Apr 29

Today’s News 29th April 2018

  • Yemen War Great For US Jobs: Watch CNN's Wolf Blitzer Proclaim Civilian Deaths Are Worth It

    With the still largely ignored Saudi slaughter in Yemen now in its fourth year, RT’s In The Now has resurrected a forgotten clip from a 2016 CNN interview with Senator Rand Paul, which is currently going viral.

    In a piece of cable news history that rivals Madeleine Albright’s infamous words during a 1996 60 Minutes appearance where she calmly and coldly proclaimed of 500,000 dead Iraqi children that “the price is worth it,” CNN’s Wolf Blitzer railed against Senator Paul’s opposition to a proposed $1.1 billion US arms sale to Saudi Arabia by arguing that slaughter of Yemeni civilians was worth it so long as it benefits US jobs and defense contractors. 

    At the time of the 2016 CNN interview, Saudi Arabia with the help of its regional and Western allies — notably the U.S. and Britain — had been bombing Yemen for a year-and-a-half, and as the United Nations noted, the Saudi coalition had been responsible for the majority of the war’s (at that point) 10,000 mostly civilian deaths. 

    At that time the war was still in its early phases, but now multiple years into the Saudi-led bombing campaign which began in March 2015, the U.N. reports at least “5,000 children dead or hurt and 400,000 malnourished.”

    And now as the death toll tragically stands at many tens of thousands, and with a subsequent U.N. report from 2017 documenting in detail “the killing and maiming of children” on a mass scale, Blitzer’s words are even more revealing of the role that CNN and other major American networks play in enabling and excusing U.S. and allied partners’ war crimes abroad.

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    Senator Paul began the interview by outlining the rising civilian death toll and massive refugee crisis that the U.S. continued facilitating due to deep military assistance to the Saudis:

    There are now millions of displaced people in Yemen. They’re refugees. So we supply the Saudis with arms, they create havoc and refugees in Yemen. Then what’s the answer? Then we’re going to take the Yemeni refugees in the United States? Maybe we ought to quit arming both sides of this war.

    Paul then narrowed in on the Pentagon’s role in the crisis: “We are refueling the Saudi bombers that are dropping the bombs. It is said that thousands of civilians have died in Yemen because of this.” 

    CNN’s Blitzer responded, “So for you this is a moral issue. Because you know, there’s a lot of jobs at stake. Certainly if a lot of these defense contractors stop selling war planes, other sophisticated equipment to Saudi Arabia, there’s going to be a significant loss of jobs, of revenue here in the United States. That’s secondary from your standpoint?”

    Paul countered, “Well not only is it a moral question, its a constitutional question.” And noted that Obama had partnered with the Saudi attack on Yemen without Congressional approval: “Our founding fathers very directly and specifically did not give the president the power to go to war. They gave it to Congress. So Congress needs to step up and this is what I’m doing.”

    * * *

    For further context of what the world knew at the time the CNN interview took place, we can look no further than the United Nations and other international monitoring groups.

    A year after Blitzer’s statements, Foreign Policy published a bombshell report based on possession of a leaked 41-page draft UN document, which found Saudi Arabia and its partner coalition allies in Yemen (among them the United States) of being guilty of horrific war crimes, including the bombing of dozens of schools, hospitals, and civilian infrastructure. 

    The U.N. study focused on child and civilian deaths during the first two years of the Saudi coalition bombing campaign – precisely the time frame during which the CNN Wolf Blitzer and Rand Paul interview took place. 

    Foreign Policy reported:

    “The killing and maiming of children remained the most prevalent violation” of children’s rights in Yemen, according to the 41-page draft report obtained by Foreign Policy.

    The chief author of the confidential draft report, Virginia Gamba, the U.N. chief’s special representative for children abused in war time, informed top U.N. officials Monday, that she intends to recommend the Saudi-led coalition be added to a list a countries and entities that kill and maim children, according to a well-placed source.

    The UN report further identified that air attacks “were the cause of over half of all child casualties, with at least 349 children killed and 333 children injured” during the designated period of time studied, and documented that, “the U.N. verified a total of 1,953 youngsters killed and injured in Yemen in 2015 — a six-fold increase compared with 2014” – with the majority of these deaths being the result of Saudi and coalition air power.

    Also according AP reporting at the time: “It said nearly three-quarters of attacks on schools and hospitals — 38 of 52 — were also carried out by the coalition.”

    But again, Wolf Blitzer’s first thought was those poor defense contractors:

    …Because you know, there’s a lot of jobs at stake. Certainly if a lot of these defense contractors stop selling war planes, other sophisticated equipment to Saudi Arabia, there’s going to be a significant loss of jobs, of revenue here in the United States.

    * * *

    This trip down memory lane elicited suitable responses on Twitter:

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    And here’s the full CNN interview segment from 2016: 

    As Wolf Blitzer is known to pal around with Clinton’s former Secretary of State Madeleine Albright, it appears he’s a quick understudy:

    Lesley Stahl on U.S. sanctions against Iraq: We have heard that a half million children have died. I mean, that’s more children than died in Hiroshima. And, you know, is the price worth it?

    Secretary of State Madeleine Albright: I think this is a very hard choice, but the price–we think the price is worth it.

    —60 Minutes (5/12/96)

  • David Stockman: Jumping The Great White Shark Of Bubble Finance

    Authored by David Stockman via Contra Corner blog,

    Wall Street has now truly jumped the shark – the one jockeyed by Jeff Bezos.

    Last night Amazon reported a whopping 41% plunge in free cash flow for the March 2018 LTM period compared to prior year. Yet it was promptly rewarded by a $50 billion surge in market cap—-with $10 billion of that going to the guy riding topside on the Great White Shark of Bubble Finance.

