Feb 26

Today’s News 26th February 2018

  • Mapping The Top Tourist Attraction In Every Country

    Even as early as a decade ago, if you were backpacking in a foreign place, Visual Capitalist’s Jeff Desjardins remembers that it was not uncommon to rely on the wisdom printed in travel guides such as Lonely Planet or Rick Steves to choose your day-to-day activities.

    “Go off the beaten path to see this secluded black sand beach that’s only used by locals.”

    “See this historic city tour, because it’s a hidden treasure that you won’t find in any other guidebook.”

    Tips like these felt like secrets only privy to you and other smart readers – and while you were sitting on that hidden black sand beach, you could revel in the fact that the rest of the travelling masses were stuck in a two-hour line to get into some silly tourist trap.

    For better or worse, things are now very different.

    THE CROWDSOURCED ERA

    Today’s infographic comes to us from Vouchercloud, and it shows the top rated “Thing to Do” for every single country in the world, according to Tripadvisor reviews.

    Courtesy of: Visual Capitalist

    In other words, the list is based on the amalgamation of millions of reviews from fellow travelers that have experienced these sights or activities first-hand.

    On the upside, these reviews are coming from your peers. People just like you have rated all of the attractions in an area – from tourist trap to hidden gem – and the end result is pretty fair and democratic.

    But this democratic component also has a downside. In the United Kingdom, for example, the highest rated activity is not seeing Big Ben, Ancient Roman baths, Stonehenge, or the Churchill War Rooms – it’s the Harry Potter Studio Tour, with 32,000+ reviews and 83% of reviewers giving it a perfect 5-star rating.

    While the Harry Potter tour is obviously a popular attraction, it’s not likely representative of the type of attractions that old school travel critics may have raved about in their travel books.

    TOP THINGS TO DO

    In the map, the top tourist destinations are broken down based on the type of attraction.

    Here’s the mix of top destinations for the 197 countries and jurisdictions included in the analysis:

    The top category of attraction is natural (38.6%), which includes places like Canada’s Niagara Falls or Norway’s Geiranger Fjord. Meanwhile, historic attractions like China’s Great Wall made up 27.4% of the total, and places of religious significance such as Thailand’s Temple of the Reclining Buddha were the top tourist attraction for 14.7% of the countries.

    The remaining category, called “Tourist” includes a much wider variety of destinations within it.

    These attractions range from Central Park in the New York City to the aforementioned Harry Potter Studio Tours in the United Kingdom. The wide category also includes museums like France’s Musee d’Orsay, which holds a staggering collection of impressionist art, as well as Germany’s Miniatur Wunderland, which is a massive miniature railroad in Hamburg.

  • "Never Seen Such A Large Crowd": Record Numbers Flock To Florida Gun Show After Shooting;

    A record number of firearms enthusiasts made their way to the Florida State Fairgrounds this weekend to attend the Florida Gun Show, amid a fierce national debate over gun rights following the Valentine’s Day massacre at Stoneman Douglas high school in Parkland, Florida. 

    Organizers say almost 7,000 people attended on Saturday, with Sunday’s tally expected to be higher. Organizer Steve Fernandez said they’ve never seen such a large crowd – however it’s possible that the cancellation of next month’s show in Fort Lauderdale may have attracted concerned citizens. 

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    Somewhat ironically, this was to be expected considering the massive effort by gun control advocates to erode as much of the Second Amendment as they can in the wake of the Parkland shooting – never letting a crisis go to waste and all that. President Trump’s recent advocacy for more stringent background checks, a 10-day waiting period and raising the age limit on the purchase of guns following the Parkland shooting likely fueled concerns over a “slippery slope” of firearms legislation.

    Florida lawmakers such as Senator Bill Nelson (D) have called for stricter laws to fix the so-called “gun show loophole” which allows people to purchase firearms without a background check. While federally licensed vendors at a gun show are still required to run background checks (FFL), private sellers without a federal license do not have the same requirement in 40 states. (California, Colorado, Connecticut, Delaware, Washington D.C., New York, Nevada, Oregon, Rhode Island and Washington all require private sellers to conduct background checks). 

    “Some of the people attending are afraid that future legislation will impact their gun ownership rights,” said Fernandez. That said, 95% of the vendors at this weekend’s Florida Gun Show are required to run background checks since they are licensed dealers. 

    Also of note, suspected gunman Nikolas Cruz passed a background check before legally purchasing a semiautomatic AR-15 style rifle.

    “This was a mental health issue. This is someone who should have been identified from the beginning by law enforcement,” says Fernandez.

    In any event, google searches for both “buy a gun“, “buy AR15″, as well as “second amendment” just hit all time highs.

    Interest in firearms ownership also spiked following President Obama’s 2008 election – as a flurry of “gun control” headlines resulted in a flood of purchases – as evidenced by number of FBI background checks conducted following the 2008 election – a phenomenon which spiked after every mass shooting or act of domestic terrorism:

    Indeed, Obama was jokingly referred to as the “best gun salesman in America,” with 52,600 weapons sold daily under his administration as of June 2016.

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    Wall St. pushes back

    Following the Parkland massacre, over a dozen major companies cut ties with the NRA, including Delta, Hertz and MetLife. Wall St. is no exception. In addition to Bank of America “reexamining relationships with clients who make AR-15s,” Blackrock – the world’s largest money manager – and the largest shareholder in gunmakers in Sturm Ruger & Company and American Outdoor Brands (Smith & Wesson) said it will speak with both manufacturers  about their response to the Florida shooting. 

    Gunmakers may also come under pressure from pensions – such as Florida’s state pension, which holds shares of American Outdoor Brands. As Bloomberg put it, “as Florida teachers grieve over the mass shooting that left 17 students and colleagues dead last week, some of them may be surprised to learn they’ve been helping fund the firearms industry—including the company that made the gun used that bloody Wednesday.”

    Investment giant Blackstone Group, LP asked outside fund managers at a dozen hedge funds to detail their ownership in companies that make or sell guns, requesting answers by Sunday night – a one day turnaround. 

