- Reality Check: No Matter Who Wins The White House, The New Boss Will Be The Same As The Old Boss
Submitted by John Whitehead via The Rutherford Institute,
“The main problem in any democracy is that crowd-pleasers are generally brainless swine who can go out on a stage & whup their supporters into an orgiastic frenzy—then go back to the office & sell every one of the poor bastards down the tube for a nickel apiece.” ? Hunter S. Thompson
Politics today is not about Republicans and Democrats.
Nor is it about healthcare, abortion, higher taxes, free college tuition, or any of the other buzzwords that have become campaign slogans for individuals who have mastered the art of telling Americans exactly what they want to hear.
Politics today is about one thing and one thing only: maintaining the status quo between the Controllers (the politicians, the bureaucrats, and the corporate elite) and the Controlled (the taxpayers).
Hillary will not save the nation. Nor will Bernie, Trump, Rubio, or Cruz.
The only ones who can save the nation are “we the people,” and yet the American people remain eager to be persuaded that a new president in the White House can solve the problems that plague us.
No matter who wins this next presidential election, you can rest assured that the new boss will be the same as the old boss, and we—the permanent underclass in America—will continue to be forced to march in lockstep with the police state in all matters, public and private.
Indeed, as I point out in my book Battlefield America: The War on the American People, it really doesn’t matter what you call them—the 1%, the elite, the controllers, the masterminds, the shadow government, the police state, the surveillance state, the military industrial complex—so long as you understand that no matter which party occupies the White House in 2017, the unelected bureaucracy that actually calls the shots will continue to do so.
Consider the following a much-needed reality check, an antidote if you will, against an overdose of overhyped campaign announcements, lofty electoral promises and meaningless patriotic sentiments that land us right back in the same prison cell.
FACT: According to a scientific study by Princeton researchers, the United States of America is not the democracy that it purports to be, but rather an oligarchy, in which “economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy.”
FACT: Despite the fact that the number of violent crimes in the country is down substantially, the lowest rate in forty years, the number of Americans being jailed for nonviolent crimes such as driving with a suspended license is skyrocketing.
FACT: Thanks to an overabundance of 4,500-plus federal crimes and 400,000-plus rules and regulations, it is estimated that the average American actually commits three felonies a day without knowing it. In fact, according to law professor John Baker, “There is no one in the United States over the age of 18 who cannot be indicted for some federal crime. That is not an exaggeration.”
FACT: Despite the fact that we have 46 million Americans living at or below the poverty line, 16 million children living in households without adequate access to food, and at least 900,000 veterans relying on food stamps, enormous sums of taxpayer money continue to be doled out for presidential vacations ($16 million for trips to Africa and Hawaii), overtime fraud at the Department of Homeland Security (nearly $9 million in improper overtime claims, and that’s just in six of the DHS’ many offices)HurricaHur, and Hollywood movie productions ($10 million in taxpayer money was spent by the Army National Guard on Superman movie tie-ins aimed at increasing awareness about the National Guard).
FACT: Since 2001 Americans have spent $10.5 million every hour for numerous foreign military occupations, including in Iraq and Afghanistan. There’s also the $2.2 million spent every hour on maintaining the United States’ nuclear stockpile, and the $35,000 spent every hour to produce and maintain our collection of Tomahawk missiles. And then there’s the money the government exports to other countries to support their arsenals, at the cost of $1.61 million every hour for the American taxpayers.
FACT: It is estimated that 2.7 million children in the United States have at least one parent in prison, whether it be a local jail or a state or federal penitentiary, due to a wide range of factors ranging from overcriminalization and surprise raids at family homes to roadside traffic stops.
FACT: According to a Gallup poll, Americans place greater faith in the military and the police than in any of the three branches of government.
FACT: “Today, 17,000 local police forces are equipped with such military equipment as Blackhawk helicopters, machine guns, grenade launchers, battering rams, explosives, chemical sprays, body armor, night vision, rappelling gear and armored vehicles,” reports Paul Craig Roberts, former Assistant Secretary of the Treasury. “Some have tanks.”
FACT: At least 400 to 500 innocent people are killed by police officers every year. Indeed, Americans are now eight times more likely to die in a police confrontation than they are to be killed by a terrorist. Americans are 110 times more likely to die of foodborne illness than in a terrorist attack.
FACT: On an average day in America, over 100 Americans have their homes raided by SWAT teams. Most of those SWAT team raids are for a mere warrant service. There has been a notable buildup in recent years of heavily armed SWAT teams within non-security-related federal agencies such as the Department of Agriculture, the Railroad Retirement Board, the Tennessee Valley Authority, the Office of Personnel Management, the Consumer Product Safety Commission, the U.S. Fish and Wildlife Service, and the Education Department.
FACT: The FBI’s Next Generation Identification (NGI) facial recognition system, which is set to hold data on millions of Americans, will include a variety of biometric data, including palm prints, iris scans, and face recognition data. The NGI will be capable of uploading 55,000 images a day, and conducting tens of thousands of photo searches daily.
FACT: Comprising an $82 billion industry, at least 30,000 drones are expected to occupy U.S. airspace by 2020.
FACT: Everything we do will eventually be connected to the Internet. By 2030 it is estimated there will be 100 trillion sensor devices connecting human electronic devices (cell phones, laptops, etc.) to the Internet. Much, if not all, of our electronic devices will be connected to Google, which openly works with government intelligence agencies. Virtually everything we do now—no matter how innocent—is being collected by the spying American police state.
FACT: Americans know virtually nothing about their history or how their government works. In fact, according to a study by the National Constitution Center, 41 percent of Americans “are not aware that there are three branches of government, and 62 percent couldn’t name them; 33 percent couldn’t even name one.”
FACT: Only six out of every one hundred Americans know that they actually have a constitutional right to hold the government accountable for wrongdoing, as guaranteed by the right to petition clause of the First Amendment.
Perhaps the most troubling fact of all is this: we have handed over control of our government and our lives to faceless bureaucrats who view us as little more than cattle to be bred, branded, butchered and sold for profit.
If there is to be any hope of restoring our freedoms and reclaiming control over our government, it will rest not with the politicians but with the people themselves.
When all is said and done, each American will have to decide for themselves whether they prefer dangerous freedom to peaceful slavery. One thing is for sure: the reassurance ritual of voting is not going to advance freedom one iota.
- Peddling Non-Fiction
Some folks were peddling fiction… for everyone else, there's this reality!
No child (or student, or poor person, or grandchild, or debtholder, or healthy person, or retiree, or African American, or family, or homeowner, or renter) left behind untouched…
Now that is a legacy.
- Eric Hunsader Explains To CNBC That "Markets Are Always Rigged" And What He May Spend His $750,000 Prize On
Once upon a time it was anathema the publicly proclaim two things: i) that central banks manipulate and intervene in the markets and that ii) the market is rigged. Ever since this website was launched 7 years ago and made the proof of these two claims its mission, it was branded as a collection of “tinfoil hat conspiracy theorists” by either the most incompetent, most corrupt or most clueless cores of what passes for financial media and capital markets participants (with either real or virtual money).
More importantly, what has also become apparent over these same 7 years, is that we were right: it is now no longer even a debate if HFTs rig markets or if central banks intervene directly in stocks, bond or FX – it is broadly accepted and even desired: just imagine the dreadful world in which there is fair price discovery and where traders actually have to take risk. Ghastly.
To be sure, those same well-dressed if hollow talking heads and click generators who claimed precisely the opposite, fell back to the only defense they had: “well, maybe the Fed intervenes, and maybe the markets are rigged, but everyone knows that and after all, what’s the big deal – they have been manipulated and rigged since the beginning.”
It is usually at that point where one laughs and moves on to important topics.
Unfortunately, Nanex’ Eric Hunsader – who as noted earlier won a $750,000 whistleblower award for demonstrating precisely how the NYSE had rigged the market in 2010 – was unable to “move on” because he had a little under 5 minutes to kill this afternoon on CNBC.
Instead he had to endure exchanges such as the following:
Q. What do you think this says about the way markets currently function? Do you think such issues have now been fixed? Do you think the playing field is more “fair now”? Do you still think the markets are rigged?
A. Well yeah.
* * *
Q. Just looking at the history of markets, aren’t they always rigged to some degree?
A. Yes, they are always rigged. Does that mean that if someone gets mugged in New York City we don’t have to care about it?
* * *
Q. Should long-term investors care about milliseconds.
A. Yes, they should.
* * *
Frankly, we were impressed by Hunsader’s stoic patience with this line of “questioning” because had we been presented with the logic that grudgingly admits the market is rigged and enriching a group of parasitic criminals who break the law billions of times every year, and who have made so much money through their crimes they have purchased the regulators, is really ok because it only affects a penny here and there – a few hundred million every hour a day mind you – it is not really a crime even if it confirm the entire “market” is built on a bedrock of lies and fraud and is thus susceptible to collapse at any given moment, we would have simply hung up the phone.