    That’s right. Amazon’s relatively meager operating free cash flow for the March 2017 LTM period had printed at $9.0 billion, but in the most recent 12 months the number has slithered all the way down to just $5.3 billion.

    And that’s where the real insanity begins. A year ago Amazon’s market cap towered at $425 billion—meaning that it was being valued at a downright frisky 47X free cash flow. But fast forward a year and we get $780 billion in the market cap column this morning and 146X for the free cash flow multiple.

    Folks, a company selling distilled water from the Fountain of Youth can’t be worth 146X free cash flow, but don’t tell the giddy lunatics on Wall Street because they are apparently just getting started.

    Already at the crack of dawn SunTrust was out with a $1900 price target—meaning an implied market cap of $970 billion and 180X on the free cash flow multiple.

    At this point, of course, you could say who’s counting and be done with it. But actually it’s worse—-and for both Amazon and the US economy.

    That’s because Amazon is both the leading edge of the most fantastic ever bubble on Wall Street and also a poster boy for the manner in which Bubble Finance is hammering growth, jobs, incomes and economic vitality on main street.

    Moreover, soon enough a collapsing Wall Street bubble will bring the already deeply impaired main street economy to its knees. So Amazon is a double-destroyer.

    In this context, Bezos e-Commerce juggernaut racked up $174 billion of sales during the March LTM period, which represented a massive $45 billion or 35% gain over prior year (both figures exclude AWS). By way of comparison, that one-year gain is nearly double Macy’s total annual sales!

    Even when you adjust for the Whole Foods acquisition that was not in the 2017 LTM numbers, the sales gain was about $35 billion or 27%.

    Either way, the robo-traders got damn excited, scooping up AMZN’s shares hand-over-fist on the back of its “great sales momentum”. But as we said yesterday, headline reading algos don’t get far below the surface, and in this case they didn’t even break the skin.

    Fully 96% of Amazon’s $5.0 billion of  LTM operating income was accounted for by its cloud services business (AWS).

    The e-Commerce juggernaut, by contrast, posted just $188 million of  LTM operating income, which am0unts to, well, 0.1% of sales on a computational basis. But we’d round that to zero—especially because Amazon’s e-Commerce business was already almost there in the year ago period when its margin on sales came in a tad higher at 0.6%!

    Needless to say,  AWS  has nothing to do with e-Commerce, and, instead, is in the brute force, capital-intensive server farm business. As the leader of a rapidly growing pack of cloud farmers,  AWS racked up a 44% year-on-year sales gain.

    Even then, the world can only migrate from desk tops and discrete devices to the cloud once—so there is no conceivable way that current growth rates can be sustained or should be capitalized in perpetuity.

    Still, give AWS the benefit of the doubt and value it at Microsoft’s red hot multiple of 50X, which we don’t think makes much sense, either. After all, it’s a 42-year old company that has posted essentially zero earnings growth over the last 7 years and much volatility of results.

    In any event, at Microsoft’s elevated multiple of the moment, the cloud business is worth $200 billion. That reflects 50X the $4 billion of LTM net income attributable to AWS, which happens to be 100% of AMZN’s net income because e-Commerce earned zero after attributable interest and taxes.

    Needless to say, that means the loony bins down on Wall Street are valuing Bezos’ profit-free e-Commerce monster at $580 billion. And that goes right to our double-destroyer point.

    Amazon is undoubtedly one of the craziest momo stocks of all-time—meaning that there is $300 billion or even more of bottled air lodged in the implied $580 billion value of e-Commerce. That’s because the vast bulk of Amazon is in the GDP business—-that is, the moving and storage and delivery of good and services.

    These grow at 3-4% per year in today’s geriatric US economy, and therefore merit perhaps a 15X multiple of steady-state operating free cash flow. And that would be generous in a world with normalized cap rates, which sooner or later must come.

    Accordingly, to be worth even $280 billion, e-Commerce would have to generate nearly $19 billion of free cash flow, and that would be no lay-up. There are not that many malls left in the US to destroy and AMZN’s attempt to go international has been a huge thumb-sucker.

    To wit, North American e-Commerce sales ex-Whole Foods were $26.5 billion in the quarter just ended and represented a 26% gain from prior year. At the same time, the LTM operating loss for the international e-Commerce business has grown from $1.2 billion in the December 2016 LTM period to $2.6 billion in Q3 2017 and $3.2 billion for the LTM period just ended.

    In other words, Amazon’s e-Commerce business is digging deeper and deeper into red ink abroad and growing steadily slower at home, where it does manage to eek out a marginal profit. So how does it ever generate the above postulated $19 billion of free cash flow?

    Indeed, therein lies the skunk in the woodpile. Customers love Amazon precisely because it doesn’t generate any free cash flow at all and never could. The implicit business model is that Amazon returns to customers 100% of the prices they pay in the form of costs for logistics, storage, transportation, fulfillment and the underlying goods and services.

    Moreover, minor tweaks like the announced increase of the Prime membership fee to $119 per year ( from $99) won’t make any difference because more than the resulting $2 billion gain ($20 X 100 million members) is being absorbed into the maws of Amazon video streaming and entertainment content services which are free to Prime members.

    In short, there is $300 billion, $400 billion or even more bottled air in the e-Commerce business and the $200 billion we have ascribed to AWS isn’t all that rock solid, either. That’s because you simply can’t value “growth” stemming from a one-time shift to the cloud at a 50X multiple—-especially in the case of a capital intensive business like server farms.

    Perhaps that’s why Amazon doesn’t break-out assets by segment: the return on capital at AWS, as opposed to sales, might look at lot less impressive.

    Stated differently, Amazon’s $780 billion market cap is a giant momo hotel, and when that mega-bubble finally breaks the contagion and spillover effect will be monumental. Even our Microsoft benchmark will take a pasting.

    After all, if not for the enormous forces of momentum in the casino, you couldn’t explain the chart below, either.