    Perhaps this explains why both shares in Ruger (RGR) and American Outdoor Brands (ABOC) have remained depressed in light of the predictable bump in sales which correspond with the renewed debate over gun control.

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    For reference, American Outdoor Brands and Ruger are down roughly -7% and -5% YTD respectively, while the S&P 500 is up 5.64%. 

    Meanwhile, guns are flying off the shelves…

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  • Lawyers For The DNC Argue That 'Primary Rigging' Is Protected By The First Amendment

    Via Disobedient Media,

    The ongoing litigation of the DNC Fraud Lawsuit and the appeal regarding its dismissal took a stunning turn yesterday. The defendants in the case, including the DNC and former DNC Chairwoman Debbie Wasserman Schultz, filed a response brief that left many observers of the case at a loss for words.

    The document, provided by the law offices of the Attorneys for the Plaintiffs in the case, Jared and Elizabeth Beck, and appears to argue that if the Democratic Party did cheat Sanders in the 2016 Presidential primary race, then that action was protected under the first amendment. Twitter users were quick to respond to the brief, expressing outrage and disgust at the claims made by representatives of the DNC and Debbie Wasserman Schultz.

    The Defense counsel also argued that because of Jared Beck’s outspoken twitter posts, the plaintiffs were using the litigation process for political purposes: “For example, Plaintiffs’ counsel Jared Beck repeatedly refers to the DNC as “shi*bags” on Twitter and uses other degrading language in reference to Defendants.” Fascinatingly, no mention is made regarding the importance of First Amendment at this point in the document.

    The defense counsel also took issue with Jared Beck for what they termed as: “…Repeatedly promoted patently false and deeply offensive conspiracy theories about the deaths of a former DNC staffer and Plaintiffs’ process server in an attempt to bolster attention for this lawsuit.”

    This author was shocked to find that despite the characterization of the Becks as peddlers of conspiracy theory, the defense counsel failed to mention the motion for protection filed by the Becks earlier in the litigation process. They also failed to note the voice-modulated phone calls received by the law offices of the Becks which contained a caller-ID corresponding to the law offices of Debbie Wasserman Schultz, a defendant in the case. In light of this context, the Becks hardly appear to be peddlers of conspiracy theory.

    The DNC defense lawyers then argued that: “There is no legitimate basis for this litigation, which is, at its most basic, an improper attempt to forge the federal courts into a political weapon to be used by individuals who are unhappy with how a political party selected its candidate in a presidential campaign.”

    The brief continued: “…To recognize any of the causes of action that Plaintiffs allege based on their animating theory would run directly contrary to long-standing Supreme Court precedent recognizing the central and critical First Amendment rights enjoyed by political parties, especially when it comes to selecting the party’s nominee for public office.”

    It appears that the defendants in the DNC Fraud Lawsuit are attempting to argue that cheating a candidate in the primary process is protected under the first amendment.

    If all that weren’t enough, DNC representatives argued that the Democratic National Committee had no established fiduciary duty “to the Plaintiffs or the classes of donors and registered voters they seek to represent.”

    It seems here that the DNC is arguing for its right to appoint candidates at its own discretion while simultaneously denying any “fiduciary duty” to represent the voters who donated to the Democratic Party under the belief that the DNC would act impartially towards the candidates involved.

    Adding to the latest news regarding the DNC Fraud Lawsuit was the recent finding by the UK Supreme Court, which stated that Wikileaks Cables were admissible as evidence in legal proceedings.

    If Wikileaks’ publication of DNC emails are found to be similarly admissible in a United States court of law, then the contents of the leaked emails could be used to argue that, contrary to the defendant’s latest brief, the DNC did favor the campaign of Hillary Clinton over Senator Sanders and that they acted to sabotage Sanders’ campaign.

    The outcome of the appeal of the DNC Fraud Lawsuit remains to be seen. Disobedient Media will continue to report on this important story as it unfolds.

  • North Korea's Winter Olympics Cheerleaders "Forced Into Sexual Slavery" Back Home

    As mainstream outlets such as USA Today, ABC News, and the New York Times pumped out a steady stream of propaganda about North Korea’s cheerleaders at the Winter Olympics “stealing the spotlight” and wearing “matching snowsuits,” a more sinister story of sexual abuse and exploitation was apparently not worth the MSM’s investigative resources.

    A North Korean defector says that members of the North Korean Olympic cheerleading squad are being forced into sexual slavery by the country’s top politicians, reports the New Straits Times.

    “North Korea’s art troupe came here and performed with dances and songs, and it might seem like a fancy show on the outside. However, they also have to go to parties and provide sexual services, that sort of pain also follows,” said former military musician Lee So-yeon, 42. She now heads the New Korea Women’s Union – a group which helps defectors adjust to life in South Korea. 

    “They go to the central Politburo party’s events, and have to sleep with the people there, even if they don’t want it. Those sorts of human-rights infringements take place, where women have to follow what they are told to do with their bodies.”

    “The women there, when they attend, they have to undress. They’re asked to undress, like objects. That’s the physical pain they have to go through.”

    Bloomberg also spoke with Kim Hyung-soo, 54, who defected to South Korea in 2009 with his son – a North Korean national league skier. Kim said that all of the North Korean coaches and atheletes are “slaves” of Kim Jong-un, though he did not mention sexual abuse. 

    “The cheerleaders, too,” he said. “They select people who are unlikely to defect, and people with loyal backgrounds. This factor is crucial from a very early stage.”

    The cheerleaders are hand picked by the North Korean regime based on a stringent set of criteria, according to defector An Chan-il who runs the World Institute for North Korea Studies. 

    “They must be over 163 centimetres tall and come from good families,” An said. “Those who play an instrument are from a band and others are mostly students at the elite Kim Il-sung University.”

    That said, Mike Pence was a bit standoffish with Kim Jong-Un’s sister, the head of propaganda for North Korea – which in retrospect may have been more newsworthy than North Korea’s forced sexual slavery of it’s national cheerleading squad.

