Today’s News 4th April 2016

• How Bad Would A Nuclear Terror Attack Be: Find Out With This Interactive Nukemap

  By Keturah Hetrick of Defense One

  How Bad Would A Radiological Terror Attack Be?

  When it comes to human health, all nuclear scenarios are not created equal. The Chernobyl disaster caused an estimated 16,000 cases of thyroid cancer, while the Fukushima power plant accident barely produced any. A dizzying number of variables go into understanding the damage that a particular nuclear or radiological device might have. But modeling the effects of such devices has become also become easier, and more public, thanks to the Internet.

  It’s “no secret” that organizations like Al-Qaeda and ISIS “are interested in securing nuclear materials so they can use them for terrorist attacks,” Dr. Timothy Jorgensen, a professor of radiation medicine at Georgetown University and the author of Strange Glow: The Story of Radiation, told an audience at the Center for Strategic International Studies on Monday.

  How might we be able to predict the effect of a particular attack? The type and size of bomb, materials used, detonation from the air versus ground, population density, and even wind can help us to predict increases in cancer risk, deaths from a bomb’s blast, and the timing of deaths from radiation sickness.

  “The distribution of doses within the population determine the survivors,” says Jorgensen. “You can predict the type and severity of health consequences by just knowing the doses among individuals.”

  Our bodies absorb radiation through the course of normal life experiences. For example, we absorb 3.0 millisieverts (a common measurement of the body’s radiation absorption, abbreviated as mSv) from a single mammogram. Eating 1,000 bananas adds another 0.1 mSv to our bodies. (Bananas, like all potassium-rich foods, contain very small amounts of radioactive material.)

  Of course, our bodies absorb far more radiation if we’re near a more-potent source, like an atomic bomb explosion or power plant accident.

  At 1,000 mSv, radiation sickness sets in as cells begin to die. Symptoms include spontaneous bleeding, ulcerated organs, and skin that sloughs off. But, you will likely recover, with only a somewhat higher chance of developing cancer later in life.

  About half of a population that receives a 5,000-mSv dose will die. This point is known as the Lethal Dose 50 (LD50).

  Doses above 10,000 mSv cause gastrointestinal (GI) syndrome, leaving the afflicted with less than two weeks to live. Above 50,000 mSv, brain swelling causes Central Nervous System (CNS) syndrome. Death will come in hours.

  Currently, there’s no treatment for CNS syndromes. According to Jorgensen, treatment for CNS “wouldn’t make much sense” because of GI syndrome’s imminence.

  In a normal distribution of radiation doses, that leaves a small number of treatable victims.

  Unfortunately, our abilities to treat victims within that range haven’t improved much. Most deaths from the U.S. bombing of Hiroshima were caused by fires or the detonation’s blast, and less than 10 percent of total deaths fell within the treatable range. If the Hiroshima bombing occurred today, we would be able to reduce the number of deaths by only 5 percent, Jorgensen says.

  Dirty Bombs

  Reports show that last week’s Brussels attackers are among many ISIS affiliates pursuing dirty bombs, renewing fears about the group’s nuclear ambitions.

  Dirty bombs, also known as radiological dispersal devices (RDDs), aren’t actually nuclear weapons. Though they distribute a small amount of radioactive material upon detonation, their blast is far deadlier, and most people exposed to the radioactive blast wouldn’t receive a lethal dose.

  According to a recent report from the Nuclear Threat Initiative, a dirty bomb “would not cause catastrophic levels of death and injury” but “could leave billions of dollars of damage due to the costs of evacuation, relocation, and cleanup,” contributing to the weapons’ reputation as “weapons of mass disruption.”

  “Recent reports out of Iraq warn that Islamic State extremists may have already stolen enough material to build a [dirty] bomb that could contaminate major portions of a city and cost billions of dollars in damage,” the report states.

  Experts agree that terrorists are more likely to use a dirty bomb than other radioactive devices because dirty bombs are less technically complicated to build and require materials that are relatively easy to obtain.

  INDs

  While experts believe that terrorist groups are more likely to use dirty bombs, uranium-based improvised nuclear devices (INDs) aren’t out of the question. But all INDs, which Jorgensen describes as “homemade atomic bomb[s],” are not alike.

  Ground detonations and air blasts result in different casualties. Terrorists are more likely to detonate an IND from the ground, rather than dropping it from a plane. This kind of blast would cause a greater amount of fallout, which increases radiation exposure and thus, health risk.

  If a terrorist group were to detonate a 15-kiloton nuclear bomb (the size of the Hiroshima bomb, considered a plausible size for a terrorist group to build or obtain), the radius for radiation sickness deaths and the radius for deaths from the blast would be about the same size.

  Interestingly, the more energy that an explosion releases, the percentage of people who die from percussive blasts increases, while the percentage who die from radiation sickness decreases. That information helps us to predict deaths from the percussive blast versus deaths from radiation—and to better predict the proportion of the population who might be treatable.

  If a 50-kiloton bomb were detonated over a civilian population, radiation sickness wouldn’t kill anyone – because anyone close enough for a lethal dose would already have been killed by the blast.

  But energy output and altitude are far from the only variables that help us to forecast a nuclear bomb’s health impact.

  Enter the Nuke Map, a project from nuclear historian Alex Wellerstein. The interactive map lets you plug in variables to see the outcome of various nuclear bomb scenarios.

  For example, a 15-kiloton nuclear bomb (the size of the Hiroshima bomb, considered a plausible size for a terrorist group to obtain) dropped from a plane on downtown Washington, D.C. would leave hundreds of thousands of casualties within city limits. That same bomb set off at ground level would result in fewer immediate casualties—but fallout that extended for miles, due to the region’s northeast winds, Jorgensen explained.

  And, even at non-lethal doses, radiation exposure introduces myriad concerns: How far away from the detonation site does cancer risk increase? Is it worth the risk to evacuate hospital and nursing home residents? When is it safe for displaced residents to return home?

  According to Jorgensen, the best way to answer these questions later is public education now. “People… can’t even discuss the topic because they don’t know the difference between radiation and radioactivity dose. They need to have at least that much information to be engaged in the process,” he says. “We, as public health officials, should do a much better job at bringing this message to the public.”

  The interactive Nukemap can be accessed below:

  

  

  

  

  

• Key U.S. Events In The Coming Week

  Key economic releases for the coming week include the ISM non-manufacturing report on Wednesday. There are several scheduled speeches from Fed officials this week. Fed Chair Yellen will take part in a discussion with former Fed Chairs on Thursday.

  Monday, April 4

  10:00 AM Factory orders, February (GS -2.1%, consensus -1.8%, last +1.6%)

  • Factory orders likely declined in February following a 1.6% gain in January. Falling factory orders would reflect the weaker-than-expected durable goods report for February.

  09:30 AM Boston Fed President Rosengren (FOMC voter) speaks

  • Federal Reserve Bank of Boston President Eric Rosengren will speak about economic and cybersecurity risks at the Boston Fed’s cybersecurity conference. In February, Rosengren noted that “if inflation is slower to return to target, monetary policy normalization should be unhurried. A more gradual approach is an appropriate response to headwinds from abroad that slow exports, and financial volatility that raises the cost of funds to many firms.”

  07:00 PM Minneapolis Fed President Kashkari (FOMC non-voter) speaks

  • Federal Reserve Bank of Minneapolis President Neel Kashkari will hold a town hall meeting on ‘too big to fail’. There will be Q&A beforehand at 5:15 PM. The newly appointed President Kashkari has said little in public regarding his views on monetary policy.

  Tuesday, April 5

  01:00 AM Chicago Fed President Evans (FOMC non-voter) speaks

  • Federal Reserve Bank of Chicago President Charles Evans speaks on the economy and monetary policy at the Credit Suisse Asian Investment Conference in Hong Kong. Audience and media Q&A is expected. Last week, President Evans discussed the “asymmetric” risks facing the US economy, noting that “we should buy some insurance against unexpected weakness by accepting a somewhat higher likelihood of stronger outcomes. Translated into monetary policy, this means being more accommodative than usual to provide an extra boost to aggregate demand as a buffer against possible future downside shocks that might otherwise drive us back to the effective lower bound.”

  08:30 AM Trade balance, February (GS -$46.0bn, consensus -$46.2bn, last -$45.7bn)

  • The new advanced goods trade report showed a slightly wider goods deficit in February (-$62.9bn from -$62.4bn), reflecting a widening trade balance across foods & beverages, capital goods, and consumer goods. We expect the services balance to be little changed in February. Overall, we expect the total trade deficit to be -$46.0bn.

  10:00 AM ISM non-manufacturing, March (GS 54.6, consensus 54.1, last 53.4)

  • Service sector surveys improved in March. The Philly Fed (+10.3pt to +13.9), Richmond Fed (+11pt to +9), and New York Fed (+23.7pt to +12.6) indices all rose (the New York survey is a relatively new and not seasonally adjusted series). The Markit Services PMI also rose (+1.3pt to 51.0), escaping contractionary levels. The ISM non-manufacturing index fell by 0.1pt last month.

  Wednesday, April 6

  12:20 PM Cleveland Fed President Mester (FOMC voter) speaks

  • Federal Reserve Bank of Cleveland President Loretta Mester speaks on the U.S. economic outlook and monetary policy at an event hosted by the Cleveland Association for Business Economics, CFA Society Cleveland, and Risk Management Association of Northern Ohio. Last week, President Mester stated, “Given actual and expected economic performance, the risks around the outlook, and the progress toward our policy goals, my assessment at this time is that it will be appropriate to continue to gradually reduce the degree of accommodation this year. Gradual normalization means that monetary policy will remain accommodative for some time to come, providing support to the economy and insurance against downside risks.”

  02:00 PM Minutes from the March 15-16 FOMC meeting

  • Fed officials indicated a more cautious approach to the near-term policy outlook at the March FOMC meeting, a message that was reinforced during last week’s speech by Chair Yellen. In the minutes, we will be watching for (1) any additional signs that the committee is embracing a “risk management” approach for monetary policy, (2) further details around the committee’s view on growth headwinds stemming from abroad, (3) the committee’s assessment of the balance of risks to the economic outlook, and (4) any views regarding the recent acceleration in core inflation.

  08:00 PM Dallas Fed President Kaplan (FOMC non-voter) speaks

  • Federal Reserve Bank of Dallas President Kaplan speaks on a moderated panel at the World Affairs Council of Dallas/Fort Worth. Last month, President Kaplan said that “the Fed needs to show patience in decisions to remove accommodation”.

  Thursday, April 7

  08:30 AM Initial jobless claims, week ended April 2 (consensus 270k, last 276k)

  Continuing jobless claims, week ended March 26 (consensus 2,170k, last 2,173k)

  • Consensus expects initial jobless claims to edge down to 270k. Initial claims moved up last week, although we suspect some of the rise may be due to seasonal effects stemming from the Good Friday holiday.

  05:30 PM Fed Chair Yellen speaks

  • Federal Reserve Chair Janet Yellen will take part in a discussion with former Fed Chairs Ben Bernanke, Alan Greenspan, and Paul Volcker at an event hosted by International House. Last week, Chair Yellen acknowledged that core inflation had risen “somewhat more than my expectation in December,” but said “it is too early to tell if this recent faster pace will prove durable”.

