Today’s News 2nd April 2016

• Trump's 1990 Playboy Interview: "We Are Being Laughed At Around The World…"

  While The Donald may come across as 'shooting from the hip', it appears based on this 1990 interview with Playboy that Trump has been thinking about the decline of America, the weakness and corruption of government, and the impact of foreign (Chinese, Mexican, and Japanese) trade practices on the average joe. As he says, "I don’t want to be President. I’m one hundred percent sure. I’d change my mind only if I saw this country continue to go down the tubes."

  

  This interview ran in the March 1990 issue of Playboy magazine.

  Via Playboy.com,

  You aren’t known for being shy at promotion; let’s start by playing a little game. Trump Tower is ______?
  The finest residential building anywhere.

  The Taj Mahal in Atlantic City is going to be ______?
  The most spectacular hotel-casino anywhere in the world.

  And the Trump Shuttle will be ______?
  Easily the number-one service to Washington and Boston.

  Your apartment sales are ______?
  The best. Trump Tower and Trump Parc have seventy percent of the top sales in New York per square foot.

  Why?
  Simple: People know they’re going into a building where no expense is spared, where the level of materials and finishes will be the best, where the location will be the best. Many European and Japanese investors literally give their subordinates instructions to buy apartments only in Trump buildings. A Japanese investor just paid me twenty million bucks for seven apartments he’s turning into one.

  OK. But here we are at the start of a new decade. How do you respond when people call you ostentatious, ego-ridden and a greedy symbol of the Eighties?
  Rich men are less likely to like me, but the working man likes me because he knows I worked hard and didn’t inherit what I’ve built. Hey, I made it myself; I have a right to do what I want with it.

  With so much poverty on the city streets, isn’t it embarrassing for you to flaunt your wealth?

  There has always been a display of wealth and always will be, until the depression comes, which it always does. And let me tell you, a display is a good thing. It shows people that you can be successful. It can show you a way of life. Dynasty did it on TV. It’s very important that people aspire to be successful. The only way you can do it is if you look at somebody who is.

  And for you, sitting snugly inside the one hundred and eighteen rooms of your Palm Beach mansion– People understand that the house in Florida is business. I use it very seldom. I could be happy living in a studio apartment.

  Oh, come on.
  I mean it; the houses, the planes and the boat are just investments. I paid twenty-nine million dollars for the Khashoggi yacht; two years later, I’ll be selling it for more than one hundred million dollars and getting a bigger one.

  Why in the world do you need a bigger yacht?
  I don’t. But the Khashoggi boat is worth more only if I sell it. This new one will–believe it or not–be even more spectacular and bring tremendous acclaim to Trump properties in Atlantic City.

  What is it that attracts you to all this glitz?
  I have glitzy casinos because people expect it; I’m not going to build the lobby of the IBM office building in Trump Castle. Glitz works in Atlantic City, and yet the Plaza Hotel has been brought back to its original elegance of 1907. So I don’t use glitz in all cases. And in my residential buildings, I sometimes use flash, which is a level below glitz.

  Then what does all this–the yacht, the bronze tower, the casinos–really mean to you?
  Props for the show.

  And what is the show?
  The show is “Trump” and it is sold-out performances everywhere. I’ve had fun doing it and will continue to have fun, and I think most people enjoy it.

  Do you think the ones who hate it are jealous?
  They could be whatever–but the vast majority dig it.

  Calvin Klein, who doesn’t have a fraction of your wealth, has often said he feels guilty about his. Do you? It’s not overriding, but I do have it.

  You don’t sound guilty at all.
  I do have a feeling of guilt. I’m living well and like it, I know that many other people don’t live particularly well. I do have a social consciousness. I’m setting up a foundation; I give a lot of money away and I think people respect that. The fact that I built this large company by myself–working people respect that; but the people who are at high levels don’t like it. They’d like it for themselves.

  Do you see yourself as greedy?
  I don’t think I’m greedy. If I were, I wouldn’t give to charities. I run the Wollman Skating Rink in New York City for nothing and I gave away the royalties from my book. I give millions for charity each year. If I were really greedy….

  You mean like Leona Helmsley, the convicted hotel queen?
  Yes, like Leona Helmsley. She is a vicious, horrible woman who systematically destroyed the Helmsley name. I know Leona better than anybody does but Harry [Helmsley]. If Harry had one fault, it was giving her too much leeway.

  When I was twenty, Harry was the big guy in town. I once drove my car down the street in Manhattan, saw him at a corner, stopped and introduced myself and offered him a ride. When I pulled over on the left side of the street, with traffic on the right, he asked me to get out of the car so he could get out on the left side. I thought to myself, This is a highly conservative guy. He never would have evaded taxes on his own. But Leona pushed and pushed him. He needed that money like you need fifty-six cents in your pockets, I’m telling you.

  Also, Leona was not a great business-woman but a very bad one. She sold me the St. Moritz Hotel and a few years later, I made more than a hundred million dollars on it. She ran that hotel badly. She set the women’s movement back fifty years. She is a living nightmare, and to be married to her must be like living in hell.

  On the other hand, your wife, Ivana, is doing a great job running the Plaza, right?
  Well, I have told Ivana, “Whatever Leona would do, do the opposite. [Laughs] Be nice to everybody.” And she is nice, anyway.

  Was it simple greed with Leona?
  Much more than greed. She’s out of her mind. Leona Helmsley is a truly evil human being. She treated employees worse than any human being I’ve ever witnessed and I’ve dealt with some of the toughest human beings alive

  What do you do to stay in touch with your employees?
  I inspect the Trump Tower atrium every morning. Walk into it … it’s perfect; everything shines. I go down and raise hell in a nice way all the time because I want everything to be absolutely immaculate. I’m totally hands-on. I get along great with porters and maids at the Plaza and the Grand Hyatt.

  I’ve had bright people ask me why I talk to porters and maids. I can’t even believe that question. Those are the people who make it all work…. If they like me, they will work harder … and I pay well.

  You lost some valued employees in a recent helicopter crash.
  Yes. I lost not only brilliant, key players in my company but true friends–and I couldn’t believe it. At first, I was shocked, called their wives, just kept functioning…. My own sense of optimism and life was greatly diminished. I never realized how deaths outside the family could have such a profound effect on me.

  What did you think when the shock wore off?
  [Pauses] It’s a tragic waste. I was also angry in that it was an event that I didn’t want to happen. Here was this press conference, a very mediocre event announcing a minor boxing match. I told these guys that they didn’t need to go, but they wanted to be there…. They gave their lives for something so unimportant. It’s been a rough time. [Pauses]

  What do you think of rich people in general?
  Rich people are great survivors and, by nature, they fall into two categories–those who have inherited and those who’ve made it. Those who have inherited and chosen not to do anything are generally very timid, afraid of losing what they’ve got, and who can blame them? Others are great risk takers and produce a hell of a lot more or go bust.

  As Merv Griffin did? After buying Resorts International from you, the company may be facing bankruptcy. What happened there?
  Merv is a good guy who I have really just gotten to know; we were both judges on the Miss America Pageant after our deal. I don’t want to bug him, but prior to buying Resorts, he was telling everybody what a great deal he made and, by inference, what a bad deal Trump made.

  But, in fact, you didn’t make such a bad deal.
  Well, let’s just say he didn’t out-Trump Trump. He has a huge amount of debt. But he is very efficient and has very good PR people. Business Week wrote a story titled How Donald Taught Merv the Art of the Deal. I was angry. And equally angry when People and Time magazines, with no goddamned research and no knowledge, incompetently reported that Merv had bested Donald. Can you imagine? They didn’t do any research. They just listened to PR people. Well, now they know the truth and have asked about following up or correcting stories. I said, “Forget it–it doesn’t matter.”

  What satisfaction, exactly, do you get out of doing a deal?
  I love the creative process. I do what I do out of pure enjoyment. Hopefully, nobody does it better. There’s a beauty to making a great deal. It’s my canvas. And I like painting it.

  I like the challenge and tell the story of the coal miner’s son. The coal miner gets black-lung disease, his son gets it, then his son . If I had been the son of a coal miner, I would have left the damn mines. But most people don’t have the imagination–or whatever–to leave their mine. They don’t have “it.”

  Which is?
  “It” is an ability to become an entrepreneur, a great athlete, a great writer. You’re either born with it or you’re not. Ability can be honed, perfected or neglected. The day Jack Nicklaus came into this world, he had more innate ability to play golf than anybody else.

  You obviously have a lot of self-confidence. How do you use that in a business deal?
  I believe in positive thinking, but I also believe in the power of negative thinking. You should prepare for the worst. If I’m doing a deal, I want to know how bad it’s going to be if everything doesn’t work rather than how good it’s going to be. I have a positive outlook, but I’m unfortunately also quite cynical. So if all the negatives happened, what would my strategy be? Would I want to be in that position? If I don’t, I don’t do the deal. My attitude is to focus on the down side because the up side will always take care of itself. If a deal is going to be great, it’s just a question of, How much am I going to make?

  How far are you willing to push adversaries? I will demand anything I can get. When you’re doing business, you take people to the brink of breaking them without having them break, to the maximum point their heads can handle–without breaking them. That’s the sign of a good businessman: Somebody else would take them fifteen steps beyond their breaking point.

  What if your pushing results in losing the deal?
  Then I pushed him too far. I would have made a mistake. But I don’t. I push to the maximum of what he can stand and I get a better deal than he gets.

  Another aspect of your deal making is how you handle the media. You managed to suppress an unflattering TV documentary about you funded by your archnemesis, [New York businessman and publisher] Leonard Stern. Do you also claim victory over him?
  Total victory, yes. But I don’t want to dwell on triumph or defeat.

  That may sound magnanimous, but, in fact, you’re known to exact revenge on people you think have tried to pull something on you.
  I think I’m fair, not tough, in business. But if somebody is trying to do an injustice to me, I fight back harder than anybody I know. When somebody tries to harm you or your family, you have an absolute right to fight back.

  Do you hate Stern?
  No. Stern is a nonentity to me. He obviously dislikes me enough to spend close to a million dollars trying to make a negative documentary

  You have a lot of enemies in New York City, among them a group that opposes your building a huge Trump City on the Hudson that will include the world’s tallest building–on the theory that it will ruin the West Side and cause unbearable congestion. What do you say to them?
  Point one: There were more people living on the West Side of New York in the Forties than there are today. Very few people understand that. Point two: Trump City is going to be an architectural masterpiece. Point three: The city desperately needs the taxes, the housing and the shopping that will produce billions of dollars in revenue. Yet that community group [West Pride] fights every job.

  Those people fight for the sake of fighting. I honestly believe that if I proposed an eighty-acre park, they would come out and fight me. Selfishly, they like what they have and don’t want to give it to anybody else. We need another Rockefeller Center–especially now that Mitsubishi has bought most of the one we had.

  Among other things, West Pride claims the largest building in the world would cast a mammoth shadow across the West Side, blocking out light and wrecking the ambience of the neighborhood.
  [Angrily] Every building casts a shadow, for God’s sake! I want this job to be dramatic. I strive for that. I don’t want it to be contextual, blending into everything else. It shouldn’t be like getting a haircut and telling the barber I don’t want anyone to know I’ve gotten one. I am competing here with the state of New Jersey, which is sucking the life-blood out of New York City. They’re beating us up. Trump City would take the play away from the development of the New Jersey waterfront. There will be nothing in New York to compete with Trump City!

  So you’re going to build it, come what may?
  I’ll build it, though it may not be now. I’ll wait until things get bad in the city, because every city in every nation has its ups and downs. If I had tried to get the zoning for Trump City in 1975, I would have gotten everything I wanted, because the city was absolutely at a low point. I may now wait for construction to stop, for interest rates to go up–then the city will desperately need Trump City.

  You often say that the key to your success is being a good deal maker and a good manager. Why?
  I’ve seen great deal makers go down the tubes because they haven’t known how to manage what they’ve had. Take [Saudi financier indicted for a felony] Adnan Khashoggi: He was a great deal maker but a bad businessman. Time will tell if Merv is a good manager. He is going to have to be.

  When you were growing up in Queens, your father was supposedly a harsh taskmaster. It has been theorized that your father instilled in you a great sense of inadequacy. True?
  That’s one hundred percent wrong. I was always very much accepted by my father. He adored Donald Trump and I’ve always known that. But I did want to prove to my father and other people that I had the ability to be successful on my own.

  You’ve often said that your father made you work as a teenager and taught you the value of the buck.
  My father never made me work. I liked to work during summers. I don’t understand these teenagers who sit home watching television all day. Where’s their appetite for competition? Working was in my genes.

  Still, your father was one tough son of a bitch, wasn’t he?
  He was a strong, strict father, a no-nonsense kind of guy, but he didn’t hit me. It wasn’t what he’d ever say to us, either. He ruled by demeanor, not the sword. And he never scared or intimidated me.

  Your older brother, Fred, who died from heart failure brought on by acute alcoholism, had a more difficult time with him, didn’t he?
  Take one environment and it will work completely differently on different children. Our family environment, the competitiveness, was a negative for Fred. It wasn’t easy for him being cast in a very tough environment, and I think it played havoc on him.

  I was very close to him and it was very sad when he died … toughest situation I’ve had….

  What did you learn from his experience?
  [Pauses] Nobody has ever asked me that. But his death affected everything that has come after it…. I think constantly that I never really gave him thanks for it. He was the first Trump boy out there, and I subconsciously watched his moves.

  And the lesson?
  I saw people really taking advantage of Fred and the lesson I learned was always to keep up my guard one hundred percent, whereas he didn’t. He didn’t feel that there was really reason for that, which is a fatal mistake in life. People are too trusting. I’m a very untrusting guy. I study people all the time, automatically; it’s my way of life, for better or worse.