  • Why Do Governments Fail? (The Exponent Problem)

    Authored by Robert Gore via Straight Line Logic blog,

    2, 4, 8, 16, 32, 64, 128, 256, 512, 1024, 2048, 4096, 8192…

    Most people find managing their own affairs sufficiently challenging. Earning a living, establishing a family, rearing children, saving for college and retirement, and dealing with illness and aging fill the days and leave little time, attention, or energy to manage someone else’s affairs.

    A hypothesis: the effort required to run other people’s lives is an exponential function. If X is the sum total of everything required to run your life; running two lives is X squared; three lives is X cubed, and so on. Call it the exponent problem. For partial verification, try running someone else’s life for a day or two. See it how it works out for you and the other person.

    Why do governments fail? Government is someone imposing rules on someone else, and backing them up with repression, fraud, and violence when necessary. The governed always outnumber those governing, which means the latter face the exponent problem. In the US, there are around 22 million employed by the government, and let’s add in another million who actively influence it. The US population is around 323 million, so there are 23 million rulers to 300 million ruled, or about 13 ruled per ruler. How fitting, like the 13 original colonies!

    Whatever amount X of time, energy, money, attention, and other resources the rulers expend on their own lives, they must expend that X to the thirteenth power to “govern” the ruled. If X could actually be quantified and it was only 2, it would still take 8192 times the effort to rule the US as it does for the rulers to govern their own lives. Those are just illustrative numbers, but you get the picture.

    No wonder rulers use repression, fraud, and violence. They’re overwhelmed by the exponent problem. On its best days governance is a comic proposition, on its worst, a tragic and terrible one. A farce, but in its own way tragic and terrible, is preceding the ultimately tragic and terrible outcome of the US government’s efforts to govern every aspect of its constituents’ lives and exercise power over what it considers its global domain.

    Robert Mueller’s Russian indictments scream Keystone investigation. The indictments of out-of-reach Russians are a tacit admission that Mueller has nothing on the Trump campaign’s alleged collusion with Russia. They are a laughable attempt to divert attention from evident criminality by the Clintons, their foundation, Barack Obama, and members of the Department of Justice, the State Department, the FBI and the intelligence community both before and after Trump’s victory. There are Russian angles to that apparent criminality, which Mueller has shown little willingness to investigate.

    Such blatant ineptitude and corruption are to be expected from people who think they can run other people’s lives. The delusion is almost universal, a toxic cognitive cloud that has persisted throughout history and has spread over the entire planet.

    The ruled usually know when their rulers are inept and corrupt. However, they often believe that somewhere else the wise and sagacious effectively govern. In the 1930s and 40s, many in Europe and America gushed over Hitler, Mussolini, and Stalin. In the 1980’s, the Japanese had the secret sauce. Liberals have long hailed Scandinavia as utopian governance.

    Across the alternative media, articles extoll Russian and Chinese leadership, particularly their joint leadership of the new Silk Road, the Belt and Road Initiative (BRI). SLL has reposted some of them. Directed by Russian and Chinese bureaucrats and politicians—surely wiser and less corrupt than our own—the BRI will build transportation and communications infrastructure across Asia, the Middle East, and Europe. The Maritime Silk Road will build Indian Ocean shipping facilities.

    The US government does not see this in a benign light. It’s an attempt by the our geopolitical rivals to rule Halford MacKinder’s center of the world, (see “Washington’s Great Game and Why It’s Failing,”  SLL, 6/8/15) and we can’t have that. The Eurasian land mass contains much of the world’s population, raw materials, and oil. Vital US interests are at stake. So are vital Russian and Chinese interests.

    Oddly enough, the contest for the center of the world has coalesced in Syria, a country about the size of Washington state. The US, Russia, China, Saudi Arabia, Turkey, Israel, Iraq, Iran, Jordan, Qatar, Kuwait, France, and the United Kingdom, various tribal and ethnic groups, various Islamic guerrilla groups, and the government of Syria itself have all declared interests in that nation. It doesn’t even have that much oil. The situation has its darkly comic aspects and at least one satire, Prime Deceit by yours truly, has been written about it.

    The situation also has its tragic and terrifying realities. On this small patch much blood has been spilled, much treasure has disappeared, and Syrian lives have been ended or upended as “interested parties” try to impose their versions of control on all or part of it. They run into the exponent problem, usually compounded by the would-be controlled’s violent resistance to the would-be controllers.

    Syria is a microcosm of what analyst Richard Maybury labels Chaostan: “The area from the Arctic Ocean to the Indian Ocean, and Poland to the Pacific, plus north Africa.” An investment in Maybury’s newsletter, Early Warning Report, may be the best investment you’ll ever make. Anybody who’s followed its recommendations since its inception in 1991 has made a fortune. “Chaostan,” Maybury notes, “contains thousands of nations, tribes and ethnic groups who have hated and fought each other for centuries.” They don’t take too well to outsiders, either.

    Attempts to impose order, be it US-style order or the Russian-Chinese-BRI version, confront that history and the exponent problem.

    We haven’t even mentioned the other exponent problem, compounding interest on the world’s mammoth and growing debt load. Imposing order takes money. Good luck, everyone, with Chaostan.

    The question is not whether efforts to impose order in Chaostan will crash and burn—they will—but how low they will take humanity. Destruction of the species is a nontrivial possibility. At present, not one person in the motley coterie that governs this planet appears to understand that control is mathematically impossible. Of course, when impossible butters your bread you embrace it, and this quixotic quest for control butters a lot of bread. Just the world’s military and intelligence spending sums to trillions of dollars.

    The exponent problem yields a testable hypothesis: present efforts at control, much less expanded efforts like global governance, will require increasingly unattainable amounts of energy and resources and will collapse. Another hypothesis: a system that would adapt itself to available energy and resources is the one which allows individuals to direct their own lives, i.e., freedom. There is a nontrivial possibility that hypothesis may get a test, too, but only after the first hypothesis has been confirmed.