    During the LTM period reported last night, Microsoft generated net income of $14.2 billion, and even if you reverse out the huge write-downs last year, the annualized run-rate is no higher than $20 billion. Yet its net income has been cycling around the $20 billion mark for the last 7 years.

    At the same time, its market cap more than tripled from $200 billion to $740 billion—meaning that its valuation multiple also tripled.

    Why?

    We’d bet its the same reason that AMZN is capitalized at $780 billion: Namely, it reflects a casino that has run wild on central bank Bubble Finance, and that is itching for a giant fall now that central bankers are trying to climb off the ledge.

    MSFT Net Income (TTM) Chart

    And that gets us to the second part of the doubly-whammy. Amazon is just the poster boy for value destruction on main street owing to the Fed’s Bubble Finance regime.

    In this case, Jeff Bezos was paid another $10 billion last night for filling a report with the SEC which implicitly documented his massive predation on the main street economy and Amazon’s far reaching destruction of assets embodied in regional malls, shopping centers and mom and pop emporiums alike.

    Yes, we understand all about Schumpeter’s “creative destruction” and that the genius of free market capitalism is that it continuously innovates and invents the new and discards the old, inefficient and obsolete. But the great Austrian also presumed that there was a level playing field—an honest free market, and most especially when it comes to pricing capital, debt and money.

    Today there is no such thing—-that’s the ultimate evil of monetary central planning. It substitutes the fallible will of 12 mortals on the FOMC for the genius and continuously self-correcting verdicts of the free market.

    And that lamentable result is not a bad thing just in the abstract. In fact, it’s a terrible thing in the concrete here and now because it utterly distorts the signaling system of the capital markets.

    At the moment, those central bank engineered signals are telling Bezos and his army that their profit-free predator is worth nearly $600 billion, and that they should keep doing more of the same.

    We will address this point at greater length in the near future, but suffice it to say that the C-suites all over the US economy are being given the same kind of false signals. And, most especially, signals to invest their cash flows and balance sheet capacity in Wall Street financial engineering schemes rather than main street growth, productive assets and human resources.

    Unfortunately, the metrics which inform the daily economic narrative are rooted in the Keynesian models from which the GDP statistics are derived. That means current spending for consumption and capital goods get added to GDP but the current period costs of destroyed malls and their support infrastructure including employees don’t get deducted.

    In the longer run, of course, the premature and non-free market based destruction of capital and other economic resources takes its toll. Ultimately, the result is lower productivity, reduced output, less GDP and lower living standards.

    In the interim, however, Amazon’s predation is actually contributing to officially measured GDP because it’s building warehouses and distribution infrastructure like there is no tomorrow.

    Yet that’s just another version of Bastiat’s broken window fallacy. The stones are being thrown by the Great White Shark of Bubble Finance, but the incentive to do so was mediated by Wall Street and fostered in the Eccles Building.

    That is worth mentioning because  lurking beneath this morning’s slight beat on real GDP was a living example of this very broken window fallacy. When you strip-out the volatile short-term impact of inventories and exports, you get a reasonably serviceable measure of contemporaneous economic activity as measured by the Keynesian concept of “spending”.

    Needless to say, a lot of windows were broken last summer during the great storms of 2017 and heavily repaired during Q4. So it is not surprising that the annualized rate of real final sales surged by 4.5%.

    It’s also not surprising that the number reverted back to its tepid trend line in Q1, when real final sales expanded by only 1.6% at an annual rate.

    As is also evident from this chart, even Keynesian style spending is running out of gas after 9-years of tepid business expansion, and in the Amazon story we have the reason why.

    Bubble Finance is breaking way too many windows.

  • Early Facebook Investor And Zuckerberg Mentor: "I Feel My Baby Has Turned Out To Be Something Horrible"

    Even if Facebook’s stellar Q1 earnings report hadn’t helped erase some of the losses that Facebook shares incurred in the aftermath of the Cambridge Analytica scandal, Facebook executives Mark Zuckerberg and Sheryl Sanderberg would still believe that the company’s troubles are largely behind them and that the company had essentially repaired the damage done to its reputation.

    That was the assessment delivered by early Facebook investor and one-time Zuckerberg mentor Roger McNamee, who warned during an appearance at an event organized by Quartz in Washington DC last week that the company’s leaders are deeply complacent and still haven’t accepted the fact that Facebook has badly mislead its users about how the company profits off their data.

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    Despite Zuckerberg’s warning, embedded in his opening statement to Congress earlier this month, that the company planned to make changes that could “significantly impact” profitability, McNamee believes it’s likely Facebook is “going to get away” with the bad things that it has done, which is “particularly dangerous” considering the 2018 midterm elections are only months away. McNamee said he’s deeply disappointed in how Zuckerberg and Sandberg have responded to the crisis by refusing to accept responsibility.

    During their post-crisis media tour, both executives insisted on blaming Cambridge Analytica for “misleading” Facebook, even though Facebook never bothered to alert users whose data had been affected.

    “They’ve done bupkis to protect us,” McNamee said.

    The whole affair has left McNamee – who considers his involvement with Facebook during its early days to be the “highlight of a long career” – deeply saddened.

    “Every part of this has made me sadder and sadder and sadder. I feel like my baby has turned out to be something horrible, and these people I trusted and helped along have forgotten where they came from,” he said in a conversation with Kevin Delaney, Quartz’s editor-in-chief.

    McNamee has become an outspoken critic of the company, comparing its role in the 2016 US election to “the plot of a sci-fi novel” while at the same time admitting that he has “profited enormously” by backing Facebook early on. The organization he helped found, the Center for Humane Technology, has made it a mission to expose Facebook’s multiple flaws, and to try to fix them.