  Why?
  I am very skeptical about people; that’s self-preservation at work. I believe that, unfortunately, people are out for themselves. At this point, it’s to many people’s advantage to like me. Would the phone stop ringing, would these people kissing ass disappear if things were not going well?

  I enjoy testing friendship…. Everything in life to me is a psychological game, a series of challenges you either meet or don’t. I am always testing people who work for me.

  How?
  I will send people around to my buyers to test their honesty by offering them trips and other things. I’ve been surprised that some people least likely to accept a trip from a contractor did and some of the most likely did not. You can never tell until you test; the human species is interesting in that way. So to me, friendship can be really tested only in bad times.

  I instinctively mistrust many people. It is not a negative in my life but a positive. Playboy wouldn’t be talking to me today if I weren’t a cynic. So I learned that from Fred, and I owe him a lot…. He could have ultimately been a happy guy, but things just went the unhappy way.

  How large a role does pure ego play in your deal making and enjoyment of publicity?
  Every successful person has a very large ego.

  Every successful person? Mother Teresa? Jesus Christ?
  Far greater egos than you will ever understand.

  And the Pope?
  Absolutely. Nothing wrong with ego. People need ego, whole nations need ego. I think our country needs more ego, because it is being ripped off so badly by our so-called allies; i.e., Japan, West Germany, Saudi Arabia, South Korea, etc. They have literally outegotized this country, because they rule the greatest money machine ever assembled and it’s sitting on our backs. Their products are better because they have so much subsidy.

  We Americans are laughed at around the world for losing a hundred and fifty billion dollars year after year, for defending wealthy nations for nothing, nations that would be wiped off the face of the earth in about fifteen minutes if it weren’t for us. Our “allies” are making billions screwing us.

  How do you feel about Japan’s economic pre-eminence?
  Japan gets almost seventy percent of its oil from the Persian Gulf, relies on ships led back home by our destroyers, battleships, helicopters, frog men. Then the Japanese sail home, where they give the oil to fuel their factories so that they can knock the hell out of General Motors, Chrysler and Ford. Their openly screwing us is a disgrace. Why aren’t they paying us? The Japanese cajole us, they bow to us, they tell us how great we are and then they pick our pockets. We’re losing hundreds of billions of dollars a year while they laugh at our stupidity.

  The Japanese have their great scientists making cars and VCRs and we have our great scientists making missiles so we can defend Japan. Why aren’t we being reimbursed for our costs? The Japanese double-screw the U.S., a real trick: First they take all our money with their consumer goods, then they put it back in buying all of Manhattan. So either way, we lose.

  You’re opposed to Japanese buying real estate in the U.S.?
  I have great respect for the Japanese people and list many of them as great friends. But, hey, if you want to open up a business in Japan, good luck. It’s virtually impossible. But the Japanese can buy our buildings, our Wall Street firms, and there’s virtually nothing to stop them. In fact, bidding on a building in New York is an act of futility, because the Japanese will pay more than it’s worth just to screw us. They want to own Manhattan.

  Of course, I shouldn’t even be complaining about it, because I’m one of the big beneficiaries of it. If I ever wanted to sell any of my properties, I’d have a field day. But it’s an embarrassment, I give great credit to the Japanese and their leaders, because they have made our leaders look totally second rate.

  A group of Japanese visitors to New York was recently asked if there were anything in the U.S. they would like to buy. The answer: towels.
  That’s fair trade: They’ll take the towels and we’ll buy their cars. It doesn’t sound like a good deal to me. They have totally outsmarted the American politician; they have no respect for us, because they’re getting a free ride. Of course, it’s not just the Japanese or the Europeans–the Saudis, the Kuwaitis walk all over us.

  The Arabs also spend plenty of money in your casinos, don’t they?
  They lose a million, two million at the tables and they’re so happy because they had such a great weekend. If you lost a million dollars, you’d be sick for the rest of your life, maybe. They write me letters telling me what a wonderful time they had.

  You have taken out full-page ads in several major newspapers that not only concern U.S. foreign trade but call for the death penalty, too. Why?
  Because I hate seeing this country go to hell. We’re laughed at by the rest of the world. In order to bring law and order back into our cities, we need the death penalty and authority given back to the police. I got fifteen thousand positive letters on the death-penalty ad. I got ten negative or slightly negative ones.

  You believe in an eye for an eye?
  When a man or woman cold-bloodedly murders, he or she should pay. It sets an example. Nobody can make the argument that the death penalty isn’t a deterrent. Either it will be brought back swiftly or our society will rot away. It is rotting away.

  For a man so concerned about our crumbling cities, some would say you’ve done little for crumbling Atlantic City besides pull fifty million dollars a week out of tourists’ pockets.
  Elected officials have that responsibility. I would hate to think that people blame me for the problems of the world. Yet people come to me and say, “Why do you allow homelessness in the cities?” as if I control the situation. I am not somebody seeking office.

  What about using your influence in Atlantic City to help the disadvantaged?
  Everybody has influence, but it is a Governmental problem. I take out those ads to wake up the Government about how Japan and others are ripping our country apart—

  Wait. Doesn’t it seem that with all your influence in Atlantic City you could do more to combat crime and corruption and put something back into the community?
  Well, crime and prostitution go up, and Atlantic City administrations are into very deep trouble with the law, and there are lots of problems there, no question about it. But there is a tremendous amount of money going to housing from the profits of the casinos.

  As somebody who runs hotels, all I can do, when you get right down to it, is run the best places, bring in as much money as possible, which in turn goes out for taxes. I contribute millions a year to various charities. Finally, by law, I’m not allowed to have Governmental influence; but if they passed legislation that allowed me to get more involved, I’d be very happy to do it. In the meantime, I have the most incredible hotels in the world in Atlantic City. The Taj Mahal will be beyond belief. And if I can awaken the government of Atlantic City, I have performed a great service.

  We’ve talked about building low-income housing; what have you done about that in other locations?
  I did that during the years I worked with my father; I did build both low-income housing and housing for the elderly. And now I’m going to be building more of it. The problem is, that stuff never gets written about.

  On the other hand, you were invited to consider building a luxury hotel in Moscow a few years ago. What was your trip to Moscow like?
  It was not long after the Korean plane was shot down over Russia. There I am up in my plane when my pilot announces, “We are now flying over the Soviet Union,” and I’m thinking to myself, What the hell am I doing here?

  Then I look out the window and see two Russian fighter planes … I later found out, guiding us in. I had insisted on having two Russian colonels flying with me–I felt safer, and my pilot doesn’t speak great Russian, which is putting it mildly, and I didn’t want problems in radio communications.

  Once you got to Moscow, how did the negotiations go?
  I told them, “Guys, you have a basic problem. Far as real estate is concerned, it’s impossible to get title to Russian land, since the government owns it all. What kind of financing are you gonna get on a building where the land is owned by the goddamned motherland?”

  They said, “No problem, Mr. Trump. We will work out lease arrangements.”

  I said, “I want ownership, not leases.”

  They came up with a solution: “Mr. Trump, we form a committee with ten people, of which seven are Russian and three are your representatives, and all disputes will be resolved in this manner.”

  I thought to myself, Shit, seven to three–are we dealing in the world of the make-believe here or what?

  What were your other impressions of the Soviet Union?
  I was very unimpressed. Their system is a disaster. What you will see there soon is a revolution; the signs are all there with the demonstrations and picketing. Russia is out of control and the leadership knows it. That’s my problem with Gorbachev. Not a firm enough hand.

  You mean firm hand as in China?
  When the students poured into Tiananmen Square, the Chinese government almost blew it. Then they were vicious, they were horrible, but they put it down with strength. That shows you the power of strength. Our country is right now perceived as weak … as being spit on by the rest of the world—

  Why is Gorbachev not firm enough?
  I predict he will be overthrown, because he has shown extraordinary weakness. Suddenly, for the first time ever, there are coal-miner strikes and brush fires everywhere–which will all ultimately lead to a violent revolution. Yet Gorbachev is getting credit for being a wonderful leader–and we should continue giving him credit, because he’s destroying the Soviet Union. But his giving an inch is going to end up costing him and all his friends what they most cherish–their jobs.

  Besides the real-estate deal, you’ve met with top-level Soviet officials to negotiate potential business deals with them; how did they strike you?
  Generally, these guys are much tougher and smarter than our representatives. We have people in this country just as smart, but unfortunately, they’re not elected officials. We’re still suffering from a loss of respect that goes back to the Carter Administration, when helicopters were crashing into one another in Iran.

  That was Carter’s emblem. There he was, being carried off from a race, needing oxygen. I don’t want my President to be carried off a race course. I don’t want my President landing on Austrian soil and falling down the stairs of his airplane. Some of our Presidents have been incredible jerk-offs. We need to be tough.

  A favorite word of yours, tough. How do you define it?
  Tough is being mentally capable of winning battles against an opponent and doing it with a smile. Tough is winning systematically.

  Sometimes you sound like a Presidential candidate stirring up the voters.
  I don’t want the Presidency. I’m going to help a lot of people with my foundation–and for me, the grass isn’t always greener.

  But if the grass ever did look greener, which political party do you think you’d be more comfortable with?
  Well, if I ever ran for office, I’d do better as a Democrat than as a Republican–and that’s not because I’d be more liberal, because I’m conservative. But the working guy would elect me. He likes me. When I walk down the street, those cabbies start yelling out their windows.

  Another game: What’s the first thing President Trump would do upon entering the Oval Office?
  Many things. A toughness of attitude would prevail. I’d throw a tax on every Mercedes-Benz rolling into this country and on all Japanese products, and we’d have wonderful allies again.

  Would you rescue our remaining hostages in Lebanon?
  Number one, in almost all cases, the hostages were told by our Government not to be there. If a man decides to become a professor at Beirut University, when he was told not to be there, and that person is captured—

  He deserves it?
  You feel very bad for him, but you cannot base foreign policy on his capture. With that being said, when they killed our Colonel Higgins, I would have retaliated militarily immediately. I would have hit something vital to them. And hit it hard. In any other case, I would let the takers of hostages know that they’d have one week to return that hostage. And after that week, all bets would be off. You would not have any more hostages taken, believe me. Weakness always causes problems.

  Do you think George Bush is soft?
  I like George Bush very much and support him and always will. But I disagree with him when he talks of a kinder, gentler America. I think if this country gets any kinder or gentler, it’s literally going to cease to exist. I think if we had people from the business community–the Carl Icahns, the Ross Perots–negotiating some of our foreign policy, we’d have respect around the world.

  What would President Trump’s position on crime be?

  I see the values of this country in the way crime is tolerated, where people are virtually afraid to say “I want the death penalty.” Well, I want it. Where has this country gone when you’re not supposed to put in a grave the son of a bitch who robbed, beat, murdered and threw a ninety-year-old woman off the building? Where has this country gone?

  What would be some of President Trump’s longer-term views of the future?
  I think of the future, but I refuse to paint it. Anything can happen. But I often think of nuclear war.

  Nuclear war?
  I’ve always thought about the issue of nuclear war; it’s a very important element in my thought process. It’s the ultimate, the ultimate catastrophe, the biggest problem this world has, and nobody’s focusing on the nuts and bolts of it. It’s a little like sickness. People don’t believe they’re going to get sick until they do. Nobody wants to talk about it. I believe the greatest of all stupidities is people’s believing it will never happen, because everybody knows how destructive it will be, so nobody uses weapons. What bullshit.

  Does any of that fuzzy thinking exist around the Trump office?
  On a much lower level, I would never hire anybody who thinks that way, because he has absolutely no common sense. He’s living in a world of make-believe. It’s like thinking the Titantic can’t sink. Too many countries have nuclear weapons; nobody knows where they’re all pointed, what button it takes to launch them.

  The bomb Harry Truman dropped on Hiroshima was a toy next to today’s. We have thousands of weapons pointed at us and nobody even knows if they’re going to go in the right direction. They’ve never really been tested. These jerks in charge don’t know how to paint a wall, and we’re relying on them to shoot nuclear missiles to Moscow. What happens if they don’t go there? What happens if our computer systems aren’t working? Nobody knows if this equipment works, and I’ve seen numerous reports lately stating that the probability is they don’t work. It’s a total mess.

  And how would President Trump handle it?
  He would believe very strongly in extreme military strength. He wouldn’t trust anyone. He wouldn’t trust the Russians; he wouldn’t trust our allies; he’d have a huge military arsenal, perfect it, understand it. Part of the problem is that we’re defending some of the wealthiest countries in the world for nothing…. We’re being laughed at around the world, defending Japan—

  Wait. If you believe that the public shares these views, and that you could do the job, why not consider running for President?
  I’d do the job as well as or better than anyone else. It’s my hope that George Bush can do a great job.

  You categorically don’t want to be President?
  I don’t want to be President. I’m one hundred percent sure. I’d change my mind only if I saw this country continue to go down the tubes.

  More locally, one of your least favorite political figures was Mayor Ed Koch of New York. You two had a great time going after each other: He called you “piggy, piggy, piggy” and you called him “a moron.” Why do you suppose he lost the election?
  He lost his touch for the people. He became arrogant. He not only discarded his friends but was a fool for brutally criticizing them. The corruption was merely a symptom of what had happened to him: He had become extremely nasty, mean-spirited and very vicious, an extremely disloyal human being.

  When his friends like Bess Myerson and others were in trouble, he seemed to automatically abandon them, almost before finding out what they’d done wrong. He could think only about his own ass–not the city’s. That was dumb: The only one who didn’t know his administration was crumbling around him was him. Power corrupts.

  You probably have more power than Koch did as mayor. And you’re getting more of it all the time. How about power’s corrupting you?
  I think power sometimes corrupts–“sometimes” has to be added.