  • Ohio Sheriff Offers Free Gun Training To 50 Teachers; Forced To Cap At 300 After Huge Response

    An Ohio sheriff who offered free firearms training to 50 teachers was forced to cap his offer at 300, after a flood of local school employees signed up in the wake of a Florida high school shooting that left 17 people dead. 

    “We put it online, we thought we’d get 20 school teachers maybe. Within 20 minutes we had 40. Within an hour we had 100. Within four hours we had 200. By the next morning, at 300, we cut it off,” Butler County Sheriff Richard Jones said on “Fox & Friends.”

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    The Parkland, FL shooting has renewed a national debate on the Second Amendment. Sheriff Jones noted that only a few schools in Ohio allow the concealed carry of a firearm, and that the plan to arm teachers would only work if “the school boards have the guts to make it a reality.” Jones suggested that school staffers should go through mandatory firearms training to help them identify the sounds of gunfire. 

    “We have to do something here because we can’t wait for our government to do anything. All they do is fight, they get nothing done,” he said.

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    Four days ago during a White House “listening session” on school shootings, president Trump suggested arming teachers – a call he as repeated since. 

    “If you had a teacher who was adept at firearms, they could very well end the attack very quickly, and the good thing about a suggestion like that — and we’re going to be looking at it very strongly, and I think a lot of people are going to be opposed to it. I think a lot of people are going to like it. But the good thing is you’re going to have a lot of [armed] people with that,” said the President. 

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    “We can’t stop the school shootings, we can’t stop guns from being manufactured, but we’ve got to do something, we’ve got to make the schools more of a hardened target,” said Sheriff Jones – adding that the class was open to teachers, secretaries and maintenance workers.

  • Trump Pivots Toward Trade Wars With Promotion Of Trade Uber-Hawk Peter Navarro

    Trump is officially on a trade war path.

    Defying threats of retaliation from the Chinese, on Friday Bloomberg reported that President Trump was pushing for the “harshest possible” global tariff of 24% on all steel imports and 10% on aluminum, a decision that would anger nearly every industrial manufacturer based in the US, while at the same time helping revive the fortunes of US steel producers. The rates were first proposed by Commerce Secretary Wilbur Ross last week.

    Now, two days later, in the latest and clearest indication yet that Trump will not back down from the coming global trade wars, the WSJ reports that the president plans to promote his advisor Peter Navarro – also known as the author of  “Death by China” and “Crouching Tiger: What China’s Militarism Means for the World” and an unrepentant trade hawk, best known for his protectionist views on trade policy and giving economic nationalists a stronger voice in internal debates as the Trump administration nears decisions on high-profile trade issues.

    Peter Navarro, an economist who helped shape Donald Trump’s 2016 protectionist campaign platform, will be named an assistant to the president, according to a person familiar with the matter.

    Navarro, who one year wrote a WSJ  Op-ed in which he warned that deficits “Could Put US National Security In Jeopardy”, began Mr. Trump’s presidency with broad influence and regular access to the Oval Office but his role was quickly limited after he clashed with the aides who oppose his views on trade deficits and multilateral trade agreements.

    Navarro was originally made head of a newly created National Trade Council, but was given little staff. That was eliminated in April and he was instead made head of a new Office of Trade and Manufacturing Policy that was seen as having little influence and was ultimately made to report to Gary Cohn’s NEC.

    As such, his sudden “reincarnation” within the Trump circle of trust likely indicates that the influence of Trump’s Wall Street-based globalist wing – Gary Cohn and Steven Mnuchin – is waning, and comes as the White House is nearing decisions on several high-profile trade matters (one almost smells an off the record phone call between Trump and Bannon here).

    Meanwhile, with the Trump administration facing an April deadline on whether to impose broad-based steel and aluminum tariffs in the name of national security, Navarro’s promotion will be certain to tip the scales in the direction of trade war. 

    Navarro has been a strong advocate of the view espoused by Mr. Trump—and rejected by most mainstream economists—that big trade deficits are, per se, bad, and that trade policy should be crafted to try to slash imbalances. Incidentally, Navarro may be on to something – despite the recent slide in the dollar, US net trade has failed to catch a boost, and as the chart below shows, the US Trade deficit excluding soaring petroleum exports, just hit an all time high!

    And with US officials also completing an investigation on widespread complaints that China improperly forces U.S. companies to turn over valuable intellectual property, a probe that is expected to result in significant economic sanctions against Beijing, it is safe to say that US-Chinese trade relations are about to hit rock bottom.

    It is unclear exactly how Mr. Navarro’s role will change, but the promotion is likely to give Mr. Navarro a more regular role in trade debates and meetings at the White House, according to the person familiar with the matter, a trade expert who has discussed the move with White House officials.

    “This gives Peter a more formal seat at the table when trade and manufacturing policies are discussed,” the WSJ source said. “That’s something that has been in question the last six months.”

    The WSJ adds that the appointment would make Mr. Navarro one of about two dozen “assistants to the president” in the Trump administration. Other officials with that title include the White House legal counsel and the heads of the various White House policy councils.

    Early in the administration, Navarro came close to persuading Trump to withdraw from the North American Free Trade Agreement with Mexico and Canada and a separate agreement with South Korea, until he was stymied by Mr. Trump’s more globalist-minded advisers, led by Gary Cohn. Both are now being renegotiated. Early in 2017, Navarro also roiled currency markets by publicly accusing Germany of unfairly manipulating the European currency to boost exports.

    “The change in his stature is a sign that the promises the president made on trade and manufacturing are more likely to be implemented,” said Michael Wessel, who advises labor unions and serves on the U.S.-China Economic and Security Review Commission, a congressional advisory panel.