Actually judging by Hunsaders’ twitter comments, it only hit him hours later:
I believe I got Josh Brown to admit the markets are rigged on CNBC today (because they’ve always been) https://t.co/VufqKDbsIx
— Eric Scott Hunsader (@nanexllc) March 1, 2016
Easy to track this in electronic markets. But not the U.S. Stock market? Did you play a + or – role today? https://t.co/c9CyAKhCGH
— Eric Scott Hunsader (@nanexllc) March 2, 2016
OK, followers, is Josh right?
Is it OK to say “markets are always rigged, so what?”
How about a do over CNBC/Josh? https://t.co/LJgI3wnjPd— Eric Scott Hunsader (@nanexllc) March 2, 2016
* * *
The best exchange however was that with Bloomberg blogger Barry Ritholtz’ partner Josh Brown, whose tongue in cheek question was if Hunsader needs advice on parking his $750,000 in pre-tax proceeds: “Have you considered the power of variable annuities and what they might be able to do for you?“
Hunsader’s in kind response: “I was thinking about GDX, throwing it all in there. What do you think?”
Drops mic.
- Terminal American Apathy – A Population Perfectly Ripened For Authoritarian Control
Authored by Brett Redmayne-Titley via ActivistPost.com,
“Tolerance and apathy are the last virtues of a dying society.” – Aristotle
When considering the cause of national apathy, Americans are evidently physiologically and socially similar to the junk food addled laboratory rat. Both tolerate repressive environments while confined against their will in a maze. In the natural desire to escape and find freedom, like the affected rat, Americans passively accept their confinement, acquiescing without struggle to a life of controlled stimulation and manipulation by all manner of drugs, tests, and mandated choice of direction. In a country objectively descending into chaos, why don’t Americans care? In recent studies at the University of California, Los Angeles (UCLA), these same rats evidence one reason for America’s irrational disinterest in self-preservation.
In ever-more-frequent and growing worldwide protests, resistance to the American empire’s imposed maze increases. Strangely, Americans offer no similar resistance at all. The social, economic, and political problems in the USA mirror those of an empire-afflicted world, yet in the “exceptional” nation most would rather chew off their tails than find the energy to extricate themselves from their maze. Examples of exceptionally paltry public resistance and protest abound. Rarely does an American protest amount to more than a few hundred temporarily outraged souls who then quickly return to their couches when told to do so by the well-armed militia of the government they came into the streets to change.
Why is America the isolated case study of this strange domestic malady that may best be summed-up as: clinical, terminal apathy?
The cause of this national apathy seems to be clear as shown in results from the UCLA study: it’s the food. Processed, adulterated, adjunct-laden, GMO-filled junk food; the preferred and almost unavoidable daily diet of Americans.
Dr. Aaron Blaisdell, a professor of psychology at the UCLA /College of Letters and Science and a member of UCLA’s Brain Research Institute, used rats to determine if a diet of poor quality processed foods resulted directly in obesity, or if the actual initial result was fatigue.
Dr. Blaisdell’s team placed thirty-two female rats on one of two diets for six months. The first received a standard rat’s diet, consisted of relatively unprocessed foods like ground corn and fish meal. As a substitute for a junk food diet the second Americanized group received highly processed food of lower quality that included substantially more sugar. As expected, “One diet led to obesity, the other didn’t,” said Blaisdell, as quoted in UCLA’s, “Newsroom.” However…
“Our data suggest that diet-induced obesity is a cause, rather than an effect, of laziness [apathy],” concluded Blaisdell. “…the [poor quality] diet causes obesity, which causes fatigue.”
The rats were given a task in which they were required to press a lever to receive a food or water reward. The rats on the junk food diet demonstrated impaired performance, taking substantially longer breaks than the lean rats before returning to the task. During repeated 30-minute sessions the overweight rats became more lazy due to their increasing obesity, taking breaks that were nearly twice as long as clean rats.
Dr. Blaisdell’s studying clearly indicates that junk food, while causing obesity, subsequently causes laziness and fatigue. Combined, the political cousin of these two symptoms is: apathy.
By all metrics, Americans consume the most quantity of the worst-quality food supply in the developed world, as such leading in obesity. In America this endemic apathy is causing Americans to have little interest in their own increasing domestic peril. In a nation of increasing authoritarian governmental control, American processed junk food may have now become the most effective US government weapon for controlling the reactions of its own population. Examples of irrational American apathy are evident every week.
Just this past weekend, on Feb 27, 2016, seventeen-year-old Abdi Mohamed, was shot three times by Salt Lake City police responding to a dispute. Not taking time to digest the situation and realize that Mohamed, who was not threatening them in any way, only held a piece of a broom stick, they opened fire within seconds of their arrival. The resulting protest of reportedly no more than one hundred outraged souls, were next met with the predicable draconian response of over one hundred cops being called to provide back-up; in force. This routine military response has one emphatic message for the protesting public, “Take your First Amendment home…and stay there.” Accepting this message, by Sunday all outrage was over. Considering this obvious example of America’s growing police disregard for life, this protest should have been in the thousands. What then?
In dozens of countries across the globe rebellion in the thousands and tens-of-thousands by outraged nationalist populations is growing despite brutal American-backed-and-funded crackdowns by their governments. This weekend alone saw huge protests which all amounted to a public rejection of the influence of the American empire on their politicians and therefore their happiness. Consider…
Just hours ago, in London, over 10,000 protested the US/NATO imposed risk to their lives of Trident submarine ICBMs. In Poland, Ukraine and South Korea equally large protests also took place against the American-controlled national policies imposed on them. In Iran and Ireland national and local elections took place peacefully, the results also showing that their citizens, too, were casting out the politicians who favor guns over food. In France, where all GMOs are still banned, thousands of French farmers have battled police due to their lives being destroyed by US-required French sanctions against these farmers exporting their crops to the once lucrative and huge Russian market. Not surprisingly, and for good reason, these protesters have had enough of the “benefits” of American empire and imposed democracy. As the military might of the empire kills scores of innocents around the globe daily, while the quality of life continues to diminish, resistance is not, for these citizens, futile. It is daily.
Why is this not the case in the American Homeland?
As for North America, Canada and Mexico have also recently produced huge protests, starting with the 2012 Montreal student protests where 100,000 angry students protested tuition fee increases. When Canada’s legislature attempted to quell the protest by passing emergency legislation allowing for new draconian anti-protest laws, this huge protest then grew exponentially to more than one million citizens. Anti- government protests in major Canadian cities have been large and frequent since. Subsequently, on November 4, 2015, the Liberal Party, led by now Prime Minister, Justin Trudeau, won 184 seats, turning-out the Conservative Party, led by incumbent, ultra-Zionist/ corporatist, former Prime Minister Stephen Harper.
In Mexico City protesters hit the one million mark, also in 2012, within minutes of the announcement of the most recent presidential election results that declared president-elect, Enrique Peña Nieto, the victor. Thanks to American-made Diebold electronic voting machines (yes, those Diebold voting machines), the results had been rigged. Mexicans knew it. They were mad as hell. They went to the streets.
In late 2014, forty-three very innocent college students were “disappeared” by Mexican government troops. That same government has been covering up the criminals involved ever since. But Mexican protests have been often, very large and unyielding to government’s demand that these anti-government protests end. The protesters will not go home.
However, back in the Homeland, where over 1300 Americans were killed by police firepower in 2015, many of whom were as completely innocent of any crime that justified deadly force, this weekend produced just one completely ineffective protest. When killer cops get off from prosecution scot-free, outrage generally amounts to, as seen in Salt Lake City, a mere hundred-or-so protesters. Even the anti-authoritarian spectacle of Ferguson, Missouri accomplished nothing except to showcase the futility of protest to the apathetic public watching on the TV. But it was not the fault of these sincere, passionate and legitimately outraged protesters who did put their freedom on the line at these small protests. The real problem in changing endemic domestic American abuses: enough people willing to rise to their feet and effect the true “power of the people!”
The most demonstrative recent example of the national terminal apathy of Americans was illustrated at the 2012 Democratic National Convention in Charlotte, North Carolina.
The government and the local police expected big trouble. Uncle Sam knew his people had good reason to take to the streets outside the convention. Four years of Pres. Obama’s broken promises, lobbyists, high unemployment, growing authoritarian state, endemic corruption in banks, business, government and sports gave many good reasons for American outrage to hit the streets of Charlotte en masse. Just months before, the dozens of Occupy camps in major cities nationwide, as the only cohesive national protest movement, had all been closed down in the space of two very violent and draconian days at the hands of nationwide police. So, when NSA, CIA, and Charlotte police authorities publicly stated their assumption of over 100,000 upset Americans showing up to protest, their estimate seemed well founded.
