by Zero Hedge - February 28th, 2017 5:00 am
- The report implies that deradicalization, either in specialized centers or in prisons, does not work because most Islamic radicals do not want to be deradicalized.
- Although France is home to an estimated 8,250 hardcore Islamic radicals, only 17 submitted applications and just nine arrived. Not a single resident has completed the full ten-month curriculum.
- By housing Islamists in separate prison wings, they actually had become more violent because they were emboldened by “the group effect,” according to Justice Minister Jean-Jacques Urvoas.
- “Deradicalizing someone does not happen in six months. These people, who have not been given an ideal and who have clung to Islamic State’s ideology, are not going to get rid of it just like that. There is no ‘Open Sesame.’” — Senator Esther Benbassa.
- “The deradicalization program is a total fiasco. Everything must be rethought, everything must be redesigned from scratch.” — Senator Philippe Bas, the head of the Senate committee that commissioned the report.
The French government’s flagship program to deradicalize jihadists is a “total failure” and must be “completely reconceptualized,” according to the initial conclusions of a parliamentary fact-finding commission on deradicalization.
The preliminary report reveals that the government has nothing to show for the tens of millions of taxpayer euros it has spent over the past several years to combat Islamic radicalization in France, where 238 people have been killed in jihadist attacks since January 2015. The report implies that deradicalization, either in specialized centers or in prisons, does not work because most Islamic radicals do not want to be deradicalized.
The report, “Deindoctrination, Derecruitment and Reintegration of Jihadists in France and Europe” (Désendoctrinement, désembrigadement et réinsertion des djihadistes en France et en Europe) — the title avoids using the word “deradicalization” because it is considered by some to be politically incorrect — was presented to the Senate Committee on Constitutional and Legal Affairs on February 22.
The report is the preliminary version of a comprehensive study currently being conducted by a cross-party task force charged with evaluating the effectiveness of the government’s deradicalization efforts. The final report is due in July.
Much of the criticism focuses on a €40 million ($42 million) plan to build 13 deradicalization centers — known as Centers for Prevention, Integration and Citizenship (Centre
by Zero Hedge - February 28th, 2017 4:15 am
While gold prices in dollars has been on a tear – almost erasing its post-Trump losses – the price of the precious metal in euros has soared as European elections loom.
As Bloomberg notes, in the Netherlands, Geert Wilders’ anti-Islam Freedom Party is holding a slim lead in polls before elections next month, and French presidential candidate Marine Le Pen has campaigned on overturning France’s ruling elites.
February is set for the biggest gains (almost 6%) since June 2016 (pre-Brexit) nearing the Maginot Line of EUR1200 once again.
It’s not just precious metals that are bid as a safe-haven. Short-dated German bonds are seeing an avalanche of safe haven flows…
And equity protection costs are soaring…
by Zero Hedge - February 28th, 2017 3:30 am
February in Romania has brought 27 consecutive days of protests against the current government, at a scale unmatched since the Revolution in 1989.
In a record day, more than 600,000 people gathered in the capital’s Victory Square and around the country to overturn a decision by the current ruling party to decriminalize some acts of corruption and abuse of office. This decision was especially self-serving given the high number of party members already serving suspended sentences for similar graft offenses. News outlets around the world have covered the events using flattering words, describing the peaceful riots as a “poetry of international resistance” and a “massive political awakening.”
The resilience—and moderate success—of protesters, in spite of the government digging its heels in and the temperatures dropping, has been undeniably impressive, and has demonstrated an energetic interest in pursuing justice, which, rightly employed, could become the driver of a much needed change in Romanian politics.
Yet at the same time, amongst the shouting against totalitarian measures aimed at changing the penal and civil code, other voices emerged as well. Equally numerous, and sometimes belonging to the same people, they call for stronger ‘democratic’ processes and offer public displays of affection for the European Union. Unsurprisingly, there have also been no mass protests against another fairly recent economic policy which forces supermarkets to ensure at least 51% of their grocery offers are of Romanian provenance. In this regard, many protesters might decry the ‘thieving multinational corporations’, and ask for a government crackdown on tax evasions, in order to provide for socialized healthcare and education.
As much as one agrees with the initial outrage or admires the revolutionary spirit of Romania’s youth, we are inevitably faced with the realization that—as is often the case in modern day revolutions—the message from protesters has hardly been one of true liberty. Rather, these social uprisings eventually coalesce into a murky “anti” movement, unsupported by principles and looking to replace a present evil with another, perhaps less evident but equally harmful.