    The longtime venture investor explained that he had started becoming disillusioned with Facebook long before the latest in string of scandals involving the company. During his talk, he echoed criticisms by early Facebook executive, Chamath Palihapitiya, who compared Facebook to “Internet crack” and said it’s “ripping apart the social fabric of how society works.”

    Like Palihapitiya, McNamee believes Facebook isn’t doing enough to mitigate the negative effects of social media addiction and misinformation spread on its platform. In other words, Facebook is sacrificing the well-being of its users in the name of uninterrupted growth.

    It’s not just about the money, McNamee said, comparing his former protégé to a cult leader. “Zuckerberg believes he’s given the world a massive gift,” he said, and the mentality at the company remains focused on becoming “the most important thing in the world.”

    Because of these issues, McNamee said the last 12 months have been “the most depressing of his life.”

    Of course, like Palihapitiya before him, McNamee’s criticisms would carry a lot more heft if they were followed by action – perhaps establishing some kind of organization meant to combat social media’s near-total influence over society. 

    Still, McNamee is hardly alone: A recent survey revealed that nearly one-third of Americans believe Facebook has a negative impact on society. And with early indicators showing user engagement numbers starting to slip in the aftermath of the company’s user-data scandal, perhaps we’ll need to wait until the company’s next batch of quarterly results to see how its users are responding to the latest user-data crisis.

    * * *

    Meanwhile, Facebook’s campaign to win back the trust of its vast user base is manifesting in an advertising blitz that has already arrived in the corridors of New York City’s subway system.

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  • Inside New York's 700-Member "Millennials-Only" Sex Club

    Daniel Saynt, a Puerto Rican bisexual ex-Jehovah’s Witness who changed his name and opened up 700-member NYC “Millennials only” sex club “NSFW” (New Society for Wellness), has a few rules for those seeking to get their group-sex on.

    • You have to be hot
    • You have to be young
    • You have to be interesting and active on social media
    • Saynt has to be able to imagine himself having sex with you or next to you
    NSFW has 700 members who all meet the following criteria: attractive, successful and social-media savy

    “If a guy applies and says, ‘I just want to have sex with as many girls as possible,’ that’s not someone we want here,” said Saynt. “I use my bi[sexual] sense … Like, do I want to hook up with them? Would I want this person having sex next to me? If not, then we won’t accept them.”

    All is not lost however for fat, sexually frustrated New York City millennials – as they’ll have ample time to work on their sex-club bodies and social skills while NSFW chews through its waiting list of over 300 horny people, while more than 9,000 applicants didn’t make the cut. 

    The average age of a NSFW member is 28, who pay a one-time membership fee of $96, and an extra charge of $30 – $150 per sex party. Around 60% of members are in open relationships, and the majority are bisexual. As we’ve mentioned, Saynt’s standards are incredibly high. 

    “Being a hot woman, I don’t want to fuck everyone and I don’t want ­everyone to think they can fuck me,” said member Lola Jean, 28, who works as a sex educator and is known in the sex-club community as a wrestling dominatrix. “At other parties, it’s hard to be the hottest person in the room and have all this attention coming at you — but here, everyone is hot so they all get it.”

    The club also holds thematic events:

    THE bacchanals — the biggest of which take place at city venues such as House of Yes — celebrate themes ranging from BDSM and foot-fetish workshops to caviar dinner parties, but all end with little to no clothing on and plenty of hooking up.

    “Members dress in layers to allow for various stages of nudity as the night develops,” said member Melissa Vitale, 25, a publicist. Sometimes there is a strict all-black dress code that includes masks. –NY Post

    Saynt, born Daniel Santiago, grew up poor in New York. Raised by Puerto Rican parents who were strict Jehovah’s Witnesses, he attended church every Sunday, woke up at 6 a.m. every day, and spent 10 hours a week at Bible study. 

    “As per the tenets of his religion, he did not celebrate birthdays or holidays, including Christmas.” –NY Post

    “It’s not just a religion, it’s a lifestyle,” said Saynt. “Your friends, family and everyone you interact with are all Jehovah’s Witnesses.”

    Then Saynt had his first sexual experience at 13 with another boy from the neighborhood.

    “It was very confusing and scary being in a faith that is so traditional in their approach to LGBT people,” Saynt said of the Jehovah’s Witnesses – who consider homosexuality a punishable sin. “It really stunts you.”

    In 2001 – against his parents’ wishes to become a missionary, Saynt enrolled at Berkeley College in Midtown, graduating in 2005 with a degree in e-commerce and legally changing his surname to from Santiago. Saynt says that he began to sexually experiment in college, hooking up with men and women on Craigslist and attending sex parties. 

    After a failed six-year attempt at a straight marriage, Saynt left the digital lifestyle-marketing company he co-founded and opened up an Eyes-Wide-Shut tier sex club in NYC. 

    “I got tired of selling shoes and handbags and beauty things that people don’t need,” said Saynt of his fashion-marketing days. “I wanted to sell things that make people happy, like sex.”

    SAYNT began accepting applications for NSFW in 2015. Potential members must answer a detailed questionnaire about their fantasies and preferences, submit photos of themselves and provide links to their social-media accounts. –NY Post

    “We look for people with a story to share,” said Saynt. “If you can’t share a conversation with someone, you can’t share a bed.”

    In order to decide who makes the cut, Saynt has a trusted “council” of five judges “want people who post photos of themselves with friends and at local hot spots, doing fun activities and traveling the world. Hateful political views, too few photos or awkward close-ups are an automatic “No.”

    Members who enter NSFW’s Williamsburg clubhouse will find six beds in the basement with mesh dividers, adorned with Christmas lights, lanterns, and a large “XXX” marquee sign which greets guests over the door. 

    Photos of tattooed models holding pizza and hot dogs over their genitals line the walls. Black leather toys are on display for members to test.

    Wonder if they’ve got this one?