  Also on the local scene, there’s a report that you wanted to be an owner of a New York–area baseball team in a proposed new baseball league–despite your bad experience as owner of the New Jersey Generals in the short-lived United States Football League.
  That’s not true anymore. It’s not a passion of mine. The sports business is a lousy business. If a player gets hurt or doesn’t perform, he wants to get his money anyway; if he performs better than expected, he wants to renegotiate his contract. I like boxing better.

  A clean, forthright sport. As one of Mike Tyson’s promoters, what can you tell us about him?
  I know Mike better than anybody and have strong opinions, pro and con. But it’s too early for me to say. I understand his obsessions, everything. And no, I don’t begrudge Don King if he’s able to get Mike Tyson to sign a contract to the benefit of Don King.

  You got to know him during his marriage to Robin Givens, didn’t you?
  Yeah; I loved it when Robin said she didn’t want any money and then sued him. He won the case against her. She was killed when she started in with the law, when she filed for divorce. Historically, this has been the case with champions. The champ can do no wrong.

  How is your marriage?
  Just fine. Ivana is a very kind and good woman. I also think she has the instincts and drive of a good manager. She’s focused and she’s a perfectionist.

  And as a wife, not a manager?
  I never comment on romance…. She’s a great mother, a good woman who does a good job.

  How did you feel when José Torres wrote his book, excerpted in Playboy, about Tyson’s sex life–the charges that he beat up women and had wild sexual escapades?
  It’s unfortunate for one of the great fighters in history to have all this crap hanging over his head. Or for politicians, for that matter. We’re living in an age when there are no boundaries left, which is unfortunate for our country. The problem is, we’re going to lose good talent because somebody likes looking at pretty women or pretty men.

  Somebody’s sex life may mean absolutely nothing to the job at hand, but when the written word gels out, we lose somebody good and the country goes to hell. I know politicians who love women who don’t even want to be known for that–because they might lose the gay vote. OK? If this is the kind of extreme we’re heading toward, we’re really in trouble.

  What is marriage to you? Is it monogamous?
  I don’t have to answer that. I never speak about my wife–which is one of the advantages of not being a politician. My marriage is and should be a personal thing.

  But you do enjoy flirtations?
  I think any man enjoys flirtations, and if he said he didn’t, he’d be lying or he’d be a politician trying to get the extra four votes. I think everybody likes knowing he’s well responded to. Especially as you get into certain strata where there is an ego involved and a high level of success, it’s important. People really like the idea that other people respond well to them.

  You and your wife are often a subject of very biting satire for magazines such as Spy, which calls you a “short-fingered vulgarian” and recently published a horrendous close-up photograph of your wife on its cover. How do you feel about that?
  Ten years ago, bad publicity was much harder for me to take than it is now. It is almost irrelevant.

  That’s all you can say about Spy?
  It’s a piece of garbage.

  We assume you take Forbes magazine more seriously; it claims you’re worth one point five billion dollars. But you say three point seven billion dollars. What’s the right figure?
  I don’t say anything. Business Week and Fortune have numbers much higher than Forbes’s. I know many people on the Forbes list who shouldn’t be there. It’s a very inaccurate survey. Malcolm Forbes seems to keep me low. Business Week and Fortune don’t have boats and they couldn’t care less.

  Speaking of Malcolm Forbes, why didn’t you accept his invitation to the Morocco bash?
  I wish I could have gone, but I couldn’t because of a schedule conflict.

  Would you spend three million dollars on a party for yourself?
  It was a great investment for Malcolm. He got fifty million dollars’ worth of free publicity. I think he should do it every day of his life. That’s like people who can’t understand why I’m building an even more spectacular boat than the Trump Princess. It’s going to be world class, beyond belief.

  Let’s talk about your main interest–buildings. Architecture critic Paul Goldberger of The New York Times hasn’t been kind to Trump buildings, panning them as garish and egotistical.
  Paul Goldberger has extraordinarily bad taste. He reviews buildings that are failures and loves them. Paul suffers from one malady that I don’t believe is curable. As an architecture critic, you can’t afford the luxury of having bad taste.

  The fact that he works for the Times, unfortunately, makes his taste important. And that’s why you see some monster buildings going up. If Paul left the Times or the Times left him, you would find that his opinion meant nothing.

  But it’s not just the architecture critics who criticize you for stamping your name on everything you own. Are you going to continue doing that forever?
  No. I own the Grand Hyatt Hotel; I don’t call it the Trump Hotel. I own the Plaza Hotel, not the Trump Plaza. But I will say that from a marketing point of view, putting my name on buildings is a plus. I’m now building Trump Palace and if I called it something else, I would get hundreds of dollars less per square foot. On the Trump Shuttle, I’ve owned it for six months and we are already taking over fifty percent of the market in Washington, Boston and New York. If I called it anything but the Trump Shuttle, it wouldn’t be nearly so successful. The Tour de Trump was actually going to be called the Tour de Jersey. We had four hundred and seventy-three reporters at a news conference for a damn bicycle race; how many would have been there for the Tour de Jersey? We would have gotten nowhere.

  You’re involved in so many activities, deals, promotions–in the deep of the night, after the reporters all leave your conferences, are you ever satisfied with what you’ve accomplished?
  I’m too superstitious to be satisfied. I don’t dwell on the past. People who do that go right down the tubes. I’m never self-satisfied. Life is what you do while you’re waiting to die. You know, it is all a rather sad situation.

  Life? Or death?
  Both. We’re here and we live our sixty, seventy or eighty years and we’re gone. You win, you win, and in the end, it doesn’t mean a hell of a lot. But it is something to do–to keep you interested.

  Do you agree with the T-shirt that says, WHOEVER HAS THE MOST TOYS WINS?
  Depends on your definition of winning. Some of my friends are unbelievably successful and miserable people. I truly believe that someone successful is never really happy, because dissatisfaction is what drives him. I’ve never met a successful person who wasn’t neurotic. It’s not a terrible thing … it’s controlled neuroses.

  What do you mean?
  Controlled neuroses means having a tremendous energy level, an abundance of discontent that often isn’t visible. It’s also not oversleeping. I don’t sleep more than four hours a night. I have friends who need twelve hours a night and I tell them they’re at a major disadvantage in terms of playing the game.

  And when you’re up at night, you’re totally alone?
  Yeah, yeah, because it’s a little tough to find anyone up at four in the morning.

  You mentioned that you have to be born with “it.” Do you suppose your children inherited “it” from you?
  Statistically, my children have a very bad shot. Children of successful people are generally very, very troubled, not successful. They don’t have the right shtick. You never know until they’re tested. But I do well with my children.

  Do you think they will have to make it?
  I would love them to be in business with me, but ninety-five percent of those children fail in a sophisticated big business. It takes confidence, intelligence, shtick. If any one of these traits is missing, you’re not going to make it.

  You’ve always said that you earned, not inherited, your empire, that adversity and uphill struggles made you stronger. What kind of adversity can your children experience?
  I’m a strong believer in genes, that my kids can be brought up without adversity and respond well if they have the genes. I have a friend who is extraordinarily smart. But he never became successful, because he couldn’t take pressure. He was buying a home and it was literally killing him–a man of forty with an I.Q. of probably a hundred and ninety. He called me one day for the umpteenth time, worrying about his mortgage and I was sitting in my chair, thinking to myself, Here I am, buying the shuttle, the Plaza Hotel, and I don’t lose an ounce of sleep over any of it. That’s lucky genes.

  Even with good genes, how can your kids ever feel they’ve lived up to what you’ve accomplished?
  I don’t know that they’ll have to. I would be happier if they were able to preserve rather than build. I’m not looking to have a great deal maker as a son, though I’d certainly like everything to run beautifully when I’m not around. I’d be happier if my son became a great manager rather than a great entrepreneur.

  My kids are extremely well adjusted. But I wonder what they think when they walk into Mar-a-Lago and see ceilings that rise to heights that nobody’s ever seen before. And when my daughter’s date picks her up at Trump Tower in a few years and sees the living room, how will he feel when he takes her out and tries to impress her with a studio apartment?

  Knowing all this, are you taking any precautions?
  It’s somewhat late. And I don’t think a paper route would work. But my son works on the boat.

  When you think about role models from history, what figures particularly inspired you?
  I could say Winston Churchill, but … I’ve always thought that Louis B. Mayer led the ultimate life, that Flo Ziegfeld led the ultimate life, that men like Darryl Zanuck and Harry Cohn did some creative and beautiful things. The ultimate job for me would have been running MGM in the Thirties and Forties–pre-television.

  There was incredible glamour and style in those days that’s gone now. And that’s when you could control situations. In those days, when your great actor was an alcoholic, and nobody ever found out–that was having tremendous control over things, which would be impossible today.

  You talk about glamour and style being gone–but isn’t that what you tried to bring back to New York?
  Yes, but not in show business, in my business. The Plaza Hotel is far more valuable than any movie I could make. If I put together a string of movies that were all hits, I couldn’t have made anywhere near what I made in real estate. I believe I’ve added show business to the real-estate business, and that’s been a positive for my properties and in my life.

  So building that second huge yacht isn’t an act of gaudy excess but another act in the show?
  Well, it draws people. It will be the eighth wonder of the world and will create an aura that seems to work. It will cost me two hundred million dollars. But I don’t need it! I could be very happy living in a one-bedroom apartment. I used to live that life. In the early Seventies, I lived in a studio apartment overlooking a water tank.

  If you were starting over again, in what business would you choose to make your fortune?
  Good question…. There’s something about mother earth that’s awfully good, and mother earth is still real estate. With the right financing, you’ve essentially invested no money. Publishing, movies, broadcasting are tougher, and there aren’t too many Rupert Murdochs, Si Newhouses, Robert Maxwells and Punch Sulzbergers. I’ll stick to real estate.

  What about the stock market?
  It’s a crap shoot. Real estate is something solid. It’s brick, mortar.

  Do you regret your statements to the press after the October 1987 crash, when you seemed to gloat about getting out in time when others were wiped out?
  No. I didn’t gloat. Somebody reported that I was out of the market and I confirmed it. I don’t know if that’s talent or luck or instinct. I then went back into the market after the crash. I think the cash market is the great one right now–cash is king, and that’s one of the beauties of the casino business.

  You seem very pleasant and charming during interviews, yet you talk constantly about toughness. Do you put on an act for us?
  I think everybody has to have some kind of filtering system. I’m very fair and I have had the same people working for me for years. Rarely does anybody leave me. But when somebody tries to sucker-punch me, when they’re after my ass, I push back a hell of a lot harder than I was pushed in the first place. If somebody tries to push me around, he’s going to pay a price. Those people don’t come back for seconds. I don’t like being pushed around or taken advantage of. And that’s one of the problems with our country today. This country is being pushed around by everyone—

  About your own toughness….
  Well, as I said, I study people and in every negotiation, I weigh how tough I should appear. I can be a killer and a nice guy. You have to be everything. You have to be strong. You have to be sweet. You have to be ruthless. And I don’t think any of it can be learned. Either you have it or you don’t. And that is why most kids can get straight A’s in school but fail in life.

  Is there a master plan to your deal making or is it all improvisational?
  It’s much more improvisational than people might think.

  As you continue to make more deals, as you accumulate more and more, there’s a central question that arises about Donald Trump: How much is enough?
  As long as I enjoy what I’m doing without getting bored or tired … the sky’s the limit.

  

  

  

  

  

• Q1 Slams Hedgies 'Most Popular Trade' – Momo Crashes Most Since 2009

  In mid-February, we warned of the looming carnage for equity market-neutral funds, and sure enough, as Bloomberg reports, one of the most popular (and successful) hedge fund trades – playing the difference between high- and low-momentum stocks – crashed by the most since 2009 in Q1. After 6 years of almost unstoppable gains, equity market-neutral funds suffered their biggest losses since 2012 – comparable to the 2007 quant crisis devastation – as weak momo stocks massively outpeformed crushing the hedgies' models.

  In Q1, 2015's worst became the best and the best became the worst…

  

  “Being short those names was a really good trade during the second half of 2015. This is the flip side of that,” said Pravit Chintawongvanich, head derivatives strategist at Macro Risk Advisors. “All these names which had been doing really bad have turned around and started performing. I would say a lot of it is people getting short squeezed.”

  Indeed it did…

  An investment approach that profits from the divergent paths of high- and low- momentum stocks over time, a strategy that had one of its biggest gains on record in 2015, seized up in the last three months, posting the worst quarter in six years. The plunge helped zap returns among a big category of quantitative hedge funds, the so-called market neutral group, whose year-to-date decline of 2.3 percent is the largest since 2012.

   

  While the tactic may be esoteric, the force that pummeled it is not: a growing revulsion among investors to shares whose main claim to fame in the past few years was that they kept going up. Anyone pursuing the strategy got into particular trouble shorting companies with the lowest price momentum, a section of the market that ended up being the quarter’s biggest winner.

   

  “Momentum was the dominant factor really significantly last year, more so than I can recall any time in my career. When market neutral performs like that, when it breaks, it breaks hard,” said Benjamin Dunn, president of Alpha Theory Advisors, which works with hedge funds overseeing about $6 billion. “All the returns to momentum that were generated, you saw that reverse this year.”

  And here is the reason why – mid-February (as Carney and Draghi bid stocks off the lows), it was weak momo stocks that massively outperformed strong momentum stocks…

  

  Entirely breaking the models…

  

   

  As Bloomeberg concludes,

  One cause of the momentum breakdown was “mean reversion,” according to JPMorgan strategist Marko Kolanovic, who predicted in January investors would rotate into value assets, seeking out shares priced at deep discounts to things like earnings and assets. Using long-short proxies, value beat momentum by 40 percent this year, buoyed by systematic strategies covering short positions, Kolanovic said in a March 17 note to clients.

   

  That turnaround may have roiled returns for hedge funds. While they were snapping up the best-performing stocks, hedge funds also reduced value stock holdings in every quarter of last year, making it the least popular of the 10 styles tracked by Evercore ISI.