Taking no chances the federal government provided Charlotte $50 million, and added $50 million more, to defend Pres. Obama from “the will of the people.” As witnessed then, this funding produced a truly awe-inspiring showcase of America’s domestic authoritarian, anti-protest arsenal. The American government was ready to take on America’s collective best shot, no matter what, at resisting Obama’s new definition of democracy.
Anyone coming to Charlotte found that walking the streets was a laboratory maze in itself. The maze was not here metaphorical, consisting of literally several miles of contiguous sixteen-foot-high, black-painted metal, crowd-proof fencing along both sides of the entire pre-selected boulevards that would be used to keep the loonies on the path. Hordes of cops by the hundreds – thirty-five hundred in total – funneled protesters back into the maze at every intersection, all dressed in full riot gear and showing different shoulder badges with insignia from police departments as far away as Austin, Texas; Chicago, Illinois; New York City and Albuquerque, New Mexico. Each cop grimaced at this arrogant display of democracy before their face masks and batons. New police vehicles were everywhere; from ATVs and MRAPs, to refrigerated trucks and golf carts. Dozens of brand new “Police” mountain bikes and motocross bikes stood in rows of twenty, some under fat cops who sat watching on menacingly. No less than four helicopters were in the air at all times. Police cars – state, federal, and local – were evident by the hundreds. CIA had commandeered a local junior college, and US Army troops maintained defenses outside the city. Just in case. These were the front lines, ready for anything an understandably outraged public of 100,000 plus might dish out.
The cops need not have bothered.
The largest protest of the six-day event was a paltry 2000 people. Almost all other protests numbered no more than three hundred. The protesters were always outnumbered by the cops and the press. Considering Charlotte has over 150 million Americans within a five-hundred-mile drive, why such a paltry, ineffective, impotent turnout throughout the national six-day event?
Why?
We may have found a cure for most evils; but we have found no remedy for the worst of them all, the apathy of human beings. – Helen Keller
Dr. Blaisdell’s rats expose the fundamentals of this malady. The toxic combination of engineered food leading to endemic apathy is causing a sickness infecting Americans. Apathy. If not; despair.
America’s diet is factually the worst in the industrialized world. GMO ingredients are in eighty-five percent of all processed foods, not that this processed food is of acceptable quality. In December 2013, Professor Irina Ermakova, vice president of Russia’s National Association for Genetic Safety, called for a 10-year ban on GMO foods. Ermakova conducted GMO rat-feeding tests that showed alarming results, including extreme mortality rates. “It is necessary to ban GMO, to impose a moratorium for 10 years. It has been proved that not only in Russia, but also in many other countries in the world, GMO is dangerous,” he concluded. In 2015 Russia past new laws banning all American GMO products. China, France and the United Kingdom have similar bans.
Illustrating Dr. Blaisdell’s study, while choosing willful ignorance, American voters have defeated GMO labeling laws in state referendums in California and Oregon. This means Americans have actually voted not to know that food-borne poison is contained in what they choose to eat. Really. But taking no chances with future elections, however, this week a US Senate committee announced it is preparing legislation seeking to prohibit states from attempting to pass their own mandatory state labeling laws via the public’s constitutional right to vote in their own interests. Labeled the “Dark Act” this is a government reaction to the few successful state initiatives requiring GMO labeling, such as Vermont, New Hampshire and Connecticut.
As reported by William Engdahl, in a study on the toxicity of GMO plants associated with the plant killer, Roundup, Anthony Samsel and Stephanie Seneff, have found additional confirmations. Their review concluded, in regard to glyphosate, the main active component of Roundup herbicide, that, “Residues (of glyphosate) are found in the main foods of the Western diet.”
Samsel and Seneff continue…
[M]any of the health problems that appear to be associated with a Western diet could be … attributed to glyphosate. These include digestive issues, obesity [emphasis added], autism, Alzheimer’s disease, depression, Parkinson’s disease, liver diseases and cancer, among others. We believe that glyphosate may be the most significant environmental toxin.
Researcher, Tim Spector, a professor of genetic epidemiology at King’s College London, bolsters the connection between junk food and apathy. Enlisting the help of his son Tom, a genetics student at the University of Aberystwyth in Wales, for a little over a week Tom ate nothing but McDonald’s Big Macs, chicken nuggets, fries, and Coke. He reported that he, “felt good for three days, then slowly went downhill, became more lethargic, and by a week my friends thought I had gone a strange gray color. The last few days were a real struggle. I felt really unwell.” Cornell University testing revealed that Tom’s gut microbes were “devastated.” He had lost about 1,400 types (or 40%) of his bacteria species, which is a red flag indicator for health issues such as obesity and diabetes.
In one week.
In Australia, further study from researchers at Deakin University and the Australian National University has shown that junk food does indeed physiologically affect the brain’s growth and development leading to poor mental health. Their findings concluded that a part in the brain – the hippocampus – has been shown to be smaller in those who consume junk food. The hippocampus is responsible for learning, memory and mental health. Researchers used MRI scanning to measure the size of the hippocampi in Australian adults between the ages of 60 and 64. Diet and other factors which could affect the hippocampus were measured and taken into account as well.
The results, published in BMC Medicine, revealed that seniors who had consumed junk food are more likely to have smaller left hippocampi. On the other hand, seniors who consume more nutrient-rich foods have larger left hippocampi. Associate Professor Felice Jacka concluded,
Recent research has established that diet and nutrition are related to the risk for depression, anxiety and dementia; however, until now it was not clear how diet might exert an influence on mental health and cognition.
Thanks to American-inspired global franchising, people throughout the world are also getting fatter on the same brand-names of poison as their American counterparts. The World Health Organization refers to the epidemic as “globesity.” Yet nowhere is the trend as pronounced as it is in the United States, where per-capita calorie consumption of the worst food on the planet rose from 2,109 calories a day in 1970 to 2,568 calories in 2010, according to the Department of Agriculture. The average man today weighs thirty pounds more than in 1960, which equals seventy-eight million people considered obese in 2012.
Americans habitually eat a lot of junk food. School children and their developing minds are affected from birth. Economically bankrupt America has created families where both Mom and Dad, by necessity are working, with the kids in daycare and the home-cooked family meal a relic of the American Dream long gone. Corporate America preys on this with a replacement of cheap, fast and processed food offerings substituted as breakfast, lunch and/or dinner. Plus snacks. The ongoing degradation of the American mind it seems, applied to Dr. Blaisdell’s laboratory rats and the UK, Russian and Australian studies, shows that growing American mental apathy is directly proportional to their extraordinarily high consumption of a very poor-quality diet.
Result: a failing American mind. Combined with an ever-failing educational system, this produces a population perfectly ripened for ongoing authoritarian control.
There is, as shown globally this past weekend, a far worse result of American apathy.
It is only one indictment that Americans to have willfully allowed themselves and their nation to go to the gallows of history without a whimper. So be it. So, suffers the fool.
But in allowing an ever-corrosive America to brainwash their souls, these same apathetic Americans also allow their government to rob, via America’s historic military might, the livelihood and futures of the remaining external and innocent world.
When considered carefully, apathy – American apathy – is a serious crime. A crime against world humanity. The checks and balances by humans on Empire are permissively missing in empirical America. Americans are thus complicit in the further daily destruction of the remaining world they wish to know little about. When the dust of the oncoming rampage of history has settled over the folly of this American empire, guilt for its accumulated horrors will sit squarely on the American people’s heads, as much as the shoulders of their obviously treasonous politicians.
Indeed.
In tests the laboratory rat proves to be stronger of will than its Americanized human counterpart. Like the protesters in France, South Korea, Poland, Ukraine, Iran and Ireland just mere hours ago – humans who presumably do not live on an obligatory junk food diet – the rat of pure mind and conscience continues, despite its confines, to desire its freedom. And…he will bite.
Ultimately, under the bright laboratory lights, while seemingly trapped in a maze of oppression, the lab rat will do what Americans can do no longer. The rat, growing ever more desperate, will find a way to escape.
Summoning both will and courage, the rat draws the strength of will to rise-up on his hind legs, peering out over the top of the wall of the maze. His indomitable desire for freedom thus reveals the obvious: the way out.
Americans have no such remaining instinct.
- Art Berman Sees Oil Heading To $16, Will Lead To "Banking Bloodbath"
As Nate Hagens noted, "people think that the economy runs on money but it runs on energy," and as Art Berman details in the following interview how the current oil price collapse represents devaluation from over-investment in unconventional oil – and most commodities – because of cheap capital, and is simply a classic bubble. "Continued oil prices of $30 per barrel or less are the only reasonable path to higher growth and a balanced oil market," Berman contends, adding that he expects $16.50/bbl – "I think we're gonna get there." Berman concludes ominously, we're not going 'back' to anything – "Normal is over, and there is no new normal yet."