  08:00 PM Kansas City Fed President George (FOMC voter) speaks

  • Federal Reserve Bank of Kansas City President Esther George will speak about the U.S. economy. Q&A is expected. At the March FOMC, President George dissented, citing her preference to raise the target range for the federal funds rate.

  Friday, April 8

  10:00 AM Wholesale inventories, February (consensus -0.2%, last +0.2%)

  • Consensus expects wholesale inventories to decrease slightly in January.

  Source: GS

  

  

  

  

  

• Presenting The Mossack Fonseca Interactive Web Of Secret Companies (And All Available Source Files)

  Even though, as we said in our previous post, the starting role in today’s record document leak should be that of Mossack Fonseca (and its heir apparent, Rothschild, operating out of Reno, NV) the general population is far more curious to learn which names will emerge as a result of this historic crackdown involving 11 million documents and 2,600 gigabytes of data.

  And while the full disclosure effort will take months, if not years, here courtesy of Fusion, is a data map of the intersection between clients, shareholders, companies and agents who have used Mossack Fonseca’s services.

  From Fusion: “the map represents just over a third of all the data we have access to through the leak. We’ve chosen to show you 115,373 of the most connected entities so you can see how, in many case, individuals are actually related in some way.

  What does that say? It tells us that the people who create shell companies through Mossack Fonseca move in similar circles.

   

  You will notice the option to select, “Leticia Montoya”, who is a Mossack Fonseca employee. Through the documents we have connected her with at least 10,000 companies as a stand-in director or shareholder. Ms Montoya earns around $900 a month in the HR department of the company.

   

  The other option is to see companies that are in some way connected with the United States.

  The Mossack Fonseca Universe:

   

  Meanwhile, for those who enjoy primary data, the full universe of currently available source documents is available at the following link. Based on a recent Wikileaks tweet, more may be becoming available soon.

  Should we release all 11 million #PanamaPapers so everyone can search through them like our other publications?

  — WikiLeaks (@wikileaks) April 3, 2016

  Finally, today is not the first time that Mossack Fonseca had made prominent headlines. Here is a Vice report from December 2014 with “The Law Firm That Works with Oligarchs, Money Launderers, and Dictators“

  

  

  

  

• Mossack Fonseca: The Nazi, CIA And Nevada Connections… And Why It's Now Rothschild's Turn

  For all the media excitement about the disclosed names in the “Panama Papers” leak, in this case represented by the extensive list of Mossack Fonseca clients, this is not a story about which super wealthy individuals did everything in their power, both legal and illegal, to avoid taxes, preserve their financial anonymity, and generally preserve their wealth. After all, that’s what they do, and it should not come as a surprise that they will always do that, especially following last year’s disclosure by the same ICIJ which revealed a list of 100,000 HSBC clients who had been dutifully avoiding the payment of taxes.

  What the story is about is the nebulous world of offshore tax evasion and tax havens, which based on data from the World Bank, IMF, UN, and central banks, hide between $21 and $32 trillion, where registered incorporation agents and law firms in small Caribbean countries (and not so small US states) make the laundering of money and the “disappearance” of the super wealthy, into untracable numbers hidden behind shell companies, possible.

  So, in order to learn some more about the real star of this story, the Panamanian lawfirm of Mossack Fonseca, we went to Fusion which has compiled a fascinating story of the company’s history, founders, and key milestone events in its life. 

  

   

  These include the Nazis, the CIA, Mexican drug lords, and of course, the U.S.

  First, here is the Nazi and CIA connection:

  Jurgen Mossack’s family landed here in the 1960s. During World War II, his father had served in the Nazi Party’s Waffen-SS, according to U.S. Army intelligence files obtained by the ICIJ. Once in Panama, the elder Mossack offered to spy on communists in Cuba for the CIA. (Mossack Fonseca said the firm “will not answer any questions related to private information regarding our company founding partners.”)

  Here is the connection to Mexican drug lord Rafael Caro Quintero, and perhaps to the DEA:

  Many times Mossack Fonseca has had no clue which nefarious characters were doing what with the companies the firm created – as when Jurgen discovered in 2005, according to internal emails, that he was the registered agent and listed as the director for a company controlled by the Mexican drug lord Rafael Caro Quintero. The co-founder of the Guadalajara Cartel was convicted in Mexico in 1985 for the brutal murder of U.S. DEA agent Enrique “Kiki” Camarena. (Today, Quintero is again considered a fugitive by the US after walking out of prison in 2013 on a technicality).

   

  Mossack Fonseca’s senior partners instructed an employee to carry out their resignation from the company upon the discovery. “Pablo Escobar was like a newborn compared to R. Caro Quintero!” Jurgen wrote in reaction to the news. “I wouldn’t want to be among those he visits after he leaves prison!”

  And then there is the state of Nevada:

  In 2013, an Argentine prosecutor’s report linked Nevada-incorporated shell companies involved in a major corruption scandal to Mossack Fonseca. When those shell companies became the subject of a federal court battle in Nevada, the leaked files show, Mossack Fonseca employees took steps to remove paper records and to wipe computer files and phone logs at its Las Vegas office. One employee even traveled from Central America to Nevada to bring back files. “When Andrés came to Nevada he cleaned up everything and brought all documents to Panama,” according to an email dated Sept. 24, 2014.

   

  Mossack Fonseca said it “categorically” denies hiding or destroying documents in its statement to the ICIJ: “Let us be clear that it is not our policy to hide or destroy documentation that may be of use in any ongoing investigation or proceeding.”

   

  The leaked records also contradict sworn testimony by Jurgen Mossack, who told the federal district court that his firm was separate from “MF Nevada,” its office in Las Vegas, and had no control over it. Mossack Fonseca “has never maintained an office, establishment or principal place of business in Nevada,” Mossack testified in July 2015. But, according to the ICIJ investigation, internal documents show the opposite, indicating that the firm’s Panama City headquarters controlled MF Nevada’s bank account, and that the firm’s co-founders and one other official with the company owned 100 percent of MF Nevada.

  Why is Nevada important? Because recall that according to a recent investigation by Bloomberg, “The World’s Favorite New Tax Haven Is the United States” …

  

  … and specifically several US states such as Nevada, Wyoming and South Dakota.

  After years of lambasting other countries for helping rich Americans hide their money offshore, the U.S. is emerging as a leading tax and secrecy haven for rich foreigners. By resisting new global disclosure standards, the U.S. is creating a hot new market, becoming the go-to place to stash foreign wealth. Everyone from London lawyers to Swiss trust companies is getting in on the act, helping the world’s rich move accounts from places like the Bahamas and the British Virgin Islands to Nevada, Wyoming, and South Dakota.

   

  “How ironic—no, how perverse—that the USA, which has been so sanctimonious in its condemnation of Swiss banks, has become the banking secrecy jurisdiction du jour,” wrote Peter A. Cotorceanu, a lawyer at Anaford AG, a Zurich law firm, in a recent legal journal. “That ‘giant sucking sound’ you hear? It is the sound of money rushing to the USA.”

  That money is rushing for one simple reason: dirty foreign – and local – money is welcome in the U.S., no questions asked, to be shielded by the most impenetrable tax secrecy available anywhere on the planet.

  One may even say that nowadays, US-based tax havens are the new Switzerland, or Bahamas or, for that matter, Panama. Indeed, for most Americans, offshore tax haven are now meaningless with the passage of the FATCA law, which makes the parking of dirty US money abroad practically impossible. So where does that money go instead – it stays in the US:

  Others are also jumping in: Geneva-based Cisa Trust Co. SA, which advises wealthy Latin Americans, is applying to open in Pierre, S.D., to “serve the needs of our foreign clients,” said John J. Ryan Jr., Cisa’s president.

   

  Trident Trust Co., one of the world’s biggest providers of offshore trusts, moved dozens of accounts out of Switzerland, Grand Cayman, and other locales and into Sioux Falls, S.D., in December, ahead of a Jan. 1 disclosure deadline.

   

  “Cayman was slammed in December, closing things that people were withdrawing,” said Alice Rokahr, the president of Trident in South Dakota, one of several states promoting low taxes and confidentiality in their trust laws. “I was surprised at how many were coming across that were formerly Swiss bank accounts, but they want out of Switzerland.”

  And, to top it off, there is one specific firm which is spearheading the conversion of the U.S. into Panama: Rothschild.

  Rothschild, the centuries-old European financial institution, has opened a trust company in Reno, Nev., a few blocks from the Harrah’s and Eldorado casinos. It is now moving the fortunes of wealthy foreign clients out of offshore havens such as Bermuda, subject to the new international disclosure requirements, and into Rothschild-run trusts in Nevada, which are exempt.

   

  * * *

   

  For financial advisers, the current state of play is simply a good business opportunity. In a draft of his San Francisco presentation, Rothschild’s Penney wrote that the U.S. “is effectively the biggest tax haven in the world.” The U.S., he added in language later excised from his prepared remarks, lacks “the resources to enforce foreign tax laws and has little appetite to do so.”

  Yes, Mossack Fonseca may now be history, and its countless uberwealthy clients exposed, but none other than Rothschild is now delighted to be able to fill its rather large shoes.

  

  

  

  

• Off The Grid Indicators Reveal True State Of U.S. Economy

  From Nicholas Colas at Convergex

  Our basket of unorthodox economic indicators shows an American economy in a state of flux.  On the plus side, used vehicle prices remain stable and pickup truck sales still show positive comps to last year.  Light vehicle dealer inventories at 68 days supply are normal for this time of year, as long as car and truck demand hold up through the spring selling season.  Google still autofills “I want to buy” with “a house” first and now “a timeshare” is second, showing continued strong consumer interest in both primary and discretionary housing.  On the downside, food stamp program participation is still running +45 million individuals and +22 million households, down only modestly from the +48 million participants at the peak in 2013. Our proprietary “Bacon Cheeseburger Index” shows deflationary pressure on par with 2009 and 1998, pulling consumer inflationary expectations lower.  And firearm background checks by the FBI both ramped to new highs in 2015 (+23 million) and show +40% year over year comps in the first two months of 2016.

  There is a t-shirt popular in certain parts of the U.S. that bears the following message: “Alcohol, Tobacco, Firearms… Who’ s bringing the chips?”  Yes, ladies sizes are also available.  And if casual clothing isn’t your thing, the same sentiment is available on caps, mugs, patches, greeting cards and bumper stickers.  Just Google the term and you’ll see a wide variety of options.

  If that sentiment abhors or confounds you, I can understand.  America is a large country, both in terms of geographic and ideological span.  What gets taken for granted in Manhattan draws a quizzical eye in Moline or Monsey, and vice versa.

  Just as it pays to travel through America to understand it completely, we also believe it pays to look beyond the customary economic data to really get under the hood of the domestic economy.  We’ve been doing this piece quarterly, highlighting these “Off the Grid” economic indicators, for 5 years now and they never fail to both illuminate and entertain.  We’ve included our customary chart deck in the attached document, but the rest of this report will be a highlight reel of this quarter’s findings.

  Take one simple example: inflation. 

