Sep 17

Today’s News 17th September 2018

  • Watch: 100s Of Illegal Migrants Crossing Balkan Mountain Passes

    Hundreds of migrants are trying to cross the Croatian border from Una-Sana Canton every day…

    GEFIRA points out that, according to the estimates, there are between 3,000 and 3,500 migrants in Bihac, and new groups from many countries of Asia and Africa arrive daily.

    Many of them try to cross the well-guarded border of the Republic of Croatia and continue their journey towards the countries of Western Europe,  through the mountain of Plješevica.

    Members of the Mountain Rescue Service Bihac registered columns of migrants in an attempt to illegally cross the state border near Bihac. 

    Source: krajina

  • Here's How Turkey Stalled The Syrian-Russian Offensive On Idlib

    Authored by Elijah Magnier, Middle East based chief international war correspondent for Al Rai Media

    Turkey is pushing further reinforcements of troops, commando units and tanks into the northern Syrian city of Idlib and around it, for a specific objective: to disrupt the attack against the city by the Syrian forces and their allies supported by Russia.

    Ankara is indeed taking advantage of the Russian slowing down of its strategy to liberate the city from jihadists (including al-Qaeda) due to the US threat to bomb the Syrian Army and government forces under that excuse of “using chemical weapons”. This “chemical weapon” has become part of the battle of Idlib, used as a tool to wage war on Syria just as the war is coming to an end.

    Russia considers the Turkish reinforcements as a breach of the Astana Turkish-Russian-Iranian deal, which limited the number of observation points and the military presence around the city and rural areas of Idlib. Moreover, Russia effectively considers Turkey to be unable to fulfil its commitment to totally end the presence of jihadists, especially including the group of al-Qaeda, stationed in the city and around it.

    In fact, the Turkish president Erdogan has asked for an extended delay to meet the Russian and the Iranian demands related to Idlib. This delay has been rejected by the government of Damascus whose leaders believe it is counterproductive to the interests of the country (to liberate the whole of Syria) and, further, would confirm Russian President Putin’s hesitancy which is apparently due to the US threat.

    Decision makers in Damascus said the following:

    Turkey has offered Russia the protection of its military base in Hmaymeem by preventing any further drone attack against it. The Russian base has been subject to over 55 armed drone attacks, all shot down by the Russian defence system around the base which is on the Syrian coast. Actually, Russia itself is prepared to attack rural Latakia in order to create a safety zone for its base and remove the presence of the jihadists who have claimed responsibility for most of the attacks. 

    Russia has rejected the Turkish offer, asking Ankara to abide by its agreement and eliminate the Jihadists from the city using Turkish influence to avoid the attack. Damascus believes Turkey would like to annex Idlib and is, therefore, rejecting any deal with Turkey beyond the one already signed in Astana which consisted of a commitment to finish off all jihadists.

    Furthermore, according to the sources, Turkey “promised to include Jabhat al-Nusra, aka Hay’at Tahrir al-Sham, within one single army in Idlib to satisfy the Russian demands and show its control over the jihadists. Ankara’s troops are bringing in more military personnel – as Turkey presents it – to support all Turkish proxies in their battle against jihadists who refuse to surrender or merge with the other groups.

    According to recent information provided by Turkish intelligence to Russia and Iran, the Turkish army is prepared to attack any group refusing to submit to Turkey. Moreover, it seems that hundreds of jihadists have left Syria for another destination. Ankara is facilitating the exit- or else- of all jihadists: otherwise, these will have to fight and die in Idlib,” the sources explained. 

    Turkey is asking for more time, to delay the attack against Idlib for few more weeks. In the meantime, Syria’s allies are determined to control the rural area around Idlib, including rural Hama and Latakia. For this purpose, and for fear of a possible attack on Aleppo by jihadists as a way to divert the Syrian forces attack, the allies are sending large numbers of troops digging in for defensive purposes around Aleppo.

    Presidents Putin and Erdogan will meet Monday to discuss the tense Idlib standoff.

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    Syria’s allies and Damascus itself consider Russia to have slowed down the pace of its attack, thus allowing Turkey to raise concerns worldwide about the necessity of the attack on Idlib. Turkey encouraged the US to take its time to prepare its bank of objectives (targets) in Syria in the case it decides to bomb Syria.

    Also, it has pressed the international community, mainly the Europeans, to intervene to prevent a possible “flood of refugees and jihadists towards the continent of Europe in the case of an attack on Idlib”.

    And this week, the two superpowers (Russia and the US) have conducted military maneuvers in the Mediterranean facing the Syrian coast and in Syria (Tanf). So they are indeed “walking on the edge of an abyss” while flexing their muscles to each other.

    According to my sources, Turkey “is asking for more time to solve the situation in Idlib without a fight. Also, it is proposing to solve the issue of tens of thousands of its armed Syrian proxy militants when the political reconciliation has matured. All these indicate strongly that Turkey is not willing to leave Syria”.

    Moscow has substantial strategic interests engaged with Ankara (commercial exchange, armaments, plus facilitating and selling energy) as well as with Tehran (commerce and energy exchange- one consequence of the Turkish rejection of the US unilateral sanctions on Iran). President Erdogan is playing on this strategic relationship to stop the battle of Idlib.

    Nevertheless, both Russia and Iran themselves sustain a more profound strategic relationship with Syria, where the desire to put an end to the war and see all of Syria liberated is much stronger.

    “There is no plan to attack the city of Idlib for now”, say the sources. The liberation of rural Hama, Latakia and Idlib are the main objectives. The almost two million Syrian civilians are not expected to exit to Turkey or Europe. They are invited to leave all areas which are under the control of the jihadists (mainly al-Qaeda and its partners or its armed supporters) and move into the city of Idlib under Turkish control.