    Saynt isn’t just selling experiences either – he’s selling sex dolls out of his sex club!

    Saynt’s marketing company, also called NSFW, works with brands such as Real Love Sex Dolls to market directly to club members by letting them test out and buy discounted products. The partnerships, in turn, help fund the parties.

    So – in addition to all the hot sex with incredibly attractive people, members receive the fringe benefit of a discount on a wide variety of sex toys. 

  • "Prepare For The Worst Possible Outcome" Migrant Caravan Warned As It Enters The US

    Around 400 migrants about to cross into San Diego are refusing the advice of immigration attorneys, who say the asylum-seekers risk a lengthy detention, or being separated from their families, before eventual deportation back to Central America.

    Kenia Elizabeth Avila, 35, appeared shaken after the volunteer attorneys told her Friday that temperatures may be cold in temporary holding cells and that she could be separated from her three children, ages 10, 9 and 4.

    But she in said an interview that returning to her native El Salvador would be worse. She fled for reasons she declined to discuss. –AP

    After crossing through Mexicali earlier last week, the migrants been gathering in Tijuana on Tuesday. So many reportedly showed up that the shelter they were occupying was overflowing by Wednesday. Most members of the group are from Guatemala, El Salvador or Honduras, and are fleeing their homes, they say, because of death threats from local gangs, or political persecution.

    That, according to many, is worth dealing with US authorities and deportation for the small chance they might be granted asylum. 

    “If they’re going to separate us for a few days, that’s better than getting myself killed in my country,” said Avila.

    “We are the bearers of horrible news,” said Nora Phillips, a Los Angeles immigration attorney while taking a break from legal workshops in Tijuana where around 20 lawyers are offering free information and advice. “That’s what good attorneys are for.”

    The mostly-Guatemalan migrants, many traveling as families, plan to test President Trump’s resolve after he instructed the National Guard and the Border Patrol to arrest any migrants caught trying to sneak into US territory – a move that US-based advocacy group Pueblos Sin Fronteras says is illegal.

    The organization is actively organizing a plan for the migrants to cross over the main pedestrian bridge into the U.S. on Sunday, after reacting angrily to an initial plan to try and cross in smaller groups over a more spread-out period of time. 

    President Donald Trump and members of his Cabinet have been tracking the caravan, calling it a threat to the U.S. since it started March 25 in the Mexican city of Tapachula, near the Guatemala border. They have promised a stern, swift response.

    Attorney General Jeff Sessions called the caravan “a deliberate attempt to undermine our laws and overwhelm our system,” pledging to send more immigration judges to the border to resolve cases if needed. –AP

    Department of Homeland Security Secretary Kristjen Nielsen said that the migrants’ asylum claims wikll be handled “efficiently and expeditiously,” adding however that the asylum-seekers should first ask Mexico if they can stay there. (lol) 

    Any asylum-seeker making false claims to U.S. authorities may also be prosecuted – along with anyone who “assists or coaches” immigrants on how to make the false claims, Neilsen added. The Trump administration claims that asylum fraud is growing, and many of the migrants are heavily coached on the “correct answers” to obtain it. 

    The group of 20 immigration attorneys giving seminars in Tijuana have denied coaching any of the roughly 400 people from the caravan currently camping out in shelters throughout Tijuana. 

    Some migrants received one-on-one counseling to assess the merits of their cases and groups of the migrants with their children playing nearby were told how asylum works in the U.S.

    Asylum-seekers are typically held up to three days at the border and turned over to U.S. Immigration and Customs Enforcement. If they pass an asylum officer’s initial screening, they may be detained or released with ankle monitors.

    Nearly 80 percent of asylum-seekers passed the initial screening from October through December, the latest numbers available, but few are likely to eventually win asylum. –AP

    As Reuters pointed out on Thursday, the timing of their arrival could sabotage NAFTA talks after President Trump repeatedly threatened to scrap the deal if Mexico doesn’t do more to stop Central American migrants from traveling through its territory.

    Moving from town to town, the migrant caravan became a stumbling block for U.S.-Mexico relations after Trump unleashed a series of tweets in early April, telling Mexican authorities to stop them. More busloads of migrants arrived during the course of the day, overflowing the first shelter.

    Local migrant aid groups said it was the biggest single group they had seen arrive together as they scrambled to find places in ten shelters.

    “Thanks to god we’re here,” said 34-year-old Aide Hernandez from Guatemala who had four children in tow. She said she planned to seek asylum in the United State. When asked why, she looked down, ashamed to detail a case of domestic abuse.

    […]

     

    “The wall doesn’t look that tall,” said Kimberly George, a 15-year-old girl from Honduras as she looked toward a stunted barrier a few feet away. “I really want to cross it.”

    Get the popcorn, a border showdown is about to occur. 

  • Twitter Sold Information To Researcher Behind Facebook Data Harvesting Scandal

    Twitter has now also become embroiled in the Facebook data harvesting scandal – as the Sunday Telegraph reveals that the social media giant sold user data to Aleksandr Kogan, the Cambridge University researcher and director of Global Science Research (GSR), who created an app which harvested the data of millions of Facebook users’ without their consent before selling it to political data firm Cambridge Analytica.

    Aleksandr Kogan, who created tools for Cambridge Analytica that allowed the political consultancy to psychologically profile and target voters, bought the data from the microblogging website in 2015, before the recent scandal came to light. –Sunday Telegraph

    Kogan says that the data was only used to generate “brand reports” and “survey extender tools” which were not in violation of Twitter’s data policies. 

    While most tweets are public information and easy for anyone to access, Twitter charges companies and organizations for access to information in bulk – though Twitter bans companies which use the data for political purposes or to match with personal user information found elsewhere. 