    So while it took capital markets about 17 years to realize that the US has “double deficits” – the most frequent argument cited for the recent plunge in the dollar, even though the US has not had a C/A or fiscal surplus since about 2001… 

    … we wonder how long it will take to figure out that trade wars are coming, and that they are not exactly good for either risk assets or risk-parity and vol-targeting funds…

  • IceCap Asset Management: "Get Ready For The 2nd Half Of Global Financial Markets"

    Submitted from IceCap Asset Management

    “The Halftime Show”

    For many, the Super Bowl football game is a rather odd event.

    To begin with, Americans claim the winner of the big game to be the world champion – despite never defeating the best from Europe, Asia, or Africa. Next, most of the Super Bowl games are duds. Aside from the crowd pleasing 5 victories by the San Francisco 49ers, and the crowd pleasing 5 losses by the New England Patriots – most games are forgettable.

    Now, this lack of competitiveness, isn’t necessarily a bad thing. After all, for most people the game is secondary to the entertainment including the commercials and the Halftime Show. The first ever Halftime Show in 1967 featured dogs leaping through hula hoops and catching Frisbees. Everyone agreed it was pretty cool.

    In 1974, the Halftime Show scored a huge win when Miss Texas, Judy Mallett, played the fiddle to the 74,000 stomping fans in Houston. THAT was a good time.

    Over the years, the Halftime Show developed into something bigger than the game itself, with the more memorable ones featuring wardrobe malfunctions and the ability of the Americans to actually make it rain while legendary rock star Prince sang about rain. And with the possibility of reuniting the Gallagher brothers and Oasis for next year’s final gig – the Halftime Show will cement itself forever as being the greatest show on turf.

    As the Halftime Show literally occurs smack dab in the middle of the game – it should signal the mid-point of the big event. Yet, in reality the 2nd half breezes by fairly quickly with the outcome usually well decided and well accepted by everyone glued to their screen.

    The irony of course, is that this year as millions prepare to enjoy the big show, millions of investors are simultaneously wondering if financial markets have also reached their very own Halftime Show.

    Naturally, with stock markets hitting all time highs, and Bond yields hitting all time lows – very good arguments are made supporting a significant change in direction for each market.

    And as life imitates art, it is reasonable to believe that the 2nd half of financial markets will zoom by just as fast as the 2nd half of the Super Bowl. So, to be safe. Buckle up. Strap on your helmet and pads. And get ready for the 2nd half of global financial markets.

    It’s a show you won’t want to miss.

    The Multiplier Effect: US Tax Cuts

    One word – ENORMOUS.

    Yes, despite all the growlings and howlings from both political rivals, and sovereign economic rivals – the recently announced American tax cuts are tremendously good for the US economy.

    This is good.

    And yes, just as proclaimed by many, these very same tax cuts will add significantly to the American debt pile.

    This is bad.

    Yes it sounds confusing, so let’s take a minute to clarify the good and the bad. Remember – here at IceCap we are not American voters, and we shed our emotions and pause our personal belief systems when assessing geopolitics (something EVERY investment manager should be doing by the way).

    First the good. From the most simplest perspective – the more money you have in your pocket the better.
    We have yet to meet anyone on this planet who would not accept more money in their pay cheque due to lower taxes. More money means more spending, more savings or faster debt pay downs.

    When this is multiplied across all of America, the aggregate amount is very, very large and significant. And, when you next consider the tax savings at the corporate level multiplied across all of America, the aggregate amount is bigger still. The two amounts together create a powerful wave of economic stimulus not only for America, but for the world.

    Some argue that the rich people are getting richer, and the wealthy companies are getting wealthier. This is irrelevant. If you are against the tax cuts and disagree, you are always welcome to pay more to the IRS than what is required. Yes, there’s no law saying you can not make extra contributions to the US Treasury.

    Any takers? Regardless if the tax savings are spent buying Budweiser, pinot noir, stock buybacks, or yachts – money begins to flow through the system creating a multiplier effect which leads to even more spending and savings. Not convinced? Consider recent comments from the world’s largest investment manager Blackrock Inc.

    Also consider that Blackrock is controlled, and managed by Larry Fink who squarely supports the American Democratic Party, and is certainly no fan of President Trump. The Above is captioned from Blackrock’s February 2018 Market Outlook. In other words – if one of the biggest non-supporters of the US President can check his personal political perspective at the door, then maybe your manager should do so too.

    As well, there are countless other company specific data points all supporting the same effect – people everywhere are receiving back more money due to the Trump Tax Cuts.

    Now, it’s also rather important to understand the significance of these tax cuts from a global perspective. Understand that America is a pretty big butterfly – and now that it’s flapping its enormous economic wings, the effect will absolutely be felt around the world.

    For starters, and to really gauge the effect of the US tax cuts, simply listen to the response from America’s economic competitors and you’ll find never ending cries of unfairness.

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    Go to where the puck will be

    President Trump may be many things. But make no mistake, he is a business person who understands the art of a competitive advantage.

    The rest of the world (and especially Europe, and Canada) pushes higher taxes on individuals and businesses as a way to pay for high-cost, government welfare states. Since all multi-national companies are profit seekers, establishing various business centers in low cost jurisdictions has always been (and always will be) a rational business strategy.

    And, depending upon your perspective, it gets better (or worse). Not only is America lowering taxes; it is also lowering the source of the biggest corporate headaches and grief in the real world – bureaucracy and regulations. And considering the European Union is the undisputed champion of rules, regulations and policies – the mere thought of operating in a jurisdiction with less (instead of more) is enough to make even the French take notice.

    It should be clear that the call for lower taxes and less regulatory/bureaucracy demands, is at the very least forcing companies to have meetings and discussions about possibly relocating or making capital investments in America.

    While Europe & Canada are really worried about being less competitive, China has a completely different reason to worry. China runs an enormous trade surplus with the United States.

    This means China sells more stuff to Americans than what Americans sell to the Chinese. And years of doing this means China has accumulated over $1.2 Trillion in US Treasury Bonds.

    Some believe China is on the verge of selling its Treasury holdings, which would cause the USD to decline sharply.  These people believe China is fearful of deteriorating American fiscal positions as well as the desire to dethrone the US and become the world’s reserve currency.

