991098&format=image

If the USA steps out of TPP (as the graphs depict) other trade blocs: APEC and RCEP -  will pick up the pace and cover the gaps.

How Many Deals? Green = 3, Orange = 2, Red = 1 www.zermattresearch.com

Regional Comprehensive Economic Partnership (RCEP), Asia Pacific Economic Cooperation (APEC), Trans-Pacific Partnership (TPP).

I remember those high flying altcoin days. So much speculation about who was using the currency in bulk: drug dealers, crime syndicates, investors, gamblers...I was curious how it would shake out, and it seems the main interest of the IRS is to grab those who used BTC (bitcoin) as a tax evasion vehicle. I can only wonder if they will go after sales tax. Sales tax on black tar heroin or stolen IDs bought from Silk Road would tip the scale, and define the line on how the Feds feel about drug sales tax. However, simple point of sale retail transactions (like pizza or a haircut in Brooklyn) could implicate merchants and penalize seemingly innocent early adapter bitcoin users.

I will add the request is for a three year period of records. There is more in the docket at the bottom of this post. 

Happy (Early) Thanksgiving. 

 

- Chad 

'The IRS further justifies its request by claiming it is targeted toward a specific group of people; namely, US taxpayers who have conducted transactions with virtual currency.'

Vice Motherboard - http://motherboard.vice.com/read/irs-demands-identities-of-all-coinbase-traders-over-two-year-period?utm_source=mbtwitter

IRS Bitcoin Tax Case Document:

https://www.documentcloud.org/documents/3222198-Petition-for-Coinbase-Trader-Identities.html

Ag % - all over the place...

While USD is wrapping up its best week in a year the MXN peso has taken a continued beating. 
Investors are worried if and how Trump policies could effect exports from Mexico, the No. 2 economy in 
Latin America, driving the peso lower and creating expensive money for Mexico. 





While the Peso hit an all time low, Mexico's 30-Year bond had a spike. So far credit ratings have not been effected, but it is too early to tell. Mexico's credit rating was moved to negative in March of this year by Moodys, moving down from stable. Moody's did not mention the US election as a risk but stated: "Subdued economic performance and continued external headwinds will challenge the government's fiscal consolidation efforts and increase the risk that rising debt ratios will not stabilize over the rating horizon."

 


Meanwhile the peso slid against the Israeli Shekel (ISLMXN) and the Singapore Dollar. While both pairs are a tad exotic, it is significant and fully represenative of the global slide of the Mexican Peso. 
 







Mexican Peso margin requirments in Canada have increased, brought on by a loss in value and more risk. The IIROC (Investment Industry Regulatory Organization of Canada) released a statement today after the currency continued a negative streak incuding a 12% drop against the dollar over the past 48 hours.

Much of the concern is from uncertainty. If Trump dismantles NAFTA the peso will stay supressed. However, this is too early for analysis and is pure speculation at this point. NAFTA could be renegotiated but many of the current business is locked in with public companies and North America's precious (but flawed) GDP measurements.
 
T.P.P. could continue without the U.S and Mexico could join trade talks with other sovereigns so as to avoid negative speculation and continued pressure on their economy. Trump is against the T.P.P agreement and Mexico stands to benefit heavily from the 12-country deal, comprising the United States, Singapore, Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, and Vietnam. The Ag industry wants T.P.P. but Trump and his GOP cohorts are against it. It will not happen during the lame duck session, meaning it will not be brought up this year. It is no secret that Mexico was counting on the continued success of NAFTA and the development and deployment of the T.P.P. deal, these outlooks will sideline immediate GDP growth and continue uncertainty for the Mexican economy.

There was a spike...

The Trump victory is essentially Brexit Two, or perhaps more apropos: the US Brexit.








Despite the turmoil of election night, most losses will not sustain.
Arguments can be made that the spikes with ES & GC were due to hedges in place in case of a black swan event. I was asleep at the switch on Trump; I expected a catastrophic GOP loss. However, it does seem that we overreacted to the idea of Trump and - despite it being early - the US markets are not taking hits like Brexit.








Trump is a real estate guy and he may make the right moves. He is not an economist, technologist or a lawyer, but he does know how nuts and bolts industry work (to a degree). I imagine that he will stick to the age old tip of choosing people smarter than yourself, and choosing the smartest person for the job. Let's hope he has goals in sight because he has the ability to pick the greatest group of economic and public policy advisors ever seen. If that is the case then America will turn around. I do not see how we can kickstart deceased industry in the rust belt, and this leads one to think of trade wars, but commodities could be sourced from US suppliers with some increased costs, and America could rebuild + add jobs. Investors and underwriters would need to be willing to pay the premium to rebuild America, and trends show support, especially now. Trump could mandate a municipal bond underwriting trend to rebuild America and we could have a repeat of the 1950's, including a new baby boomer generation, a striving middle-consumer class and bubbles...

This is just one scenario out of many that I envision coming into effect over the next few years. There is no doubt we need infrastructure rebuilding and reinvestment into our country. Private employment hiring is expanding, but will this lead to inflation and or significant pricing bubbles brought on by over investment and over supply?

Here is a quote + chart from Torsten Sløk, Chief International Economist @ Deutsche Bank Securities: "I’m getting many questions about the potential for a significant fiscal expansion and what it means for growth, inflation, and the Fed. The chart below shows that construction worker wage growth is already near 2006-2007 levels and hiring more infrastructure workers for government projects is going to put even more upward pressure on wage inflation."

Gold Since 1975 (F:GC)



Thank you Zermatt