  • Academic discussions center on either growth in the money supply or the change in the general price levels of goods and services. Core PCE (the Fed’s preferred measure) is currently +1.7%, but we all heard Fed Chair Yellen’s skepticism on this data during her speech this week.
  • The Fed Chair is right to be cautious, for it is inflationary expectations that really matter. If the population believes prices will decline in the future, or at least become relatively less dear, they will delay consumption today.  Look for “Japan” in the economic dictionary to understand the consequences.  To understand where consumer inflation expectations are going, you would do well to consider a basket of commonly and frequently purchased goods.  That, after all, is what anchors inflation expectations for many consumers.
  • Enter our very own “Bacon Cheeseburger Index”, an evenly split mini-basket of items that just happen to make up summertime’s most desirable lunch or dinner treat. Thanks to price declines in all three cholesterol-laden commodities, a bacon cheeseburger now costs 5.1% less than a year ago.
  • A look back at this index to 1990 finds that it is actually a decent indicator of deflation risk. Prior periods when the BCI turned resoundingly negative (3 percent or more) since 1990 include: 2009 (Financial Crisis), 1998 (EM/Long Term Capital), and 1992 (lead up to Iraq Invasion).  In each case, the Fed was cutting interest rates, not raising them.

  So should the Fed actually use the Bacon Cheeseburger Index?  Of course not…  But does it help explain in one compact (if anecdotal) form why the Federal Reserve is happy to hold off on rate increases?  I think it does.

  We have a host of other indicators we track, and in the remainder of this note I will summarize them.

  Auto-related indicators.  Used car prices are a highly underappreciated economic bellweather.  Everyone looks at new car sales, but with every new vehicle that rolls off the lot, a less shiny one stays behind.  The value of that trade-in can stop a potential buyer from signing a new car loan or upgrading models.  Other indicators worth a mention: full sized pickup truck sales (a proxy for small business growth) and overall new vehicle inventories.

  • Used car prices according to Manheim auto auctions – one of the biggest in the business – have remained stable since mid-2010. If there is a worrisome sign, it is that they recently dropped 1.4%. That bears watching, especially with 3 year old off-lease vehicles from the 2013 sales year coming back to dealers.
  • Full sized pickup truck sales are still rising, up 8% year over year.
  • Dealer inventories of new cars and trucks is currently 68 days, down from 73 days last year at this time and 80 days in February. Anything over 60 is considered “High”, but a good spring selling season should clear inventory.

  

  

  Supplemental Nutrition Assistance Program (also called Food Stamps) Participation data tells a story about how deep the economic “Recovery” has run through the strata of American society.

  • Prior to the Financial Crisis (2006 Fiscal Year data), there were 26.5 million Americans in the SNAP program.
  • That number rose to a peak of 47.6 million in 2013 and has only declined to 45.8 million as of the end of the last government Fiscal Year in September.
  • The most recent data available has total participation at 45.1 million and 22.3 million households. This amounts to 14% of all Americans and 20% of all American households.

  We track a range of goods and services to assess where Americans are investing and spending:

  • Background checks by the FBI for firearm purchases hit a new record at 23.1 million last year. At an average transaction price of $600 (an educated guess based on many visits to gun stores over the years) that is $14 billion in firearms sales.  Moreover, data from January and February 2016 shows background check volumes running +40% over last year.  Now, not every check results in a sale, but we assume most do and some no doubt actually represent multiple purchases.  Also worth noting: Google Trend data (the number of searches for a specific term) for ‘Buy a Gun’ are at multiyear lows.  To me, that means that repeat buyers are responsible for the recent growth since they have no need to search for a Federal Firearms Dealer.
  • Precious metal coin purchases from the U.S. Mint show consumers are more interested in gold over silver bullion purchases. On a rolling 6 month basis, the Mint is selling $87 million of gold coins/month now versus $62 million/month a year ago.  As for silver bullion coins, the current average selling rate is $63 million/month versus $69 million last year at this time.  Worth noting: both figures far exceed the amount of incremental capital invested in U.S. equity mutual funds, which is negative $23 billion YTD according to the Investment Company Institute.  As with the firearms data, Google searches for ‘Gold coins” is at multiyear lows and likely indicates bullion buyers are repeat purchasers.
  • Gallup Daily Tracking surveys for dollars spent out of pocket show an average daily outlay of $84, up from last year’s $82 at this time but down from the $87/day level of two years ago.
  • Miles driven continue to climb, according to the U.S. Department of Transportation. For January 2016, the growth here was 2.0% over last year and on a rolling 6 month average basis the comps are still running closer to 3% – numbers we haven’t seen since the middle of the last decade. Cheap gas is, of course, the primary explanation but also forces the question: where is everyone going and why aren’t they spending more when they get there?

  

  

   

  

   

  To measure common items searched on Google for either purchase or sale, we look at what the search engine “Autocompletes” when you type “I want to buy” and “I want to sell”.  Autocomplete is a proprietary Google algorithm that attempts to predict the rest of your query based on what others have completed to the same starting words.

  Yes, hilarity ensues sometimes with Autocomplete (see here: http://www.telegraph.co.uk/technology/google/6161567/The-20-funniest-suggestions-from-Google-Suggest.html), but we’ve tracked what Google has recommended to finish “Buy” and “Sell” searches since 2011. Here’s the latest:

  • “A house” has been the #1 autocomplete for “I want to buy” since Q1 2015, and remains on top this quarter.
  • Moving up to #2 for “Buy” is “a timeshare”. We’ll take it as a positive for both the primary and secondary residence real estate markets that these feature at the top.
  • Rounding out the top 4 are “a car” and “stock”.
  • For “I want to sell”, the top three answers are “Car”, “House” and “Kidney”. And yes, the last one is still illegal in the U.S.

  

  

  

  

  

• The Onion Explains How Virtual Reality Will Change Our Lives

  In the aftermath of such “paradigm” flops as 3D TV, 4K TV, the “wearables” revolution, the tech world is now obsessed with Virtual Reality. Here, courtesy of The Onion, are some potential ways that Oculus Rift and other virtual reality technologies will affect our lives.

  • Pornography: New 360-degree pornographic films will allow viewers to pan all around the bed and across the room to where cameramen and boom mic operators are standing
  • Education: Students will have access to wealth of new interactive visual aids that won’t be updated for the next 50 years
  • Business: Provides another medium that CEO won’t understand but will demand be wedged into the new marketing campaign by June
  • VR Industry: Potential to see moderate growth in this sector
  • Tourism: Could very well grind to screeching halt once travelers realize they can experience Liberty Bell from comfort of own living room
  • Neck Pain: Cases of neck pain projected to triple in both volume and severity over the next five years
  • Music: Immersion in 360-degree drum kits will allow amateurs to thrash with increased sickness
  • Clamming: Virtual reality to have no discernible impact on clamming
  • Mental Health: Putting on a VR headset to discuss feelings of dissociation and detachment with a computer-generated avatar will be extremely quick and affordable

  

  

  

  

  

  

• First Panama Papers Casualty? Former Iceland Premier Calls On Current PM To Resign To "Prevent An Uprising"

  One of the more prominent names featured in the Panama Papers disclosure is that of Iceland’s Prime Minister Sigmundur David Gunnlaugsson. The reason is that according to the leaked files, Prime Minister Sigmundur David Gunnlaugsson and his wife secretly owned a company called Wintris set up in 2007 on the Caribbean island of Tortola in the British Virgin Islands, to hold investments with his wealthy partner, later wife, Anna Sigurlaug Pálsdóttir.

  As Guardian reports, the couple were living in the UK at the time and had been advised to set up a company in the tax haven in order to hold and invest substantial proceeds from the sale of Pálsdóttir’s share in her family’s business back in Iceland.

  Gunnlaugsson owned a 50% stake in Wintris for more than two years, then transferred it to Pálsdóttir, who held the other 50%, for one dollar. The prime minister’s office now says his shareholding was an error and “it had always been clear to both of them that the prime minister’s wife owned the assets”. Once drawn to the couple’s attention in late 2009, the error was corrected.

  Towards the end of Gunnlaugsson’s time as a Wintris shareholder, having returned to Iceland, he was elected to parliament as leader of the Progressive party.

  Gunnlaugsson, who became prime minister four years later, never disclosed his Wintris shares on Iceland’s parliamentary register of MPs’ financial interests.

  As the Guardian also reported earlier, in the video clip below, PM Gunnlaugsson walks out of an interview with Swedish television company SVT. Gunnlaugsson is asked about Wintris, which he says has been fully declared to the Icelandic tax authority. Gunnlaugsson says he is not prepared to answer such questions and decides to discontinue the interview, saying: ‘What are you trying to make up here? This is totally inappropriate.’

   

  The prime minister and his wife then rushed out separate public statements in Icelandic condemning reporters’ intrusions into their private business matters.

  Both stressed their financial interests had always been properly disclosed to the Icelandic tax authorities. The Guardian has seen no evidence to suggest tax avoidance, evasion or any dishonest financial gain on the part of Gunnlaugsson, Pálsdóttir or Wintris.

  But it may be too late.

  As the Guardian adds, the prime minister is this week expected to face calls in parliament for a snap election after the Panama Papers revealed he is among several leading politicians around the world with links to secretive companies in offshore tax havens.

  The financial affairs of Sigmundur Davíð Gunnlaugsson and his wife have come under scrutiny because of details revealed in documents from a Panamanian law firm that helps clients protect their wealth in secretive offshore tax regimes. The files from Mossack Fonseca form the biggest ever data leak to journalists Opposition leaders have this weekend been discussing a motion calling for a general election – in effect a confidence vote in the prime minister.

   

  On Monday, Gunnlaugsson is expected to face allegations from opponents that he has hidden a major financial conflict of interest from voters ever since he was elected an MP seven years ago.

  As Iceland’s Visir reports, quoting a facebook post by Iceland’s former PM Johanna Sigurdardottir, she is calling upon Gunnlaugssonto resign to “prevent a social uprising”, and calling on him to “give a straightforward account of all the facts of the matter”. Google translated:

  Prime Minister Johanna Sigurdardottir said debt his people to leave immediately and prevent an uprising in society.

   

  Johanna Sigurdardottir, a former prime minister, says that the Prime Minister must immediately resign and the government all to leave. The Facebook post her she says that it is not just the credibility of the nation to the international community that is at stake – but will people never feel what leaders have been proven to be. It has formed a real breaches of confidentiality between the Government and the people of the country. Riots and anger in the community will not be weaker this collapse. Furthermore, says Johanna society will not have the Prime Minister that it needs to be ashamed, Prime Minister of the obvious has become the deception and dishonesty, the Prime Minister described was mistrust on the currency and the Icelandic economy by hiding their money in tax shelter, the Prime Minister does not seem to understand what morality is and wants to get yourself set up its own protocol, which is currently placed in the group with the perverse power brokers in the world. Prime Minister owes his people to leave immediately and prevent an uprising in society.

  The former finance minister Steingrímur Sigfússon told the Guardian: “We can’t permit this. Iceland would simply look like a banana republic. No one is saying he used his position as prime minister to help this offshore company, but the fact is you shouldn’t leave yourself open to a conflict of interest. And nor should you keep it secret.”

  Essentially, Gunnlaugsson political career is over, and the only question is whether Goldman has already picked a banker to replace him.

  

  

  

  

  

• A Massive Shift Is Underway!