Full Art Berman interview below (via Macro Voices):
Breakdown:
18:25 – OPEC will cut production in 2016
19:05 – OPEC’s objective is to kill shale drillers’ source of funding
19:30 – The idea that Iraq/Iran will cooperate with Saudi Arabia is laughable
22:30 – EIA/IEA numbers are estimates at best, and almost certainly wrong
24:00 – He doesn’t believe recent EIA figures saying consumption has fallen dramatically
24:40 – US production must drop in a more meaningful way before OPEC can affect crude price
27:00 – Baker Hughes Rig Count is only focused on by traders because it’s available data, not because it matters
29:00 – Regardless of rig count, regardless of what people think, the number of producing wells continues to increase!
31:30 – US production not necessarily in direct competition with Iranian production
33:15 – As long as storage numbers are 80% of capacity or more, prices will remain “crushed”
35:45 – Forget about the nonsense that you read in the WSJ about “the true breakeven price” for shale operators – the true breakeven price for the best operators in the 3 main US shale plays is $60-70/bbl
38:40 – These shale operators “have no money”
39:00 – If investors abandon shale company stock, their total assets decline and their debt is in trouble
40:45 – Pretty obvious to anyone who knows that this situation is going to crash in a big way, it’s just a question of when
40:55 – Similar situation to “The Big Short”
44:40 – Very few options beyond increasing Cushing storage capacity, which takes time
46:30 – Whiting Petroleum clearly out of money, made a terrible acquisition, and is stopping further drilling because they have no other option. They could care less about the shareholders and are acting out of desperation.
48:05 – Midwestern gasoline refineries cutting back on crude purchases as they don’t see sufficient demand
50:00 – $16.50/bbl – “I think we’re gonna get there”
52:35 – Capital providers clearly pulling back from investing in US tight oil projects
53:00 – Future investments in the Oil Sands are dead
54:05 – In the first half of 2016 there will be a wave of shale operator bankruptcies and defaults on bond payments, a collapse in the high yield bond market which could spill over into other markets, as well as further distress in the banking industry – “will be a bloodbath”
55:00 – 2016 shale operator bankruptcies could reach 50%
57:00 – Iran will not get back to 1970’s levels as they would like to suggest. Production levels will be far less.
58:45 – Libya is the wild card. If they ever get their civil unrest under control, they could bring 1.5MMbbl/day to market and “that would be a disaster(for oil prices)”
1:04:15 – We’re not going back to anything – “Normal is over, and there is no new normal yet”
* * *
And finally Art Berman's Presentation:
- PBOC Weakens Yuan To One-Month Lows
Having yesterday expressed clearly that there was no desire to see the Yuan depreciate, The PBOC weakened the Yuan fix by 0.16% to one-month lows. This sent offshore Yuan notably lower back to post-RRR-Cut lows. For the 2nd day in a row, PBOC also decided to ‘skip’ open market operations (due to ample liquidity according to their statement).
The illusion of stability once again gives way…
And offshore Yuan drops – not helped by the Moodys ratings watch shift…
- As Fukushima Continues Leaking, 3 Former TEPCO Execs Charged With Negligence
Submitted by Claire Bernish via TheAntiMedia.org,
Three former executives from the Tokyo Electric Power Company (TEPCO) have been formally charged with negligence over the 2011 disaster at the company’s Fukushima Daiichi Nuclear Power Plant.
In accordance with a ruling from a citizen’s panel last year — and despite two previous refusals by Tokyo prosecutors to press charges — the three will be the first to go to court over the catastrophic meltdown, which followed a massive tsunami.
Those charged include former TEPCO chairman, Tsunehisa Katsumata, and former executive vice presidents, Sakae Muto and Ichiro Takekuro, according to Reuters. As their indictments did not stipulate arrest, none of the trio have been taken into custody.
Despite previous claims there was insufficient evidence necessary to prosecute, a unique component of the country’s legal system allowed citizens to make the final call. As Reuters explained:
“Japanese citizens’ panels, made up of residents selected by lottery, are a rarely-used but high-profile feature of Japan’s legal system introduced after World War Two to curb bureaucratic overreach. They were given the power to force prosecutions if they called for them a second time.”
That panel found the three executives did not exercise sufficient preventive means, despite being warned of the potential effects a tsunami could have on the Fukushima plant.
Japan’s national media outlet, NHK, said the three former executives planned to enter not-guilty pleas, as they could not have anticipated the size of the March 2011 tsunami, said the BBC.
None of the three charged were available for comment, reported Reuters.
Nearly five years ago, one of the strongest earthquakes ever recorded struck off the coast of Japan, spurring an enormous tsunami, which forced roughly 160,000 residents to flee. Three reactors at the Fukushima plant suffered meltdowns as the wall of water knocked power offline, triggering chain reactions.
Close to 16,000 people died and around 2,500 are still listed as missing from events of that day — though none have been directly attributed to the nuclear catastrophe. As radioactive contamination has created an uninhabitable zone surrounding the plant, and with leaks and general mismanagement of the Fukushima cleanup still continuously making headlines, the meltdown is considered nearly on par with Chernobyl in 1986.
- Bearish Oil Market API Report 3 1 2016 (Video)
By EconMatters
If the EIA report matches API tomorrow there should be some weakness in the Oil Markets on Wednesday. API reported large builds in Cushing, Oil Inventories and Distillates – a rather bearish report overall.
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- Caught On Tape: Tear Gas Deployed As Migrants Revolt In France
Last month, we profiled Calais, or “the jungle” as it’s known.
The infamous refugee camp has been the subject of quite a bit of media coverage of late and now, France is tearing it down. “With the orange-vested workers again protected by dense lines of riot police as they knocked down huts with hammers and power tools, the debris then lifted into skips by diggers, a dozen or so migrants and activists climbed on to the roofs of shacks next in line to be demolished,” The Guardian notes.
The destruction of Calais has led directly to a move by Belgium to reinstate border controls as the country fears that the demolition of the camp will lead directly to an increased flow of migrants across the border.
As RT notes, “police were called to the area after refugees, enraged by an earlier eviction, attacked trucks with stones, debris, and iron bars.” Ultimately, police used tear gas to subdue the crowd.”
And here’s what a migrant did to a makeshift shelter in the wake of the French government’s decision to destroy the camp:
- Moody's Downgrades China's Credit Outlook From Stable To Negative – Full Text
It is likely just a coincidence that just a month after we reported that China’s real consolidated debt/GDP was far greater than the 280% or so accepted conventionally, and was really up to 350% if not higher after the recent record loan issuance surge, moments ago Moody’s officially downgraded its outlook of China’s credit rating from stable to negative, citing three key risks:
- The ongoing and prospective weakening of fiscal metrics, as reflected in rising government debt and in large and rising contingent liabilities on the government balance sheet;
- A continuing fall in reserve buffers due to capital outflows, which highlight policy, currency and growth risks;
- Uncertainty about the authorities’ capacity to implement reforms – given the scale of reform challenges – to address imbalances in the economy.
While these were topical about a year ago for the financial media, and about 6 months ago for everyone else, we can’t help but notice that as expected Moody’s has said nothing at all about China’s biggest current risk factor – its collapsing labor market and surging unemployment. That’s ok, we are confident even the rating agencies will be up to speed with what we have been reporting since last November before the year is done.
Below is the full report:
Moody’s changes outlook on China’s Aa3 government bond rating to negative from stable; affirms Aa3 rating
Singapore, March 02, 2016 — Moody’s Investors Service has today changed the outlook to negative from stable on China’s government credit ratings, while affirming the Aa3 long-term senior unsecured debt, issuer ratings, and (P)Aa3 senior unsecured shelf rating.
The key drivers of the outlook revision are:
- The ongoing and prospective weakening of fiscal metrics, as reflected in rising government debt and in large and rising contingent liabilities on the government balance sheet.
- A continuing fall in reserve buffers due to capital outflows, which highlight policy, currency and growth risks.
- Uncertainty about the authorities’ capacity to implement reforms — given the scale of reform challenges — to address imbalances in the economy.
At the same time, China’s fiscal and foreign exchange reserve buffers remain sizeable, giving the authorities time to implement some reforms and gradually address imbalances in the economy. This underpins the decision to affirm China’s Aa3 rating.
RATINGS RATIONALE
RATIONALE FOR ASSIGNING A NEGATIVE OUTLOOK
FIRST DRIVER — WEAKENING FISCAL METRICS AND SIZEABLE CONTINGENT LIABILITIES
The first driver of the negative outlook on China’s rating relates to the government’s fiscal strength which has weakened and which we expect to diminish further, albeit from very high levels.
The government’s balance sheet is exposed to contingent liabilities through regional and local governments, policy banks and state-owned enterprises (SOEs). The ongoing increase in leverage across the economy and financial system and the stress in the SOE sector imply a rising probability that some of the contingent liabilities will crystallize on the government’s balance sheet. In addition, we believe that continuing growth in contingent liabilities — along with stated government objectives to introduce more market discipline — suggests that support from the government and the banking system will increasingly be prioritized, based on the relative importance of each entity for the implementation of strategic national policy goals.