    This is wrong.

    In fact, China fears the exact opposite. The Chinese are incredibly worried that America’s new approach to trade combined with lower taxes and less regulatory hurdles make it a prime destination for foreign capital that will actually siphon even more Chinese private capital out of the country and into America.

    This of course would weaken the Yuan, and force China’s central bank to increase interest rates and impose even more strict capital controls.

    Anyone who is short USD for Yuan is sitting on a whole lotta risk.

    This is great news, unless it isn’t

    In addition to the tax cuts, the other point of contention towards America’s new trade policies focuses on protectionism. Effectively, going forward America will now do trade deals that are economically profitable.

    While this may sound like a novel concept – the European Union (EU) is especially enraged at this new positioning. In some ways you can’t blame them. After all, for over 100 years America has used economic policies to further promote and advance their foreign policies.

    Foreign economic losses to achieve foreign political agenda has become indoctrinated within the American political ideology. For America to now change this approach, is unprecedented and should of course rattle the rest of the world. After all – no one likes change.

    Of course, having the EU refer to anyone as being protectionist is perhaps the biggest irony since Alanis Morissette sang about ironies.

    Every country in the world engages in protectionism.

    The French protect their companies from foreign takeovers. Canada has been protecting and subsidizing Bombardier for years. And then there’s China and their internally promoted “Made in China 2025” industrial policy which clearly encourages domestic over foreign.

    The uproar over the paradigm shift in American trade policy is being sold as protectionism – which is branded as being politically incorrect and unacceptable. Whereas in reality, the only bad is from the perspective of non-American companies and nations who will gradually make less money from American trade.

    As investors, one should simply accept it is happening and adjust accordingly.

    In the end, with American corporate taxes now lower than that demanded in Europe and Asia – investors should expect a flood of business and investors flowing into the United States. Yes this is exciting stuff, yet don’t get too excited.

    All of this is great news, unless of course you are heavily invested in bonds, or worse still – you are a bond manager, or a company or country who is heavily dependent upon continuous borrowing to survive.

    Serious investors ask serious questions

    The tax cuts are not the panacea for all wrongs in the world. In fact, the entire act merely provides the world with one final sugar high, delaying the inevitable – a crisis in the bond market. The Debt Machine Critics of the Trump Tax cuts focus on the expectation for the American debt pile to increase further and therefore causing a debt crisis for the country.

    This view is correct. Yet, the irony here is that these very same critics of America’s debt balances are either quite ignorant of the debt balances of other countries, or worse still – they choose to ignore it. Despite anyone’s personal view of the world, they must understand, accept, and acknowledge that the entire planet runs off the same yield curve.

    What we mean by this is that all global interest rates are a function of US interest rates. When interest rates are established in Europe, Asia, South America, and anywhere else that borrows – the market interest rate is established as a spread (higher or lower) relative to interest rates offered in the US Treasury bond market.

    Next up – know that sovereign debt levels are compared to each other on a relative basis. In other words, America’s debt balances may be bad, horrible, disastrous or whatnot, but they are actually less bad, not as horrible, and slightly less disastrous than other country’s.

    Sadly, those who are bearish on the USD, ignore or have completely forgotten that the Americans have another incredible advantage over all other countries.  With the USD dominating world trade and world debt issuance, the United States Treasury has a never ending private sector AND public sector demand for all bonds that it issues.

    No other country or currency bloc has this advantage. Put another way, when discussing sovereign debt levels, the most important fact to know is how countries are funding their borrowing. In other words – if a country is borrowing all the time, someone else is lending all the time. Since we already know who is borrowing, serious investors should naturally be asking – who is lending? Knowing the answer to this question should shine light on why the USD is not headed towards zero (well, not yet anyway – other currencies go there first, thereby causing USD to eventually surge).

    In many ways, the absolute level of interest rates are irrelevant. What is relevant is that investors are lined up to lend money to these supposedly dead-beat borrowers. And this is where the USD dooms day hoopla is confused.

    Today around the world, there is an enormous demand for USD and American debt.

    In fact, the demand is so large – the real fear in the world is that there isn’t enough of USD to spread around.

    A recent study by Ilzetzki, Reinhart, and Rogoff shows 60% of all countries in the world use USD as their anchor currency. And better still, this 60% equals over 70% of the global economy.

    The amazing thing about this data point, is that it is occurring during a period where the American dominance over global GDP is shrinking. Think about that for a moment. And of even more significance is the fact that #2 in the world is not even close.

    In other words – the last days of the USD dominating the world’s financial landscape can only occur if both the global demand for USD ends AND if there is a reasonable substitute. Ironically, it is the world’s reliance upon USD and USD issued debt that will eventually cause the USD to lose its reserve status.

    This will occur – but first other currencies and sovereign debt will enter crisis first.

    As of writing – the New England Patriots have a better chance of coming back to win the big game, than the USD dominance coming to an end any time soon This isn’t to say USD won’t bounce around in the short-term – all financial markets do this from time to time.

    But it is to say – those who are so painfully focussed every minute of the day on high-lighting any real or perceived flaws in America’s economy, its politics, or its social make-up is looking in the wrong place. To further demonstrate the relative dominance of America consider the following chart which details how global businesses view the United States relative to China.

    This is a survey of 1,300 chief executives from the private sector who always seek to maximize their firm’s profits. Considering all of the negativity surrounding America over the last year, these survey results should grab your attention.

    Putting it Together

    To square the peg, investors must make the connection that all of this borrowing by countries, individuals and companies, is achieved by selling bonds.

    And it is the buyers of these bonds that are unknowingly sitting on top of the most explosive financial crisis to hit in our lifetime. The biggest worry and concern in the money world today isn’t tax cuts, trade wars or even the current stock market jitters.

    Instead, the greatest worry that few even know exists is the slowdown of money printing by the world’s central banks.