  By Chris at www.CapitalistExploits.at

  I was abruptly awoken yesterday by a “PMS day.” A Richter-like force, brimming under the surface, evidenced by the stomping, grumbling, and frustration that accompanies this phenomenon. As a husband, I’m grateful for the warning signs; I can hide (I mean prepare) accordingly.

  It’s not hard to see change when it’s upon us. Identifying it ahead of time is a little bit trickier, but not much. The signs, like a grouchy wife, are often there if we care to look.

  I have often wondered if the average Joe in the midst of the Industrial Revolution ever looked around and noticed the change that was coming?

  The amazing changes witnessed since the late 1700’s are easily understood in hindsight. What is not commonly understood (in large part because we’re in the midst of it) is that today we stand on the brink of a technological revolution that will fundamentally alter the way we live work and play.

  But first, to understand the future we need to look to the past.

  Let’s take the aforementioned Industrial Revolution, which can be broken down into 3 key areas of innovation and disruption:

  The First Stage

  The first stage of the Industrial Revolution, around 1780, entailed harnessing steam power. Remember those old steam trains and water mills seen now only in children’s books and third world hell holes? Well, what they did was mechanize production, resulting in huge advances in manufacturing.

  The Second Stage

  Around 1870 electricity, which provided mechanization and production at a greatly increased level, in large part replaced steam.

  The Third Stage

  Around 1970 the use of information and electronics to amplify, enhance, and automate production came into the fold.

  Fast forward to 2016 and what is upon us, and taking place at an exponential rate, is a revolution driven by a coalescing and a convergence of multiple technologies, each providing a magnifying effect on one another.

  Just as an amazing chocolate cake requires a number of ingredients, today we have multiple ingredients (technologies) coming together and forming entirely new systems. In doing so, these technologies are  completely replacing and disrupting existing industries, products and power structures.

  It’s easily one of the most exciting and potentially frightening times to be an entrepreneur, investor and consumer. Frightening because expecting things to be the way they’ve always been is the most dangerous thing one can do; exciting because the tsunami-like shift of power and capital taking place at ever increasing speed affords incredible opportunity.

  If you’ve read the media over the past couple years you may be familiar with peer-to-peer lending, crowdfunding, crowdsourcing, Bitcoin (both the currency and the blockchain) or the sharing economy, which includes services such as Uber, Airbnb, Wikileaks and even Tesla.

  A common theme with all of these is that they disrupt an existing industry which often enjoys a stranglehold.

  Peer-to-peer lending, for instance, usurps investment banks and lending institutions. Bitcoin and crypto currencies usurp the need for central banks, financial institutions, stock exchanges, custodians, notaries, and credit cards to name but a few. Then we have 3D printing, which disrupts manufacturing by allowing individuals to design, create, and produce customized goods in their own home for less than the mass-produced alternatives.

  Fighting is Futile

  Fighting technology is a losing battle. You may as well fight oxygen.

  Take for example the case against Kim Dotcom. The US Government have spent millions of dollars doing all that they can to shut down file sharing, and they chose little Kim and his company Megaupload as the poster child designed to teach “all who may dare to follow” a lesson.

  Here’s how successful they’ve been…

  

  Why are these exponential technologies so successful? That answer is the same one that explains why the US military has been wildly unsuccessful in fighting Al Qaeda. It’s a lesson they should have learnt from the Soviets 20 years earlier.

  The answer is decentralization.

  Attacking a bunch of goat herders in Jesus sandals, who are scattered across inhospitable terrain, with factions on every continent, is like trying to defeat soil.

  Technological advancements were the game changer for the terrorists. Not only are terrorists decentralised, but the cost of military hardware and advancements in technology have altered the global power structure.

  Not only do these exponential technologies disrupt industries, they will also bring about disruptive changes in political regimes and even borders at an increasing speed.

  The Soviet Example

  1986 was the year that the Mujaheddin first shot down a Soviet Mi-24 Hind helicopter. The Ruskies had been in Afghanistan for 7 years enforcing their will. A military superpower to be reckoned with. 3 years later they were gone, tail between their legs.

  Why?

  The US-made Stinger missile. Costing less than $75,000 it was a steal, easily operated by a single man. And sporting a kill ratio of 70%, the Stinger in the hands of a bunch of goat herders changed the economics and success of large scale, centralised warfare.

  

  Who would have guessed that a shoulder held missile, manned by a poverty-stricken group of villagers, would stave off a military superpower?

  While the Stinger missile and cyber warfare today massively disrupt the existing balance of power, seemingly innocuous technologies we’re all now used to, and consume regularly, do much the same thing.

  Authorities tried to stop Airbnb as well as Uber. City officials have banned their use, lobby groups have fought and continue to fight them, and yet both have continued to grow.

  They grow not because of the companies themselves marketing heavily, but because their users share it. When something is fundamentally useful and valuable to the consumer, human nature is to share it.

  If a particular product is centralised and found in a large factory, shutting its operations would be a cinch. This is why labour unions dominated society during the industrial era.

  Today that’s not the case. In order to stop product use each and every consumer would need to be stopped.

  The world we’re living in includes billions of people connected digitally, holding unprecedented processing power, storage capacity, and access to knowledge that only a decade ago was un-achievable to even the most powerful of the world’s leaders.

  If centralized powers are to fight this trend they will be fighting a decentralized network of billions of individuals scattered across the globe. Borders matter less and less in our connected world.

  Networks which are viral, decentralised and useful, are incredibly difficult to stop, and with every passing day they grow in strength. Once a tipping point is reached they become part of the very fabric of society and things are never the same again.

  The Disrupted

  Napster was one of the early movers in sharing music online. In 2001 it was shut down by the authorities. Much like file sharing mentioned above, today music sharing is multiples of what Sean Parker ever had in mind.

  The disrupted?

  

  Here we have traditional music sales. Anyone who was making a living from selling CDs has had to find something else to do.

  At our upcoming Seraph Summit in Del Mar, California, attendees will get to meet Andres Barreto, the founder of Grooveshark, another music sharing service that post-dated Napster. Disruptive technologies are top of the list of subject matter.

   

  The disruptive technologies reshaping how we live, work and play have a number of characteristics:

  1. They defy the status quo. Whenever you disrupt the status quo you are smashing head long into people’s livelihoods. It’s never pretty. This explains why Julian Assange is still holed up in the Ecuadorian embassy in London. It explains the list of lawsuits against Tesla by the automotive industry. It explains the banking industries fear of, and rejection of, Bitcoin.
  2. They disrupt the balance of power. To point number 1 above, it’s not possible to disrupt existing power structures without defying the status quo and it’s not possible to defy the status quo, succeed and simultaneously not disrupt the balance of power.
  3. They are decentralised. There are only two ways to change incredibly powerful institutions and power structures. One is the industrial age method of head-to head-combat. War! The other is with exponential decentralised technology, which is almost impossible to stop.
  4. They are transparent. Bitcoin is open source. Tesla’s technology is open source. Crowd funding and peer-to-peer lending all function with transparency embedded.
  5. Distribution. They can be distributed rapidly, efficiently and at scale.

  These facts are aiding to compound and multiply the rate of growth in emerging technologies such as 3D printing, robotics, artificial intelligence, biotech, nanotechnology, virtual reality, and a host of others, including blockchain.

  Perhaps the most important point to consider is point number 5. The thing to understand is how exponential technologies permanently reshape the demand curve.

  The Impacted

  There are few industries that are not being (or will not be) impacted by this tidal wave of disruption. The shift from centralized industries to decentralized is unmistakable and accelerating every day.

  When an entire host of accelerating technologies come together, working off each other, the results are spectacular. New systems are formed with increasing speed and old systems fragment and fall apart as their inherent weaknesses become increasingly evident.

  I recently had an excellent conversation with a friend on this very topic. I recorded it and if you’re a subscriber you’ll get it early next week. He’s also joining us in Del Mar, California in a few week’s time, and if you’re a forward-thinking investor you should consider joining us too.

  Seriously, if you wish to get a deep understanding of the most powerful trends in motion today and how they are shaping the world then you need to book your space now before we’re full.

  The timing could not be better. The changes afoot today are causing a shift of wealth the magnitude of which promises to be one of the largest in human history.

  The Elephant in the Room

  I’ll leave you with a question.

  What entity or entities can you think of that are exhibiting the following traits?

  • Dishonest, shielding information from the public who are their “clients”
  • Centralized
  • Lacking in transparency
  • Hold, via coercion, the balance of power

  Have a good weekend!

  – Chris

  “This kid came up with Napster, and before that, none of us thought of content protection.” – Morgan Freeman

   

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• Four Major Fallacies in the Oil Market (Video)

  By EconMatters

  

  We discuss some of the current fallacies in the Oil Market in this video. From Russia Oil Production, Inventory Builds, Saudi Arabia`s Strategy, and Market Sentiment regarding the rally off the bottom.

  © EconMatters All Rights Reserved | Facebook | Twitter | YouTube | Email Digest | Kindle  

  

  

  

  

• About That Historic Q1 Market Rebound: 24 Of 26 Massive Snapback Rallies Occurred Within A Secular Bear Market

  Dy Dana Lyons of My401kPro.com

  Stocks Should Double In 3 Years (…Or Drop By A Third)

  In our April 1st Chart Of The Day, we showed that the Dow Jones Industrial Average (DJIA) did something that it has only done 3 other times since 1900. After dropping over 10% during the quarter, it recovered to close the quarter positive.

  

  The 3 prior quarters that saw the DJIA accomplish this feat were the 4th quarter of 1933, the 4th quarter of 1971 and the 4th quarter of 2000. Following these reversals, the index had some interesting returns over the subsequent 3 years: it was up a lot…or it was down a lot. After the 1933 occurrence, the DJIA rallied as much as 98% over the next 3 years. Following the 1971 and 2000 events, the index dropped by as much as 35% and 33% in 3 years, respectively.

  So which will it be this time? The size of the deficit that stocks overcame in the 1st quarter may give us a clue. At its low, the DJIA was down -11.3% for the quarter. Looking at the prior reversals, we see that the DJIA’s max intra-quarter loss in 4Q, 1971 was -10.9% and in 4Q, 2000 it was -10.1%. The max drawdown in 4Q, 1933 was…-11.3%, exactly the same as this past quarter.

  Therefore, bulls can take heart in the fact that our prior circumstances are more similar to the 1933 event. And if history is to repeat, we should expect the DJIA to nearly double over the next 3 years to around 35,000. Of course, we can never be too sure, so we would recommend adjusting one’s portfolio to take advantage of both potential scenarios.

  In all seriousness, one thing that may be instructive about such reversals is the overall investment climate in which they occur. The three prior events took place within secular bear markets. Additionally, there were 26 other quarters since 1900 which saw the DJIA recover at least 8% off its quarterly low after being down at least 10%. All but 2 of those quarters (4Q, 1987 and 4Q, 1997) occurred within a secular bear market.

  Therefore, if there is anything that is to be gleaned from such large positive reversals, perhaps it is that they tend to occur within negative secular environments.

  

  

  

  

  

• Stanley Druckenmiller: "This Is The Most Unsustainable Situation I Have Seen In My Career"

  By Jody Chudley, originally posted on the Daily Reckoning

  Simple Math Shows America Is Headed for an Economic Disaster

  With so many voices streaming at us through our televisions and computers, a person can’t be blamed for tuning out.