    What is clear so far is the certainty that President Assad is not ready to give up Idlib to President Erdogan. Assad is said to be ready to start the attack in a few weeks even alone, at the cost of dragging everybody behind him onto the battlefield.

  • Three New Deals: Why The Nazis And Fascists Loved FDR

    Authored by David Gordon via The Mises Institute,

    [Three New Deals: Reflections on Roosevelt’s America, Mussolini’s Italy, and Hitler’s Germany, 1933-1939. By Wolfgang Schivelbusch. Metropolitan Books, 2006. 242 pgs.]

    Critics of Roosevelt’s New Deal often liken it to fascism. Roosevelt’s numerous defenders dismiss this charge as reactionary propaganda; but as Wolfgang Schivelbusch makes clear, it is perfectly true. Moreover, it was recognized to be true during the 1930s, by the New Deal’s supporters as well as its opponents.

    When Roosevelt took office in March 1933, he received from Congress an extraordinary delegation of powers to cope with the Depression.

    The broad-ranging powers granted to Roosevelt by Congress, before that body went into recess, were unprecedented in times of peace. Through this “delegation of powers,” Congress had, in effect, temporarily done away with itself as the legislative branch of government. The only remaining check on the executive was the Supreme Court. In Germany, a similar process allowed Hitler to assume legislative power after the Reichstag burned down in a suspected case of arson on February 28, 1933. (p. 18).

    The Nazi press enthusiastically hailed the early New Deal measures: America, like the Reich, had decisively broken with the “uninhibited frenzy of market speculation.” The Nazi Party newspaper, the Völkischer Beobachter, “stressed ‘Roosevelt’s adoption of National Socialist strains of thought in his economic and social policies,’ praising the president’s style of leadership as being compatible with Hitler’s own dictatorial Führerprinzip” (p. 190).

    Nor was Hitler himself lacking in praise for his American counterpart. He “told American ambassador William Dodd that he was ‘in accord with the President in the view that the virtue of duty, readiness for sacrifice, and discipline should dominate the entire people. These moral demands which the President places before every individual citizen of the United States are also the quintessence of the German state philosophy, which finds its expression in the slogan “The Public Weal Transcends the Interest of the Individual”‘” (pp. 19-20). A New Order in both countries had replaced an antiquated emphasis on rights.

    Mussolini, who did not allow his work as dictator to interrupt his prolific journalism, wrote a glowing review of Roosevelt’s Looking Forward. He found “reminiscent of fascism … the principle that the state no longer leaves the economy to its own devices”; and, in another review, this time of Henry Wallace’s New Frontiers, Il Duce found the Secretary of Agriculture’s program similar to his own corporativism (pp. 23-24).

    Roosevelt never had much use for Hitler, but Mussolini was another matter. “‘I don’t mind telling you in confidence,’ FDR remarked to a White House correspondent, ‘that I am keeping in fairly close touch with that admirable Italian gentleman'” (p. 31). Rexford Tugwell, a leading adviser to the president, had difficulty containing his enthusiasm for Mussolini’s program to modernize Italy: “It’s the cleanest … most efficiently operating piece of social machinery I’ve ever seen. It makes me envious” (p. 32, quoting Tugwell).

    Why did these contemporaries see an affinity between Roosevelt and the two leading European dictators, while most people today view them as polar opposites? People read history backwards: they project the fierce antagonisms of World War II, when America battled the Axis, to an earlier period. At the time, what impressed many observers, including as we have seen the principal actors themselves, was a new style of leadership common to America, Germany, and Italy.

    Once more we must avoid a common misconception. Because of the ruthless crimes of Hitler and his Italian ally, it is mistakenly assumed that the dictators were for the most part hated and feared by the people they ruled. Quite the contrary, they were in those pre-war years the objects of considerable adulation. A leader who embodied the spirit of the people had superseded the old bureaucratic apparatus of government.

    While Hitler’s and Roosevelt’s nearly simultaneous ascension to power highlighted fundamental differences … contemporary observers noted that they shared an extraordinary ability to touch the soul of the people. Their speeches were personal, almost intimate. Both in their own way gave their audiences the impression that they were addressing not the crowd, but each listener as an individual. (p. 54)

    But does not Schivelbusch’s thesis fall before an obvious objection? No doubt Roosevelt, Hitler, and Mussolini were charismatic leaders; and all of them rejected laissez-faire in favor of the new gospel of a state-managed economy. But Roosevelt preserved civil liberties, while the dictators did not.

    Schivelbusch does not deny the manifest differences between Roosevelt and the other leaders; but even if the New Deal was a “soft fascism”, the elements of compulsion were not lacking. The “Blue Eagle” campaign of the National Recovery Administration serves as his principal example. Businessmen who complied with the standards of the NRA received a poster that they could display prominently in their businesses. Though compliance was supposed to be voluntary, the head of the program, General Hugh Johnson, did not shrink from appealing to illegal mass boycotts to ensure the desired results.

    “The public,” he [Johnson] added, “simply cannot tolerate non-compliance with their plan.” In a fine example of doublespeak, the argument maintained that cooperation with the president was completely voluntary but that exceptions would not be tolerated because the will of the people was behind FDR. As one historian [Andrew Wolvin] put it, the Blue Eagle campaign was “based on voluntary cooperation, but those who did not comply were to be forced into participation.” (p. 92)

    Schivelbusch compares this use of mass psychology to the heavy psychological pressure used in Germany to force contributions to the Winter Relief Fund.