  This did not end well the last time, as detailed at the time, during the week of August 6, 2007, a number of high-profile and highly successful quantitative long/short equity hedge funds experienced unprecedented losses.

  The losses at the time were initiated by the rapid unwinding of one or more sizable quantitative equity market-neutral portfolios.

   

  Given the speed and price impact with which this occurred, it was likely the result of a sudden liquidation by a multi-strategy fund or proprietary-trading desk, possibly due to margin calls or a risk reduction.

   

  These initial losses then put pressure on a broader set of long/short and long-only equity portfolios, causing further losses on August 9th by triggering stop-loss and de-leveraging policies.

  Which perhaps suggests there is more fall-out from this to come now that quarter-end is over. Things did not go well after the last crisis…

  

  

  

  

  

  

• The Next Big Problem: "Stagflation Is Starting To Show Across The Economy"

  In the past few months, the Bureau of Labor Statistics has gone out of its way to show that U.S. worker compensation is finally rising. There is one problem with that: while that may be true on an hourly basis…

  

  … on a weekly basis, the picture is vastly different. What is happening is that weekly wage growth have gone nowhere in years, but because the average hours worked per week has declined and today hit a 2 year low of 34.4, it translates into more money per hour worked.

  

   

  But let’s assume that wages, or at least the perception thereof, is indeed rising – is this helping the average American? Well, as we showed earlier this week, the net “after expense” income of average Americans measured in real dollars has declined from $17K in 2004 to $6,000 in 2014 because as wages have declined dramatically, expenses have surged. In fact, according to the recent Pew study, by 2014, median income had fallen by 13 percent from 2004 levels, while expenditures had increased by nearly 14 percent, As such a 2.5%, or 3.5% or even 10% increases in wages will not manage to offset the surging expenditures, mostly on rent.

  

  All of this you will never see discussed in a sellside research report, which instead relies on the basic hourly earnings headline numbers. Instead, you will see charts like this from Wells Capital’s Jim Paulsen.

  

  And yet, even the analysts who are only looking at the most rudimentary data are now warning that a new problem is emerging for the US economy, a problem which is always present whenever wages are rising, while overall economic growth is stalling (as it is currently according to the Atlanta Fed with a 0.7% Q1 GDP) and corporate profits are about to plunge by the most since the financial crisis: stagflation. 

  In a note earlier today, Deutsche Bank laid out the following ominous warning:

  Worry not about the eight per cent drop in forecast earnings in the upcoming quarter reporting season. That aggregate figure is well telegraphed. Instead, pay attention to those companies with wafer-thin margins. Every year since the crisis, S&P500 stocks in the lowest quartile of ebitda margins have outperformed the market. Until, that is, last year when these least profitable companies trailed by 11 per cent. That is because after holding steady for six years, their already low margins nearly halved to 4.5 per cent while the median for S&P500 companies barely budged from 20 per cent. Benign cost pressures in recent years have allowed even the laggards to keep up. But if commodity prices start to rally, for example, or low unemployment finally gives employees some bargaining power, those companies living on minuscule margins may really start to sweat.

  What Deutsche Bank is referring to is the following chart which shows the explicit and inverse correlation between corporate profits and employee wages. What it demonstrates clearly is that if indeed labor income, i.e., wages, are rising, then profit margins have no choice but to fall even more; this means that if the stock market wishes to continue rising even higher it will only achieve this with margin expansion, which however can only be achieved by even more Fed intervention and more stimulative inflation, which then pushes wages even higher generating a self-defeating feedback loop.

  

   

  This is something we touched upon early in January when we made an observation on small business operating margins, namely that “If Companies Are Telling The Truth, Profit Margins Are About To Collapse The Most In The 21st Century.”

  

  Which brings us to the following Bloomberg TV interview with Wells Fargo’s Jim Paulsen in which the otherwise jovial permabull focuses on only one thing: the rising threat of stagflation. This is what he said:

  I think stagflation is starting to show – that idea of stronger nominal growth but weaker real growth is starting to show up across the economy. It certainly is showing up with real personal consumption slowing; it’s showing with slower job creation growth as the wage rate rises, and it’s showing up in weaker profits as the share of labor income rises reducing profit margins for corporations.

   

  I think to some extent companies are starting to feel that pinch of higher labor costs and since margins are near post-war highs to begin with, they don’t have much ability to raise them much further, but if labor costs now start to go up, they’ll probably suffer some margin erosion.

   

  What scares me about this is we’ve had a very weak growing recovery by historic standards, about 2% real growth, but what’s made it palatable to some degree, is that inflation has been so low and because of that interest rates have been so low. So even though laborers have only gotten 2% wage increases which doesn’t sound very good, until you recognize that because inflation has been virtually non-existent, real purchasing power, real wages have been growing very nicely.

  … At this point we would like to interject that while we love the strawman argument that real wages are “growing fast” as much as the next guy, the reality is that this is bullshit as the previously shown chart from Pew has demonstrated: whether Americans are spending for more items, or actual prices are soaring, the consumer’s net income as shown below, has plunged.

  

   

  Anyway, back to Paulsen who then says this:

  And now for the first time you start to have core costs rising, then even if we get a little faster nominal growth, the final result on the real outcome might not be nearly as positive as hoped. Yellen is trying to raise the inflation rate and I am thinking you better be careful what you wish for.

  Can this scenario tip us into a recession Paulsen is asked, his answer: “it’s possible. I am concerned that the Fed is so dovish in the face of rising core inflation.”

  Which means that now that the “very serious economists” are talking about it, get ready to hear much more about the “threat of stagflation” for the US economy, a threat which the Fed is powerless to defeat unless it is willing to launch another market crash.

  

  

  

  

  

• ReaDY FoR SoDoMY…

  

  

  

  

  

• Just A Warning From Ron Paul

  Ron Paul took to Twitter to explain how he feels about The Donald…

  Sorry…Trump's Not Really An Outsider https://t.co/9TXSltEFMM pic.twitter.com/gH4BgrZL4u

  — Ron Paul (@RonPaul) March 21, 2016

  As Paul notes, Yes, Donald Trump is shrewd and really wants to sell himself as an outsider. He understands how to stir the many people who are unhappy.

  But when you get beyond the theatrics, he's not really an outsider at all. Paul discusses this, as well as Ted Cruz and Hillary Clinton below on Fox Business:

  Watch the latest video at video.foxbusiness.com

  

  

  

  

• Doug Casey Warns "We're Exiting The Eye Of The Giant Financial Hurricane"

  Via InternationalMan.com,

  (This is Doug Casey’s foreword to Casey Research’s Handbook for Surviving the Coming Financial Crisis.)

  Right now, we are exiting the eye of the giant financial hurricane that we entered in 2007, and we’re going into its trailing edge.

  It’s going to be much more severe, different, and longer lasting than what we saw in 2008 and 2009.

  In a desperate attempt to stave off a day of financial reckoning during the 2008 financial crisis, global central banks began printing trillions of new currency units. The printing continues to this day.

  It’s not just the Federal Reserve that’s printing. The Fed is just the leader of the pack. The U.S., Japan, Europe, China… all major central banks… are participating in the biggest increase in global monetary units in history.

  These reckless policies have produced not just billions but trillions in malinvestment that will inevitably be liquidated. This will lead us to an economic disaster that will, in many ways, dwarf the Great Depression of 1929–1946. Paper currencies will fall apart, as they have many times throughout history.

  This isn’t some vague prediction about the future. It’s happening right now. The Canadian dollar has lost 25% of its value since 2013. The Australian dollar has lost 30% of its value during the same time. The Japanese yen and the euro have crashed in value. And the U.S. dollar is currently just the healthiest horse on its way to the glue factory.

  These are gigantic losses for major currencies. After all, we’re not talking about small volatile stocks. We’re talking about the value of money in peoples’ bank accounts. These moves show we’re in the early stages of a currency crisis.

  At this point, it’s a lock cinch that the world’s premier paper currency – the U.S. dollar – will lose nearly all its value. I just don’t see any realistic way around it. Since the financial crisis began eight years ago, the U.S. government has created 3.5 trillion new dollars. In that same eight years, the U.S. government has borrowed $9 trillion – as much as it has borrowed in the previous 232-year history of the United States.

  Though politicians would like us to believe otherwise, actions have consequences. You simply cannot quadruple the money supply and double the national debt in eight years without catastrophic results.

  As this unfolds, your biggest risk isn’t the crashing stock market or the crashing bond market. Your biggest problem, and also the one most people just don’t see, is political. Your government is by far the most serious threat to your money and wellbeing.

  Why do I say that? Like any organism, the prime directive of a government is to survive. When faced with a threat to its survival, a broke government will do anything it can to stay alive. President Roosevelt confiscated Americans’ gold in 1933. And in just the last few years, we’ve seen broke governments raid private pensions and confiscate cash directly from people’s bank accounts.

  As we head into a currency crisis for the record books, I think currency controls are a lock. Governments have used currency controls since the days of the Roman Empire. A country debases its currency, raises taxes beyond a certain level, and makes regulations too onerous. Naturally, productive people react by getting their capital, and then themselves, out of Dodge.

  But the government can’t have that, so it puts on currency controls that prevent people from moving assets outside the country. In effect, currency controls force people to stay with a sinking ship.

  I’ll be genuinely surprised if some form of currency controls isn’t instituted within two years. If you don’t get significant assets out of your home country now, you may soon find it costly and very difficult to do so.

  I’ve written many times about the importance of internationalizing your assets, your mode of living, and your way of thinking. I suspect most readers have treated those articles as a travelogue to some distant and exotic land: interesting fodder for cocktail party chatter but basically academic and of little immediate personal relevance.

  I hope this book will shake you out of that mindset. There’s a very real risk that if you don’t act soon, you may find yourself penned like a sheep and your options extremely limited.

  This book will teach you how to move some of your money and investments outside the reach of your home government. You’ll learn how to open a foreign bank account… the best ways to store gold for maximum safety… what you need to know before buying foreign real estate, and much, much more.

  We’ve done most of the legwork for you. But it’s up to you to act.

  The next few years are going to be quite catastrophic. Hundreds of millions of people will slip into poverty when the currency crisis destroys their savings.

  The good news? If you take the steps outlined in this book, you won’t be one of them.

  If you’re interested in obtaining this book, you can obtain a hard copy in the mail. Click here for more details or to download the PDF now.

  

  

  

  

  

• Friday Humor: Most Financially Responsible Act Of A 17-Year-Old's Life

  COLORADO SPRINGS, CO — Saying the turn of events will greatly benefit the 17-year-old’s economic security, sources confirmed Friday that local high school senior Emily Harrison’s failure to get into the University of Southern California, a private academic institution, will be the single most financially responsible act of her entire life.

  According to reports, Harrison’s rejected application, which she spent weeks preparing in hopes of spending four years at her “dream school,” will save the young student a total of nearly $370,000, including $205,768 in tuition, $3,714 in fees, $57,392 in room and board, and $101,670 in student loan interest payments.

   

  

   

  The rejection, which led a visibly devastated Harrison to agonize over whether she should have participated in more extracurricular activities or obtained additional letters of recommendation, will reportedly allow her to avoid a period of 10 years or more in which she would have struggled to repay her loans, inevitably racking up credit card debt to cover basic necessities and ultimately leaving her unable to buy a home.

  Sources said the teen will still face financial disaster if she follows through on her long-term plan to enter a PhD program, which would require her to spend approximately one-fifth of her adult life bringing in little to no income.

  Source: The Onion

  *   *   *

  Indeed, while this satire is humorous, as Charles Hugh-Smith recently detailed, a system that piles debt on students in exchange for a marginal or even zero-return on their investment is morally and financially bankrupt.

  Every once in a while you run across an insider's narrative of a corrupt, morally bankrupt sector that absolutely nails the sector's terminal rot. Here is that nails-it narrative for higher education: Pass, Fail: An inside look at the retail scam known as the modern university.

  Here are excerpts of the article, which was published in Canada but is equally applicable to higher education in the U.S.:

  A university degree, after all, is a credential crucial for economic success. At least, that’s what we’re told. But as with all such credentials—those sought for the ends they promise rather than the knowledge they represent—the trick is to get them cheaply, quickly, and with as little effort as possible. My students’ disaffection is the real face of this ambition.

   

  I teach mostly bored youth who find themselves doing something they neither value nor desire—and, in some cases, are simply not equipped for—in order to achieve an outcome they are repeatedly warned is essential to their survival. What a dreadful trap.

   

  One in particular matches perfectly with the type of change I’ve observed on my watch: the eradication of content from the classroom.

   

  All efforts to create the illusion of academic content are acceptable so long as they are entertaining, and successful participation requires no real effort and no real accountability.

   

  Remove your professor hat for a moment and students will speak frankly. They will tell you that they don’t read because they don’t have to. They can get an A without ever opening a book.

   

  But don’t worry—you won’t go bust because of this failure, not in the modern university. So long as your class is popular and fun, you’ll be favoured by the administration and probably receive a teaching award. This, even though your students will leave your class in worse condition than they entered it, because you will have pandered to their basest inclinations while leaving their real intellectual and moral needs unmet.

   

  There is no clearer example of administrators’ contempt for faculty. But there is also no clearer example of their contempt for students.

   

  As money is siphoned from academic programs through attrition, it is channelled into a host of middle-management positions.

   

  From 1979 to 2014, central administration and staff ballooned by three and a half times, while the size of the faculty merely doubled.

   

  Parents, students, and governments keep supplying them with capital, assuming there will be a genuine return on investment. But since the institution no longer produces anything, no such return is forthcoming.

   

  Spending on the student services sector in Canadian universities increased an incredible six-fold between 1979 and 2014.