  For the most part, tuning out is exactly what we should do. But sometimes it is very important that we pay attention…

  By listening to Jeremy Grantham, Jim Grant and a host of other investors, a person could have avoided and profited the crashing of the tech bubble of the late ’90s.

  By listening to Kyle Bass, Michael Burry and Prem Watsa, an investor could have avoided and even profited from the crashing of the housing bubble in 2008.

  Today is another time when we all need to be paying attention. This time, the man we need to be listening to is Stan Druckenmiller.

  

  For 25 years as a hedge fund manager, Druckenmiller compounded money at an annualized rate of return of 30%. Incredibly, he did it without a single down year.

  Druckenmiller has a dire warning for all of us. One that requires action.

  There is nothing for Druckenmiller to gain from providing this warning. He isn’t talking his book or trying to gain investor support — he isn’t promoting anything. He doesn’t even have a political agenda.

  He is spending his own time and money to try to bring this issue to light because he believes it is crucial for the United States.

  Druckenmiller simply believes that America is heading for a disaster, and he is trying to use his high-profile position to get people motivated to stop it.

  What you need to know about Stan Druckenmiller is that his incredible investing performance was rooted in his skills in making macroeconomic forecasts.

  When describing how he was able to compound money at such a crazy rate and not have a single down year, Druckenmiller said:

  How did we do it? Very simple. While others were focusing on the present, we looked and focused on the future in terms of analyzing unsustainable situations.

   

  And when I look at the current picture of expected tax revenues combined with benefits promised to future generations, this is the most unsustainable situation I have seen ever in my career.

  The disaster that Druckenmiller sees coming for the United States is all about changing demographics and entitlement spending. They don’t add up to a sustainable situation.

  In 1940, entitlement payments, which include everything from disability payments to Social Security to Medicare, amounted to just over 20% of annual government spending in the United States.

  Today, entitlement spending has swelled to nearly 70% of the annual federal budget.

  Things are about to get a whole lot more complicated. The 20-year baby boom that took place after World War II is now beginning to result in a retiree boom.

  For context, Druckenmiller points out that in 2030, the average age of an American citizen will be older than the average age of a resident of Florida today.

  This demographic trend is going to create an entitlement spending catastrophe.

  The way the system works, the current workforce provides the tax revenue to support the current senior population. A huge rise in the retiree population relative to the number of people working results in a funding dilemma.

  Since 1980, the number of working-age people the country has had has outnumbered those age 65 and over by a count of 5-to 1.

  The country has had enough workers generating tax revenue to support the number of retirees.

  By 2030, that ratio is going to drop to 2.5-to-1.

  By 2029, there will be 11,000 new seniors arriving every day and only 2,000 new adults being added to the workforce to pay for them.

  There is just no way that the workforce at that time is going to be able to fund the entitlements of these seniors.

  This is a problem because those are commitments that have been made and will have to be paid.

  Corporations are required to disclose on their balance sheet the future defined pension obligations that their employees have earned.

  Those are very real liabilities for companies that are going to have to be paid, so they should be included.

  The balance sheet of the United States, meanwhile, doesn’t account for the future payments that it has promised to its senior citizens. Again, like defined benefit pension payments, these are very real obligations.

  They should be recorded as liabilities of the United States.

  Here is how much the U.S. debt would increase, assuming no change in tax rates, if those obligations were included:

  

  Source: Stan Druckenmiller presentation

  That chart makes the size of the problem abundantly clear. There are a lot of people already very concerned with the amount of debt the United States has. Imagine how they would feel if they were aware that with these liabilities conclude the number is 20 times larger.

  This is a case of simple math.

  Either tax rates increase in a massive way or the payments to seniors have to be cut significantly. The status quo doesn’t work. There just isn’t going to be anywhere close to enough money coming in to fund the payments going out.

  The country can’t borrow its way out of a funding issue of this size.

  This issue that Druckenmiller is so passionate about is a huge problem. One with no possible solution that will be popular with the American voters.

  Either higher taxes or lower benefits. Likely some combination of both. Both very unattractive options for big percentages of the voter base.

  You can hear the politicians kicking this can further down the road, can’t you?

  Fixing this is going to require some real sacrifice by the American people. That doesn’t sound like a very appealing platform upon which to get re-elected.

  The finances of the entire world are run by short-term thinkers. Central bankers have been dead set on trying to inflate economies for a decade now using more and more aggressive easy-money policies.

  To try to make the short term a little better, these central bankers have been perfectly willing to roll the dice on the long term.

  The issue that Druckenmiller has raised will have to be dealt with. I’m sure it will be dealt with far later than it should be as politicians do kick that can down the road.

  By doing that, they are only going to make the corrective actions that the country has to take more severe.

  It is crucial that all of us realize that our long-term financial well-being really needs to be taken care of by one person. That one person is the man or woman you look at in the mirror in the morning when you are brushing your teeth.

  We have to make sure we protect our wealth diligently and invest in assets that will retain their value when the consequences of all of this short-term thinking arrive.

  Because eventually, they will.

  

  

  

  

  

• Why Silicon Valley’s “It’s Different This Time” Is Now A Broken Record

  Submitted by Mark St. Cyr

  Why Silicon Valley’s “It’s Different This Time” Is Now A Broken Record

  Like a broken record whenever a profit measure was asked of “Silicon Valley” (i.e., everything social or tech) as to when something would either be profitable or, begin returning investor cash with either net profits or dividends. The response was always the same “It’s different this time.” Meaning: there aren’t any now, but just you wait! Some are still waiting, and waiting, and waiting, and….

  The only reason this retort was tolerated for as long as it had been is for that other “it’s different this time” meme that took hold in unison when it came to everything one thought they understood about investing, free markets and capitalism itself: quantitative easing e.g., QE.

  As long as the Fed enabled “free money” to chase momentum plays – the gravy train to cash-out-riches was running on rails. Yet, here too investors, savers, and more would ask “When does normalization type policies begin that benefit the prudent balance sheet or fiscally responsible?” And here the retort was much same, “Not now, but just you wait!” And again they too are still waiting, and waiting, and waiting, and…

  Of course the answer to the question of why we’re waiting is, you guessed it – “it’s different this time.” Four words that replaced a teenager’s one word answer to everything: “Because!” But that’s what a Ph.D is for I guess – making the simple more complex. But I digress.

  However, today there are visible cracks showing in the armor of that once fool-proof defense. Everywhere you look (but you have to open your eyes too see) the once celebrated IPO cash-out where dreams and fortunes are made regardless if the business model works, stable, or is even viable, has been all but erased 4 months into 2016. And how much longer it goes on is anyone’s guess.

  As we stand today, as of this writing, there have been zero IPO’s of any “unicorns.” Zero, as in zip, zero, nada. Why? Is it – different this time?

  It seems too me the deciding difference is more of the same old, same old. i.e., Without QE’s enabling “hot money” for momentum chasing – net profits matter. Not “net-eyeballs” for fairy-tale story telling. And net profits today are as rare as the vaunted unicorn itself: mythical. Unless it’s Non-GAAP, then as they say “You’re crushing it!”

  Today, investors of all stripes seem to be no longer buying into myths. At least not without “free money” (e.g., QE) that is.

  “Eyeballs for ads” (aka – user growth etc., etc.) has been the celebrated metric used and touted for everything social et al from its inception. Not sales, not profits, nor a whole lot of other business centric measurements as to the health and viability of an enterprise. No, like a broken record only user growth metrics (i.e., eyeballs) mattered. Yet, there’s currently a very, very, very (did I say very?) big problem with this whole “eyeballs” or “user growth” defense. The issue is: The fairy tale metric has morphed into a real-life counter factual that can no longer be hidden. And this nightmare is growing day, by day, by day, and by day. Let’s list a few shall we?

  Regardless of how a next in rotation fund manager, economist, think tank alumni, or Ivy League’d Ph.D professor et al wants to justify these “markets.” Anyone with a modicum of business acumen understands there’s no fundamental business reason or metric that logically explains why we should be at these heights. None. It’s a fairy-tale story based on a mirage as its factual base. All smoke and mirrors supported via a cohort of complacent onlookers, along with, just as many fervent believers hoping, and praying that this “Never-land” can exist forever. Do I need to remind you that even the Bank of Japan’s governor Mr. Kuroda actually uses the term “Peter Pan” to describe his monetary thesis? Welcome to monetary policy 21st century style. Remember – it’s different this time.

  Yet, how is it, here we are within spitting distance of the all time, never before seen in human history highs and: there hasn’t been a one? Not any unicorns cashing out? None in all of 2016 thus far? How is it different this time? Why is it different this time? How can all this good in the markets be so bad not only for the “eyeballs for ad dollars” based social everything genre, but all IPO candidates in general?

  Oh right, I forgot. Not to sound like a broken record but “it’s different this time.” I would suggest this time, is a looking a lot like last time. Can you say A – O – L? Many can – they just won’t.

  Another point is; when it comes to that cashing-out IPO stock option dream and picking up a San Francisco McMansion on the cheap at $5 million or so. Those dreams are beginning to take on more of a realization that a shipping container reality might be here to stay far longer than first anticipated. Or, if you’re lucky, you might find a nice place in some box, or under some stairwell or crawl space to rent while you wait for that “just you wait!” IPO announcement we’re told is coming any day now.

  Only issue? Hopefully that box, or room in a McMansion isn’t rented from someone who is also waiting. Or, you may find they’ll need to use that space eventually for themselves as they list their bedroom on AirBnB™ to help foot the bill. But not too worry. For they’ll state, “It’s just any day now!” when they’ll cash out their shares with ____________ (fill in the blanks) unicorn’s IPO. If it ever does – at a value that pays. After all: there’s always next quarter, right? Just like earnings. But again I digress, sorry.

  How about some past unicorn cash outs? How are they doing? Twitter™? Linkedin™? Square™? If you hold shares in these companies you should be crushing it when it comes to your portfolio. After all, these companies have seen their shares hurt “unfairly” as many a Silicon Valley aficionado or next in rotation fund manager will attest. So, with a historic rise that dwarfed all previous measures prior in the “markets,” with the best recovery ever (yes, ever) in a quarter in the stock markets history. The share prices of these companies should be on fire, no?

  No. In actuality if you still own shares I would surmise the description would be more in kind with underwater, or drowning in a sea of red, yes? Well remember, it’s different this time, right?

  But these are new business models we’re told. It is us or you that “just doesn’t get it” when it comes to all these new businesses emanating from tech. Disruption is the key! Profits come later, making net profits much later (if ever!) It’s all about “eyeballs for ads.” Once they get that user growth model back on track just you wait!

  Well we’re still waiting, but more importantly, Wall Street has been waiting and has clearly shown it’s losing its patience. And for many, not only are they no longer willing to wait. But more importantly: They’re either pulling out, or turning a blind eye to “eyeballs” entirely. Now it’s, “Where’s my money or, I’m showing you the door.” And it’s gaining ground daily.

  There’s no better example today than Yahoo™. Here’s a company only a mere 3+ years ago was heralded with its hiring of Marissa Mayer as CEO, its stake in Alibaba™, along with its “eyeballs for ads” count was, and still is, one of the highest on the web. Today? Now that  QE is no longer, the only thing worth keeping (as to sell) seems to be its stake in Alibaba. Although at a far lower value than they were from its own IPO heights.