    Both the New Deal and European fascism were marked by what Wilhelm Röpke aptly termed the “cult of the colossal.” The Tennessee Valley Authority was far more than a measure to bring electrical power to rural areas. It symbolized the power of government planning and the war on private business:

    The TVA was the concrete-and-steel realization of the regulatory authority at the heart of the New Deal. In this sense, the massive dams in the Tennessee Valley were monuments to the New Deal, just as the New Cities in the Pontine Marshes were monuments to Fascism … But beyond that, TVA propaganda was also directed against an internal enemy: the capitalist excesses that had led to the Depression… (pp. 160, 162)

    This outstanding study is all the more remarkable in that Schivelbusch displays little acquaintance with economics. Mises and Hayek are absent from his pages, and he grasps the significance of architecture much more than the errors of Keynes. Nevertheless, he has an instinct for the essential. He concludes the book by recalling John T. Flynn’s great book of 1944, As We Go Marching.

    Flynn, comparing the New Deal with fascism, foresaw a problem that still faces us today.

    But willingly or unwillingly, Flynn argued, the New Deal had put itself into the position of needing a state of permanent crisis or, indeed, permanent war to justify its social interventions.

    “It is born in crisis, lives on crises, and cannot survive the era of crisis…. Hitler’s story is the same.” … Flynn’s prognosis for the regime of his enemy Roosevelt sounds more apt today than when he made it in 1944…

    “We must have enemies,” he wrote in As We Go Marching. “They will become an economic necessity for us.” (pp. 186, 191)

  • The World's Most Bearish Hedge Fund Unveils A New "Big Short"

    It was another tough month for Horseman Global, which we previously dubbed “the world’s most bearish hedge fund”, due to its exposure which, while fluctuating, has been net short for the past 6 years and most recently had a net short position of -43.5%.

    In August, the fund dropped another 5%, bringing its total return for 2018 to -10.40%, setting up for another painful year for Horseman LPs who have underperformed the market since 2015.

    The fund’s underperformance was not lost on CIO Russell Clark, who writes that while he likes “big ideas, and I like trying to do something different. When it works, its great. But when it doesn’t, it’s average” admits that “lately, performance has been very average.” He attributed the reason for that to “US assets and the dollar which are drastically outperforming all other markets”, something we have discussed extensively in prior posts.

    Clark’s lament is the same as that from Goldman Sachs, namely that running a large fiscal deficit with record low unemployment “makes little sense” – Goldman went so far as describing this state of affairs as only observed during war time –  and with US oil production beginning to slow, he warns that “something is likely to break.“

    Being bearish on the US dollar and US assets has hurt. I had a very similar problem, and similar lackluster performance from 2009 to 2011, when I thought Chinese monetary and fiscal policy was similarly deluded

    Still Clark, and Horseman, continue undeterred, and as he writes in his latest letter to investors (who appear to be shrinking, with AUM under Horseman Global now down to $488MM), he has seen “lots of good short themes in the markets over the last year including Western corporates suffering from Chinese competition, higher commodity price and bond yield impacting the corporate bond market, an investment grade borrower getting downgraded and dislocating the high yield market, the collapse in crypto currencies and their negative impact on the semiconductor market and finally the destruction of the short volatility trade.”

    Yet none of these were enough to get Clark truly excited, because as he further explains “all of these are ideas that hold water from a macro perspective, but they lacked one important factor: An industry that investors so believed in, they would continue to hold even as the sector began to break down.”

    Now, with just 2 weeks left in the third quarter and with Horseman increasingly desperate for a Hail Mary trade, Clark writes that “finally, this month we think we found” what may be the next big short trade.

    Here is his explanation of why the semiconductor space may be due to for a big drop in the coming months:

    We had been looking at the semiconductor market for a while, but mainly looking at cutting edge semiconductor makers, and their exposure to cryptocurrency mining. However, one of our shorts, Applied Materials, stated in a conference call that the majority of its orderbook is for lagging technology, not leading as had been expected.

    What is lagging semiconductor technology? To simplify massively, it tends to be sensors. Sensors take real world data and convert it to electronic data. When we looked closer, we found that investors had become enamored with this area for two reasons. One; the “internet of things” had convinced investors that demand would remain strong for the foreseeable future, and two; “the breakdown of Moore’s Law” had meant that supply was constrained.

    We found that the number of lagging semiconductor fabs were forecast to increase after declining for years.

    Finally, we had found the sector that investors believe in, even as fundamentals declined. We also know that the Chinese are entering this sector. All we needed was a market signal. And right on cue, a Japanese sensor producer, Renesas, warned on Q2 profits and then followed this up with a cash bid for US producer Integrated Device Technology at seven times sales! That’s what I call ringing the bell.

    As we continued to look at the sensor industry, we began to see that the sector was seeing a slowdown in orders from the auto sector and particularly in China after a long period of growth. The auto sector is a big buyer of sensors. Higher commodity prices are starting to affect the profitability of auto firms globally, which have large amounts of debt. Ford has been downgraded to one notch above high yield and looks likely to become a fallen angel. General Motors could well follow.

    With that in mind, here is Horseman’s latest portfolio allocation:

    The short book is made up of sensor related stocks, autos and banks that will be affected by deterioration in the corporate debt market. The long book has seen us reduce or exit miners that produce commodities tied to the auto industry, such as copper, nickel and zinc. While the Chinese auto market is slowing, the effect on profitability is likely to impact foreign producers who dominate this market.

    And visually:

    His parting thoughts underscore why Clark remains (painfully) bearish:

    2011 and 2018 are playing out very similarly for me. Easy momentum trades of the past year are breaking down, and investors are herded from one area to another. While all the talk is of an emerging market crisis, the biggest emerging markets are all engaging in reform, while the developed markets are still overly reliant on easy money. In 2011, selling the then outperforming emerging markets, and buying Irish debt was the right trade. And in 2018, shorting developed markets and buying emerging markets looks the right trade now.