    A Twitter spokesman confirmed the ban and said: “Twitter has also made the policy decision to off-board advertising from all accounts owned and operated by Cambridge Analytica. This decision is based on our determination that Cambridge Analytica operates using a business model that inherently conflicts with acceptable Twitter Ads business practices.

    The company said it does not allow “inferring or deriving sensitive information like race or political affiliation, or attempts to match a user’s Twitter information with other personal identifiers” and that it had staff in place to police this “rigorously”.-Sunday Telegraph

    Data licensing made up 13% of Twitter’s 2017 revenue at $333 million. In a March blog post, Citron Research said that Twitter’s 2018 data-licensing business will generate $400 million (analysts polled by FactSet say $387 million) and that it represents the fastest-growing segment of the company’s operations (which it is, according to FactSet). 

    https://platform.twitter.com/widgets.js

    Citron says it is shorting Twitter because it’s data business is “vastly more successful and profitable than the company’s advertising,” along with a large amount of insider selling, low short interest and the unlikely prospect of a near-term acquisition. 

    “Dynamics are in place to short Twitter,” Citron said four weeks ago. 

    Of note, Twitter says that it doesn’t sell direct messages as part of its data-licensing businesses. 

    https://platform.twitter.com/widgets.js

    A spokesman for Cambridge Analytica said that they used Twitter for political advertising, but had not engaged in “a project with GSR focusing on Twitter data and Cambridge Analytica has never received Twitter data from GSR,” adding “Cambridge Analytica is a data-driven marketing agency and does not ‘manipulate political views’.”

    Kogan, meanwhile, told the UK’s Department for Digital, Culture, Media & Sport last week that his company, GSR, was founded in 2014 to specifically cater to Cambridge Analytica parent company, SCL Group. 

    Last week, the Moldovan-born researcher from Cambridge University said he’s being used as a scapegoat in the data harvesting scandal, and that there are “tens of thousands” of other apps do the same thing, Kogan said. “It’s certain”

    “In reality, I think, the truth is we’ve got tens of thousands of over apps that did the same thing, probably on a much bigger scale than me,“ Kogan told CNBC’s Power Lunch. “And they’re all out there and Facebook has no accounting for it.”

    “The amazing thing is if you go and look at Facebook apps literally right now, many, if not most will have language in the terms of service that say they can transfer the data to third parties. I’m not talking about small companies, I am talking about some of the biggest companies in the world. And you can go and do this yourself right now. And Facebook is still not policing it.“

  • "This Nonsense Has Been Going On Long Enough…"

    Authored by James Howard Kunstler via Kunstler.com,

    Who hit Kanye with that white privilege stick? The rapper / fashion maven / theologian / Kardashian arm candyman sent chills through the Twitterverse when he declared himself, somewhat elliptically, off-the-bus of the Progressive #Resistance movement and an admirer of the Golden One in the Oval Office. This came in his endorsement of YouTube blogger Candace Owen, who happens to not be down with the cause of the national victim lottery. Both Kanye and Candace have apparently crossed some boundary into a Twilight Zone of independent thought. Many probably wonder how they are able to get out of bed in the morning without instructions from Don Lemon.

    Speaking as a white cis-hetero mammal, I’m not quite as dazzled by the president, but it’s a relief to see, at last, some small rebellion against the American Stasi who have turned the public arena into a giant holding pen for identity offenders — though it is but one corner of the triad-of-hysteria that also includes the Hate Russia campaign and the crusade against men. This nonsense has been going on long enough, while the country hurtles heedlessly into a long emergency of economic disarray.

    Next in line after Kanye and Candace, a popular Twitter critter name of Chance the Rapper endorsed Kanye endorsing Candace, more or less, by tweeting “black people don’t have to be Democrats.” The horror this thought aroused! Slavery, these days, it turns out, has a lot of appeal — maybe not so much for laboring in the canefields under the noonday sun as for serving juleps in the DNC plantation house. It happened that Kanye’s mom was a college professor, Chance’s dad was an aide to Chicago Mayor Daley (Jr.), and later worked in Mr. Obama’s Department of Labor. Candace describes her childhood home in Stamford, CT, as “very poor,” but she rose far-and-fast out of college to become an executive on Wall Street in her twenties. What they seem to have in common is being tainted with bourgeois values, horror again!

    In speaking up against the Victim Cartel, it is thought that they threaten a solidarity of narrative: that the USA (perhaps all of Western Civ) is composed of identity victims and identity oppressors. Candace, being a more conventional polemicist (i.e. not a rapper) makes the point overtly and repeatedly in her writing that all the “help” and solicitude black Americans have gotten from their overseers on the Democratic Party plantation has only made life worse for them — especially policies based on the idea that black people need lots of assistance to overcome structural racism and the legacies of slavery.

    Luckily for the rest of us, the DNC has decided to put its mojo behind a lawsuit against Russia and Wikileaks for ruining the 2016 election. It’s an amazing exercise in idiocy — like, who, exactly, in Russia do they expect to subpoena for this epic showdown in court? If the suit finds a sympathetic judge who does not laugh it off — not so difficult these days — we’ll be treated to a fabulous Chinese fire drill in a three-ring circus of clowns running around in DNC dirty laundry. The party may not survive the suit. They’ve Whigged themselves into a final, fatal apoplexy of irrelevance.

    I dunno about the perpetually scowling Kanye, with his periodic mood problems and spotlight-stealing antics on stage, or Chance the Rapper’s artificial hood raptures, but Candace makes the argument for the value of a common culture that might bind us together as a nation of individuals, not hostile tribes, starting with a language that everybody can understand. Of course, the whole Kanye / Candace dust-up may be forgotten by the middle of next week, and the country can go back to gaslighting itself into either a new civil war or world war three. Candace seems to have drive, guts, and stamina and there’s no sign that she’s going to shut up. Won’t some Ivy League university please invite her to speak, just to see what happens?