    In America, the Federal Reserve has already stopped printing money, and in fact now, it is actually reducing the bonds and MBS it acquired over the last 9 years.

    When this is considered, together with the relentless march higher in Fed Funds Rates (over night interest rates), it should be crystal clear why the US is a destination of choice for objective, foreign capital. Europe is a different story. And it’s a story that will not end well.

    The big Canadian, American and Australian banks and their legions of mutual fund sales people have all completely dismissed or worse still, missed, the biggest risk story in our financial lifetime.

    In some ways, they can be forgiven. After all, their relentless focus on short-term earnings, protecting margins, and meeting regulatory requirements are all to the detriment of actually seeing the risk in front of them – is a sad song that plays over and over again.

    They all missed the Tequila crisis, the Asian crisis, the Ruble crisis, the LTCM crisis, the Tech crisis, and the Housing crisis. Expecting them to see, understand and proactively protect their millions of investors exposed to the bond market is perhaps a bit too much to ask.

    In the bond world, the bad news today is that long-term interest rates have already begun to leap higher, leaving a wake of losses and despair.

    The good news is that IceCap’s forecast for higher long-term rates has been 100% correct. As well, anecdotal evidence shows that an increasingly higher number of other boutique investment managers now share the same view.

    Protection against near-certain losses in the bond market is available.

    There’s even better news – the current bad spell for the bond market is entirely due to the expectation that inflation will be higher. Our expectation for surging long-term interest rates will come from a re-escalation of the sovereign debt crisis. This recent bad spell for the bond market is a nothing burger.

    The real show hasn’t even started.

    Yet, to demonstrate just how sensitive bond investors are to rising long-term interest rates, consider the below chart.

     

    The biggest financial crime to ever occur in our lifetime wasn’t the Madoff scandal. Nor was it the scandals from Enron or WorldCom.

    Instead, the biggest (alleged) financial crime was the decision by the central banks in USA, Australia, Canada, Britain, Europe, Norway, Switzerland, Sweden, Denmark and Japan to socialise the global debt problem.

    To refresh your memory, in response to the 2008 crisis, all central banks lowered interest rates to zero or negative rates with the hope that it would stimulate economic growth.

    The financial crime with this scheme, was the negative effect it had on the traditional savers and low risk investors around the world.

    Now, nearly 10 years later we are starting to see where the risk lies, and the downside of what is to become.

    Global long-term interest rates reached record lows and have now begun to swing higher. The problem with higher long-term interest rates is that they have a significant negative effect on bond strategies and mutual funds.

    This chart shows how a mere 0.5% rise in long-term rates affects bond investors and their ability to recapture these losses with interest/coupons received. From the chart you’ll see how a 0.5% increase in long-term rates in America, and Canada will force bond investors to wait over 2 years to recover those losses with interest payments received.

    Think about that for a moment. You are a cautious investor, dependent upon bond interest to buy groceries and gas, and then suddenly you realize you just lost 2 years worth of income while invested in supposedly the safest investments in the world.

    For France, Sweden, Finland, Austria, Belgium, and the Netherlands the financial crime is even worse. In these countries, a mere 0.5% increase in long-term interest rates means 6 to 9 years to recoup your losses. Yet, this is nothing compared to the devastation awaiting the Germans.

    In Germany, the self-proclaimed bastion of conservative investing and financial management, investors here only break even after nearly 12 years of coupon clipping. And all of this assumes long-term rates ONLY increase 0.5% and stay there forever.

    Which of course, should lead you to ask – What happens if long-term rates rise more than 0.5%? Two things actually. To start, global losses from bonds will be measured in the TRILLIONS.

    To end, and this is the risk few are talking about – countless individuals, companies and worst of all – governments, will have to pay exceedingly more to borrow money from investors.

    And that’s if they are able to borrow at all.

    In fact, the threat of rising long-term interest rates has already hit markets and headline news.

    Due to the medias’ and the big bank mutual fund machines’ obsession with stock markets, one has to look a bit harder for the evidence that is lying before you in plain sight.

    More in the complete IceCap presentation (pdf)

  • How Cryptocurrencies Spawned A New Media Industry

    In the span of just a few years, Blockchain and cryptocurrencies have taken financial markets by storm. Blockchain technology has already created new ways of financing companies. Bitcoin is gradually changing the rules of the game in the financial market: over $3.7 bln was raised by 372 ICOs between 2015 and 2017, meanwhile despite recent volatility, crypto currencies have been some of the best investments in recent years, and according to JPM, on a risk-adjusted basis, bitcoin has generated higher returns than the S&P.

    In the media industry where rapid changes have become part of everyday business, traditional sources were unprepared to work with the crypto community. As a result, a large field for media newcomers appeared. Crypto holders are their audience, crypto companies and ICO issuers are their clients.

    Below we take a quick look at some of the most popular new crypto media outlets.

    Blockonomi

    • Website: blockonomi.com; Twitter: @blockonomi
    • Audience: 2.4 mln visits per month according to SimilarWeb
    • History: Blockonomi was launched in 2017 by Kooc Media company. They are focused on writing reviews of companies and beginners guides, not news articles.
    • Editorial policy: No information. According to Blockonomi’s press-kit, the media accepts fiat only.
    • Business-model: Revenue from advertising.

    The Merkle

    • Website: themerkle.com; Twitter: @themerklenews
    • Audience: 4.8 mln visits per month according to SimilarWeb
    • History: San-Francisco-based The Merkle was founded in June 2014. It is led by Mark Arguinbaev who also founded TheVRBase, media source about the VR industry.
    • Mission statement: The Merkle publishes cryptocurrency news and a variety of educational articles relating to Bitcoin.
    • Editorial policy: No information. The company accepts Bitcoin for press-releases, but do it through BitPay’s service, which turns Bitcoin into dollars.
    • Business-model: Revenue from advertising.