  • The Backlash Begins: Critics Question Motives Behind Bezos' New $2 Billion Charity

    Amazon CEO Jeff Bezos is the world’s wealthiest man. He was also – until very recently – widely considered the least generous billionaire. To wit, the Bezos Family Fund – the only major philanthropic endeavor bearing his name – was established with money earned by his parents, who were early private investors in Amazon.

    But for whatever reason (maybe it was the intensifying political pressure from Bernie Sanders’ “Stop BEZOS” act, or positive PR ahead of Amazon’s much-hyped HQ2 announcement, or even the fact that Amazon Web Services is jockying for an immensely valuable DoD contract), Bezos decided that he wanted to improve his public image.

    So earlier this week, he took his first tentative step toward establishing a reputation for philanthropy by unveiling the “Bezos Day One Fund.” The fund, according to an announcement tweeted by Bezos, will help finance organizations dedicated to helping the homeless (several months after Amazon killed a Seattle employment tax to fund resources for that city’s burgeoning homeless community) and establishing a network of preschools that will serve children from low-income families.

    Bezos

    But unfortunately for Bezos and his PR team, the unveiling of the “Day One Fund” elicited more questions than answers. After pointing out that Bezos has historically been one of the most parsimonious members of the uber-rich, one expert quoted by CNBC wondered: “Why now?”

    Brad Fulton, who teaches nonprofit management at the University of Indiana, suspects the focus on homeless families “probably has something to do” with the payroll tax bill Amazon opposed in Seattle. And while Bezos has been working on this fund for over a year, the timing of the announcement certainly comes at an interesting time, he said.

    “It’s unclear why he made the announcement now, except that it comes on the heels of Sanders’ critiques, and Bezos apparently no longer liked being known as the least generous billionaire,” he said.

    The BBC took it one step further by pointing out the irony in Bezos establishing a fund to help the homeless while some workers at Amazon’s fulfillment centers reportedly live in tents.

    But far from being universally applauded, the Amazon founder’s pledge was met with fierce criticism.

    James Bloodworth, a writer who went undercover to expose working conditions at the company’s fulfilment centres, said there was “something slightly ironic” about Mr Bezos’s plan.

    “There have been credible reports of Amazon warehouse workers sleeping outside in tents because they can’t afford to rent homes on the wages paid to them by the company,” he told the BBC.

    “Jeff Bezos can tout himself as a great philanthropist, yet it will not absolve him of responsibility if Amazon workers continue to be afraid to take toilet breaks and days off sick because they fear disciplinary action at work.”

    Another critic argued that Bezos’ donation did little to tackle the “deep and complex root causes” of homelessness.

    But according to Anand Giridharadas, Mr Carnegie’s approach helped give rise to mass inequality.

    Mr Giridharadas, whose book Winners Take All tackles the so-called “charade” of modern philanthropy, characterises Carnegie’s approach as “extreme taking followed by extreme giving”.

    The super rich, he argues, stop short of “transforming the system atop which they stand”.

    While Mr Bezos’s donation is admirable, he says, it does not tackle the “deep and complex root causes” of homelessness and poverty in the US – which include Amazon itself, as the firm has been a beneficiary of the new world of precarious employment.

    Meanwhile, CNBC pointed out that Bezos’ announcement left many unanswered questions, including what would be the structure of the fund, why he only committed $2 billion of his massive $160 billion fortune and – of course – “why now?”

    Here’s a summary of the most glaring unanswered questions, courtesy of CNBC:

    * * *

    What’s the structure?

    One of the biggest questions is how Bezos plans to structure the fund. Depending on how it’s structured, it will be held to different types of regulatory and transparency standards. For example, if it’s a private foundation, Bezos will be required to spend 5 percent of the fund’s value every year, while an LLC structure will give him more flexibility.

    Once the structure is determined, Bezos will have to hire a leadership team to run the initiative and put in proper oversight measures, like more details about the grant making process, which will all help add transparency to his fund, Camarena said.

    “No foundation or billionaire can solve the world’s most pressing problems alone,” Camarena said. “The more you’re open, the more you’re trusted.”

    Why did Bezo only give $2 billion?

    Without knowing the exact structure of the fund, it’s unclear where the $2 billion will come from. If it comes straight out of Bezos’s own pocket, which many assume it will, he will be eligible for steep tax deductions. Thirty percent of the gift will be deductible if he sets up a private foundation; 50 percent if it’s a donor-advised fund.

    The bigger question is the size of the fund, which is smaller compared to what other high net worth individuals in the tech industry, like Mark Zuckerberg or Bill Gates, have pledged to give back. Bezos hasn’t joined the Giving Pledge either, a popular campaign that has some of the world’s richest individuals commit to giving away the majority of their wealth.

    Bezos, however, hinted in an interview Thursday that he could potentially add more to the $2 billion commitment as the initiative grows. Leslie Lenkowsky, a philanthropic studies professor at the University of Indiana, said Bezos’s idea of starting small before expanding, commonly known as an “acorns to oaks” approach, is not uncommon among wealthy individuals.

    “There’s a good argument to start with a relatively smaller amount, and then when you see it’s successful, expand it,” Lenkowsky said.

    Over what period of time will the money be disbursed?

    In theory, most philanthropic vehicles can run in perpetuity. Bezos hasn’t disclosed how long his fund will run or the timeline for distributing the $2 billion. If it’s set up as a private foundation, it must expend at least 5 percent of net assets value annually, but other forms, like an LLC or donor-advised funds, don’t have a required payout.

    One way to ensure the fund is used more effectively, in a shorter period of time, is to follow a “sunset model,” in which a spending deadline is put in place, typically over a 10 to 20 year period, according to Brent Copen, who teaches financial management of nonprofit organizations at Berkeley.