   

  The student services cabal is no longer there to support faculty in their work of educating students “but to compete with them to define the student experience.”

  Insiders are quiet after they read this, because they know it's true.

  The financial burden created by the higher education cartel is immense and expanding:

  

  To mask the enormity of the sums squandered on "education" that has little measurable results, the federal government has purchased most of the debt:

  

  No inflation here–just a 137% increase in 15 years:

  

  A system that piles debt on students in exchange for a marginal or even zero-return on their investment is morally and financially bankrupt.

  

  

  

  

  

• Iran Moves To Take Key City From ISIS In Critical Sectarian Feud

  Believe it or not, the Iraqi army is on the verge of launching an attack on ISIS-held Mosul.

  The city – home to millions of Iraqis – is Bakr al-Baghdadi’s most important urban stronghold.

  Raqqa is the ISIS “capital”, but it’s easier to command. Mosul is a major city with a population that numbers in the millions. If ISIS were to lose its grip there, it would almost surely mark the beginning of the end for the self-styled “caliphate.”  

  Over the past three weeks, Mosul has come under pressure from Russian-backed Shiite militias, US-supported Iraqi regulars, and Kurdish Peshmerga fighters who at this point have no idea who is on their side and who isn’t. 

  Below, find excerpts from a new WSJ piece that outlines the pressure Islamic State faces from an international intelligence community that no longer finds them useful. 

  Last week, the Pentagon said the U.S. military had killed a man they identified as one of Islamic State’s top military officials. It didn’t give any further information, but Gen. Magsosi said the man, known as Abu Eman, was the top expert at the Mosul bomb lab.

   

  When Islamic State captured Mosul, Iraq’s second-largest city, in the summer of 2014, the university was one of the spoils. The university had a strong reputation around Iraq for its science departments, alumni say.

   

  By March 2015, dozens of Islamic State engineers and scientists had set up a research hub in the chemistry lab, which was full of equipment and chemicals, according to the people with knowledge of the university.

   

  Many of the regular staff, including professors specialized in organic, industrial and analytical chemistry, remained in the city at the time, but the new laboratories were staffed by Islamic State’s own men, according to one of those people.

   

  At least since August, dozens of individuals—presumed to be foreigners because they didn’t speak Iraqi Arabic—were seen moving through the labs, the two people said. They said they were told specialized units had been set up there for chemical explosives and weapons research as well as suicide-bomb construction.

   

  A separate group at the university’s technical college was dedicated to building suicide-bomb components, one of the two said.

  Of course it’s a little late to be getting that kind of feedback. Sure, ISIS is now in control of Mosul’s intellectual community and that includes the bombmakers.

  The question is whether these individuals will fold under pressure from the IRGC and admit what they know to the Ayatollah.

  

  

  

  

  

• April "Fools" In March

  Submitted by Peter Schiff via Euro Pacific Capital,

  It may be almost impossible to underestimate the gullibility of professional Fed watchers. At least Lucy van Pelt needed to place an actual football on the ground to fool poor Charlie Brown. But in today’s high stakes game of Federal Reserve mind reading, the Fed doesn’t even have to make a halfway convincing bluff to make the markets look foolish.

  Just two weeks ago, the release of the Fed's March policy statement and the subsequent press conference by Chairwoman Janet Yellen should have made it abundantly clear that the Central Bank policy had retreated substantially from the territory it had previously staked out for itself. In December it had anticipated four rate hikes in 2016,  but suddenly those had been pared down to two. Based on the conclusion that the era of easy money had been extended for at least a few more innings, the dollar sold off and stocks and commodities rallied.

  But in the two weeks that followed the dovish March guidance, some lesser Fed officials, including those who aren't even voting members of the Fed's policy-setting Open Market Committee, made some seemingly hawkish comments that convinced the markets that the Fed had backed off from its decision to back off.

  The campaign began on March 19 when St. Louis Fed President James Bullard said that the Fed had largely met its inflation and employment goals and that it would be “prudent to edge interest rates higher.” (H. Schneider, Reuters) Two days later Bloomberg reported that Atlanta Fed President Dennis Lockhart had said, “There is sufficient momentum…to justify a further step…possibly as early as April,” (J. Randow, S. Matthews, 3/21/16)

  And it didn't stop there. On March 22, Philadelphia Fed President Patrick Harker said,“there is a strong case that we need to continue to raise rates…I think we need to get on with it.” (J. Spicer, Reuters) On March 24, Bullard chimed in again, saying that rate hikes “may not be far off,” appearing to back Lockhart’s suggestion for a surprise April hike. Suddenly, chatter erupted on Wall Street that the April FOMC meeting should be considered a “live” one, where a rate hike was possible. With such caution spreading, the markets reacted predictably: the dollar rallied, gold and stocks declined. 

  At the time I said, as I have been saying all year, that the Fed never had an intention to tighten further, and that it would continue to talk up the economy just to create the impression of health. But many believed that Janet Yellen would use her speech this week at the New York Economic Club (her first public comments since her March press conference) to underscore the comments made by her colleagues in the past two weeks. Instead she delivered a double-barreled repudiation of any potential hawkish sentiment. In fact, her talk could be viewed as the most dovish she has ever delivered since taking the Chair.

  The market reaction was swift. In fact, as the text of her address was released a few minutes before she hit the podium, gold jumped and the dollar dropped even before she started speaking. The only surprise was that there was any surprise at all.

  If market watchers actually looked at economic data instead of trying to parse the sentence structure of Fed apparatchiks, they would know that the economy is rapidly decelerating, and most likely heading into recession (if it’s not already in one). These conditions would prohibit an overtly dovish Fed from any kind of tightening. Just this week February consumer spending increased at a tepid .1%, in line with very modest expectations (Bureau of Economic Analysis). But to get to that flaccid figure, the much more robust .5% growth rate originally reported for January had to be revised down to .1%. If that major markdown had not occurred, February would have come in as a contraction. The sleight of hand may have fooled the markets, but the Fed's own bean counters had to take it seriously. The figures were the primary justification for the Atlanta Fed’s decision to slash its first quarter GDP estimate to just .6%. That estimate had been as high as 1.4% last Thursday and 2.7% back in February. Clearly something isn't working. But whatever it is, Janet Yellen won't speak its name.  

  In her speech in New York, Yellen was careful to mention that the Fed has not reduced its full year growth forecast of 2.5% to 3.0% that it had laid out in December. This despite the fact that their first quarter predictions, which must be a big part of their full year predictions, have already been hopelessly shattered by the Atlanta Fed's updates. 

  If the Fed really believes that we are still on a solid growth track, then two major questions should immediately come to mind:

  1) Given that she acknowledges greater than expected financial stresses and expected deceleration abroad, what could possibly be the catalyst that will suddenly reverse our economic trajectory, and

   

  2) If it really does believe that this miracle will occur, why has the Fed abandoned the monetary policy trajectory that it announced in December?

  The answer to the first question is a mystery. For much of the past year, Yellen stressed the improvements in the labor market, as evidenced by the low unemployment rate. But that figure has been thoroughly debunked by those who correctly point out that job creation in the U.S. has been dominated by low-paying part-time jobs that detract from economic health rather than add to it. But while Yellen clung to her rosy domestic outlook, she acknowledged the significant slowdown abroad. But if these global concerns are sowing caution at the Fed, why does she expect the U.S. to buck the trend?

  She is correct that that many countries around the world have badly missed First Quarter forecasts. But she totally ignores the fact that the U.S. has been one of the bigger disappointments. For instance, since the end of last year, expectations for Q1 growth have declined 12.5% for Germany, 30% for Canada, 45% for Norway, and 57% for Japan (Bloomberg, 3/30/16). But based on the current estimates from the Atlanta Fed, the U.S. economy is growing at a rate that is 75% slower than the 2.4% projection Yellen and the Fed had forecast back in December. So why does the Fed acknowledge unexpected weakness abroad, yet ignore even greater unexpected weakness in the U.S.? Could it be that Yellen does not want to be seen as one of those “fiction peddlers” that President Obama criticized in his State of the Union address who have the audacity to suggest that the U.S. economy is not strong?

  But the bigger question is not why the Fed is mindlessly cheer-leading, that is after all part of its job description, but how it can justify altering its monetary policy while holding fast to its economic forecasts. To square that circle,Yellen said that the Fed had erred in its assumptions as to what constitutes a “neutral” policy level whereby rates are neither stimulating nor restrictive. She said that based on her global concerns, neutral policy should now be considered close to 0% rather than the 2% that the Fed had hinted at earlier. She also said that the range of factors that the Fed considers in reaching its rate decisions had evolved beyond simply looking at the traditional inputs of GDP growth, inflation and unemployment to include global risk factors that could impact the U.S. In other words, the Fed is not simply “data dependent” but is now “globally data dependent,” a stance that could allow it to point to any potential crisis anywhere in the world as a rationale not to raise rates. Already many observers are suggesting that the June “Brexit” vote in the UK will be a justification to take a rate hike off the table for the June FOMC meeting.

  Of course, this ever-expanding list of criteria should be viewed as what it really is: a continual shifting of goal posts that will prevent the Fed from EVER having to raise rates again (at least until a rapidly rising CPI forces its hand). It may have incorrectly believed it could get away with a series of increases when it first started raising in December, but those expectations may have wilted when the markets and the economy dropped so decisively in the immediate wake of December’s 25 basis point increase. Yet even though markets have recovered, I believe they have only done so because the Fed has backed off. In fact, if that initial rate hike was a trial balloon for future hikes, its flight was about as successful as the Hindenburg’s. As such, the Fed hardly wants to risk another sell-off that it may be unable to reverse.

  So the handwriting is on the wall for anyone literate enough to read it. The Fed is stuck in a monetary Roach Motel from which it may never escape. Keynesian economists like to discuss a “liquidity trap” but their policies have created an undeniable “stimulus trap” that I believe will remain in place until the whole merry-go-round spins out of control.

  The quarter that just ended yesterday saw the biggest quarterly declines in the U.S. dollar in five years (T. Hall, Bloomberg, 3/30/16), and the strongest quarter for gold in 30 years (R. Pakiam, Bloomberg, 3/30/16). These moves completely took the Wall Street establishment by surprise. But given the historic rally enjoyed by the dollar over the past five years, three months’ worth of declines may just be a small down payment on the declines the dollar may experience in the years ahead.

  Despite having fallen for all of the Fed’s prior head fakes,  some economists are taking today’s March payroll report, which showed the creation of 215,000 jobs and a tick up in the labor participation rate to 63.0% (Bureau of Labor Statistics), as a sign that the Fed will now have to shift back into a hawkish stance. Putting aside the fact that the majority of the new jobs were part-time and went to people who already had at least one, and that the official unemployment rate actually ticked up, one wonders how much more of this will we have to witness before economists  finally realize that there will likely never be a real ball to kick.

  

  

  

  

  

• Who's The Real Threat To America? CIA School Bus Edition

  In the wake of the terrorist attacks that left nearly two dozen killed and some 100 people injured, officials in Brussels (not to mention presidential candidates in the US) are wondering whether police in Belgium should have tortured Salah Abdeslam last weekend.

  To let Donald Trump and others tell it, torturing Abdeslam would likely have yielded valuable information that may well have prevented the attacks that left some 34 people dead last week. 

  Meanwhile, “the terrorists” are planning attacks on Belgium’s nulclear facilities – or at least that’s what the mainstream media wants you to believe. 

  As you can see from the following headline dump however, the real threat to peace in the Western world may emanante from sheer incompetence.

  

  

  

  

  

  

• NATO: Worse Than "Obsolete" – It's A Crony Capitalist's Dream

  Submitted by Justin Raimondo via AntiWar.com,

  Unlike many libertarians, I love presidential election season, because that’s when generally ignored foreign policy issues are discussed beyond the small circle of Washington wonks. And that’s why I’m having such fun with Donald Trump – much to the annoyance of some of my readers, both libertarians and liberals alike: because he’s provoking a much-needed discussion about who benefits (and loses) from “American leadership” on the world stage. Most useful is his recent assertion that the North Atlantic Treaty Organization (NATO) is “obsolete.”

  So it is. When the Berlin Wall fell, and the Soviet Union dissolved, the rationale for NATO disintegrated along with it. However, as libertarians know all too well, government programs (especially those that benefit the corporate sector) never die, nor do they fade away: they just keep growing to the degree that their constituency wields political clout. In NATO’s case, this clout is considerable.

  When the citizens of Berlin did what Ronald Reagan urged Gorbachev to do – “Mr. Gorbachev, tear down that wall!” – the Soviet leader tried to negotiate with the West. And, to his mind, he succeeded: an understanding was reached with Washington that the Russians would allow German reunification on the condition that the NATO alliance would not expand eastward.

  That promise was not kept. Instead, the lobbyists, both foreign and domestic, went into overdrive in a campaign to extend NATO to the very gates of Moscow. It was a lucrative business for the Washington set, as the Wall Street Journal documented: cushy fees for lobbyists, influence-buying by US corporations, as well as political tradeoffs for the administration of George W. Bush, which garnered support for the Iraq war from Eastern  Europe’s former Warsaw Pact states in exchange for favorable treatment of their NATO applications.

  The Committee to Expand NATO, later re-dubbed the US Committee on NATO, had at its core many of the founding members of Bill Kristol’s Project for a New American Century (PNAC) which played such an instrumental role in agitating for the invasion of Iraq. Yet it was too lucrative to exclude “progressives” of the Clintonian variety, bringing together neoconservatives like Paul Wolfowitz, Robert Kagan, Stephen Hadley, and Richard Perle, with liberal internationalists such as Will Marshall, of the Progressive Policy Institute, and Sally Painter, a former Commerce Department official under Bill Clinton –turned-lobbyist, who raked in hundreds of thousands in contracts from aspiring NATO countries and their corporate clients in the US.