All this was reminiscent of Mises’s analysis of the ‘sham anticommunist front’ in The Anti-Capitalistic Mentality:
What these people… are aiming at is communism without those
by Zero Hedge - February 28th, 2017 2:45 am
Money may not buy happiness, but, as Visual Capitalist’s Jeff Desjardins notes, it does buy the ultimate flexibility for making financial and lifestyle decisions.
For many of the world’s millionaires, money provides a highly effective means to escape their home country when times get tough. They can pack their bags, and move their family and capital to a location that will provide superior opportunities for prosperity.
According to a new report by New World Wealth, this couldn’t have been truer for 2016, as the amount of millionaire migrants increased by 28% from the previous year.
HUMAN AND CAPITAL FLIGHT
In 2016, there were a total of 82,000 millionaire migrants that left for greener pastures.
France tops the list for a second straight year, as rich people dodge conditions that they consider to be adverse. France has rising religious tensions and populism, but it also has a tax system that is not particularly friendly to the ultra rich. The International Business Times calls the ongoing problem a “Millionaire Exodus”.
China and India both continue to have net outflows of millionaires, but two of the more interesting countries on this list are Brazil and Turkey.
Brazil continues to be deep in economic crisis, with its worst-ever recession likely continuing into its eighth-straight quarter in Q4 2016. The country also recently impeached Dilma Rousseff in August 2016. On the other hand, the Washington Post describes Turkey as a country that is in a “permanent state of crisis”. This may be a fair criticism, since in 2016 there was the assassination of a Russian ambassador, a currency crisis, an economic crisis, and also an attempted military coup.
Like most people, millionaires don’t like uncertainty – and they have the wherewithal and conviction to get out of places that have ongoing issues.
In 2016, Australia was the number one destination for millionaire migrants, with the United States and Canada being close behind.
New Zealand also had the amount of net inflows double, while the UAE remained a popular location for the wealthy in the Middle East.
by ValueWalk - February 28th, 2017 2:40 am
By Jeff Miller. Originally published at ValueWalk.
A Presidential address to Congress is an important occasion. In the first year of a term, it is called just that. In later years, it will be called the State of the Union Address. The circumstances, ceremony, and protocol are the same. I have been watching these speeches for decades, first as a political science and public policy professor and more recently as an investment manager. The combination of these perspectives helps me identify the most important aspects of these events.
The first such speech is especially important as a clue about the new relationship between the executive and legislative branches of government. I previewed Obama in 2009. In 2008 I suggested ideas for the Bush team, predicting that you would not hear that speech. I was (unfortunately) correct in that prediction. My suggestions would have helped to stabilize markets before the 2008 crisis.
The Trump Address
The simple term “address” is quite different from the standard approach of the President. His Inaugural Address is our only example. Most people, including most of the punditry, will be looking for the wrong things. The key points include both style and substance. In the conclusion, I will explain more about why the style is important. Here is your Trump Speech Checklist:
- Initial entry. The Doorkeeper of the House will announce his arrival. A normal entry includes sustained and respectful cheering and a slow, hand-shaking pace up the aisle. It will be our first clue about mutual respect, and especially the President’s respect for Congressional traditions.
- Trump’s target audience. In these speeches, there is always tension between playing to the room or to the TV audience. Trump’s style generally emphasizes the audience in front of him and is fueled by feedback from that audience. Most people do not understand how challenging it can be to remain focused on the larger television audience instead of what you see right in front of you.
- Specific policy statements. Do not expect fresh news. He has already commented on most key issues, but without any real legislation. This is almost a polar opposite of the early days of Obama – early legislative success, but lingering doubt about what was to come next.
- Signals of cooperation – in both directions. Will the President embrace the power
by Zero Hedge - February 28th, 2017 2:00 am
The Michael Flynn Affair is one of those movies where you figure out a jumble of things that don’t make sense as you walk out of the theater.
There has been a deluge of articles about the Michael Flynn affair from an array of political and ideological vantage points, and SLL has reposted some of them. What’s lacking are coherent and cohesive explanations for what would be, if this were a novel or movie, gaping plot holes. The upshot of many commentators is that Trump has underestimated the Deep State, he’s floundering, and so on. This article takes the opposite tack, out of innate contrariness and because President Trump has been so consistently underestimated by both friends and foes.
Why was Michael Flynn cashiered? The administration’s story is that he talked with a Russian diplomat and mentioned lifting sanctions, then lied about his conversations to Vice President Pence. What’s become the conventional subtext is that the intelligence agencies have launched a “soft coup” against Trump, he has been significantly weakened, and the Deep State has scored a major victory.