    “While you want to put money to work, you also want to do it in a way that’s thoughtful and responsible,” he said.

    Why focus on the homeless and preschools?

    Camarena at the Foundation Center said that it would be interesting to know how Bezos ended up choosing homelessness and early childhood education as the fund’s priorities. While Bezos has actively supported early childhood education programs, he is less known for having an interest in solving homelessness issues.

    Bezos said during an interview at an event in Washington, D.C. Thursday that he’s received over 47,000 ideas over the past year, and that he’s interested in “helping the world in many different ways.” For the preschool initiative, he said he’ll be actively involved, “operating” those schools.

    One very important difference in Bezos’s approach is how he’s focused on more near-term issues, as opposed to other super rich people who tend to support more ambitious projects, like curing cancer, said Lenkowsky.

    “It’s a much more realistic approach,” Lenkowsky said. “He is doing philanthropy in a way that we have not seen people of his wealth do it in a long time.”

    And – last but not least – why now?

    Plans for the new fund come at a time when politicians like Senator Bernie Sanders are stepping up their criticism of Bezos for worsening income inequality. Amazon, meanwhile, was one of the most vocal opponents of a new payroll tax proposal in Seattle that would have helped build affordable housing.

    Brad Fulton, who teaches nonprofit management at the University of Indiana, suspects the focus on homeless families “probably has something to do” with the payroll tax bill Amazon opposed in Seattle. And while Bezos has been working on this fund for over a year, the timing of the announcement certainly comes at an interesting time, he said.

    “It’s unclear why he made the announcement now, except that it comes on the heels of Sanders’ critiques, and Bezos apparently no longer liked being known as the least generous billionaire,” he said.

    * * *

    With questions about Amazon’s mistreatment of workers at its distribution centers, subsidiaries and even its subcontractors once again working their way into the headlines, we imagine Bezos and his team will swiftly furnish answers to the most pressing questions, because it would be such a shame to waste $2 billion and accomplish little in the way of rehabilitation.

  • CNN Ratings Collapse, Losing To Nickelodeon And Fox News 

    Trump’s “fake news” nemesis, CNN, experienced a dramatic collapse in ratings last week compared to 2017.According to AdWeek, CNN viewership tumbled 41% in daytime TV ratings and tumbled 36% in primetime versus the same week last year.

    “CNN ranked No. 6 across basic cable in total primetime viewers, and No. 5 in total day this past week. Despite the top 10 finishes, the network was -36 percent in primetime viewers, and -41 percent in total day viewers vs. the same week last year”, AdWeek wrote.

    The increasingly more partisan news network was once again beat by its traditional competitors: Fox News was No. 1 across the board for basic cable for the Labor Day week of Sept. 03, 2018 (No. 1 in total viewers across the 24-hour day for 35 consecutive weeks), while MSNBC came in second.

    In basic cable, CNN placed fifth with ESPN and Nickelodeon placing No. 3 and No. 4, respectively as Sponge Bob suddenly emerges to be more popular/credible than Jake Tepper and Chris Cuomo.

    In primetime, CNN ranked No 6. while ESPN secured the first ranking. Fox News, MSNBC, HGTV, and the USA network all placed higher than CNN for primetime views. 

    The network has repeatedly seen embarrassing viewership losses compared to 2017. In August, the network lost 12 percent of its primetime viewers compared to 2017. During one week in August, the network dropped 23 percent during the day and 24 percent in primetime compared to the same week last year, said Breitbart News.

    CNN’s sharp fall might be the result of President Trump’s relentless hostility towards the network in the last several years. 

    Of course, it may also simply be the result of increasingly more viewers switching over to other, less biased sources of news and information. 

  • "The Big Short's" Steve Eisman Reveals Where The Next Crisis Will Come From (And His Favorite Long Idea)

    Overnight, we presented the views of 4 people who saw the last financial crisis coming, and shared their outlook for the future. There was one name we forgot, however, perhaps the most famous of all: Steve Eisman, who was popularized by the movie The Big Short, and who not only “saw it coming”, but made a lot of money in the process.

    Now a fund manager at Neuberger Berman in New York, Eisman spoke to the Financial Post’s Barbara Shecter about the crisis, its aftermath, and how he’s investing now. Below we present the key highlights, including not only his takes on former Fed Chair Alan Greenspan, but also the Fed’s response to the financial crisis, how markets responded to the crisis, his views on US, Canadian and European banks, the risks to the US economy, where the next crisis will come from, and what his favorite long idea is currently.

    As published originally in the Financial Post

    Steve Eisman, Hector Retamal / AFP / Getty Images

    Q: This Saturday (Sept. 15) marks 10 years since the collapse of Lehman Bros. What has been the most significant change you’ve seen in global markets since then?

    A: I think the biggest change, at least in the United States, is how much more extensively and harshly banks are regulated. Let’s use Citigroup as an example. So just before the financial crisis started, Citigroup was levered about 33 to 1. Today, it is levered about 10 to 1. That is, in my world, like comparing the distance from Mercury to Pluto. It’s such an enormous change it’s hard to even describe it. I can honestly say for the first time in all the many, many years that I have covered the financial services sector, I actually think the banking system in the United States is safe.

    Q: What about Canada?

    A: One of the potential issues with the Canadian banks is that the risk weights that are given to mortgages are exceptionally low and that’s because there have been no losses in Canada for 25, 30 years. So for example, if you look at the larger Canadian banks, you’ll see that they assume the risk rates are in the single digits — and to get to that number they assume 85 per cent of the mortgages that they have that are not government-guaranteed will produce losses of 20 basis points or less per year.

    Q: That’s low?