  • David Tepper: "We May Have Reached The Highs For The Year"

    Billionaire investor David Tepper, who is one of the few remaining hedge fund icons who moves markets with a single word, took some time out from browbeating the owners of the Carolina Panthers to participate in a Q&A Thursday evening with students from Carnegie Mellon’s Tepper School of Business (yes, you too can give a speech in a business school named after you if you donate $125 million).

    During the wide-ranging discussion, the former Goldman trader turned distressed investing billionaire shared his views on a range of topical issues – from the potentially catastrophic fallout from a US-China trade war to his take on what’s in store for interest rates and equities for the balance of this year – while also providing the type of career-management advice that box-checking b-school students crave.

    The early part of the the discussion included several amusing anecdotes from Tepper’s early-career days – most notably his time as a trader at Goldman Sachs, where he was mentored by Bob Rubin (whose arb desk spawned countless hedge funds and then went on to serve as Treasury Secretary under President Bill Clinton), and his feud with Jon Corzine (profiled extensively by NY Mag).

    At the start of the Q&A, one student asked Tepper how he managed to retain his integrity and commitment to ethics during his early career on Wall Street (and especially working at Goldman). Tepper responded with a lengthy story about an incident during his time at Goldman when a senior manager ordered him to buy a bond that had been on Goldman’s restricted list.

    “When I was at Goldman Sachs, they set up this bankruptcy fund and the person who set up this fund. The person who set up the fund was the head of M&A – and this was back after Drexel Burnham went under. So the guy who was in charge was in charge of this fund that was buying assets. He wanted to buy this one company’s bonds and he gave an order and I refused his order because the company was on the restricted list because we had information inside the firm and he had it taken off then told me to buy it the next day. So I told him ‘I’m not buying it’. So it was a big thing – we went to legal. And legal said to me ‘it’s okay’. But I refused to buy anything for this guy. Now, this hurt me next time I was up for partner. But it hasn’t really hurt me in my career. So next time somebody tells you to do something that you think isn’t right – don’t do it.”

    The conversation drifted to Tepper’s feelings about President Trump and the potential fallout from a full-blown trade war with China. The hedge-fund manager made light of an incident where he called Trump a “demented narcissistic scumbag“, but also admitted that, though he doesn’t agree with everything Trump has done (the feud with Amazon was “insane” Tepper alleged), the Trump tax cuts as well as his push for deregulation have largely benefited the economy.

    “Although I did call him a demented narcissistic scumbag – but that’s beside the point – from a policy standpoint some of the regulation stuff was probably good for the economy…some of those things had to happen and I think it was holding back the economy. And the tax policies, I don’t think they were all good, but I think something needed to be done. I don’t know if they needed to cut some stuff for higher income people.

    And while threatening to impose tariffs on effectively all Chinese goods entering the US might’ve been “nuts”, particularly considering that Trump didn’t consult his cabinet before threatening to impose tariffs on another $100 billion of Chinese imports, Trump has a point about China’s theft of intellectual property.

    “The tariffs – I think tariffs in general isn’t the best way to go about it. Steel companies support so few jobs in the economy that I’m not sure that was the best place to start. On the other hand, if you talk to tech companies, they believe – and there has been proof – that China has taken intellectual property. The first $50 billion in tariffs I don’t know if I agree with it but it was a shot across the bow and I guess that’s okay – but the $100 billion in tariffs he didn’t tell anybody in his cabinet so that’s just nuts…they probably will get a NAFTA agreement.

    That said, Tepper is sufficiently worried that Trump may take his trade war with Beijing far enough that it eventually transforms into a real, shooting war with Beijing.

    …You probably don’t want to take things too far with China because I can tell you the steps that it will go to and you get to the fourth step, it’s a war – it’s a real war. If you look at the history of tariffs, they’ve resulted in – a lot of times – real wars. So I get a little nervous every time you start down that path.”

    Asked about the importance of mentorship early in his career, Tepper offered an amusing anecdote about how scumbags mentors can sometimes let you down – even when they go on to become the Secretary of the Treasury, especially dealing with other scumbags mentors end up blowing up MF Global.

    “So I had a mentor at Goldman Sachs, his name was Bob Rubin who became co-chair of the firm and eventually became Secretary of the Treasury. But there’s the third time, when I didn’t become a partner, it was kind of Bob Rubin’s fault. He was a mentor and he liked being on the floor and he liked talking to me. At some point Bob had the role of head of fixed income before he became chairman and vice chairman. So I would talk to Bob and I was the head trader and I would go talk to him. Eventually, this guy named Jon Corzin, who eventually became the governor of New Jersey, became the head of fixed income. Now, when Corzin became the head of fixed income he came from the government side Bob Rubin came from merger arbitrage – so I was in junk bonds. Bob Rubin knew about junk bonds because they had an equity component so I would talk to him still and I wouldn’t go to Corzine’s office. But Bob Rubin should’ve said “go to Corzine’s office”. Because when my third shot at partner came, Corzine killed me – or so I heard. So even if you have a mentor who becomes Secretary of the Treasury, you still got to think for yourself. That was the reason I didn’t get it – he didn’t think I was one of his people.”

    But what was certainly the highlight of the Q&A (at least as far as Tepper’s views on capital markets are concerned) one student asked Tepper where he anticipates bond and stock markets finishing 2018. The answer, suggesting that Tepper was reading a bit too much Morgan Stanley recently, won’t please the bulls (5:20 into Part 2)

    “Listen, it’s tough right now. Because historically yields have been fairly low. Actually tonight I’m trying to figure out what the BOJ’s doing because either this meeting or next meeting they might change their policy which would affect our Treasurys and will effect the stock market. So I think as far as the stock market is concerned I think they’re okay. I don’t think it’s great. I think we might’ve reached the highs for the year.

