Today’s News 5th February 2016

• What Is The Best Method Of Rebellion Against Tyranny?

  Submitted by Brandon Smith via Alt-Market.com,

  I have heard it often said that there is no one right way to accomplish a goal. I agree. However, I would add that while there is no such thing as “one right way” to achieve an objective, this does not mean there aren’t numerous WRONG ways to achieve an objective.

  Doing “something” is not always better than doing nothing if that “something” is based on terrible strategy. Unfortunately, there are people out there with otherwise good intentions, even in the liberty movement, that seem to think that taking action without planning is preferable to patience. They do not understand that there is such a thing as negative returns.

  The reality is that action is easy. Patience and planning are difficult. Emotional reaction is simple. Quiet professionalism is complicated.

  This is the dynamic that is plaguing the liberty movement today; the battle between our emotional drive to jump headlong into conflict with our progressively corrupt establishment, and the absolute necessity for intelligent strategy and proper timing.

  The issue here is not “fighting.” Most of us know and accept the fact that a fight is coming whether we like it or not. I say by all means, let’s fight, but fighting is not enough. If we fight, we must fight TO WIN, and this requires fighting smart.

  On the other side of the coin, the weak handed and weak hearted will argue that fighting in any respect is "useless" or "immoral" and will result in failure.  This is the pacifist camp, which never produces much in the way of practical solutions.  There are very useful and peaceful methods for non-participation and nullification, most of which I am happy to promote.  That said, non-participation is only part of the battle.  If you are dealing with a psychopathic adversary (which we are), ultimately that adversary will use overt violence to stop you from nullifying their authority.  If you are not willing to use active self defense against true evil based on some deluded Gandhi complex, then you and the historical memory of you will be erased.  It is perfectly possible for a person to fight in self defense while maintaining his core principles.

  If you fight, then there is a chance.  If you do not fight, then failure is guaranteed.  The "odds" are irrelevant.  How you fight (fighting smart) is the only matter of importance.

  Recently I have seen a growing contingent of people within the movement that seek a fight but question the concept of planning or waiting. They’ll argue that planning is somehow impractical, or that there will never be a perfect time for action. This way of thinking has only been inflated by the latest events in Burns, Oregon.

  The Oregon standoff is a stunning example of how emotional action leads to failure and tragedy. Many will argue over the circumstances surrounding the death of Lavoy Finicum — did he reach into his jacket, or was he reacting to being shot? Were the police officers involved in fear for their lives, or were they out for blood? The majority of liberty activists will undoubtedly assume malicious intent on the part of the government due to their track record of murder and lies. I don’t blame them. That said, I would point out that while Finicum may be dead because of ill intent on the part of trigger happy cops, he was put in that position in the first place due to inadequate planning and leadership.

  The argument that the FBI should have never been in Burns in the first place overlooks the fact that Bundy and team, strategically speaking, should not have been there either. They could have been in a far better position if only they had thought their conundrum through.

  Oregon and the death of Finicum are not failures on the part of the liberty movement. They are failures on the part of Bundy and team, who refused to listen to scores of people with far more experience and knowledge in such situations; the same people who tried to help the occupiers adjust their tactics and offer them safer ground and safer footing. The failure in Oregon is what happens when amateurs, not just in training but in tactical philosophy, undertake a rebellion.

  Some will argue that experienced tacticians within the movement (and there are many) refused to show up for the fight, and thus sentenced the occupiers to defeat. I would argue that the Oregon standoff was FUBAR from the very beginning. From its inception it was doomed. Half the movement saw it plain as day. For me, the end result was obvious.

  A team of well-meaning but unorganized and untrained activists thrust themselves into a situation beyond their capabilities and under the potential influence of agents provocateur. There was no vetting for random strangers seeking to join their ranks; no direct goals and no clearly defined strategy, only vague demands and notions. No thought of planning one or two steps ahead, let alone five steps ahead. A circus atmosphere inspiring public ridicule rather than public respect. A complete lack of understanding of the gravity of the situation leading to a false sense of safety and comfort, or in some cases even hubris.

  This is why most liberty tacticians had no interest in showing up to the Oregon standoff; not because they were fearful, not because they are “sunshine patriots,” not because they are waiting for a “perfect” moment that will never come to kick off a revolution. They did not show up because it was a scenario that could not be salvaged. It was a carnival. Period.