    A: Yeah I would say so but, hey, it’s Canada.

    Q: And Europe?

    A: Look, I’m very critical of U.S. regulators before the crisis — I think they were horrendous, just horrendous. But post-crisis I think they’ve done a good job. And they basically did two things: they made the banks write down their losses as quickly as possible, and they made them raise a lot of capital. And the combination basically allowed the financial system to heal relatively quickly. In Europe, they took a bit of a different attitude. I think they felt that if the banks wrote down assets too quickly it would sink the economies, and so they were much more permissive. In Italy, we’re still dealing with the same non-performing loans they had 10 years ago. And the second thing is that while they certainly made banks raise capital so that their leverage ratios are better than they were, they’re still 1.5 to two times more than the United States, the absolute leverage.

    Q:  How do you think history will judge the Fed’s response to the crisis?

    A: If I had to give it a grade, I’d say pre-crisis I’d give the Fed an F. And I would say that Alan Greenspan will go down in history as the worst Chairman of the Federal Reserve in the history of the United States. I’d say, during the crisis (Ben) Bernanke did a very good job, I’d give him a B or B+, and that’s what I think about how they did.

    Q: And post-crisis?

    A: I think they did a very good job regulating the banks under the leadership of Daniel Tarullo.

    Q: What’s surprised you as an investor over the past decade?

    A: I think what surprised me most about the markets was how quickly they recovered and how quickly people forgot what happened.

    Q: Why do you think that happened?

    A: I think that’s a function of the fact that the Fed embarked on this great quantitative easing experiment. There were three Q/Es: QE1 took place in the spring of 2009 when markets were just dead. This was very successful and so the fixed income markets went back to normal. And then two years later, the Fed decided that, hey, interest rates are zero, the economy is really not growing, we’re worried we going to go back into a recession. So they went out and bought U.S. government bonds and mortgage bonds backed by Fannie Mae and Freddie Mac, and the idea was they were therefore removing trillions of dollars worth of risk-free assets from the marketplace with the idea that that would force both investors and companies to go out on the risk curve. The idea was that that would somehow get companies, for example, to build factories and hire people and that would get the economy growing faster.

    Q: And that wasn’t as successful?

    A: In my view it failed, 100 per cent. It caused the stock market to go up because people took all that liquidity and invested it in the stock market, but it did not cause the economy to grow even 10 basis points faster. I like to nickname quantitative easing “monetary policy for rich people.” You could quote me on that. You know, they took a shot; it didn’t work. And then they doubled down and did it again. Same result.

    Q:  From a global perspective, what is the biggest risk today that people aren’t talking about?

    A: I’m pretty sanguine these days about the U.S. economy. I don’t see any real risks out there.  A lot of the things I usually look at that would tell you there might be a problem — like changes in credit quality — are not showing any signs of stress. And I think the only real threat is some sort of global trade war.

    Q: Is the current growth of the U.S. economy sustainable?

    A: I don’t know. All I can say is that given the data I look at I don’t see any slowdown until 2020. It’s just not in the data. Again, barring a trade war it could stay more or less like it is — three per cent, high twos growth rate, which is pretty powerful for us.

    Q:  Where will the next crisis come from?

    A: I think it’ll come in the corporate sector because I think that’s where a lot of the debt’s been issued. It’s not going to come from the consumer sector. But you need a real slowdown in the economy for that to happen.

    Q: When you look back at the crisis of 2008, do you think of it as “lesson learned”?

    A: Well, lesson learned in the sense that the banking system is much less levered than it was. But other people are more levered, so we’ll see how they do next time around. But whatever happens, it’s not going to be a systemic issue. Let’s make a hypothetical: say there’s a recession and let’s say there’s a lot of these high-yield companies go bankrupt. That’s not a systemic problem, that’s a problem for the people who own those bonds. If you ask yourself what made that crisis different, there were four elements to it. There was too much leverage, a big asset class (residential real estate) blew up in everybody’s face, important firms owned that asset class, and number four was derivatives, like credit default swaps, that tied balance sheets of all the institutions together. So this one bank went down, another bank would go down. Today, they’re less levered — maybe some of them will own some of an asset class that blows up but since they’re less levered it’s not going to destroy them.

    Q: Has your approach to investing changed? I think you were quoted a few years ago saying that judging stocks on the fundamentals was not a good business anymore.

    A: Back then, I was running a hedge fund that just invested long/short in financials. And what I was really trying to say was that in a world where rates are zero, and credit quality is pristine, investing in financial stocks to try and generate alpha out of them had become unbelievable difficult. So it’s, like, you took my game away from me! It was impossible to differentiate for a long time. I still do long/short but I do all sectors.

    Q: We’ve been talking about big shorts for 10 years now. What is your favourite long idea?

    A: I think there are certain companies in the U.S. that are kind of oligopolistic, that are big data stories, where they control the data that they sell, and there’s very little competition. There are three companies like that in my portfolio. Equifax is an example, but there are a few others that have massive databases and because it’s so expensive to recreate what they have, there can only be a few companies that do it. Google controls a lot of data but it’s a different kind of data. It’s not the same thing. The best predictor of consumer action is the databases that the consumer credit bureaus have of their credit behaviour. It’s every loan you have, and whether you’ve paid monthly on everything that you’ve ever had. It’s the best database I know of.

  • Robinhood Investing App Secretly Makes Millions Selling Millennials' User Data To HFT Firms

    Stealing from millennials to give to the rich. Robinhood App sells user customer data to make a quick buck from the high-frequency trading (HFT) firms on Wall Street. 

    Robinhood Financial, LLC, a US-based mobile stock brokerage company, founded on the basis of disrupting the brokage industry by offering commission-free trading, has been secretly making millions of dollars in a profit scheme by selling users’ data to HFT traders, said Logan Kane, a writer for North of Sunset Publishing.