  How valuable is all that “eyeballs for ads” goodwill? As the ole saying goes: “How much you got?” For it seems via the rumor mill it isn’t going to take all that much to acquire it. Talk about a diminishing value. As for being a board member? That now has a life expectancy of “how long before you can move out?” And as for its once high flyer, party throwing CEO? Maybe LinkedIn will be her next ticket to fame. No, not as an executive – but as a job board participant. Oh and by the way, LinkedIn shares are still on sale – and nobody seems to care. Except those with double-digit percentage losses. But alas, once again, I digress.

  It seems she’s just the latest in an ever-growing list of “social everything” brilliance – as long as there’s QE to supply the brain power. And the debacle at Yahoo is just the latest of the oldest names. For I believe: It’s coming to the “new” in much the same fashion and will snowball even quicker. And yes, even with the markets at these levels. Why? Easy…

  The fairy-tale can no longer withstand reality. Net profits, and return of money and/or investment matters. Period. Unless…

  You’re one of the fortunate that is somehow already located within an index fund that is targeted and/or held by either a central bank or sovereign wealth fund. If not? “There’s no soup for you!” (i.e., money to wait.) That time has now since passed for “it’s different this time.” And not the way the “Valley” has argued these last 6+ years. (And I believe that too is about to find itself in a whole ‘nother “it’s different this time” reality check in the very near future.)

  The time of “eyeballs for ads” has peaked in my opinion. That story as I’ve argued over the years would unravel quicker than a sweater thread, and all it would take was when the meme of “it’s different this time” began being debunked by measurements the “Valley” itself couldn’t just talk over or spin away.

  As a matter of fact I’m of the opinion that today: the more words used to protect the fairy-tale meme will actually work against it. I’ll finish with the latest example for anyone who wants to truly understand just how encompassing the “it’s different this time” narrative really has become and – to what extent.

  There is probably no other industry that has been disrupted, broken, changed, and far more other ways than I can type – than music. And there has been no other business model in the “eyeballs/ears for ads” internet genre than streaming music services. Billions of listeners, billions of this, billions of that. Valuation touted of $BILLIONS, and more. “It’s the way of now!” “Streaming is it!” “Invest now or miss the boat!” “This is where the money of the decade is to be made!” And on, and on, and on. However, there’s a problem.

  Remember how I implied “would unravel quicker than a sweater thread?” And all it would take was when the meme of “it’s different this time” began being debunked in ways so glaringly obvious without saying a word? Well, here is the latest fulfillment of that argument.

  Streaming music; for all that it’s been touted to be; both the be all, and, end all of music. Along with why its business model would be the darling of investors everywhere. I ask you not only to contemplate this yourself, but also, think about how this one fact is going to play into the minds of not only current investors, but rather, those desperately needing new investors today for all that “cashing out” to take place tomorrow. Ready?

  Vinyl sales, yes, as in those plastic looking arcane relics of yesteryear that adorn many a bar room wall or lie boxed is some grandparents basement hasn’t just made some resurgence that you didn’t read on you latest social media “eyeballs for ad revenue” of choice. No, this resurgence isn’t making such a comeback as to replace digital. However, what is has done is antiquated that meme of “it’s different this time” when it comes to those “eyeballs for ads” supported models. Ready? (If you’re an investor in one form or another of the “eyes for ads” model you might want to take a seat. Don’t say I didn’t warn you.)

  According to the Recording Industry Association of America (RIAA) vinyl sales generated more revenue in 2015 than ALL the ads/advertising on YouTube™, Spotify™, and Soundcloud™ – Combined!

  But what about all those eyeballs/and ears you ask? Sorry, but the pun just writes itself:

  It’s differen..It’s differn…It’s differen…It’s differen…It’s differen…It’s differen…

  

  

  

  

  

• Iran Oil Minister Rejects Saudi Demand To Freeze Crude Production

  In the aftermath of Bloomberg’s surprising Friday report, according to which Saudi Arabia flipflopped on its previous promise that it would freeze its oil output while allowing Iran to grow supply until it hit its pre-embargo peak, instead saying that it would only join the freeze curbe Iran – and all other OPEC member nations – also joined, crude tanked.

  Today, what little hope there may have been that Iran will suddenly change its mind and join the production freeze evaporated on Sunday when Iran’s oil minister rejected a Saudi demand to stop throttling up its petroleum production. As the WSJ adds, this threatens what has become a farcical deal to “limit crude output and raise prices” when the major oil producers meet in Doha on April 17.

  The follows Zanganeh’s admission that Iran’s oil and condensates exports surpassed 2mm b/d, a trend Iran will certainly not want to imperil.

  

  Iranian Oil Minister Bijan Zanganeh

  As the WSJ notes, Zanganeh’s remarks were his first comments since a report emerged last week that Saudi Arabia, the world’s largest crude exporter, would limit its production only if Iran followed suit.

  The dueling positions by the Middle East’s two biggest rivals for power and economic might have set off a scramble among other oil-producing nations to salvage a deal to freeze their output and stop growth in the world’s petroleum supplies. Global oil production outpaces demand by almost two million barrels on any given day, sending prices to their lowest levels in over a decade.

  Ironically, in advance of the Doha meeting which many thought had a chance of reaching some agreement, other OPEC members had pushed their oil production to the limit, flooding the market with even more excess supply. Most will find it virtually impossible to throttle production back.

  As a reminder, Saudi Arabia and other members of the 13-nation Organization of the Petroleum Exporting Countries are set to meet with nonmembers like Russia on April 17 in Doha to hash out a production freeze.

  The Bloomberg report on Friday. citing an interview with the kingdom’s Deputy Crown Prince Mohammed bin Salman, shocked Saudi Arabia’s Arab allies in the Persian Gulf.

   

  Before the prince’s comments, Saudi Arabia had been signaling it would hold production steady, instead of increasing, even if Iran ramped up its output. Iran just received relief from Western sanctions that had crippled its oil industry and is increasing output to achieve presanctions levels.

  As for Iran, it is merely sticking to what it has said before it would do: Zanganeh told Iran’s semiofficial Mehr News Agency that he still intended to bring Iran’s oil production to its presanctions level of four million barrels a day an increase of one million barrels a day compared with late 2015.

  As noted above, Iran’s oil and gas condensate exports rose by 250,000 barrels a day in March to surpass two million barrels per day, the ministry’s Shana news service quoted Mr. Zanganeh as saying.

  Even though Mr. Zanganeh told Mehr he would certainly attend the Doha meeting if “he had time,” his refusal to heed to Saudi demands that Iran freeze its output calls the success of the upcoming meeting into question.

  With the Iran breaking ranks, Kuwait and Qatar are scrambling to reach Riyadh to salvage the prospective agreement, according to the WSJ. Kuwait’s acting oil minister Anas al-Saleh said cooperation between OPEC and nonmembers would “certainly help stabilize oil prices.”

  “We believe that a common agreement on a positive stand will serve market stability,” the minister said.

  Of course, Kuwait has already made it clear that without Iran there is no deal: as we reported on March 8, Kuwait’s oil minister said on Tuesday that his country’s participation in an output freeze would require all major oil producers. “I’ll go full power if there’s no agreement. Every barrel I produce I’ll sell,” Anas al-Saleh told reporters in Kuwait City last month.

  He may now have no choice.

  Oil prices have risen since Saudi Arabia and Russia met in Doha in February and first broached the idea of a freeze. Prices have climbed over $40 a barrel in recent weeks, after hitting lows of $27 a barrel in January. But prices fell on Friday after the Saudi prince’s comments were published. It remains to be seen if oil will revert back to its February lows now that any hope for a coordinated supply cut is no longer on the table.

  

  

  

  

  

• IMF's Lagarde Responds To Tsirpas: Calls Use Of Credit Event As Negotiating Tactic "Simply Nonsense"

  After last night’s oddly drafted letter by the Greek PM Tsipras (which contained a combination of typed text and scribbles) to IMF head Lagarde in the wake of the Wikileaks revelation which was interpreted by many, the Greek government included, that the IMF would seek a “credit event” to facilitate its debt-reduction negotiations with Angela Merkel, it was only a matter of time before the IMF officially responded to the Greek premier and population. She did so moments ago.

  The highlights:

  • … any speculation that IMF staff would consider using a credit event as a negotiating tactic is simply nonsense
  • … if it were necessary to lower the fiscal targets to have a realistic chance of them being fully met, there would be an attendant need for more debt relief.
  • … this weekend’s incident has made me concerned as to whether we can indeed achieve progress in a climate of extreme sensitivity to statements of either side
  • … I have decided to allow our team to return to Athens to continue the discussions.
  • … it is critical that your authorities ensure an environment that respects the privacy of their internal discussions and take all necessary steps to guarantee their personal safety.
  • … the IMF conducts its negotiations in good faith, not by way of threats, and we do not communicate through leaks

  Full letter:

  Dear Prime Minister,

   

  Thank you for your letter of April 2, in which you ask about the IMF’s position regarding the program negotiations with Greece.

   

  My view of the ongoing negotiations is that we are still a good distance away from having a coherent program that I can present to our Executive Board. I have on many occasions stressed that we can only support a program that is credible and based on realistic assumptions, and that delivers on its objective of setting Greece on a path of robust growth while gradually restoring debt sustainability.

   

  Otherwise it would fail to re-establish confidence, with the implication, among others, that Greece would soon again be forced to adopt yet more measures. Of course, any speculation that IMF staff would consider using a credit event as a negotiating tactic is simply nonsense.

   

  As you and I have discussed several times, including recently on the telephone, I have been consistent in pointing out that, if it were necessary to lower the fiscal targets to have a realistic chance of them being fully met, there would be an attendant need for more debt relief. In the interest of the Greek people, we need to bring these negotiations to a speedy conclusion.

   

  I agree with you that successful negotiations are built on mutual trust, and this weekend’s incident has made me concerned as to whether we can indeed achieve progress in a climate of extreme sensitivity to statements of either side. On reflection, however, I have decided to allow our team to return to Athens to continue the discussions.

   

  The team consists of experienced staff who have my full confidence and personal backing. For them to be able to do their work, as you have invited us, it is critical that your authorities ensure an environment that respects the privacy of their internal discussions and take all necessary steps to guarantee their personal safety.

   

  Finally, the IMF conducts its negotiations in good faith, not by way of threats, and we do not communicate through leaks. To further enhance the transparency of our dialogue, I have therefore decided to release the text of this letter on our website at www.imf.org. I also look forward to any personal conversation with you on how to take the discussions forward.

   

  Sincerely yours,

   

  Christine Lagarde

  And so once again conditions between Greece and the IMF (the only Troika agency that advocates more Greek debt cuts) are right back to their traditional sub-frigid place.  As to whether Greece can guarantee the personal safety of the IMF’s team, we shall find out imminently: the critical negotiations are set to begin in the next few days.

  

  

  

  

  

• A Look Inside Iceland's Kviabryggja Prison: The One Place Where Criminal Bankers Face Consequences

  What do Lloyd Blankfein, Jamie Dimon, James Gorman, John Thain, Jimmy Cayne, and any of the revolving door of AIG CEO’s have in common? Three things come to mind rather quickly: 1) All were financial executives during the 2008 global financial crisis. 2) All of their firms received massive public bailouts. 3) None of them went to jail for their firm’s involvement in said crisis. As a matter of fact, most are still plugged in somewhere on Wall Street, presumably helping to facilitate the next great financial crisis.