While not our base case scenario, the government’s fiscal strength would be exposed to additional weakening if underlying growth, excluding policy-supported economic activity, remained weak. In such an environment, the liabilities of policy banks would likely increase to fund government-sponsored investment, while the leverage of SOEs — already under stress — would rise further.
We do not expect all or even a significant proportion of contingent liabilities to crystallize on the government’s balance sheet in the short term. However, their existence and increase in size reflect economic imbalances. In particular, high and rising SOE leverage raises the risk of either a sharp slowdown in economic growth, as debt servicing constrains other spending, or a marked deterioration of bank asset quality. Either of these developments could ultimately result in higher government debt and additional downward pressure on the government’s credit profile.
In addition, government debt has risen markedly, to 40.6% of GDP at the end of 2015, according to our estimates, from 32.5% in 2012. We expect a further increase to 43.0% by 2017, consistent with an accommodative fiscal stance that will likely involve higher government spending and possible reductions in the overall tax burden.
At the same time, we expect debt affordability to remain high as large domestic savings will continue to fund government debt.
SECOND DRIVER — ERODING EXTERNAL STRENGTH
The second driver relates to China’s external vulnerability. China’s foreign exchange reserves have fallen markedly over the last 18 months, to $3.2 trillion in January 2016, $762 billion below their peak in June 2014.
At the same time, reserves remain ample, particularly in relation to the size of China’s external debt. However, their decline highlights the possibility that pressure on the exchange rate and weakening confidence in the ability of the authorities to maintain economic growth and implement reforms could fuel further capital outflows. In particular, a fall in reserves — corresponding to sustained deposit outflows — could raise pressure on the deposit-funded banking sector.
Measures to address falling foreign exchange reserves and downward pressure on the renminbi have negative implications for the economy and financial sector. First, a tightening of capital controls in response to sustained outflows would damage the credibility of the authorities’ commitment to liberalizing the capital account, an essential element of financial sector reform.
Second, allowing reserves to fall to preserve the value of the currency — when pressures exist — would tighten liquidity conditions in China at a time when parts of the economy are slowing sharply and when the debt-servicing capability of some corporates is impaired.
Third, preserving foreign exchange reserves and allowing a sharp depreciation of the currency would likely fuel further capital outflows.
THIRD DRIVER — RISKS OF A LOSS IN POLICY CREDIBILITY AND EFFICIENCY
The third driver concerns institutional strength. China’s institutions are being tested by the challenges stemming from the multiple policy objectives of maintaining economic growth, implementing reform, and mitigating market volatility. Fiscal and monetary policy support to achieve the government’s economic growth target of 6.5% may slow planned reforms, including those related to SOEs.
Incomplete implementation or partial reversals of some reforms risk undermining the credibility of policymakers. Interventions in the equity and foreign exchange markets over the past year suggest that ensuring financial and economic stability is also an objective, but there is considerably uncertainty about policy priorities.
Without credible and efficient reforms, China’s GDP growth would slow more markedly as a high debt burden dampens business investment and demographics turn increasingly unfavourable. Government debt would increase more sharply than we currently expect. These developments would likely fuel further capital outflows.
RATIONALE FOR AFFIRMING CHINA’S Aa3 RATING
The very large size of China’s economy contributes to its credit strength. Moreover, although GDP growth is slowing, it will remain markedly higher than most of China’s rating peers. The size of the buffers available to face current fiscal and capital outflow challenges allows for a gradual implementation of reform and therefore supports an affirmation of the rating at Aa3. These buffers include a relatively moderate level of government debt, which is financed at low cost, and high domestic savings and still substantial foreign exchange reserves.
We expect a gradual economic slowdown, made possible by the capacity and willingness of the authorities to support growth. Moreover, although contingent liabilities are large, they do not pose an imminent risk to the government’s balance sheet. In a largely closed financial system, buffer erosion would most likely be gradual, providing time to address key areas of reform.
WHAT COULD CHANGE THE RATING UP/DOWN
Moody’s could revise the rating outlook to stable if we concluded that government policy was likely to succeed in balancing competing priorities and thereby arrest the deterioration in China’s fiscal metrics and reduce contingent liabilities for the sovereign most likely through effective restructuring of SOEs in overcapacity sectors.
Moreover, a moderation in capital outflows due to improved confidence in the economy and policies as well as advancement of reforms — in particular in the SOE and financial sectors, including some further opening of the capital account — would be consistent with returning the outlook to stable.
Conversely, Moody’s could downgrade the rating if we observed a slowing pace in the adoption of reforms needed to support sustainable growth and to protect the government’s balance sheet. Tangibly, this could happen if debt metrics weaken, contingent liabilities increase, or progress on SOE reform stalls. Sustained capital outflows or a marked tightening in capital controls without tangible progress on reform implementation would also be consistent with a downgrade of the rating.
- Did Free Markets Cause The Flint, Michigan Water Disaster?
Submitted by Dale Steinreich via The Mises Institute,
In the wake of numerous cases of lead poisoning through Flint, Michigan’s government-managed water supply, some commentators immediately began looking for ways to blame the private sector. Shortly thereafter, David Brodwin of U.S. News and World Report wrote “Flint: The Big Cost of Small Government.”
According to Brodwin, what caused lead-tainted water to gush forth from faucets in Flint were “attacks on investment in public infrastructure and on regulation of all kinds.” For these he blames “right-leaning libertarian interests,” although he does not name a single one.
America, writes Brodwin, has fallen under an “obsession with tax cuts [which] has reduced budgets to the point where they can no longer sustain basic infrastructure.” Attacks on regulation supposedly caused the failure of the Michigan Department of Environmental Quality to do its job. “Either its staff was buffaloed by those in power, or its professionals had been replaced by political hacks willing to ignore the mission of the agency.” Brodwin does not support these assertions with evidence.
But then comes a strange concession from Brodwin: “Local officials of the federal [Obama administration] Environmental Protection Agency failed as well.”
Brodwin’s conclusion is that “[i]f we don’t address the underlying ideologies that led to this problem, we’ll face it again and again, all over the United States.”
If you are wondering at what point in its history Flint, Michigan jumped onto the cutting edge of free-market thinking and practice, join the club.
Obviously Brodwin’s contradictory essay doesn’t begin to explain how small government caused lead-tainted water to pour out of Flint’s taps. From an economics perspective, what all the facts of the Flint case clearly point to is the all-too-typical failure of central planners to adequately think through the most important implications of a decision.
On 25 March 2013, Michigan state officials and the Flint city council (by a 7–1 vote) decided to switch the city’s water source from the Detroit Water and Sewerage Department (DWSD) to the new Karegnondi Water Authority (KWA), which would not begin operating until 2016.
In the meantime, an alternate source of water had to be found. The 26th of June 2013 was when the actual decision by the city (signed by the state-appointed emergency manager, Ed Kurtz) was made to hire an engineering firm to put Flint’s water plant into full-time operation, thus switching Flint’s water supply from Detroit to the Flint River. (The river was already Flint’s back-up water source.)
What city, county, and state officials all failed to do was take measures to ensure that the river’s corrosive water was sufficiently treated so that it did not absorb toxic lead from Flint’s water network.
Far from being unusually negligent for a government, this sad story is unfortunately understandable and predictable. Unlike the numerous suppliers of private bottled water, central planners have no competitive pressures to rigorously think through any and all of their decisions.
One civil servant in Spain, for example, just recently ended a stint of not showing up for work for six years. Successfully executing such a stunt in a private-sector job in a competitive industry is just about impossible.
Sebring, Ohio; Jackson, Mississippi; and the Trouble with Government Water
While most readers of this site will have undoubtedly heard a lot about the lead-tainted water in Flint, Michigan, the stories that comparatively few will have heard about are lead in the water in Sebring, Ohio and last Wednesday (February 24) in Jackson, Mississippi.
Again, what should come as no surprise is that the same type of government bungling that put lead in Flint’s waters is on full display in Sebring and Jackson as well.
On 17 February 2016, the Ohio Environmental Protection Agency fired two of its employees and demoted a third. The first employee who was terminated failed to verify that lab test results were received by a field office. In turn, this employee’s boss was terminated for not double checking the work of said subordinate who had a long record of incompetent job performance.
The third employee, the one demoted, was a manager who failed to notify his bosses that Sebring officials ignored warnings about their town’s lead-contaminated water.
None of the three individuals are being publicly identified. So much for state transparency.
In Jackson, Mississippi, of a hundred homes tested in January of 2016, almost a dozen had tap water with levels of lead that require correction. Fifty-eight of these homes had been tested in June of 2015 but the Mississippi State Department of Health did not (as required) notify Jackson officials that some homes had forbidden levels of lead in their tap water until January of 2016.
The Progressive Jihad Against Bottled Water
Progressives have placed a spotlight on Flint but not Sebring and Jackson because their ideology precludes them from acknowledging systemic problems with government and its central-planning process. Progressive economists such as Brodwin lay the blame at the feet of libertarian ideology. Worse than their delusions about the state, the ultimate dream of progressives is to outlaw just about all competition to government water.