    Kane said the latest Second Quarter Securities and Exchanges Commission (SEC) filing shows that Robinhood Financial takes from the millennial and gives to the HFT firms.

    “Robinhood accept payment for order flow, but on a back-of-the-envelope calculation, they appear to be selling their customers’ orders for over ten times as much as other brokers who engage in the practice. It’s a conflict of interest and is bad for you as a customer.

    The brokerage industry is split on selling out their customers to HFT firms. Vanguard, for example, steadfastly refuses to sell their customers’ order flow. Interactive Brokers, which is the preferred broker for sophisticated retail traders, doesn’t sell order flow and allows customers to route orders to any exchange they choose.

    Robinhood not only engages in selling customer orders but seems to be making far more than their competitors from it. Among brokers that receive payment for order flow, it’s typically a small percentage of their revenue but a big chunk of change nonetheless,” Kane said.

    This represents, a severe breach of confidentiality for its over four million active users, and a remarkable act of deception from the Silicon Valley firm that promotes ethical trading practices to benefit the everyday American, but as we discovered via Kane’s reporting — the company is handsomely profiting from the average person by selling users’ order flow.

    Robinhood’s website presents millennials with feel-good statements and hypocritical statements like:

    • “Invest for free: We believe that the financial system should work for the rest of us, not just the wealthy. We’ve cut the fat that makes other brokerages costly, like manual account management and hundreds of storefront locations, so we can offer zero commission trading.”

    • “Trusted by Millions in the USA: We’re serious about security and use cutting-edge technology to ensure your personal information is fully encrypted and securely stored.”

    • “Introducing Free Options: Trading Find out how to trade options the Robinhood way. It’s quick, straightforward & free.”

    Kane explains that brokerage firms that sell order flow must disclose these transactions to the SEC.

    He said: “there is a material difference in the disclosures between what Robinhood and other discount brokers are showing that suggests that something is going on behind the scenes that we don’t understand at Robinhood.”

    From Robinhood’s latest SEC rule 206 disclosure:

    Compare this with E*TRADE. They have AUM of $392.8 billion and generate roughly $47 million per quarter selling order flow to HFT (from the latest E*TRADE rule 606 disclosure).

    TD Ameritrade has AUM of roughly $1.2 trillion and made $119 million last quarter selling order flow (From TD Ameritrade’s rule 606 disclosure).

    “Look closely here – if you don’t, you’ll miss it,” said Kane. 

    TD Ameritrade and E*TRADE both report their payments for order flow as a tenth of a penny per share. Now glance at Robinhood’s SEC filing. They report their figure as “per dollar of executed trade value.” According to Kane, this means the numbers in Robinhood’s filings appear smaller if they are not cross-referenced by competitors, but it is actually much larger.

    “Let’s do some quick math. Assume the average stock traded has a share price of $50. It takes 20,000 shares traded at $50 for $1,000,000 in volume, for which E*TRADE makes $22 per $1,000,000 traded, which sounds like a small number until you realize they cleared $47,000,000 last quarter from this. But off an identical $1,000,000 in volume, Robinhood gets paid $260 from the same HFT firms. If Robinhood did as much trade volume as E*TRADE, they would theoretically be making close to $500 million per quarter in payments from HFT firms,” Kane said.

    Kane asks the question: Why are high-frequency trading firms willing to pay over 10 times as much for Robinhood orders than they are for orders from other brokerages? He notes that the co-founders of Robinhood have had a history of building software for hedge funds and high-frequency traders.

    Kane then asks another difficult question: Why wouldn’t they report how much they are getting paid per share like E*TRADE, TD Ameritrade, or Charles Schwab and instead report per dollar of trade value where the number can look smaller when it’s actually ten times as much?

    “I’m not a conspiracy theorist… But Robinhood is not being transparent about how they make their money. Every other discount broker reports their payments from HFT “per share”, but Robinhood reports “per dollar”, and when you do the math, they appear to be receiving far more from HFT firms than other brokerages. This raises questions about the quality of execution that Robinhood provides if their true customers are HFT firms.

    Robinhood isn’t the worst thing to happen to online trading, but they market their service as a free/no-commission product, which has the effect of pushing trade volume through the roof.

    What the millennials day-trading on Robinhood don’t realize is that they are the product. Robinhood is well on their way to making hundreds of millions of dollars in cash income by selling their customers’ orders to the HFT meat grinder. High-frequency traders are not charities.

    The only reason high-frequency traders would pay Robinhood tens to hundreds of millions of dollars is that they can exploit the retail customers for far more than they pay Robinhood,” Kane concluded.

    So, once again, sorry millennials – Wall Street and Silicon Valley win again. The deception of free trading via Robinhood comes at the hidden cost of poor execution and being frontrun by HFTs on every single trade.

  • America's Fake-Money System: Honest Work For Dishonest Pay

    Authored by Economic Prism’s MN Gordon, annotated by Acting-Man’s Pater Tenebrarum,

    Misadventures and Mishaps

    Over the past decade, in the wake of the 2008-09 debt crisis, the impossible has happened.  The sickness of too much debt has been seemingly cured with massive dosages of even more debt.  This, no doubt, is evidence that there are wonders and miracles above and beyond 24-hour home deliveries of Taco Bell via Door Dash.

    The global debtberg: at the end of 2017, it had grown to USD 237 trillion. Obviously this is by now a slightly dated figure, as debt issuance has continued with gay abandon this year. [PT]

    But how can dosages of more debt be the cure for too much debt?  Can more Cutty Sark be the cure for a dipsomaniac?  Certainly, in both instances, and after some interim relief, the cure always proves to be much worse than the disease.