  Founder and president of the NATO Committee was Bruce Jackson, at the time finance director of Bob Dole’s presidential campaign, and vice-president in charge of planning and strategy for Lockheed – today Lockheed-Martin – the biggest military contractor in the country.

  The NATO expansion project fit neatly in with Jackson’s day job: all NATO applicants must upgrade their military forces in order to meet uniform standards, and this meant a windfall for the military-industrial complex – with Lockheed first in line. The Lockheed connection was reinforced by Randy Scheunemann, a member of the Committee’s board, and president of Orion Strategies, a public relations firm whose clients include Lockheed.

  The Clinton administration fully supported NATO expansion, and the Committee’s activities brought together the White House, members of Congress from both parties, and the Washington lobbyists and their foreign clients for a spate of conferences, dinners, and private meetings. Reams of propaganda were aimed at the mass media, and the political class, including a very visible presence at the national conventions of both political parties.

  In short, NATO expansion was – and is – a crony capitalist’s dream, albeit not the sort that gets the same amount of attention from “libertarian” critics of such boondoggles as the Ex-Im Bank, who regularly remind us that Boeing is the Bank’s biggest customer. Forgotten (or evaded) is the fact that Boeing (or Lockheed-Martin, General Dynamics, etc.) gets billions whenever a new applicant is added to NATO’s ranks and has to modernizes its forces.

  The NATO expansionists won their battle: Poland, Hungary, and the Czech Republic joined in 1999: Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia, and Slovenia were added in 2004. Albania and Croatia came on board in 2006. The latest applicants are tiny Montenegro, a splinter shaved off of the former Yugoslavia, which will probably be admitted this summer, and Georgia, which is not even in Europe, and is still fighting to join the club: its inclusion is controversial in part because it would be seen as throwing down the gauntlet to Russia, with whom it fought a brief war in 2008 over the breakaway Republic of Ossetia.

  Therein lies the real danger posed by NATO expansion – and, indeed, the existence of the alliance thirty years after the Soviet implosion. As Sen. Robert A. Taft put it in a 1949 nationally broadcast speech opposing US entry into NATO, he said:

  “It obligates us to go to war if at any time during the next 20 years anyone makes an armed attack on any of the 12 nations. Under the Monroe Doctrine we could change our policy at any time. We could judge whether perhaps one of the countries had given cause for the attack. Only Congress could declare a war in pursuance of the doctrine. Under the new pact the President can take us into war without Congress. But, above all the treaty is a part of a much larger program by which we arm all these nations against Russia… A joint military program has already been made… It thus becomes an offensive and defensive military alliance against Russia. I believe our foreign policy should be aimed primarily at security and peace, and I believe such an alliance is more likely to produce war than peace. A third world war would be the greatest tragedy the world has ever suffered. Even if we won the war, we this time would probably suffer tremendous destruction, our economic system would be crippled, and we would lose our liberties and free system just as the Second World War destroyed the free systems of Europe. It might easily destroy civilization on this earth…

   

  “There is another consideration. If we undertake to arm all the nations around Russia from Norway on the north to Turkey on the south, and Russia sees itself ringed about gradually by so-called defensive arms from Norway and. Denmark to Turkey and Greece, it may form a different opinion. It may decide that the arming of western Europe, regardless of its present purpose, looks to an attack upon Russia. Its view may be unreasonable, and I think it is. But from the Russian standpoint it may not seem unreasonable. They may well decide that if war is the certain result, that war might better occur now rather than after the arming of Europe is completed…

   

  “How would we feel if Russia undertook to arm a country on our border; Mexico, for instance?

   

  “Furthermore, can we afford this new project of foreign assistance?”

  Which brings us to Trump’s critique: that NATO is a “bad deal” because we bear a disproportionate share of the costs. He is quite correct on this score. As of today, the US and Estonia are the only two NATO members keeping to the “requirement” that their military spending equals two percent of GDP. Former Defense Secretary Robert Gates pointed this out in a 2011 speech in which he predicted that NATO’s future was sure to be “dim if not dismal.” Our shiftless allies are all too “willing and eager for American taxpayers to assume the growing security burden left by reductions in European defense budgets,” he said.

  Added to the direct costs of NATO is the expense of stationing over 60,000 troops in Europe, maintenance of our many bases, and the opportunity costs of money that could have been diverted to productive domestic uses. Taft, it seems, was right that the costs of NATO would turn out to be “incalculable.”

  And then there is yet another cost – the price of risking World War III.

  NATO expansion has led to Russian rearmament and the nullification of arms treaties negotiated as the cold war neared its endpoint. The Western powers have launched provocative military “exercises” that cannot be seen by the Russians as anything other than a dress rehearsal for war – and the Kremlin has reacted accordingly.

  With his plan – or, rather, inclination – to abandon the old NATO and replace it with some sort of multilateral counterterrorist operation, and his insistence that our “allies” pay up, Trump is forcing an issue onto the stage that hasn’t been seen since the days of Bob Taft. And with the bogeyman of Communism absent, he is free to say he could get along with Vladimir Putin and only catch flak from committed neocons.

  NATO isn’t just an expensive luxury of the sort we can no longer afford – it is a tripwire that could be set off by a minor border conflict involving Moldova, the status of Kaliningrad, or – more likely – another round of hostilities in Ukraine.

  Would we start World War III in defense of the oligarchs of Kiev?

  I wouldn’t put it past them.

  That’s why, no matter what the fate of Trump’s presidential bid, we all owe him for raising this vital issue – and within the GOP, no less, a party which has been, up until now, a bastion of support for the NATO-crats and the new cold war against Russia.

  

  

  

  

  

• New York Follows California, Will Raise Minimum Wage To $15/Hour

  Earlier his week, California paved the way for a $15/hour minimum wage, in a move that essentially communicated the following message: “..to hell with economics.”

  The living wage issue is one of the most controversial debates playing out in America today and it goes right to the heart of partisan politics.

  Anyone who’s “feeling the Bern” so to speak, believes they’re entitled to make enough flipping burgers to feed their family. And you know what? They’re wrong. Dead wrong.

  Either, i) they don’t have the skill set they need to find a job that pays a decent wage, ii) they have other personal problems that keep them from securing gainful employment, or iii) the US economy has simply become a service sector, minimum wage job creation machine that severely limits job seekers’ opportunities and forever relegates the vast majority of society to the bottom of the pyramid in what is increasingly becoming a feudal system.

  Note that our rather harsh assessment doesn’t actually put the blame on workers.

  Sorry, but society doesn’t value a dollar menu cheeseburger as much as it values a porcelain cavity filling. So the guy (or girl) putting the burger in a bag makes $8/hour while the dentist makes $100. That doesn’t mean the burger flipper is “worth” less of a person than the dentist in metaphysical terms. Sure, sometimes the people handing you a Taco Bell bag at the drive-through might have spit in your burrito, but you know what? the dentist who fills your cavity might be having an affair with the hygienist who just cleaned your teeth. In the back of the office. Just before you signed in and got comfortable in the chair.

  The point is that what’s missing in this equation are the breadwinner, skilled labor jobs that allow everyday people who i) have attained a decent education and acquired a skill that’s useful to society, and ii) are willing to work hard 10 hours a day, to get a job where they can simultaneously benefit the global economy while making enough money to support their families.

  Raising the minimum wage to $15 or $20 or even $30/hour isn’t going to fix that. And neither are labor unions. This is an existential problem that needs to be addressed at the highest possible levels. Of course it won’t. The good folks that inhabit the Eccles building will point to record low unemployment to justify rate hikes (when they want to, but when they don’t they’ll point to China and subpar inflation to justify keeping things on hold) and to support the contention that the US economy is on solid footing.

  Here’s a bit of color on the New York mandatory minimum issue via Reuters:

  Governor Andrew Cuomo and state legislative leaders reached a deal on Thursday to raise New York state’s minimum wage towards $15 per hour, but fell short of a uniform state-wide increase.

   

  The deal outlines a faster rise in New York City, but carves out a slow lane for small businesses and surrounding counties. In less prosperous areas north of the city it rises to $12.50 per hour before a state review of the law’s impact.

   

  The minimum wage agreement was part of a broad budget deal that Cuomo announced late on Thursday. He said the plan included 12 weeks of paid family leave and $4.2 billion in tax cuts. The $147 billion budget caps spending growth at 2 percent.

   

  “I believe that this is the best plan the state has produced in decades,” Cuomo told a news conference.

   

  Under the terms of the deal the minimum wage would rise from its current $9 per hour to $15 over three years in New York City starting on Dec. 31, 2016. City businesses with up to 10 employees would be given four years to implement the measure.

   

  Long Island and Westchester County around New York City would be given six years to push through the increases while the rest of the state would see the minimum wage rise to $12.50 in five years, with indexed increases to $15 possible after review.

   

  There is also a provision to suspend the increases from 2019 if economic conditions worsen.

  Great. You’ll now make $15/hour to serve downtown lattes to Jamie Dimon’s assistant and on the off chance someone important happens to venture up to mid-town (which they won’t), you may get a $5 tip in the plastic cup. 

  Of course you still won’t be able to afford your upper east side apartment without an annoying roommate, nor will you have any hope of making anything of your life other than ensuring that you know the difference between a latte and a cappuccino.

  But don’t worry. Your vote counts. Because Hillary will fix this.

  Or Trump will.

  Or Bernie will.

  Or Cruz will.

  Or wait… is this hopeless? 

  Maybe you’ll just stay broke until the “right” person comes along…

  * * *

  Bonus: from Bloomberg…

  Raising wages by government fiat seems to be catching on. The lowest-paid workers in Britain and California — two of the world’s largest economies — are only the latest beneficiaries of plans to lift the minimum wage.

  The goal in every case is commendable, but the method is far from ideal. On Friday, Britain’s minimum wage will increase to 7.20 pounds ($10.36) an hour for workers age 25 and older, rising each year until it is expected to be above 9 pounds by 2020. California has agreed to set a $15 minimum wage by 2022. New York Governor Andrew Cuomo wants to do the same in his state.

  At least 25 U.S. cities have raised their minimum wage since 2014. Germany did so last year, and more increases are planned. Japanese Prime Minister Shinzo Abe hascalled for a 3 percent increase in the minimum wage each year.

  It’s hard to quarrel with the goal of a “higher wage, lower welfare, lower tax” society, as the U.K.’s government puts it. But the minimum wage is a two-edged instrument, because it raises the cost of hiring unskilled labor. Any increase, therefore, runs the risk of raising unemployment — and the bigger the increase, the bigger the risk. In addition, governments aren’t being honest about who bears the costs. At least some of the increase in employers’ costs will be passed along as higher prices to consumers.

  It’s hard to say exactly what the effects of this minimum-wage activism will be. The economic literature on the subject is voluminous — but inconclusive. A 2014 Congressional Budget Officestudy concluded that a $10.10 minimum wage in the U.S. would lift 900,000 out of poverty but result in the loss of 500,000 low-wage jobs. Other studies say the employment effects would be smaller. There’s little experience as yet with minimums as high as $15.

  Another problem, especially with national minimums, is that labor-market conditions vary a lot from place to place. Britain’s minimum applies equally to London, where the wage floor by 2020 will be 47 percent of local median income, and Sheffield, where it will be 71 percent. The one-size-fits-all approach is going to cause problems for Germany as it tries to absorb an enormous influx of unskilled immigrants.

  If governments overdo it and push the minimum too high, correcting the error might not be easy. Lowering the minimum will arouse political resistance. The California proposal includes “off ramps” that would allow the government to pause the annual increases, but it couldn’t lower the floor — and current rates of inflation would take a long while to do that without assistance.

  A safer and more honest way to support the wages of the low-paid is with a subsidy, using programs such as the U.S.’s earned income tax credit. Rather than reducing the demand for unskilled labor, a subsidy increases it. The drawback is political rather than economic — the cost to taxpayers is explicit. This approach, therefore, calls for brave leadership, which is not always in supply.

  The best way to raise low wages is to raise productivity by helping workers to acquire skills and by ensuring that new entrants to the workforce are well educated. Reform along these lines requires not just political courage but also patience, because the benefits might not be apparent for years.

  In the short term, raising the minimum wage — modestly, and with sufficient flexibility to allow for local market conditions — might do more good than harm. Relieving poverty in work deserves to be a high priority. But smarter ways of doing it shouldn’t be sidelined, and caution should be the watchword.

  

  

  

  

  

• "Maced Girl" Who Punched Trump Supporter May Be Charged By Police

  One of the truly remarkable things about Donald Trump’s run for the White House is the extent to which he has proven to be immune to criticism. 

  In many ways, the GOP frontrunner is a living, breathing negative ad for himself. Whether you hate him or you love him, you hold your breath when he opens his mouth because you understand there’s a decent chance something absolutely off the wall is about to come spilling out and you’re never really sure whether this will be “the one” – the Trumpism that finally pushes too far beyond the sensibilities of even the most ardent supporters. 

  Incredibly, Trump still hasn’t met his Waterloo. He’s called Mexicans drug dealing rapists. He suggested that John McCain is a loser for getting himself captured in ‘Nam. He’s theoretically banned the world’s fastest growing religion from North America. He’s promised to tax Chinese imports at 40%. He’s implied he’ll force Mexico to built a giant cage around itself to keep its people from escaping. And now he’s suggested that if abortion were illegal, he’d need to figure out the best way to punish women who break the law. 

  But here’s the thing: it works.

  Trump is onto something. Apparently, America’s blood is boiling and “The Donald” has tapped right into a vein.