  While everyday Americans were (and still are) quite disgusted with the fact that absolutely nobody was actually held accountable for the creation of the financial crisis, it’s safe to say that most have given up hope that anyone will be convicted. As a matter of fact, US Attorney General Eric Holder once said that banks are so large that it would be difficult to prosecute anyone. 

   That’s nice.

  Enter Iceland, a small country of roughly 330,000 residents, where as Bloomberg reports, bank executives are actively being prosecuted and sent to jail for their negligent actions.

  Unlike the jellyfish in the US, Iceland appointed Olafur Hauksson as special prosecutor to investigate bankers and their roles in the financial crisis. The result? 26 convictions of bankers and financiers since 2010. In upholding the convictions, Iceland’s Supreme Court said that actions were “thoroughly planned”, and “committed with concentrated intent” – refreshingly different than Holder’s let’s just let them get away with it because it’s hard to figure out verbiage.

  This is Olafur Haukson: a person who is the diametrical opposite of Holder; a person who dares to prosecute bankers.

  

  Olafur Haukson, special prosecutor to investigate the banking cases

  As Bloomberg writes, in contrast to the Icelandic saga, no bank CEOs in the U.S. or the U.K. have been convicted for their roles in the subprime mortgage crackup and related disasters. Bringing white-collar criminal cases may be easier in Iceland because courts don’t use juries. Rather, they employ neutral experts to help judges understand the intricacies of finance. In Britain’s highest-profile case stemming from the crash, the country’s Serious Fraud Office investigated London-based real estate magnates Vincent and Robert Tchenguiz in connection with their business dealings with Kaupthing. The brothers were never charged, and in 2014 the SFO even had to pay them £4.5 million ($6.4 million) in damages to settle their claims of malicious prosecution.

  Hauksson, a bear of man with a fighter’s jaw, is pressing ahead with a half-dozen more cases related to the crash. The former top lawman in Akranes, a port town up the coast from Reykjavik, Hauksson was one of only two applicants for the job of special prosecutor—and the only lawyer. “It was important for the country to look carefully at what happened in the months that led up to the banking collapse,” he says. Few expected him to succeed in untangling the web of self-dealing that stretched from Reykjavik to Luxembourg to London. “He was used to issuing parking fines and breaking up drunken brawls,” says Sigrun Davidsdottir, a journalist who writes about the bank cases on her website, Icelog. “It’s earth-shattering what he’s accomplished.”

  What he has accomplished is to do the unthinkable: send criminal bankers in prison.

  Working with the Financial Supervisory Authority, his office found that the country’s top three banks routinely made huge loans to their biggest stockholders. Worse, the banks secured the debts with their own equity, which spelled doom when share prices nosedived in September 2008. That month, Kaupthing Chairman Einarsson and CEO Sigurdsson surprised investors by announcing that Sheikh Mohammed bin Hamad bin Khalifa al Thani, a member of Qatar’s royal family, had acquired a 5.1 percent stake in the bank. The two bankers, with the help of Gudmundsson in Luxembourg and stockholder Olafsson, had directed Kaupthing to lend the sheik $280 million to buy the stake through a daisy chain of shell companies in the British Virgin Islands and Cyprus, according to court records. Arion Bank was formed from the domestic assets of Kaupthing after it failed in October 2008.

  The result: Iceland’s economy is vibrant and growing: “It’s a rebound other European nations would envy. Iceland’s gross domestic product is set to expand almost 4 percent this year, according to forecasts compiled by Bloomberg. The unemployment rate of 2.8 percent is about one-third the average of the European Union. As the state prepares to lift capital controls later this year, the banking sector continues to strengthen: State-owned Islandsbanki, the nation’s No. 2 lender with $8.4 billion in assets, boasts a common equity Tier 1 ratio of 28.3 percent. That’s more than twice the 12.7 percent average recorded by Europe’s 25 largest banks as of Dec. 31, according to Bloomberg data. “Before the crisis, the banks grew too fast and too much,” says Unnur Gunnarsdottir, director general of the Financial Supervisory Authority, which oversees the lenders. “That will not happen again.”

  * * *

  Despite Haukson’s success in ensuring criminal bankers pay for their actions, Hauksson isn’t letting up. He still has half a dozen more cases relating to the 2008 crash. Those on the receiving end of his convictions get to visit the beautiful Kviabryggja Prison, an old farmhouse turned prison, located in a remote area bordered by the North Atlantic.

  Kviabryggja Prison in western Iceland doesn’t need walls, razor wire, or guard towers to keep the convicts inside. Alone on a wind-swept cape, the old farmhouse is bound by the frigid North Atlantic on one side and fields of snow-covered lava rock on another. To the east looms Snaefellsjokull, a dormant volcano blanketed by a glacier. There’s only one road back to civilization.

   

  This is where the world’s only bank chiefs imprisoned in connection with the 2008 financial crisis are serving their sentences, Bloomberg Markets magazine reports in its forthcoming issue. Kviabryggja is home to Sigurdur Einarsson, Kaupthing Bank’s onetime chairman, and Hreidar Mar Sigurdsson, the bank’s former chief executive officer, who were convicted of market manipulation and fraud shortly before the collapse of what was then Iceland’s No. 1 lender. They spend their days doing laundry, working out in the jailhouse gym, and browsing the Internet. They and two associates incarcerated here—Magnus Gudmundsson, the ex-CEO of Kaupthing’s Luxembourg unit, and Olafur Olafsson, the No. 2 stockholder in the bank at the time of its demise—can even take walks outside, like Kviabryggja’s 19 other inmates, all of whom were convicted of nonviolent crimes.

   

  * * *

   

  At Kviabryggja Prison, the tumult in the capital seems worlds away. It’s dead quiet around the single-story barracks, and in the distance rise massifs that form Iceland’s western fjords. The Kaupthing convicts are marking time in different ways. A couple of them are tutoring fellow inmates. The subjects: math and economics.

  This is where Iceland’s criminal bankers can be found now:

  

  

   

  Meanwhile, in the US…

  

  

  

  

  

  

• "Land Of The Free?"

  Submitted by The Burning Platform

  

  

  

  

  

• The Great Global Weight Gain: The World Has Too Much Food

  For the first time in history, more people are obese than underweight, according to a new study. In 1975, more than twice as many people were underweight than obese…

  

   

  Behind the global spike is greater access to cheap food as incomes have risen. "It’s been very easy, as countries get out of poverty, to eat a lot, and to eat a lot of unhealthy calories,” said the study’s senior author, adding that "the price of fresh fruits, vegetables, and whole grains are often “noticeably more than highly processed carbohydrates." The rich world can blunt the health impacts of unhealthy weight with drugs, but health systems in the developing world may not be equipped to do the same.

  The past 40 years have seen an unprecedented increase in the number of obese adults worldwide, climbing to about 640 million from 105 million in 1975. If the current trend continues, about one-fifth of adults will be obese by 2025.

   

  The rate has more than doubled for women and tripled for men, according to a new analysis published in the Lancet. Under the present trajectory, the chance of meeting a goal set by the World Health Organization to halt the increase over the next decade is, according to the study, “virtually zero.”

   

  

   

   

  A person who has a body-mass index higher than 30, or weighs at least 203 pounds and is 5-foot-9-inches tall, is considered obese.

   

  The world population’s average weight has increased by about 3.3 pounds (1.5 kilograms) per decade since 1975, the researchers estimate. Excess weight raises the risk of diabetes, heart disease, and other chronic conditions.

   

  “The issue really comes down to people either not having enough to eat or not having enough healthy food to eat,” he said. “It becomes a manifestation of the same problem.”

  Governments need to prepare for the jump in medical costs that accompany unhealthy weight and focus on prevention now to avoid higher costs in the future, said Bill Dietz, director of the Sumner M. Redstone Global Center for Prevention and Wellness at George Washington University. “They should be as nervous as a cat on a hot tin roof about the tsunami of diabetes that’s coming their way,” Dietz said. “The cost of this rise in the prevalence of obesity is going to be staggering.”

  The main takeaway? Excess weight has become a far bigger global health problem than weighing too little. While low body weight is still a substantial health risk for parts of Africa and South Asia, being too heavy is a much more common hazard around the globe.

  

  

  

  

• "Unprecedented Leak" Exposes The Criminal Financial Dealings Of Some Of The World's Wealthiest People

  An unprecedented leak of more than 11 million documents, called the “Panama Papers“, has revealed the hidden financial dealings of some of the world’s wealthiest people, as well as 12 current and former world leaders and 128 more politicians and public officials around the world.

  More than 200,000 companies, foundations and trusts are contained in the leak of information which came from a little-known but powerful law firm based in Panama called Mossack Fonseca, whose files include the offshore holdings of drug dealers, Mafia members, corrupt politicians and tax evaders – and wrongdoing galore.

  The law firm is one of the world’s top creators of shell companies, which can be legally used to hide the ownership of assets. The data includes emails, contracts, bank records, property deeds, passport copies and other sensitive information dating from 1977 to as recently as December 2015.  

  It allows a never-before-seen view inside the offshore world — providing a day-to-day, decade-by-decade look at how dark money flows through the global financial system, breeding crime and stripping national treasuries of tax revenues.

  Here is the brief summary of how these documents have been revealed, via the Sueddeutsche Zeitung:

  Over a year ago, an anonymous source contacted the Süddeutsche Zeitung (SZ) and submitted encrypted internal documents from Mossack Fonseca, a Panamanian law firm that sells anonymous offshore companies around the world. These shell firms enable their owners to cover up their business dealings, no matter how shady.

   

  In the months that followed, the number of documents continued to grow far beyond the original leak. Ultimately, SZ acquired about 2.6 terabytes of data, making the leak the biggest that journalists had ever worked with. The source wanted neither financial compensation nor anything else in return, apart from a few security measures.

   

  The data provides rare insights into a world that can only exist in the shadows. It proves how a global industry led by major banks, legal firms, and asset management companies secretly manages the estates of the world’s rich and famous: from politicians, Fifa officials, fraudsters and drug smugglers, to celebrities and professional athletes.

  A quick snapshot of the scale of the leak in context:

  

  * * *

  Mossack Fonseca’s fingers are in Africa’s diamond trade, the international art market and other businesses that thrive on secrecy. The firm has serviced enough Middle East royalty to fill a palace. It’s helped two kings, Mohammed VI of Morocco and King Salman of Saudi Arabia, take to the sea on luxury yachts.

  In Iceland, the leaked files show how Prime Minister Sigmundur David Gunnlaugsson and his wife secretly owned an offshore firm that held millions of dollars in Icelandic bank bonds during that country’s financial crisis. In the video clip below, PM Gunnlaugsson walks out of an interview with Swedish television company SVT. Gunnlaugsson is asked about a company called Wintris, which he says has been fully declared to the Icelandic tax authority. Gunnlaugsson says he is not prepared to answer such questions and decides to discontinue the interview, saying: ‘What are you trying to make up here? This is totally inappropriate’

   

  The ICIJ records show Sergey Roldugin, a long-time friend of Vladimir Putin, as a behind-the-scenes player in a clandestine network operated by Putin associates that has shuffled at least $2 billion through banks and offshore companies, German daily Süddeutsche Zeitung and other media partners has found. In the documents, Roldugin is listed as the owner of offshore companies that have obtained payments from other companies worth tens of millions of dollars.