They (including filmmaker Michael Moore) are apoplectic about Flint (and by extension Sebring and Jackson) residents consuming bottled water: it has to be transported in on “pollution-spewing” trucks and it creates waste and environmental damage in the form of empty plastic bottles.
When progressives succeeded at banning bottled water at the University of Vermont in 2013, the number of empty plastic bottles being discarded on campus actually increased as students, staff, and faculty members switched from consuming bottled water to less healthy bottled soft and other drinks. In other words, even in Bernie Sanders’s government-worshipping Vermont, consumers did everything they could to avoid government taps.
Before Lead, There Was Viagra and Anti-Psychotics
Years before the Flint, Sebring, and Jackson contaminations, an AP investigation in 2008 discovered everything from antibiotics, antidepressants, sex hormones, erectile-dysfunction drugs, to tranquilizers in the water supplies of twenty-four metropolitan areas with 41–46 million Americans exposed.
Consuming government water is a bad idea. At its very best, it has a repulsive over-chlorinated swimming-pool smell and even worse off-putting saturated chemical taste. At its worst it can be tainted with everything from trace or higher levels of Viagra or estrogen to dangerous levels of lead. Only a complete fool would regularly and solely consume it to the exclusion of its private alternatives.
- Explaining Trump's Success In One Chart
We’ve said it over and over again.
The “protest” vote – as exemplified by the American electorate’s support for Donald Trump and Bernie Sanders – reflects a backlash against the deeply entrenched political aristocracy and a revolt against business as usual inside the Beltway.
But it’s not just politics as usual that voters are protesting with their support for Trump and Sanders. Their strong poll numbers also reflect a rebellion against a system that “everyday” Americans feel like has utterly failed them.
Wall Street nearly collapsed the global economy in 2008 and Main Street never got a reprieve after the post-Lehman chaos wiped away 50% of Americans’ 401ks.
Meanwhile, the Jamie Dimons and Lloyd Blankfeins of the world have become billionaires – literally. Ben Bernanke will tell you that this isn’t his fault, but if you want to understand why America is prepared throw the establishment out of office, look no further than the follwoing chart, which shows that since 2006, only the rich have seen their incomes climb.
Perhaps we should ask “courageous” Ben if this is what he set out to achieve with the “wealth effect.”
Whether or not Trump (or “the Bern”) can remedy this rather deplorable situation remains to be seen, but the bottom line is this: Americans are sick and tired of being sick and tired and they seem to believe Trump has the cure.
- Trump, Clinton Sweep Super Tuesday, On Collision Course For White House
Update: Clinton wins Virginia, Georgia, Alabama, Arkansas, Tennessee, and Virgina; Sanders wins Vermont (obvioulsy), and Trump wins Alabama, Tennessee, Georgia, Massachusetts.
* * *
The polls are closing on Super Tuesday with Donald Trump and Hilllary Clinton expected to lock up the GOP and Democratic nominations, respectively. Here’s the up-to-date delegate breakdown:
Stay tuned for live coverage.
* * *
Super Tuesday is upon us and we’re about to find out whether Donald Trump and Hillary Clinton will run the table on rivals and lock up their respective party nominations.
“About half of the delegates needed for a Republican candidate to win the nomination are at stake, plus about a third for Democrats,” Bloomberg notes. “In roughly a dozen state races, Republican front-runner Donald Trump and Democratic leader Hillary Clinton seem poised to win in landslides that could render them nearly inevitable.”
In other words, this is it for Marco Rubio, Ted Cruz, and the incomparable Bernie Sanders. Either they pull off a miracle today or we’re about to witness a billionaire reality TV host square off against a former Secretary of State who is being investigated by the FBI with the keys to The White House on the line.
It’s not winner-take-all, delegate wise, on the GOP side, so conceivably, Rubio and Cruz could “win” even if they lose (so to speak), but the outlook isn’t good on the Republican side if your name isn’t Donald Trump.
Bloomberg is out with a preview of six separate predictions for today’s polls. You can read the full breakdown here, but the following two tables do a nice job of summarizing the outlook:
Meanwhile, a new CNN/ORC poll suggests that both Hillary Clinton and Bernie Sanders would beat Trump handily in the national election. “In the scenario that appears most likely to emerge from the primary contests, Clinton tops Trump 52% to 44% among registered voters,” CNN says. “That result has tilted in Clinton’s favor since the last CNN/ORC Poll on the match-up in January.”
According to the poll, Clinton faces a tougher battle against Cruz or Rubio. In fact, in a head-to-head battle, Rubio or Cruz would win, according to the same poll.
Frankly, we’re incredulous. The idea that Clinton would lose to Ted Cruz or Marco Rubio but would beat Trump handily seems dubious at best given what we’ve seen in New Hampshire, Nevada, and South Carolina. Cruz is flagging and Rubio, although polished, comes across as nervous and inexperienced under fire. Trump is.. well.. just Trump. Nothing sticks in the way of criticism.
“Nearly 600 delegates are up for grabs on Super Tuesday — the most for any day of the 2016 primary season,” WaPo notes. “The bulk of them come from seven Southern contests, including the day’s biggest prize: Texas.” Here’s the visual breakdown:
And here’s a look ahead:
“Voters’ choices broken out by party provide an interesting window into areas where Trump might hold cross-party appeal,” CNN says. “Though the share of leaned Republicans choosing Clinton on any of the tested issues tops out at 8% on health care, Trump is the most trusted for 15% of leaned Democrats on terrorism, 14% on the economy and 13% on immigration.”
Still, there’s significant push back against the GOP frontrunner. Indeed, some say many Republicans would vote for Hillary rather than watch Trump steamroll his way into the White House. But according to some polls, it’s far too close to call:
Of course after Tuesday, the argument will no longer be relegated to the realm of the hypothetical.
If things go as planned today, we’re going to get to watch the Hillary versus Trump battle play out in real life, which will inevitably provide all types of entertainment value. And if that’s not a good enough reason to root for the billionaire and the former First Lady on Super Tuesday, we don’t know what is.
- Negative Rates… Negative Outcomes
Authored by Sean Corrigan, originally posted at TrueSinews.com,
There has been much head-scratching of late as to why, with interest rates lower than they have been since the Universe first exploded out of the Void, businesses are not undertaking any where near as much investment as that hoped for beforehand by the academic cabal whose ‘effective demand’ and ‘transmission channel’ fixations have helped drive rates to today’s mind-boggling levels.
This is obviously a complex topic in which there are many different factors at work – not the least of which is that the prevalence of overly-low interest rates for much of the recent past has meant that all too much of such investment as is now desired has not only already been done, but done in what has turned out to be so misguided a fashion, that there is less appetite – as well as fewer means, in many cases – to undertake much more of it today.
If the cure for higher prices – as the saying in commodity markets goes – is higher prices, then the cause of lower rates is almost certainly lower rates!
Be that as it may, on a more fundamental level, it might also be possible to tease out at least one aspect of the answer to the conundrum with the aid of a little straightforward logic, as we shall now attempt to do here.
In theory, positive interest rates reflect the primal truth that goods fit for our enjoyment today are worth more to their potential consumer than those same goods which are only available tomorrow. Moreover, since producer goods are otherwise inedible, unwearable, uninhabitable, etc., in their present form, they only derive their value in respect of their quality of being innate consumer goods-to-be.
Hence, the means of producing the day’s goods for some future date are always to be discounted back using that same ratio (which is none other than the natural rate) as the one which prevails between consumables-now and consumables-then. Doing so gives us a positive IRR (or, if you prefer, assuring that NPV>0) for the process.
Here it goes without saying that since the natural rate is inherently unobservable, the market interest rate will be used in its place – an unavoidable substitution which demands that this latter quantity be subject to as few falsifications as possible (a vexed topic suitable for a forthcoming, much deeper treatment).
This calculation therefore presents the entrepreneur with his bare minimum hurdle – one which, in practice, he will routinely wish to exceed in order to earn that additional surplus which constitutes his true economic, rather than his accounting, profit, as well as to compensate him for the risks he must run and the uncertainties he must bear along the way.
Negative rates, however, tell our man the converse to the above: they implicitly prize tomorrow’s goods more highly than today’s. This means that a productive combination today should command a HIGHER price when assembled than will the combined cash value of the stream of goods and services to which it is expected to give rise over the course of time.
That being the case, why on earth would any sane company boss make sizeable new expenditures whose IRR is deemed to be negative in cash terms – and which will therefore both deplete his equity and sap his means of paying dividends to the firms’ owners – when he can, as is becoming widely bemoaned, make alternative use of the same financial means to boost the price of his shares by swapping some of them for an obligation which he is effectively being rewarded for taking on, so making his hapless bond-holders pay his wages for him instead?
Madness!