  Now, the downtrodden masses – i.e. an electorate that’s sick and tired of the entrenched political aristocracy inside the Beltway and utterly fed up with being told to “eat cake” by the legions of modern day Marie Antoinettes that flit around Capitol Hill and Mahogany Row with their thumbs glued to Blackberry scroll balls that went extinct on Main Street a half decade ago – are mainlining the Trump brand of political heroine. Millions of Americans are nationalists without even knowing it. They’re speaking out against EM mercantilism without the slightest conception of what that means. And most importantly, they’re prepared to bet two-and-a-half centuries of history on a campaign platform built on an appeal to one man’s ad hoc version of Realpolitik.

  Would a Trump presidency usher in a new era of American prosperity? Almost certainly not. But note we said “almost.” A Clinton presidency will definitely not change anything. And neither would a Cruz presidency or a Kasich administration. In short, Americans know two things for sure at this point: 1) both Trump and Bernie Sanders would bring real (as opposed to Obama-brand) “change” to America; 2) Trump can win his party’s nomination, while Bernie can’t.

  The takeaway: if you want real change, you vote Trump.

  In short, by simply saying what a whole lot of people are thinking anyway, Trump has instilled his campaign with a degree of authenticity that’s impossible for other candidates to emulate and that makes him virtually unstoppable save a misstep or two (or three) when someone like Chris Matthews presses him on specifics.

  What the billionaire’s detractors have failed to understand is that the only way to beat Trump is essentially to join him. That is, you have to show his support base that the establishment is prepared to address their concerns.

  Simply insulting his intelligence and/or making a scene at his rallies will not only not work (there’s a fun double negative), it will invariably backfire, which brings us full circle to what we said at the outset: Trump. Is. Teflon.

  Need proof? Take the 15-year-old girl who quite a few people probably thought was set to become the pepper-sprayed face of the “peaceful” Trump protester movement. What was initially billed as an indiscriminate attack on an underage girl who, according to some reports, was being “groped” taharrush gamea-style by a gang of roudy neo-Trump-Nazis, quickly morphed into a far different story wherein a belligerent teenager, unable to tolerate what she perceived as an afront to American democracy, punches an old man in the face and then is pepper sprayed. 

  Now, authorities have recommended that someone file a disorderly conduct charge against the girl who insists that she “felt pressure on her breasts.”

  “Clearly her punch was illegal,” police chief David Moore told reporters.

  So once again, attempts to derail Trump have backfired in dramatic fashion. No longer is the headline “15-Year-Old Girl Pepper Sprayed By Trump Fanatics,” it is now “Police Recommend Charge Against Girl At Trump Rally.”  From the AP:

  Investigators said Thursday that they’re recommending a disorderly conduct charge be filed against a 15-year-old girl who was pepper-sprayed after she punched a man at a rally for Republican presidential front-runner Donald Trump in Wisconsin.

   

  Video of the altercation shows a crowd of people in a parking lot outside the rally in Janesville on Tuesday. The girl can be seen holding an anti-Trump sign and arguing with a 59-year-old man.

   

  The video shows the man turning away with his hands in the air. Seconds later, the girl punches him in the face. Another man wearing a red Trump hat then pepper-sprayed the girl and disappeared into the crowd.

   

  The girl told police the first man groped her breast. But Chief David Moore told reporters during a news conference Thursday that additional video doesn’t show any evidence the man groped her and that 12 out of 13 witnesses said they didn’t see him do anything.

   

  Moore said the man who was punched didn’t want to press assault charges against the girl, but investigators have recommended juvenile authorities charge her with disorderly conduct for what he called “an act of violence.” He said time passed between the alleged groping and the punching and the man and the girl were several feet apart when she threw the punch.

   

  The chief said investigators won’t pursue charges of filing a false police report against the girl. He said she genuinely believes she felt pressure on her breast. However, he said, quarters were tight and people were brushing up against one another throughout the crowd.

   

  “Clearly her punch was illegal,” he said.

  

  

  

  

  

• The Path To The Final Crisis

  Submitted by Pater Tenebrarum via Acting-Man.com,

  Reader Questions on Negative Interest Rates

  Our reader L from Mumbai has mailed us a number of questions about the negative interest rate regime and its possible consequences. Since these questions are probably of general interest, we have decided to reply to them in this post.

   

  

  The NIRP club – negative central bank deposit rates – click to enlarge.

   

   

  Before we get to the questions, a few general remarks: negative interest rates could not exist in an unhampered free market. They are an entirely artificial result of central bank intervention. The so-called natural interest rate is actually a non-monetary phenomenon – it simply reflects time preferences. Time preferences are an inviolable category of human action and are always positive.

  Market interest rates consist of the natural interest rate plus two additional components: a price (or inflation) premium that reflects the expected decline in money’s purchasing power, and a risk premium or entrepreneurial profit premium that reflects the perceptions of lenders of a borrower’s creditworthiness and generates an entrepreneurial profit for those engaged in lending.

  One often reads that interest is the “price” of money, but that is actually not quite correct. It is really a price ratio, the difference between the valuation of present against that of future goods. An apple one can obtain today will always be worth more than a similar apple one can obtain at some point in the future. If time preferences were to decline to zero, people would stop consuming altogether. All efforts would be directed toward providing for the future, but they would never see that future, because they would starve to death before it arrives.

  In theory, time preferences can rise almost to infinity: for instance, if an asteroid were to hit Earth in two week’s time and we knew for sure that it would destroy the planet, it would no longer make sense to provide for the future. Saving, investment and production would stop, and everybody would confine himself to consumption. But the opposite can never happen, since we cannot just stop consuming. As long as time passes and there is a “sooner” and a “later”, there simply cannot be zero or negative interest.

   

  

  A far more detailed explanation of the topics summarized in the introductory remarks above can be read in Human Action by Ludwig von Mises.

   

  Fiduciary Media vs. Covered Money Substitutes

  Now let us look at L’s questions. He writes:

  I am interested in knowing more about negative interest rates. I feel at some stage it might lead to people pulling out their cash out of the bank. I am trying to figure out what happens when they do it en masse (Let us forget how they are going to store it for the moment).

   

  Can it bring a bank down? Since banks seem to have a lot of deposits, no loans to make, it ends up as excess reserves, on which they have to pay negative interest rate to the CB (in Europe now) and thus they do not want it. In fact RBS I read somewhere refused a big deposit from an Institutional Investor. In such a case I am not able to understand how pulling deposits out of a bank can bring a bank down. Does it mean even if the bank has excess reserves a bank run can bring it down?

  In a fractionally reserved system, any withdrawals from bank deposits will in theory create a “reverse multiplier effect”. Hypothetically speaking, if a banking system were to operate under a 10% minimum reserve requirement and was “fully loaned up”, having created $90 in additional money for every $10 on deposit, it would be forced to call in loans if people started withdrawing money from their deposits.

  The banks in our example can only be “fully loaned up” under the assumption that all newly created deposit money was kept within the banking system, that all banks extended loans to the full capacity allowed by the reserve requirement, and that any imbalances between banks were canceled out via interbank lending of reserves. In that case the credit multiplier is simply given by the formula d/r (d=deposits, r=reserve ratio).

  In reality, reserve requirements haven’t played a role in the banking systems of developed economies for a long time, in the sense that have not represented an obstacle to credit expansion. As a result, the vast majority of deposit money extant prior to the 2008 financial crisis consisted of fiduciary media, i.e., uncovered money substitutes.

  People had numbers in their accounts, but there was almost no standard money held in reserve covering these numbers. This has changed dramatically since 2008 as a result of “QE”. While the percentage of covered money substitutes in the US banking system was a mere 0.35% on the eve of the 2008 crisis, it stood at 23.67% at the end of February 2016. The true money supply has expanded enormously, but the percentage that consists of fiduciary media is far smaller than previously:

   

  

  The percentage of covered money substitutes in the US banking system (calculated as the ratio between total bank reserves and TMS-2 excl. currency). Note that in the annotation it should actually say “the banks had created almost $100 per 35 cents on deposit” – one must deduct the 35 cents…  🙂 – click to enlarge.

   

  In other words, nowadays the large percentage of uncovered money substitutes is no longer such a big problem. Bank reserves can always be transformed into cash currency when customers are withdrawing money from demand deposits. Still, deposits are an important funding source for many banks, so we don’t think they would be very happy if people started emptying their deposits en masse.

  More importantly though, while banks haven’t been constrained by reserve requirements for a long time (e.g. in the euro area official reserve requirements ystand at a mere 1%, while in the US reserve requirements have been circumvented through sweeps since the mid 1990s), they are definitely constrained by new regulations regarding capital requirements and leverage ratios (details on the Basel III regulations and the EU’s new capital rules can be easily found via Google).

  So a bank run could certainly still not be shrugged off as a non-event. After all,  bank reserves deposited with the central bank represent the cash assets of commercial banks. It obviously makes a difference whether or not they have those. It has to be assumed though that central banks will do whatever it takes to mitigate such an event, just as they have done in 2008.

  Lastly, negative interest rates on bank reserves do represent a problem for banks. In Germany they are referred to as “penalty rates”, since they are an additional cost for commercial banks that they cannot really escape (since QE continues to create more and more reserves, whether they like it or not). The low interest rate environment has also had a sizable negative impact on their net interest margins.

  Why central bankers ever thought that this was a good idea is completely beyond us. But then again, the last time a central banker said or did anything that made sense was probably in the 1950s.

   

  Hoarding of Cash Currency

  There is not enough currency to go around, so what is likely to happen, do CBs start printing them? What else could they do? Also what could be its effect as they may not be able to print it as fast as people want to pull it out and that could cause serious panic and panic can bring the system down.

  We don’t believe this would be a big problem. Yes, a lot of currency would indeed have to be printed, but there exists a fairly large stock of vault cash that could be used to satisfy those at the head of the queues, so there would presumably be enough time to print sufficient amounts of new currency.

  In extremis, the authorities will per experience impose restrictions on withdrawals or declare what is euphemistically called a “bank holiday”, i.e, they’ll simply order the banks to close. This has recently happened in Cyprus and Greece, and before that in Argentina. It is usually the precursor to the outright confiscation of bank deposits. This is nowadays called a “haircut”, as if one were just visiting a hair-stylist (formerly known as a barber).

   

  

  Vault cash held by US banks – currently approx. $72 billion. Note the big spike in vault cash after the WTC attack – this shows that large amounts of additional cash can indeed be mobilized quite quickly – click to enlarge.

   

  Stemming the Tide

  When $500 billion was pulled out from money market funds in 2008, the Fed woke up to the fact that there was something amiss and did a lot of things. What are the possible measures they are likely to take now? What happens if it does not stem the tide?

  First of all,  we would note here that ever since negative interest rates on bank reserves have been imposed, there has been a concerted media campaign with assorted statist bien pensants  arguing in favor of a cash ban under a multitude of pretexts (apart from breathing air, criminals use cash, and we have to make central bank intervention more effective). These were the usual suspects, such as e.g. Mr. Summers and Mr. Rogoff in the US (representing the two main wings of establishment-approved statist economic thought, namely Keynesianism and Monetarism) and their counterparts in other countries.

  Consider that in spite of having to pay penalty rates on reserves, commercial banks have as a rule not passed negative rates on to their customers, precisely because they fear that this could lead to a run on deposits. Obviously, if our vaunted central planners continue to try to force people to increase their spending and consumption (putting the cart before the horse is their idea of creating “economic growth”), the idea of simply making cash withdrawals impossible must seem tempting. For obvious reasons, banks would also not be averse to this. And lastly, a cash ban would utterly destroy financial privacy, installing a system of total control.

  However, as we have previously discussed, extending negative interest rates beyond the realm of bank reserves would hasten the arrival of a profound crisis, as it would lead to widespread capital consumption. The complex latticework of the economy’s structure of production would become increasingly fragile as entrepreneurs would withdraw their capital to consume it or to render it inert (by e.g. buying gold) in order to wait for better times.

  Apart from this campaign to either ban cash or make its use beyond certain amounts illegal (cash payments exceeding certain thresholds have already been banned in several European countries), we can be fairly certain that there are no limits to the creativity of central bankers when it comes to fighting a crisis of confidence. But there are other limits: whatever they decide to do will only work as long as confidence in state-issued fiat money itself doesn’t evaporate.

   

  Government Bonds vs. Cash

  How can government bonds be better investment than physical cash in such an environment? Cash becomes a interest earner in a deflationary environment. Thus why will not Institutional Investor not hold cash instead of buying bonds (Munich Re has started doing this in a small way)? Then what happens to the bond market?

  Assuming confidence in state-issued fiat money as such remains strong, it seems obvious that cash should be preferred over bonds sporting negative yields. So why are these bonds still in demand, given that they generate a guaranteed loss if held to maturity?

  For one thing there are speculative reasons – some buyers expect to sell them at still higher prices and even more deeply negative yields.  Apart from that though, there are a numerous other reasons why government bonds remain in demand.

  For instance, financial repression is imposed via various government regulations: the same capital and solvency rules that constrain the activities of banks in many ways these days also give them a strong incentive to hold government bonds, which have been assigned a risk-weighting of zero.

  Insurers are also subject to regulatory pressures with respect to capital, liquidity and the assets they may hold. Government bonds are also widely used as collateral in repo transactions so many financial institutions need to have an inventory of such bonds in order to be able to operate in these markets.

   

  

  As of February, approx. $7 trillion in government bonds were sporting negative yields-to-maturity – click to enlarge.

   

  Moreover, big investors may actually prefer to hold government bonds at a small loss rather than keeping cash on deposit with banks, because short term government bonds are considered less risky. Large deposits could come under threat if a bank becomes insolvent and its losses are too large to be absorbed by its shareholders and bondholders – especially under the new “bail-in” regime.

  Government bonds are usually highly liquid, and can be sold at any time if cash is needed.  Short term bills of highly rated government debtors are actually akin to secondary media of exchange, since they are widely accepted as collateral in financial transactions. Many may consider storing cash in a vault as problematic in terms of flexibility, as it cannot be deployed quickly. T-bills on the other hand can be sold at a mouse click.