  To compare events to the first American Revolution, I do not see the standoff and the shooting of Finicum as a Lexington Green moment (though it hasn’t fully ended yet). Rather, I see it as a Boston Massacre moment. The Boston Massacre was an absolute tragedy, but also not a cut-and-dry affair. John Adams, acting as legal defense for the British soldiers accused of initiating bloodshed, realized that the Sons Of Liberty were desperate to use the event politically to rally support for direct revolution, but also understood that the timing and the circumstances were utterly wrong. The Sons of Liberty wanted to hold up the Boston Massacre as a symbol of ALL the oppression the colonials suffered under the crown. Adams, though an avid champion of the cause, correctly treated it as a singular tragedy and not an opportunity for exploitation.

  The colonials would eventually enter into revolution at Lexington and Concord; clearly defined defensive scenarios in which the militia obstructed the path of British soldiers sent to arrest leaders of the Sons of Liberty (Samuel Adams and John Hancock), as well as to confiscate firearms and black powder caches. The militia had a direct goal (to impede the British from reaching Adams and Hancock) and the British used clear and overt force against them, resulting in an immediate and violent justified response by other militias. This is one right way to start a rebellion.

  So if Oregon represents an example of the wrong way to do things, what is a better way? I described alternative methods with a much greater chance of success in my article “Real Strategies For Removing Federal Presence From Western Lands,” but I would like to explore beyond specific tactics and discuss mindset — the overall philosophy behind a winning rebellion in our modern era.

  Divided We Win, United We Fall

  This might sound counter-intuitive; I’ll explain.

  A movement should be united in its stance and its values in order to succeed and I believe the liberty movement is indeed united for the most part on these terms. However, when it comes to concrete action the more centralized our efforts the less we will achieve and the more likely we are to fail.

  I find it interesting that whenever a call goes out to the movement to take action it usually involves concentrating large masses of us into a small area with no outlined plan or directives. With the exception of Bundy Ranch, which I believe was entirely organic in how it came about, most of these calls to arms are initiated by questionable personalities or people possibly under the influence of provocateurs who seek to march us all into a box, whether it be a bridge in Washington, D.C. or a scrub brush refuge in Oregon. In the face of a vastly superior opponent in terms of arms and technology, it seems to me that the establishment would prefer us all to be hyper-focused on only one battle space at one time, putting all our eggs in one basket and leaving us vulnerable.

  Instead, a rebellion in this day and age must be asymmetric in nature; meaning smaller groups acting covertly on their own initiative everywhere rather than in only one place. Amassing in one small region might be useful under very specific conditions, but if you want to pose an actual threat to a large criminal system, you need hundreds of events, all of them far better planned than Oregon.

  Organization Through Localism

  If you cannot even secure your own family or your own neighborhood from potential threats, then why would you expect to be successful in projecting out to a whole other state and community and securing it instead? Local organization is more important than national organization or grand posturing on the national stage. If you can strengthen your own community while others do the same across the country, then the effects will be felt nationally by default.

  Far more can be accomplished through localism than by rolling the dice on mass theatricality and Alamo-style tactics.

  Communications Networking

  Unity does not come best through concentrated action but through solid communications. The fact that most of the liberty movement has no coms networks outside of the mainstream grid is a sad state of affairs that will lead to our downfall. As far as my information shows, the Oregon occupiers had no ham radio communications and relied primarily on cell phones. This is a disaster waiting to happen.

  When there is a national network of ham operators providing communications to the liberty movement, then and only then can we claim to have the means to organize effectively outside of our own communities. Do not assume for a second that you will have access to mainstream grid communications when you need them.

  Prepare To Aid People Outside The Movement

  The establishment would like nothing more than for the liberty movement to completely isolate itself from the general public. The more we refuse to interact with our communities the easier it will be to paint us as dangerous outsiders. The more we offer valuable services and training to a community, such as classes on emergency medical response, personal defense against active shooters, food storage and preparedness, etc., the more likely we will be seen as valuable assets to that community in the wake of a crisis.

  I have been undertaking such efforts in my own community for the past couple of years and have met many excellent people who are of like mind but not necessarily “activists” in the traditional sense. If you discount efforts to improve your local situation and to build bridges, you do so at your own peril.

  Focus On The True Culprits

  Eventually, someone is going to have to bring the international banking elites to justice for their direct influence over government corruption and destructive economic policy. Making stands against the Bureau of Land Management and other questionable federal agencies might be a necessary part of this fight, but the fight will never end until the original perpetrators are removed at the root. Beware of any group or “leader” who calls you to action but ignores the money-elite; they are probably more interested in exploiting you than helping you.

  Quiet Professionalism

  Perhaps most important of all is the need for liberty activists to adopt an attitude of quiet professionalism. This means analyzing situations objectively. This means having one’s heart in the right place without being driven emotionally. This means attaining personal excellence in any field of knowledge that might help you to gain victory.