- Three Weeks After Buying Stocks, Gundlach Is Cashing Out Again: "I'm Bearish"
it was just last Friday, when roughly at the same time that Dennis Gartman flipflopped to bullish (just as the rally stalled, and just before turning bearish again ahead of today’s torrid rally) we reported that in what came as a surprise to us, that just as Jeff Gundlach was warning about the impending failure of central banks, the lack of a “bullish case for oil”, about a bear market for stocks, and about an imminent surge in gold in early February, the DoubleLine manager was buying stocks.
As Reuters first reported, Jeffrey Gundlach “said on Friday that his firm purchased some U.S. stocks two weeks ago after their rocky start in January.”
His reasoning was simple: buy the bear market rally.
“I thought it was a good buy point two weeks ago Wednesday and so we bought some,” Gundlach told Reuters. Gundlach, who oversees $90 billion in assets for the Los Angeles-based DoubleLine, said the firm was at “maximum underweight” since last August.
Two days later, and following the biggest rally to start the month of March in history, Gundlach is happy to count his profits and once again cash out.
In an interview with Reuters Jennifer Ablan after DoubleLine Capital’s February flow figures were released (it was a $2.2 billion inflow) , Gundlach said the firm is now considering closing out some of its long positions in the stocks that they purchased three weeks ago.
Is the bond trader now just a closet equities daytrader? We wond’t know, but since the S&P 500 has jumped 8% in that period, why not takes some profits.
“That’s what we’re talking about,” Gundlach said about booking some gains after their short-term rally.
Gundlach still maintains that the U.S. stock market is in a bear market but had made those equity purchases because the conditions in the second week of February with “wickedly negative equity sentiment were such that risk/reward favored a potential tradable rally and also made such a low allocation less advisable.”
The time to buy the dip, however, has passed: “I am bearish. There are just wiggles and jiggles in the markets.“
- Hillary Clinton: A Bigger Warmonger Than Bush/Cheney?
Bush and Cheney launched two disastrous and totally unnecessary wars which increased terrorism and undermined America’s standing in the eyes of the world.
Hillary Clinton is at least as bad …
She is largely responsible for the war in Syria, which is plunging the Middle East and Europe into chaos.
The New York Times confirms that Clinton is responsible for the violent regime change in Libya, which was also completely unnecessary.
Hillary is largely responsible for the bombing of Yugoslavia … another wholly unnecessary war. Diana Johnstone writes:
In her star-struck biography of the First Lady, Hillary’s Choice, Gail Sheehy reported Hillary’s plea in favor of bombing Yugoslavia in 1999 as a major point in her favor. According to Sheehy’s book, Hillary convinced her reluctant husband to unleash the 78-day NATO bombing campaign against the Serbs with the argument that: “You can’t let this ethnic cleansing go on at the end of the century that has seen the Holocaust.”
This line is theatrical and totally irrelevant to the conflict in the Balkans. As a matter of fact, there was no “ethnic cleansing” going on in Kosovo at that time. It was the NATO bombing that soon led people to flee in all directions – a reaction that NATO leaders interpreted as the very “ethnic cleansing” they claimed to prevent by bombing.
Joshua Marshall notes:
At least 15,000 Kosovars gathered in the central square of Pristina, the country’s capital, to demand the government’s resignation. In January, thousands of protesters clashed with police, hurling Molotov cocktails, setting a major government building and armored police cars on fire, and wounding 24 police officers.
The aim of this protest was to overthrow the government with violence, as the government said in a statement. The U.S. ambassador chimed in, “Political violence threatens democracy and all that Kosovo has achieved since independence.”
This violence gets little attention from the American media in part because, unlike the Ukrainian demonstrators who overthrew their democratically elected government in 2014, Kosovo’s protesters are targeting a pro-Western government that eagerly seeks membership in the European Union.
But it’s no wonder that Kosovo’s political fabric is so rent by violent confrontations. The rump state was created by a violent secessionist movement led by the Kosovo Liberation Army (KLA). That guerrilla band of Albanian nationalists was covertly backed by the German secret service to weaken Serbia. Its terrorist attacks on Serbian villages and government personnel in the mid-1990s prompted a brutal military crackdown by Serbia, followed by NATO’s decisive intervention in 1999.
During the fighting the KLA drove tens of thousands of ethnic Serbs from Kosovo as part of an ethnic cleansing campaign to promote independence for the majority Albanian population. It recruited Islamist militants – including followers of Osama Bin Laden – from Saudi Arabia, Yemen, Afghanistan and other countries.
President Bill Clinton’s special envoy to the Balkans, Robert Gelbard, called the KLA “without any question, a terrorist group,” and a Council on Foreign Relations backgrounder added, “most of its activities were funded by drug running.”
None of that, however, stopped Washington from embracing the KLA’s cause against Serbia, a policy spearheaded by the liberal interventionist First Lady Hillary Clinton and Secretary of State Madeleine Albright. Without authorization from the United Nations, NATO began bombing Serbia in March 1999, killing some 500 civilians, demolishing billions of dollars’ worth of industrial plants, bridges, schools, libraries and hospitals, and even hitting the Chinese embassy. (“It should be lights out in Belgrade,” demanded New York Times columnist Thomas Friedman. “Every power grid, water pipe, bridge, road and war-related factory has to be targeted. Like it or not, we are at war with the Serbian nation.”)
Following Serbia’s capitulation, according to Human Rights Watch, “elements of the KLA’€ engaged in “widespread and systematic burning and looting of homes belonging to Serbs, Roma, and other minorities and the destruction of Orthodox churches and monasteries. This destruction was combined with harassment and intimidation designed to force people from their homes and communities. By late-2000 more than 210,000 Serbs had fled the province . . . The desire for revenge provides a partial explanation, but there is also a clear political goal in many of these attacks: the removal from Kosovo of non-ethnic Albanians in order to better justify an independent state.”
Former KLA leaders, including its political head Hashim Thaqi, went on to dominate the new Kosovo state. A 2010 report by the Council of Europe declared that Thaqi, who was then Kosovo’s prime minister, headed a “mafia-like” group that smuggled drugs, guns and human organs on a grand scale through Eastern Europe. The report’s author accused the international community of turning a blind eye while Thaqi’s group of KLA veterans engaged in “assassinations, detentions, beatings and interrogations” to maintain power and profit from their criminal activities.
***
In 2012, Madeleine Albright and a former Clinton special envoy to the Balkans bid to take control of the country’s state-owned telecommunications company despite widespread allegations of corruption, the attempted assassination of the telecommunications regulatory chief, and the murder of the state privatization agency’s chief.
***
In 2014, a three-year E.U. investigation concluded that “senior officials of the former Kosovo Liberation Army” should be indicted for war crimes and crimes against humanity, including “unlawful killings, abductions, enforced disappearances, illegal detentions in camps in Kosovo and Albania, sexual violence, other forms of inhumane treatment, forced displacements of individuals from their homes and communities, and desecration and destruction of churches and other religious sites.”
Under tough pressure from the United States and E.U., Kosovo’s parliament finally agreed last summer to permit a special court to prosecute former KLA leaders for war crimes. The court will begin operating this year in The Hague.
“The sad thing is that the United States and European countries knew 10 years ago that Thaqi and his men were engaged in drug smuggling and creating a mafia state,” said one European ambassador last year. “The attitude was, ‘He’s a bastard, but he’s our bastard.'”
Hillary also backed coups against the democratically-elected leaders of Haiti, Honduras and other countries.
And she helped create the idea of “humanitarian war”, where the U.S. brutally overthrows a government by military force … justifying the action by falsely claiming that otherwise civilians will be.
Hillary has also literally supported Islamic jihadis with arms, money and logistical support.
For example, the U.S. under Clinton supported Al Qaeda (and see this) so that it could overthrow Libya’s government.
And the U.S. under Clinton supported Islamic jihadis so that they would overthrow Syria’s government.
- The U.S. started plotting regime change and arming jihadis in Syria – in an effort to topple Assad – a decade ago
- Hillary Clinton – as secretary of state – admitted that arming the rebels would strengthen Al Qaeda
So while Bush and Cheney’s foreign policy was utterly despicable, Hillary Clinton has wreaked havoc on the world stage on a scale which is comparable … if not worse.
Postscript: It's telling that the Neoconservative hawks – the same people who brought us the fiascos in Iraq and Afghanistan (which Hillary also supported) – HATE Trump and LOVE Hillary.
- "We're In Trouble": Alan Greenspan Delivers Stark Warning
Were you wondering what Alan Greenspan thinks about the outlook for monetary policy across the globe?
Neither were we, but Bloomberg was and Tom Keene and Mike McKee got the “privilege” of sitting down with the “maestro” on Monday afternoon to discuss a variety of topics including NIRP, which Greenspan says “warps investment behavior.”
While he isn’t willing to go so far as to condemn negative rates as “dangerous,” he does say the global race to the proverbial Keynesian bottom is “counterproductive.”