    Why the uncharacteristic (for Tepper) pessimism? Why rates, of course: here is Tepper’s two cents on the topic du jour (and d’annee): where will the yield on the 10Y break equities:

    And a lot of it has to do with interest rates. We’re right on the cusp of breaking out on interest rates at this level around 3%. I think they closed at around 2.98% on the 10-year – actually I know because I just looked. But a lot of people don’t think they’re going to break higher – most people are only saying they’re only going to 3.25%. And I think if they only go to 3.25% for the rest of the year then stocks might be up. But too many people are saying that. And when too many people are saying one thing that’s when I start to get worried. So if we break above that, then stocks might have a problem.”

    Finally, another student – who we imagine is tenuously exploring the likelihood that one will be able to make a sustainable living as a sell-side or buy-side trader – asked Tepper whether he believes algorithms will soon take over Wall Street. Tepper responded that machines and trading algos – whose performance is sucking this year – are only as good as the traders writing them, which to Tepper is a great advantage in an environment such as this one where rates are rising and yet the machine programming remains the same… 

    “Machines are doing shitty this year. Really bad. Not good. I’m kicking their ass. When I went to Goldman Sachs, they had a trading model on the desk and it was just wrong. That was one of the great things about being here I just knew the option prices were wrong – they were just wrong. But now when people talk about machines taking over, the machines are only as good as the people who are programing the machines. But now, when people talk about machines taking over, the people are only as good as the people programming the machines. And when you have times that are changing – like when interest rates are rising as we come out of this QE environment, sometimes you have people programming the same thing. When times change, the programs don’t change unless the people programming them make them change. And when the times are changing fast.”

    We couldn’t have put it better ourselves. Watch Parts 1 and 2 of the Tepper Q&A below, and check back tomorrow for Tepper’s thoughts on Bitcoin.

    h/t @dennycrane550

  • Freddie Mac Launches "3% Down" Mortgage With No Income Restrictions

    It’s been a while since the US made a wholesale push to get more cash and income-strapped households into the ever more unaffordable American dream of owning a house, three years to be exact, which is when nationalized housing agency Freddie Mac last rolled out a conventional mortgage that only required a 3% down payment for certain borrowers.

    The problem is that what modest requirement the mortgage program had back in 2015, meant that most Americans who needed access would be excluded. The program, which as we described at the time was designed for qualified (that being the key word) low-and moderate-income borrowers – i.e., Millennials – saw limited progress over the last few years, with FHFA Director Mel Watt telling Congress last year that Freddie’s 3% down program (along with a similar one from Fannie Mae) was continuing to grow.

    It just wasn’t growing fast enough, because while putting 3% down may not have been especially challenging for most Americans, having even the modest income required to go along with it, was.

    So fast forward to last week, when Freddie Mac announced on Thursday it was about to supercharge its 3% down program and launch a widespread expansion of the offering, when it announced that it is rolling out a new conventional 3% down payment option for qualified first-time homebuyers, – effectively the same as the 2015 program… with one small difference: there would be no geographic restrictions; more importantly there no longer will be any income restrictions. To wit:

    In other words, whereas many Americans could not qualify for the original 3% down program because, well, they lacked virtually any income, that will no longer be a hindrance and the government will effectively backstop the lack of income as a new wave of ‘income-challenged’ Americans rushes in to buy houses.

    Amusingly, the new program, which is called HomeOne (full brochure below), puts Freddie Mac in direct competition for mortgage business with the Federal Housing Administration, which also only requires 3% down on some mortgages.

    Furthermore, according to Freddie Mac, this new offering is not replacing its Home Possible 3% down mortgages. Rather, the program is meant to complement the Home Possible program, which will still be available to low-and moderate-income borrowers.

    “Freddie Mac’s HomeOne mortgage is part of the company’s ongoing efforts to support responsible lending, provide sustainable homeownership and improve access to credit,” Danny Gardner, senior vice president of single-family affordable lending and access to credit at Freddie Mac, said in a statement.

    It was not quite clear how it is responsible to lend money to households which have saved only enough to put down 3% equity value, oh, and which have no income to even give the false impression their equity stake may grow in the future.

    It gets better. As Housing Wire summarizes the terms of HomeOne, Freddie Mac said that the new mortgage is designed for first-time homebuyers, who currently make up nearly half of all home purchases.

    According to Freddie Mac, a HomeOne mortgage must be underwritten through its Loan Product Advisor, which makes a complete risk assessment based on several factors as it relates to credit, capacity and collateral.

    Additionally, the HomeOne mortgage is offered only for conforming fixed-rate mortgages that are secured by a 1-unit primary residence. And, at least one of the borrowers must be a first-time homebuyer.

    There is one potential hurdle: when all the borrowers are first-time homebuyers, at least one borrower must participate in homeownership education in order to qualify for the mortgage.

    Yes, one may have no income and still qualify as long as one watches a few videos explaining why having an income is critical to avoid having another housing market crash, or something.

    None of that matters however, as the US government is once again clearly more interested in well and truly blowing another housing bubble, where not Countrywide or New Century, but the government itself is issuing NINJA loans.

    “The HomeOne mortgage will provide our customers the flexibility they need to help borrowers anywhere in the country achieve the milestone of homeownership and overcome the common down payment resource hurdle,” Gardner continued. “HomeOne is a great solution for aspiring homebuyers to grab that first rung of the property ladder and enjoy the financial and social benefits of participating in homeownership.”

    What was unsaid is that now that rates just happen to be rising, making homes even more unaffordable and resetting ARM mortgages higher, the generously funded by taxpayers HomeOne also assures another housing crisis, and even more GSEs/Fredde/FHA bailouts in the near future.

    The fun beguns on July 29, 2018, when the new HomeOne mortgage will become available.  For more, check out the program detail and marketing materials from Freddie Mac.

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