    Bitcoin Magazine

    • Website: bitcoinmagazine.com; Twitter: @BitcoinMagazine
    • Audience: 2.3 mln visits per month according to SimilarWeb
    • History: Bitcoin Magazine was the first magazine dedicated to cryptocurrency. It was founded by  Mihai Alisie and Vitalik Buterin, the creator of Ethereum, in 2012. They published the first issue in May 2012 and later joined forces with Coin Publishing LLC. In 2015 Bitcoin Magazine was acquired by BTC Media LLC, which also publishes Bitcoin, Let’s Talk Bitcoin and Distributed. Bitcoin Magazine ceased publication of their print magazine and currently posts content online. In total 22 magazine editions were issued.
    • Editorial policy:  Bitcoin Magazine’ writers are allowed to hold cryptocurrencies, but they have to disclose the information about their crypto investments.
    • Business-model: BTC Media LLC earns money on advertising and selling crypto fans’ stuff.

    Bitcoinist

    • Website: bitcoinist.com; Twitter: @bitcoinist
    • Audience: 5.1 mln visits per month according to SimilarWeb
    • History: Bitcoinist was founded in 2014 and is based in Budapest, Hungary. The media focus on the latest news alongside interviews, reviews and op-eds. It has its own ICO listing and list of online casinos.
    • Editorial policy: All writers are paid in Bitcoin. Articles include a disclosure note if the author is a holder of the given coin. Bitcoinist accepts payment in bitcoin from its sponsors and advertisers, but do not trade or invest in cryptocurrency markets.
    • Business-model: Revenue from advertising.

    NEWSBTC

    • Website: newsbtc.com; Twitter: @newsbtc
    • Audience: 3.4 mln visits per month according to SimilarWeb
    • History: London-based NewsBTC is working since October 2013. It publishes news, interviews, technical and price analysis. The media has its own cryptocurrencies price charts, casino listing, the list of hot ICOs and the calendar of crypto events.
    • Editorial policy: No information.
    • Business-model: NEWSBTC earns money through advertising. Moreover, the company has franchise program: individuals and businesses can gain exclusive rights to use the NewsBTC brand and build up on it in their region.

    CCN (Cryptocoinsnews)

    • Website: ccn.com; Twitter: @CryptoCoinsNews
    • Audience: 16.7 mln visits per month according to SimilarWeb
    • History: Oslo-based media CryptoCoinsNews was founded in September 2013. The editorial team is composed of freelance writers. In November 2015, CryptoCoinsNews and its sister-site Hacked offered a five Bitcoin reward for information that leads to the arrest of an extortionist targeting them with a distributed denial of service attack. On Dec. 18, 2017, Cryptocoinsnews.com was redesigned and now it’s site transfer visitors on new domain name ccn.com.
    • Editorial policy: No information. The team accepts Bitcoins for advertising.
    • Business-model: Revenue from advertising. Clients can place banner, sponsored story and press release or order newsletter ad.

    Cointelegraph

    • Website: cointelegraph.com; Twitter: @Cointelegraph
    • Audience: 26.2 mln visits per month according to SimilarWeb
    • History: Cointelegraph is a London-based news site founded in October 2013. It is a source of cryptocurrency news, with its interviews and analysis of crypto market. The media has different services: Cryptocurrency Price Index, ICO calendar and exchange scanner. Cointelegraph also hosts BlockShow conferences, international events for showcasing established Blockchain solutions.
    • Editorial policy: Cointelegraph has no publicly stated policy on whether its writers can own Bitcoin. Public statements by its writers suggest at least some of them were paid in Bitcoin. The media also accepts Bitcoin for advertising.
    • Business-model:
      • Media group: Cointelegraph started from banner placements but now they have a whole media group. According to CEO Victoria Vaughan, Cointelegraph’s clients were interested in advertising on various resources, so the team started offering sales services to the owners of other sites.
      • Franchise: Cointelegraph gives local entrepreneurs the right to use its brand and editorial materials, as well as sales and marketing support.
      • Events: Cointelegraph also earns money by arranging BlockShow conferences and industry meetups.

    Bitcoin.com

    • Website: bitcoin.com; Twitter: @BitcoinCom
    • Audience: 26.9 mln visits per month according to SimilarWeb
    • History: Bitcoin.com originally is not a media source but a company that provides services, such as its own Bitcoin wallet, buying and selling cryptocurrencies and choosing a crypto wallet, Bitcoin mining pool, Blockchain explorer, Bitcoin forum, pricing charts, store and online games casino. The company also provides news, features and newcomers’ guides. It produces its own podcast. The source was founded in 2015 by Roger Ver, who is known as Bitcoin’s first angel investor. Ver is also famous for being a strong supporter of Bitcoin Cash.
    • Editorial policy: There is no information regarding the authors’ ownership of crypto. Obviously, the company is directly interested in the growth of the cryptocurrencies.
    • Business-model: Bitcoin.com earns money through services and advertising.

    Coindesk

    • Website:  coindesk.com; Twitter: @coindesk
    • Audience: 41.9 mln visits per month according to SimilarWeb
    • History: CoinDesk was started in 2013 by Shakil Khan, Student.com co-founder. The media provides news, industry research and guides for those who new to digital currencies. Bitcoin Price Index was launched in July 2013. Since 2014 the media publishes The State of Blockchain, an analysis on the growth of Blockchain technology. Coindesk also hosts Consensus summit in New York City every year since 2015. The company was acquired by Digital Currency Group (DCG) in January 2016 for an undisclosed amount. DCG owns and operates Bitcoin brokerage firm, Genesis Trading and asset management firm Grayscale Investments, which manages the public Bitcoin investment vehicle, the Bitcoin Investment Trust.
    • Editorial policy: CoinDesk employees are not restricted from owning or investing in digital currencies or Blockchain-based projects. But its contributors must disclose this information in their user bios. According to Coindesk’s Editorial Policy, the company doesn’t trade or invest in digital currency markets. However, CoinDesk accepts payment in Bitcoin. They argue that the company works with Bitcoin payment processors to instantly convert those funds to US dollars.
    • Business-model: CoinDesk earns money through events, research and advertising.

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