Plot hole: if Trump had wanted to keep Flynn, he could have kept him and rode out the media firestorm. Blogger The_Real_Fly has suggested there was either a prearranged plan for Flynn to make an early exit, or Trump did an about-face, determined Flynn was not a good fit, and decided to get rid of him. A subplot hole: Flynn, an intelligence veteran, undoubtedly knew his phone was tapped. Either he knowingly said what he said to set a trap, or when the Washington Post story surfaced, Trump saw his chance and got rid of Flynn. He has demonstrated a cold-blooded capacity to quickly cut his losses: “Your fired!” It’s telling that Flynn’s replacement, H.R. McMaster, authored Dereliction of Duty: Lyndon Johnson, Robert McNamara, The Joint Chiefs of Staff, and the Lies that Led to Vietnam. This looks like a classic Trump double down, replacing a maverick the Deep State didn’t like with a bigger one they’ll like even less.
Whatever the real story, Trump has gained valuable leverage on the intelligence agencies. Somebody leaked an intelligence agency transcript of Flynn’s call to the Washington Post, and that’s illegal. Just before he left office, President Obama relaxed limits on
by ValueWalk - February 28th, 2017 1:08 am
By Adventures in Capitalism. Originally published at ValueWalk.
As I scour the world for opportunity, I’m usually looking at macro themes or misplaced pessimism or some other reason for an asset’s current undervaluation with an eventual catalyst. Sometimes, in that process, I simply stumble upon something that is unusually cheap. Normally I choose not to write about these, because being cheap tends to be boring—especially if there’s no added story. After some urging from friends, I intend to write about more of these situations. As always, the hard analytical work is up to you—I’m merely the messenger regarding the situation.
NZME LTD (NZM: Australia) is one of New Zealand’s largest media conglomerates, operating in print, radio and online. In a typical day, by 9am 73% of New Zealanders have engaged with NZME in some way. Every investor hates print newspapers, but New Zealand is somewhat insulated from the forces that have destroyed US papers as there just aren’t that many other options to get domestic news—especially regional news—as opposed to the tens of thousands of options in the US. As a result, while print subscriptions are declining, overall readership is increasing due to online penetration—leading to a slow decline in revenue with a more constant overall EBIT profile. Meanwhile, radio has been more constant, adjusting for some recent volatility in how sales were organized. I expect other business segments to have a negligible impact on the consolidated business. Overall, I don’t expect anything particularly momentous for this business. Results will probably range between meh and bleh, with a focus on cost cutting to offset future revenue declines—which likely leads to rather stable EBIT. In the end, advertisers in New Zealand have a rather constant annual marketing budget and there are only so many channels to push it through. Given NZME’s market penetration, it’s likely to absorb a roughly constant percentage of this revenue over time.
In summary, this is a somewhat boring cash cow which wouldn’t get my attention except for four unique facts. To start with, at Friday’s closing price of AUD $0.66, the shares change hands at roughly four times cash flow. The company reported earnings on Friday and I was pleasantly surprised at the results. I even bought a few more and I almost never pay up above my cost basis. Secondly, studies have shown that spin-offs tend…
by ValueWalk - February 28th, 2017 12:29 am
By Dr. Andrew Stotz, CFA. Originally published at ValueWalk.
Global Equity FVMR Snapshot – February 2017
The consensus estimate for 2017 return on equity (ROE) has been adjusted upwards for Emerging Markets and is now at 11.9% (versus 11.2% in October 2016) and is expected to continue to improve in 2018.
Developed Markets have been adjusted slightly upwards as well to 2017 ROE of 12.8% compared to 12.6% in October 2016. US is still the reason that Developed Markets have higher expectations than Emerging Markets, Developed non-US have ROE expectations at only 10.4% for 2017.
US still has the strongest fundamentals and is the reason that Developed Markets have higher expectations than Emerging Markets, Developed non-US has ROE expectations at only 10.4% for 2017. Latin America is fundamentally strongest in Emerging Markets considering both ROE and dividend payout ratio (DPR).
Japan has the lowest expected ROE and lower DPR than Emerging Markets.
US increases the valuation of Developed Markets now trading at 2017 17.0x price-to-earnings (PE) and 2.2x price-to-book (PB). If we exclude the US, Developed Markets trade closer to Emerging Markets on PB. Developed non-US still trades higher on 2017 15.0x PE versus Emerging Markets at 12.2x PE.
Emerging Europe has a dirt-cheap valuation that drags down the valuation of Emerging Markets.