As far as the US economy is concerned, Greenspan isn’t optimistic. “We’re in trouble basically because productivity is dead in the water…Real capital investment is way below average. Why? Because business people are very uncertain about the future.”
Well yes, they most certainly are. Of course were it not for “the Greenspan put” and decades of policy largesse we might not have ever had a financial crisis in the first place (David Stockman will tell you all about Greenspan’s role in creating the conditions we now find ourselves in).
As for whether Dodd-Frank has solved anything, Greenspan says no: “The regulations are supposed to be making changes of addressing the problems that existed in 2008 or leading up to 2008. It’s not doing that. ‘Too Big to Fail’ is a critical issue back then, and now. And, there is nothing in Dodd-Frank which actually addresses this issue.”
And finally, here’s the punchline. Asked whether he’s optimistic going forward, Greenspan said this: “No. I haven’t been for quite a while. And I won’t be until we can resolve the entitlement programs. Nobody wants to touch it. And that is gradually crowding out capital investment, and that’s crowding out productivity, and it’s crowding out the standards of living where do you want me to go from there.”
Here are the clips in which Greenspan touches on everything from NIRP to faux Chinese GDP data to US crude production:
Now if only he hadn’t gotten us into this mess in the first place…
- Is Ackman Facing A Liquidity Crunch: CP Files Shelf With Pershing As Selling Shareholder
It is often said that on Wall Street there are no guarantees. That is wrong: there is nothing more certain in the realm of big money than carnivorous predators surrounding and tearing apart any hedge fund that bleeds in the water by shorting its longs and forcing a squeeze of its shorts, until and past the point of max pain, which forces the fund to liquidate and hit any bid or lift any offer, traditionally at extremely preferential terms to everyone on the other side of the trade.
For the sake of simplicity, “predators” include any and all hedge funds, especially those which the target assumed it was friendly with and until recently was inviting to his or her “idea dinners.” In fact the only catalyst predators typically need is any confirmation that the prey is crippled, at which point the last dance begins. In other words, any “blood in the water” usually means the different between life and death; and in these violently fast markets, the time from life to death may be counted in milliseconds.
Which is why any time a distressed hedge fund finds itself in liquidity difficulties or faces a surge redemption requests, its first priority is to hide these as well as possible. The problem is that it still has to sell something to free up liquidity, and once it starts doing that, the prime brokers make sure it is marketwide news within minutes.
One such hedge fund, of course, is Bill Ackman’s Pershing Square, which thanks to just one stock, Valeant, has found itself in a heap of trouble, and as of a week ago was down -17.3% for 2016 after tumbling 20% in 2015; worse, after the latest rout in Valeant stock, we expect the fund to report it is down over 20% YTD when it issues its weekly update for the week ended March 1 overnight.
However, despite the massive performance rout Pershing Square has experienced, so far there had been no hints it may be impacting either the fund’s liquidity or, so far at least, redemption requests.
That may have changed today when earlier this afternoon, Pershing Square portfolio company (long 13.9 million shares) Canadian Pacific filed a $1.5 billion mixed Shelf statement which covered everything from Common to Preferred to Warrants and Units.
As a reminder, a shelf, or S-3 filing, is a type of public offering where certain issuers are allowed to offer and sell securities to the public without a separate prospectus for each act of offering. Instead, there is a single prospectus for multiple, undefined future offerings.
In effect, it gives the seller a green light to approach the market at will.
What was curious about the CP shelf is the following disclosure:
Canadian Pacific Railway Limited (“CPRL” or the “Corporation”) may from time to time offer common shares (“Common Shares”), first preferred shares (“First Preferred Shares”), second preferred shares (“Second Preferred Shares”), subscription receipts (“Subscription Receipts”), warrants (“Warrants”) and units (“Units”) of CPRL (collectively, Common Shares, First Preferred Shares, Second Preferred Shares, Subscription Receipts, Warrants and Units are referred to herein as the “Securities”) having an aggregate offering price of up to US$1,500,000,000 or its equivalent in any other currency. Certain funds managed by Pershing Square Capital Management, L.P. (“Pershing Square”) or its affiliates or their respective permitted assignees (collectively, the “Selling Shareholder”) may also from time to time offer and sell Common Shares pursuant to this prospectus. See “Selling Shareholder”.
And this:
SELLING SHAREHOLDER
As at the date hereof, based on publicly available information, the Selling Shareholder beneficially owns 13,940,890 Common Shares, which is approximately 9.1% of the outstanding Common Shares. The Selling Shareholder may sell some, all or none of their Common Shares covered by this prospectus.
Pershing Square, a registered investment advisor under the United States Investment Advisors Act of 1940, is the investment advisor to each of Pershing Square, L.P. (“PS”), Pershing Square II, L.P. (“PS II”), Pershing Square International, Ltd. (“Pershing Square International”) and Pershing Square Holdings, Ltd. (“Pershing Square Holdings” and, together with PS, PS II and Pershing Square International, the “Pershing Square Funds”). PS Management GP, LLC (“PS Management”) is the sole general partner of Pershing Square. Pershing Square GP, LLC (“Pershing Square GP”), a registered investment advisor under the Investment Advisors Act of 1940, is the sole general partner of each of PS and PS II. Pershing Square has investment discretion with regards to 13,940,890 Common Shares, which Common Shares are directly owned by the Pershing Square Funds. The Common Shares were acquired during the period from September 23, 2011 to February 2, 2012. William A. Ackman is the Chief Executive Officer of Pershing Square and the managing member of each of PS Management and Pershing Square GP. Mr. Ackman is also a director of CPRL. Paul Hilal, a former Partner at Pershing Square, served as a director of CPRL from 2013 until his resignation from CPRL’s Board of Directors on January 26, 2016. Pershing Square is a Delaware limited partnership and its address is 888 Seventh Avenue – 42nd Floor New York, NY 10019.
In other words, the selling shareholder quietly tacked on to the CP Shelf is not just the company, but a major investor, in this case the second largest investor in CP after T. Rowe Price which is Bill Ackman’s Pershing Square which owns just over $1.7 billion in common stocks, or roughly enough to fill the entire shelf.
Why go this circuitous route to sell shares directly? The simplest answer is also the most disturbing for Pershing Square LPs – Ackman’s liquidity breaking point has come, and the fund is quietly starting to liquidate positions directly to the market bypassing prime brokers. Of course, if that is indeed the case, then Ackman would promptly deny any interest in using this shelf for liquidation purposes.
Not surprisingly that is precisely what he did moments ago, when as Bloomberg reported:
- PERSHING HAS NO CURRENT PLANS TO SELL CANADIAN PACIFIC SHRS
Then why file it?
Perhaps Ackman is telling the truth, but we wonder how much lower the stock price of VRX will have to drop before Pershing does precisely the opposite when faced with a major margin call on its option-based position, and maybe a better question – how much lower can Pershing’s P&L drop before Ackman is finally flooded with terminal redemption requests by investors who by now must have lost all their hair using Ackman as a levered bet on the survival of a company which with every passing day smells increasingly more like fraud.
In the meantime keep an eye on Pershing Square’s weekly performance updated on the following site, because while the credibility of Ackman’s word is “fluid”, numbers – especially negative ones – are always ironclad.
- Worst Global Economic Data In 4 Years Sparks Stocks Best Day In 6 Months
Dudley's "Downside Risks" and Draghi's "No Limits" were all it took to trump the worst global macro data since 2012 (JPM Global PMI) and send stocks soaring… Some quick thoughts from (ironically) 1930…
Worst global economy since 2012…
Best day for Nasdaq in six months…(and best first day of a month since 2013)
Futures show what really happened…
The Dow soared over 400 points off overnight lows, surging to the lows from the first trading of 2016… Bad News Is Great News once again!!
With financials leading the ripfest…
With financials managing to tag the 50DMA…
But seriously – are we going to fall for this again?
Ripped higher on the back of USDJPY…(but even that decoupled in the last hour as 114.000 capped the gains)…
As the crude correlation broke shortly after EU close…
This was not a short-squeeze per se – but as the day went on the "most shorted" names did start to suffer…
But we do note that once again the "weakest momentum" stocks notably outperformed (messing with quant funds again)
VIX broke to a 17 handle following trail of its tails…
Breaking back below its 200-day moving-average for the first time in 2016…
Lots of chatter today about liquidations of VRX positions (and the SPY market hedges with them) – driving VRX lower and the market higher… until we tweeted about it…
Treasury yields exploded higher on the weak data this morning
The USD Index slid back to unchanged on the week today after an early bounce on JPY weakness which was trujmped by EUR strength after Europe closed)…
Commodities were mixed today: PMs very modstly lower, copper and crude higher – bnut we note the broad based flush ast around 8ET…
And finally there was Nattie – which popped and dropped and popped on weather changes, hedge fund rumors, and force majeurs…
Charts: Bloomberg
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