    Without question, a moment of clarity is approaching that will bisect the world of today from the world of tomorrow, like the Patriot Act bisects the present world from its prior state of bliss.  Thus, what follows is a rudimentary preview of what’s in store.  But first, some context is in order…

    The fake money system – a system centered on debt based legal tender and centrally fabricated interest rates – produces booms and busts of greater extremes with each progression of the business cycle.  This century alone we’ve experienced two iterations of these boom and bust scenarios.  First the dotcom bubble and bust.  Then the housing boom and crash.

    The “well-contained” end of the housing boom…  [PT]

    Make no mistake, these booms and busts were anything but garden variety gyrations of the business cycle.  In fact, the Federal Reserve’s finger prints are all over them.  The booms originated from Fed monetary policy misadventures.  The busts were triggered by Fed monetary policy mishaps.

    Anatomy of a Mishap

    Presently, we are closing in on a decade’s long economic boom and bull market in stocks. This boom, like the boom of the mid-2000s, advanced during an extended period of monetary policy misadventures. This was the ZIRP and QE misadventure from 2009 through 2015, which distorted financial markets and disfigured the economy.

    The last several years of this boom and bull market, however, have been a monetary policy transition period. First the Fed tapered back QE. Then the Fed began ever so slightly reducing its balance sheet and raising the federal funds rate.

    Total assets held by the Federal Reserve system and the federal funds rate. It will be interesting to see at what level the next bust will be triggered. In fact, busts have already been triggered elsewhere in the world, as a number of emerging markets have recently gone over the cliff. [PT]

    Obviously, the Fed’s tightening operations over the last several years have been done with kid gloves.  The tightening increments have been subtle. They have also been telegraphed from a mile away.  But that doesn’t mean a monetary policy mishap, and subsequent bust, will somehow be averted.

    The crossover into the monetary policy mishap stage is never apparent until well after the fact.  In truth, the crossover may have already happened… and we just don’t know it.  The mishap will come as a surprise.

    On a glorious day, much like today, when everything appears to be unfolding according to plan, all of the suddenly, out on the margins, an emerging market economy will be stricken by a debt crisis and go kaput.  Moments later, during much confusion and panic, another two or three more emerging markets will also croak.

    Is something sinister lurking in Lehman’s ruins? [PT]

    Then Fed Chair Powell, just as Bernanke did at the onset of the subprime mortgage meltdown, will step forward with calming confidence and declare the sickness to be contained.  But the reassurance will be short lived.  Because the contagion will have already spread to the center of the financial system.

    Then, to Wall Street’s astonishment, a major financial institution will collapse – like Lehman Brothers a decade ago – and the flow of credit will be reduced to that of cold molasses.  After that, things will really get out of hand…

    Honest Work for Dishonest Pay

    The impending crisis, intensified by the dual stressors of currency and trade wars, will bring with it a vast collection of state sponsored solutions to save the world from itself.  Any and all ideas, ranging from the absurd to the ludicrous, will be put to the acid test so long as they meet two very critical criteria. They must preserve the status quo and further concentrate wealth into the hands of the few.

    One trio of bad ideas, which was burped into the atmosphere last weekend by former IMF chief economist Olivier Blanchard, is for the Fed to combat the next recession by buying stocks, financing the deficit, and directly purchasing goods.  Surely, Blanchard’s a clever fellow.  He’s even a Professor of Economics emeritus at MIT.

    Optimized credit crunch outcome. You need a scientific monetary policy for that… [PT]

    Yet, predictably, Blanchard didn’t mention that the Fed would need to create money from thin air so that it could buy stocks, loan it to the government, and go on its massive spending spree.  Perhaps these massive helicopter money drops would prevent asset prices from deflating.  But they would also destroy any remaining semblance of market-derived pricing and perpetuate an upside-down economy.

    Blanchard also didn’t mention that these actions would transfer the ownership of publicly traded companies, and future tax payer labors, to the Fed.  Conceivably, there are infinitely many places where this could all lead – though we don’t suspect any of them would be very appealing.

    Former IMF chief economist and arch-Keynesian Olivier Blanchard – a well-known fount of truly atrocious voodoo-economics ideas, one nuttier than the next. The books in the background of this picture are probably meant to indicate that he’s been properly indoctrinated (they certainly haven’t made him any smarter). We have yet to come across a headline with his name in it that doesn’t cause us to inwardly cringe. Where do they find these people? Well, this one they found in France, inter alia home to luminaries like Marxist economist Thomas Pikkety, a country in which government spending has reached a staggering 58% of GDP, which has become one of the poster children for economic stagnation. It is hard to believe that economists like Turgot, Bastiat or de Molinari also came from France. What has happened to the French classical liberal tradition? Very little of it, if anything, seems to have survived. If we sound less than respectful it is because we consider people like Blanchard a danger to civilization – as are all central planners and would-be central planners. It is utterly appalling how much outright economic nonsense is paraded as the “solution” to the rolling catastrophe the interventionism of bureaucrats of his ilk has brought about in the first place. [PT]

    One direction Blanchard’s plan would take us is to a place where taxpayers and the company’s they work for would be reduced to milk cows not for the federal government… but for private bankers.  This, in turn, would complete the central banker’s long desired wealth extraction scheme.

    Still, that doesn’t mean things would be all bad. Here at the Economic Prism we are eternal optimists. We see the glass half full. We make lemonade with our lemons. When we spill salt, we throw a pinch over our left shoulder and right into the devil’s eyes.

    Moreover, as a milk cow for private bankers we’re confident we would still find plenty of satisfaction – and have a little fun too – while providing an honest day’s work for a dishonest day’s pay.

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