  The files include a convicted money launderer who claimed he’d arranged a $50,000 illegal campaign contribution used to pay the Watergate burglars, 29 billionaires featured in Forbes Magazine’s list of the world’s 500 richest people and movie star Jackie Chan, who has at least six companies managed through the law firm. The files contain new details about major scandals ranging from England’s most infamous gold heist to the bribery allegations convulsing FIFA, the body that rules international soccer.

  In the “Operation Car Wash” case in Brazil, prosecutors allege that Mossack Fonseca employees destroyed and hid documents to mask the law firm’s involvement in money laundering. A police document says that, in one instance, an employee of the firm’s Brazil branch sent an email instructing co-workers to hide records involving a client who may have been the target of a police investigation: “Do not leave anything. I will save them in my car or at my house.”

  In Nevada, the leaked files show, Mossack Fonseca employees worked in late 2014 to obscure the links between the law firm’s Las Vegas branch and its headquarters in Panama in anticipation of a U.S. court order requiring it to turn over information on 123 companies incorporated by the law firm. Argentine prosecutors had linked those Nevada-based companies to a corruption scandal involving an associate of former presidents Néstor Kirchner and Cristina Fernández de Kirchner.

  Today, Mossack Fonseca is considered one of the world’s five biggest wholesalers of offshore secrecy. It has more than more than 500 employees and collaborators in more than 40 offices around the world, including three in Switzerland and eight in China, and in 2013 had billings of more than $42 million.

  An interactive summary of some of the most prominent individuals named:
  

  The leak also provides details of the hidden financial dealings of 128 more politicians and public officials around the world.

  The cache of 11.5 million records shows how a global industry of law firms and big banks sells financial secrecy to politicians, fraudsters and drug traffickers as well as billionaires, celebrities and sports stars. These are among the findings of a yearlong investigation by the International Consortium of Investigative Journalists, German newspaper Süddeutsche Zeitung and more than 100 other news organizations.

  The files expose offshore companies controlled by the prime ministers of Iceland and Pakistan, the king of Saudi Arabia and the children of the president of Azerbaijan.

  They also include at least 33 people and companies blacklisted by the U.S. government because of evidence that they’d been involved in wrongdoing, such as doing business with Mexican drug lords, terrorist organizations like Hezbollah or rogue nations like North Korea and Iran.

  “These findings show how deeply ingrained harmful practices and criminality are in the offshore world,” said Gabriel Zucman, an economist at the University of California, Berkeley and author of “The Hidden Wealth of Nations: The Scourge of Tax Havens.” Zucman, who was briefed on the media partners’ investigation, said the release of the leaked documents should prompt governments to seek “concrete sanctions” against jurisdictions and institutions that peddle offshore secrecy.

  The documents make it clear that major banks are big drivers behind the creation of hard-to-trace companies in the British Virgin Islands, Panama and other offshore havens. The files list nearly 15,600 paper companies that banks set up for clients who want keep their finances under wraps, including thousands created by international giants UBS and HSBC.

  An ICIJ analysis of the leaked files found that more than 500 banks, their subsidiaries and branches have worked with Mossack Fonseca since the 1970s to help clients manage offshore companies. UBS set up more than 1,100 offshore companies through Mossack Fonseca. HSBC and its affiliates created more than 2,300.

  Some of the key findings summarized via AFR:

  

  

  

  

  * * *

  In the largest media collaboration ever undertaken, journalists working in more than 25 languages dug into Mossack Fonseca’s inner workings and traced the secret dealings of the law firm’s customers around the world. They shared information and hunted down leads generated by the leaked files using corporate filings, property records, financial disclosures, court documents and interviews with money laundering experts and law-enforcement officials.

  Reporters at Süddeutsche Zeitung obtained millions of records from a confidential source and shared them with ICIJ and other media partners. The news outlets involved in the collaboration did not pay for the documents.

  Before Süddeutsche Zeitung obtained the leak, German tax authorities bought a smaller set of Mossack Fonseca documents from a whistleblower, a move that triggered the raids in Germany in early 2015. This smaller set of files has since been offered to tax authorities in the United Kingdom, the United States and other countries, according to sources with knowledge of the matter.

  The larger set of files obtained by the news organizations offers more than a snapshot of one law firm’s business methods or a catalog of its more unsavory customers. It allows a far-reaching view into an industry that has worked to keep its practices hidden — and offers clues as to why efforts to reform the system have faltered.

  * * *

  The year-long investigation was coordinated by the International Consortium of Investigative Journalists (ICIJ), who worked with hundreds of journalists from the world’s top media organisations including the ABC’s Four Corners program.

  What the documents reveal is the inner workings of a global industry of law firms and big banks who sell financial secrecy to those who can afford it.

  The ICIJ findings include evidence that:

  • Offshore companies linked to the family of China’s top leader, Xi
    Jinping, as well as Ukrainian President Petro Poroshenko, who has
    positioned himself as a reformer in a country shaken by corruption
    scandals
  • 29 billionaires featured in Forbes Magazine’s list of the world’s 500 richest people
  • Icelandic Prime Minister Sigmundur David Gunnlaugsson and his wife secretly owned an offshore firm that held millions of dollars in Icelandic bank bonds during the country’s financial crisis
  • Associates of Russian President Vladimir Putin secretly shuffled as much as $2 billion through banks and shadow companies
  • New details of offshore dealings by the late father of British Prime
    Minister David Cameron, a leader in the push for tax-haven reform
  • Offshore companies controlled by the Prime Minister of Pakistan, the King of Saudi Arabia and the children of the President of Azerbaijan
  • 33 people and companies blacklisted by the US Government because of evidence that they have done business with Mexican drug lords, terrorist organisations like Hezbollah or rogue nations like North Korea
  • Customers including Ponzi schemers, drug kingpins, tax evaders and at least one jailed sex offender
  • Movie star Jackie Chan, who had at least six companies managed through the law firm

  The leaked data allows a never-before-seen view inside the offshore world — providing a day-to-day, decade-by-decade look at how dark money flows through the global financial system, breeding crime and stripping national treasuries of tax revenues.

  Most of the services the offshore industry provides are legal if used by the law-abiding. But the documents show the extraordinary lengths individuals will go to in order to hide the true owners of companies.

  Mossack Fonseca offers extra services to provide “front people” known as nominees to act as shareholders, directors or even the owners of your company. This can make it extremely difficult for authorities trying to investigate money laundering or follow the money through complex networks of offshore accounts.

  Firm worked with more than 14,000 ‘middlemen’ on clients’ behalf

  An ICIJ analysis of the leaked files found that more than 500 banks, their subsidiaries and branches had worked with Mossack Fonseca since the early 1970s to help clients manage offshore companies.

  In all, the files indicate Mossack Fonseca worked with more than 14,000 banks, law firms, company incorporators and other middlemen to set up companies, foundations and trusts for customers.

  The documents reveal that these offshore players often failed to follow legal requirements to ensure their clients were not involved in criminal enterprises, tax dodging or political corruption.

  Mossack Fonseca says the middlemen are its true clients, not the eventual customers who use offshore companies. The firm says these middlemen provide additional layers of oversight for reviewing new customers. As for its own procedures, Mossack Fonseca says they often exceed “the existing rules and standards to which we and others are bound”.

  Mossack Fonseca offers backdating of documents

  The leaked files also show the firm regularly offered to backdate documents to help its clients gain advantage in their financial affairs. It was so common that an email exchange from 2007 showed firm employees talking about establishing a price structure — clients would pay $8.75 for each month farther back in time that a corporate document would be backdated.

  In a written response to questions from ICIJ and its media partners, the firm said it “does not foster or promote illegal acts”.

  “Your allegations that we provide shareholders with structures supposedly designed to hide the identity of the real owners are completely unsupported and false,” the firm said.

  The firm added that the backdating of documents “is a well-founded and accepted practice” that is “common in our industry and its aim is not to cover up or hide unlawful acts”.

  The firm said it could not answer questions about specific customers because of its obligation to maintain client confidentiality.

  * * *

  There is much more in the full set of releases covered in the ICIJ’s website, however we wonder what if any action will be taken against any of these criminals who also happen to be some of the world’s wealthiest people and most powerful politicians: after all, it is they who make the rules.

  * * *

  Finally, for those curious why not a single prominent US name features in the list above, the reason may be found within the snapshot of the non-profit ICIJ’s “funding supporters“:

  Recent ICIJ funders include: Adessium Foundation, Open Society Foundations, The Sigrid Rausing Trust, the Fritt Ord Foundation, the Pulitzer Center on Crisis Reporting, The Ford Foundation, The David and Lucile Packard Foundation, Pew Charitable Trusts and Waterloo Foundation.

  And then, at the bottom of the Panama Papers disclosure site we again find Open Society which, as everyone knows, is another name for George Soros.

  

   

  Finally, let’s recall that as Bloomberg reported earlier this year, the world’s biggest and “favorite” new tax haven as of this moment, is… the United States itself.

  

  

  

  

  

• Chart Of The Quarter: Nothing Else Matters

  US equity markets rebounded by the greatest amount ever in Q1 to end the quarter with a "keep the dream alive" positive return. This 'central-bank'-sponsored bounce occurred as S&P 500 earnings expectations plunged 9.6% – the biggest quarterly collapse since Q1 2009. As FactSet details,

  During the first quarter, analysts lowered earnings estimates for companies in the S&P 500 for the quarter. The Q1 bottom-up EPS estimate (which is an aggregation of the estimates for all the companies in the index) dropped by 9.6% (to $26.32 from $29.13) during this period. How significant is a 9.6% decline in the bottom-up EPS estimate during a quarter? How does this decrease compare to recent quarters?

   

  During the past year (4 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 4.4%. During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 4.0%. During the past ten years, (40 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 5.3%. Thus, the decline in the bottom-up EPS estimate recorded during the first quarter was larger than the 1-year, 5-year, and 10-year averages.

   

  In fact, this was the largest percentage decline in the bottom-up EPS estimate during a quarter since Q1 2009 (-26.9%).

   

  At the sector level, nine of the ten sectors recorded a percentage decline in the bottom-up EPS estimate for the first quarter that was larger than the 5-year average for that sector. Six of the ten sectors recorded a percentage decline in the bottom-up EPS estimate for the first quarter that was larger than the 10-year average for that sector.

   

  As the bottom-up EPS estimate for the index declined during the quarter, the value of the S&P 500 increased during this same time frame. From December 31 through March 31, the value of the index increased by 0.8% (to 2059.74 from 2043.94). This quarter marked the 10th time in the past 12 quarters in which the bottom-up EPS estimate decreased during the quarter while the value of the index increased during the quarter.

  What doe this idiocy look like?

  

   

  And all it took was the coordinated easing from most of the world's largest central banks…

  

   

  It's not the first time Central Banks have lifted stocks away from reality…

  

   

  Simply put, nothing else matters.

  

  

  

  

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