   

  

  Germany’s 5 year government bond yield: minus 33 basis points – click to enlarge.

   

  What Munich Re. has done is of course under consideration by a number of other insurers and pension funds as well. After all, the more deeply government bond yields fall into negative territory, the more competitive the costs of storing and insuring large amounts of cash will become. However, as we know e.g. from Switzerland, the authorities are actively discouraging institutional investors from taking such steps, even though they would be perfectly legal (see “The War on Cash Migrates to Switzerland” for details on this).

  We actually don’t think the government bond market is under much of a threat from an increase in cash hoarding. What represents the biggest potential threat to the bond market would be a crisis of confidence focused on state-issued money itself – but that would be bad for cash as well. This is the kind of crisis our central planners are likely to eventually provoke, for the simple reason that they fail to take the very long term effects of their radical ad hoc policies into account.

  Naturally monetary bureaucrats believe such a thing is impossible, because they are convinced  they will be able to maintain confidence in fiat money by taking certain measures such as raising interest rates, draining liquidity from the system, and so forth. It sounds simple enough, but it ignores the economic and political pressures the authorities will probably face when the time to implement such measures comes.

  It also ignores the “potential energy” harbored by the enormous amounts of money that have been created already. A loss of confidence is not a linear event. Usually, confidence appears just fine until a certain unknowable threshold is crossed – and then it is lost in a flash.

   

  Conclusion

  Negative interest rate policy is inherently self-defeating, as are more traditional forms of monetary pumping. The aim is to rescue a system that has been brought to the verge of implosion after too much unsound debt and too much malinvested capital have accumulated, by creating even more unsound debt and provoking even more capital misallocation. This, in a word, is insane. While debt continues to grow, the economy’s ability to create the wealth that will be required to repay it is concurrently undermined.

  We cannot be sure what shape the next crisis will take, although it seems likely that it will be yet another “deflation scare”, mainly caused by falling asset prices. However, we do know what the last crisis of the current system will look like. It will entail a crumbling of the public’s faith in fiat money and the institutions that issue and administer it.

  Ironically, repeated deflation scares are actually hastening the arrival of this long-term outcome, as they provoke ever more extreme policy responses, all of which tend to end up boosting the amount of outstanding money and credit.

   

  

  US money supply TMS-2: economic downturns and “deflation scares” continually provoke money printing on an ever more breathtaking scale – click to enlarge.

   

  

  

  

  

  

• State Department Suspends Probe Of "Top Secret" Clinton Emails

  While the media goes into a frenzy every time someone is punched or maced at a Trump rally, or frankly any time Trump says anything out of place (and lately he has has had more than his fair share of supply), what according to many is the real scandal, is quietly being doused with the media obligingly looking the other way.

  Moments ago, AP reported that the State Department has suspended its internal review into whether former Secretary of State Hillary Clinton or her top aides mishandled emails containing information now deemed “top secret.”

  Spokeswoman Elizabeth Trudeau said Friday the department had paused the review to avoid complicating or impeding an ongoing FBI investigation into Clinton’s use of a private server while she was America’s top diplomat. She said the review would remain “on hold” pending completion of the FBI probe. The review could result in counseling, warnings or other action if findings show information was mishandled.

  It will most likely result in absolutely nothing, and with the DOJ stonewalling the FBI probe which supposedly has 147 agents on the case, “nothing” is also what the ultimate outcome of any and all probes involving the future president of the US will be, something the broader betting market has also figured out.

  

  An FBI spokesman did not immediately respond to request for comment in a phone call from the AP.

  

  

  

  

  

• Weekend Reading: Bulls vs Bears – Who Will Win?

  Submitted by Lance Roberts via RealInvestmentAdvice.com,

  As March marked the beginning of spring, the bulls were stampeded by a “perfect storm” of Central Bank actions. From the ECB dropping rates into negative territory and launching a bigger “quantitative easing” program, to the Federal Reserve backing off its plans to hike interest rates this year, the “accommodative support” gave the bulls the clearance they needed to pile back into equities.

  With a short-term improvement in the technical underpinnings of the markets and an improvement in overall sentiment, the short-covering fueled rally pushed the S&P 500 back into positive territory for the year. That is where the bulls find their victory. 

  Yet, despite all of the “whooping and hollering” by the bulls, there has actually been little progress made. Yes, the rally from the lows has been very inspiring, but it is the same rally as seen from the previous two lows.

  

  With volume declining on the rally as short-covering fades, the thrust of Central Bank actions now behind us, the focus will once again turn to the economic and fundamental data. From that standpoint, the “bears” remain firm in the commitments. With profit margins and earnings on the decline, economic data weak and interest rates hovering near lows, there is little support for an ongoing bull rally. 

  

  But then again, the current rally has defied expected logic up to this point. Will it continue, or will it die a quick death? With traditional summer weakness fast approaching, that is the question that must be answered and the subject of this weekend’s reading. It’s the bulls versus the bears – who will win?

  ---

  CENTRAL BANKING

  • The Whole Idea Of Forward Guidance Is Confusing by Caroline Baum via MarketWatch
  • What Rate Tools Does The Fed Have Left by Ben Bernanke via Brookings Institution
  • Shampoo Policy – Rinse & Repeat by Jeff Snider via Contra Corner
  • Negative Rates Put Globe On Edge by Satyajit Das via FT
  • Yellen Monetary Policy Driven By Markets by Rich Miller via Bloomberg
  • Yellen Says What Markets Want To Hear by Mohamed El-Erian via Bloomberg

  ---

  MARKETS & EARNINGS

  • Stocks Post Best Performance Since October by Anora Mahmudova via MarketWatch
  • The Two Stocks To Take The Dow Above 18000 by Alex Rosenberg via CNBC
  • 2016’s Case Of Jekyll & Hyde via MarketWatch
  • The Market Doesn’t Believe Yellen by Chris Matthews via Fortune
  • Worse Quarter Since The Financial Crisis by Lauren Laughlin via Fortune
  • Death Cross Says Stay Away From Stocks by Brett Arends via MarketWatch
  • The Easiest Way For The Bull Case To Improve by Chris Ciovacco via Ciovacco Capital
  • Weak Earnings May Be Markets Failure by Adam Shell via USA Today
  • Get Ready For A Rough Earnings Season by Dominic Chu via CNBC
  • Whats Missing From The Markets Advance by Kevin Marder via MarketWatch
  • A Hidden Risk Will Sabotage Stocks by Mark Hulbert via MarketWatch

  ---

  ECONOMY & OIL 

  • U.S. Economy Has Stalled…Again by Anthony Mirhaydari via Fiscal Times
  • Impatient Banks: Real Red Flag For Oil Patch by Nick Cunningham via OilPrice.com
  • A Funny Thing Happened On The Way To Recession by A Gary Shilling via Bloomberg
  • Oil Surge Driven By Biggest Short Squeeze Ever by Tyler Durden via Zero Hedge
  • The Big Bust In Oil Fields by Chico Harlan via Washington Post
  • MLP “Reversions” Have Begun by Laura Saunders via WSJ

  ---

  OTHER GOOD READS

  • Systemic Risk: You’ll Know It When You See It by Ron Rimkus via CFA Institute
  • Watch The Dollar For Clues by Joe Calhoun via Alhambra Partners
  • A Case For Cash In 2016 by Doug Kass via Real Clear Markets
  • Millennials & Low Income Buyers Driving Economy by Eric Morath via WSJ
  • Repercussions Of Booms & Busts by Dan Crawford via Angry Bear
  • Market Trends & Borderline Data by Bill Hester via Hussman Funds
  • Decline Of The Middle Class by Noah Smith via Bloomberg
  • 1700 On The S&P 500 Is Too Bullish by Keith McCullough via HedgeEye
  • Indicator Suggests Bear Market Underway by Jesse Felder via The Felder Report
  • Stocks Entering Weakest Quarter Of Presidential Cycle via Dana Lyons via Tumblr

  ---

  “There is nothing so disastrous as a rational investment policy in an irrational world” – John Maynard Keynes

  

  

  

  

  

• Stocks Spike On "Good Jobs" As Crude Crashes

  "Off the lows"…

   

  So this just happened…

  

   

  But it doesn't really matter when all it takes is a phone call…

  

   

  Post-Payrolls, stocks faded until the US open, and then took off…

  

   

  Thanks to Dennis Gartman, The Dow surged 250 points off the lows…

  

   

  On the day, good jobs was bad news but good ISM was good news…

  

   

  On the week, Small Caps soared but Trannies were unable to get out green…

  

   

  Year-to-date, Russell 2000 and Nasdaq remain the red as Trannies outperform…

  

   

  VIX was battered almost every day…trading to 13.00!

  

   

  With VIX in control, stocks decoupled from bonds and FX carry….

  

   

  And Stocks totally decoupled from oil today at the US open…

  

   

  Despite the equity strength, bonds also surged with yields down 6bps (30Y) to 15bps (5Y) on the week…

  

   

  The USD Index tumbled most in 2 months to its lowest close since Oct 2015…(driven by a surge in JPY)

  

   

  The USD Index suffered a "Death Cross" this week – will it be a false alarm like in October?

  

   

  Gold managed to close the in the green (best week in a month) as crude was clobbered…

  

   

  This was Crude's first losing week in 7 weeks – pushing crude to one-month lows…

  

   

  So on the week – Stocks Up, Bonds Up, Gold Up, Dollar Down, Oil Down…

  Charts: Bloomberg

  Bonus Chart: Reminder – You Are Here

  

  

  

  

  

• The American Voter Summarized In 1 Cartoon

  Presented with no comment…

   

  

  Source: The Burning Platform

  

  

  

  

  

• The Trade Wars Begin: China Retaliates To Steel Tariffs With Global Anti-Dumping Duties

  When looking back in history, December 23, 2015 may be the date the global trade wars officially began. On that day, as we reported at the time, the U.S. imposed a 256% tariff on Chinese steel imports.

  It did so perhaps with good reason: with its local end markets mothballed, China was desperate to dump as much excess capacity as possible offshore with shipments of steel, oil products and aluminum all reaching new highs according to trade data from the General Administration of Customs, and the result was a dramatic drop in US prices.

  

  On the other hand, with Chinese mills, smelters and refiners all producing far more than can be purchased domestically amid slowing domestic demand, as well as the government’s anti-pollution crackdown, China’s decision to ship the excess overseas was also understandable.

  As Bloomberg wrote at the time, “the flood of Chinese supplies is roiling manufacturers around the world and exacerbating trade frictions. The steel market is being overwhelmed with metal from China’s government-owned and state-supported producers, a collection of industry associations have said. The nine groups, including Eurofer and the American Iron and Steel Institute, said there is almost 700 million tons of excess capacity around the world, with the Asian nation contributing as much as 425 million tons.”

  2016 was expected to get even worse: Colin Hamilton, head of commodities research, said the the price of hot-rolled coil, used in everything from fridges to freight containers, may decline about 13 percent next year. China’s steel exports, which have ballooned to more than 100 million metric tons this year, may stay at those levels for the rest of the decade as infrastructure and construction demand continues to falter.

  To be sure, it was India who launched the first shot, when it announced that it plans to step up its protection for debt-laden domestic steelmakers by imposing a minimum price on steel imports among other measures, Steel Secretary Aruna Sundararajan said in December. The import curbs are necessary to ensure a “level-playing field” for Indian companies after restrictions imposed in September failed to stop a decline in prices, she said.

  And then it was the US’ turn, when shortly after India unleashed protectionist measures, the US Department Of Commerce announced that  corrosion-resistant steel imports from China were sold at unfairly low prices and will be taxed at 256 percent. The move was clearly aimed at China: imports from India, South Korea and Italy would be taxed at lower rates, while imports from Taiwan and Italy’s Marcegaglia SpA would not face anti-dumping tariffs.

  We left it off by saying that “now that the US has fired the first trade war shot, it will be up to China to retaliate. It will do so either by further devaluing its currency or by reciprocating with its own protectionist measures against the US, or perhaps by accelerating the selling of US Treasurys. To be sure, it has several choices, clearly none of which are optimal from a game theory perspective, but now that the US has openly “defected” from the “prisoner’s dilemma” game, all bets are off.”

  To be sure, just a few weeks later China proceeded with another dramatic devaluation of the Yuan, which may or may not have been accompanied by an aggressive selling of Treasury.

  However the missing link was China unveiling its own protectionist response: a necessary and sufficient condition for fully symmetric trade wars.

  It did so earlier today when, accused of flooding world markets with cheap steel, it imposed its own anti-dumping duties as high as 46.3% on electric steel products imported from Japan, South Korea and the European Union, the Ministry of Commerce said on Friday.

  According to Reuters, the overseas suppliers include JFE Steel Corp, Nippon Steel and Sumitomo Metal Corp and POSCO, the ministry said in a notice posted on its website (www.mofcom.gov.cn). The ministry did not identify any EU supplier.

  What is curious is that China, by far the world’s biggest steel producer, imports relatively small quantities of high-end steel products, including electric steel used in power transformers and generators. In other words the move was mostly symbolic, and a confirmation that China now believes it is being treated unfairly enough to where it can demand in-kind protectionism which will only escalate as the end demand to the global supply glut is simply not there.

  The tariffs come at a time when the UK is up in arms over the decision by Tata Steel, the owner of much of UK’s steel industry, to sell its local plants in the process liquidating about 15,000 jobs. Tata blamed a flood of cheap Chinese supplies which means now that China has re-escalaed, thousands of newly laid off ironworkers in the UK (and elsewhere) will have a new global target which to blame for their troubles.

  We doubt it will end there, because one trade wars begin, the logical consequences of currency wars, they rarely end amicably or on short notice, and on numerous occasions devolve into outright, conventional wars.

  

  

  

  

  

  

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