Looking at ROE/PB, we can see that Emerging Markets are more attractive at 2017 8.2% ROE/PB than Developed Markets at 5.9%. Most ROE for the price-to-book you pay you’ll find in Emerging Europe where you get 13.1% ROE for every unit of PB.
Emerging Markets trade at a PE-to-EPS growth (PEG) ratio of only 0.8 (a rule of thumb is that below 1.0 is cheap) while only Developed Asia trades at a PEG ratio below 1.0 among Developed Markets.
Consensus expects double-digit growth in earnings across the board for 2017, with Emerging Europe being the only exception. Emerging Markets are expected to grow faster than Developed Markets in 2017, with an expected earnings growth of 16.0% versus 12.6%.
The past 2W price performance has been strongest in the US and weakest in Emerging Europe. Looking at the past one year, most regions have returned about 20%, the main standout being Latin America that saw a price increase of 31%.
by Market Shadows - February 28th, 2017 12:04 am
Financial Markets and Economy
Hedge funds are raising their exposure to commodities as prices rally and investors respond to macro shifts including the prospect of accelerating inflation under U.S. President Donald Trump, according to Citigroup Inc.
Contracts to buy previously owned U.S. homes dropped in January on a shortage of inventory in the Midwest and West regions, the National Association of Realtors said on Monday.
The World’s Most Radical Experiment in Monetary Policy Isn’t Working (The Wall Street Journal)
During Japan’s go-go 1980s, Hiromi Shibata once blew a month’s salary on a cashmere coat, wore it a few times, then retired it. Today, her daughter’s idea of a shopping spree is scrounging through her mom’s closet in Shizuoka, a provincial capital.
Don’t be fooled by the biggest black-market gain in a year for Nigeria’s naira.
The rally, sparked by increased sales of foreign-exchange forwards and looser capital controls, is contingent on the central bank continuing to sell down its reserves.
Asian shares edged up on Tuesday, bolstered by gains on Wall Street as investors awaited a speech by U.S. President Donald Trump for signals on tax reform and infrastructure spending.
Asian stocks rose, with Japanese shares receiving support from a drop in the yen overnight, while the dollar maintained gains ahead of Donald Trump’s address to Congress. Crude remained above $54 a barrel.
Unconventional Suncor Does Not Explore For Oil, It Manufactures Oil (Oil Industry Trends & Insights, Seeking Alpha)
Suncor's (NYSE:SU) resource potential is enormous, it has over 30 billion barrels of recoverable oil sands resources, roughly double the amount of its nearest Canadian competitor.
Asset Markets as Banks (Philosophical Economics)
Let’s suppose that you have money on deposit in a bank,
by Zero Hedge - February 27th, 2017 11:30 pm
Before Donald trump took office, he promised to rebuild the US military by diverting a lot more funding into the armed forces. And when he made that promise, he wasn’t just talking about our conventional forces. He also proposed expanding America’s nuclear capability; a position he recently reiterated in an interview with Reuters. He stated that “It would be wonderful, a dream would be that no country would have nukes, but if countries are going to have nukes, we’re going to be at the top of the pack.”
If Trump is really going to reinvigorate our nuclear program (a decision that many experts fear could spark another arms race), then he needs to be very careful about who he listens to. That’s because some of the high ranking officials in our government have some certifiably insane ideas on what a nuclear arsenal should look like. Recently a Pentagon panel known as The Defense Science Board, told the Trump administration that they need to remake our nuclear arsenal into a force that is capable of engaging in a “limited” nuclear war.
According to the report, “The Defense Science Board … urges the president to consider altering existing and planned U.S. armaments to achieve a greater number of lower-yield weapons that could provide a ‘tailored nuclear option for limited use.’”
The strategy behind limited nuclear use sounds deceptively simple. You need to escalate a conflict just enough to end it.
As the theory goes, using low-yield nuclear weapons against an adversary’s conventional forces will demonstrate that you mean serious business and might be crazy enough to launch an all out nuclear attack. This will cause the enemy to “blink” and ultimately back down, rather than risk global thermonuclear war or continue conventional hostilities.
There’s only one problem with the idea of engaging in a limited nuclear war. It simply can’t be done. Any limited nuclear war would eventually lead to a full scale nuclear war.
The lynchpin of a limited nuclear war is the tactical nuke. These are nuclear weapons that have a much smaller yield than a strategic nuke. Whereas a strategic nuke might have a yield of half a megaton or more, a tactical nuke is usually somewhere in the