  Winning this fight will require the extraordinary dedication of extraordinary individuals; anything less will result in disaster. Giving our all does not mean simply being willing to sacrifice our lives. That may be what happens, but this cannot be our only trump card. If you are not striving every day to master your own skills and initiative then you are not giving your all. If you are not organizing effectively at the local level because you assume no one will listen to you, then learn to communicate better and try again. If your only plan is to go out guns blazing, then you might as well stay home because you will do more harm for the movement than good.

  Become a local pillar rather than a mere complainer. Seek to produce results rather than demanding others do it for you. When you act, act intelligently. Be steady in your resolve and do not let anger or panic rule your thinking. Be fair in your assessments, and above all, once again, if you fight, fight to win. Fighting merely in the name of fighting is a fool’s game.

  If the movement had 10,000 individuals of this caliber victory would be assured against any odds.

  

  

  

  

  

• Kyle Bass Asks If China Is Fine, Why Are They So Worried About "Some Hedge Fund Manager In Texas"

  If there’s one thing China hates, it’s a nefarious “manipulator” spreading innuendo, and fear in an already nervous market.

  When these evildoers are Chinese citizens, the problem is easily solved. Beijing simply arrests them and beats a confession out them or else simply locks them away in the bowels of the Politburo for the remainder of their days. This is what we saw late last summer when Xi moved to crackdown on what the government claimed were multiple bad actors creating volatility and exacerbating the stock market rout.

  However, when the “manipulators” aren’t Chinese citizens and don’t reside within the country’s borders, officials have fewer options. Now that a bevy of well known fund managers have the yuan in their crosshairs, China is using the only tool is has to combat foreign “speculators” intent on spreading “information that does not conform to the facts”: the captive press.

  China is particularly keen on using the Party’s various media mouthpieces to counter perceived threats to the country and to calm the masses whose nerves are increasingly frayed amid the equity market collapse and the decelerating economy.

  Last month for instance, a hilariously absurd “op-ed” appeared in People’s Daily carrying the title “Declaring war on China’s currency? Ha ha.” In it, Beijing calls George Soros – who said at Davos that he’s betting against Asian currencies and that China is experiencing a hard landing – a “financial crocodile” whose “war on the renminbi cannot possibly succeed.”

  Of course Soros isn’t the only one waging “war” on the yuan. Kyle Bass is also betting against the currency.

  China’s banking system, Bass told CNBC on Wednesday, is a $34 trillion ticking time bomb, and when it explodes, Beijing will need to plug the holes. $3.3 trillion in FX reserves will be woefully inadequate, he contends.

  “Very few people have looked at what the cause of the problem is,” Bass begins. “They’ve let their banking system grow 1000% in 10 years. It’s now $34.5 trillion.”

  Bass then goes on to note that special mention loans (which we’ve discussed on any number of occasions) are around 3% of total assets. “If they lose 3%, that’s a trillion dollars,” Bass exclaims. Ultimately, Bass’s argument is that when China is forced to rescue the banking system by expanding the PBoC’s balance sheet, the yuan will for all intents and purposes collapse. This is of course exacerbated by persistent capital flight.

  Below, find some other soundbites from the interview. Notably, towards the end, Bass says that if China is right and speculation around a much larger devaluation is indeed unfounded, then it’s curious why China seems to care so much about what “one fund manager in Texas thinks.”

  From Kyle Bass:

  “The IMF says they need $2.7 trillion in FX reserves to operate the economy. They’ll hit that number in the next five months. Those who think they can burn it to zero and they have a few years ahead of them, they really only have a few months ahead of them.”

   

  “When they lose money in their banks they’re going to have to recap their banks. They’ll have to expand the PBoC balance sheet by trillions and trillions of dollars.”

   

  “No one’s focused on the banking system. Focus will swing to it this year.”

   

  “A Chinese devaluation of 10% is a pipe dream. It will be 30-40% by the end.”

   

  “If some fund manager in Texas is saying that your currency is dramatically overvalued, you shouldn’t care on a $10 trillion economy with $34 trillion in your banks. I have, call it a billion –  it’s so small it should be irrelevant and yet somehow it’s really relevant.”

   

  “If 4% of the population takes out their $50,000 quota, the FX reserves are gone. We lose ourselves in the numbers. $3.3 trillion is a big number, but the reserves to bank assets number is one of the worst in the world.”

  Kyle Bass is devoting much of his hedge fund’s capital to shorting the Chinese currency. He explains why:https://t.co/pLMkaNfdgC

  — David Faber (@davidfaber) February 3, 2016

  Lest you should be inclined to believe Bass, we close with yet another amusing “Op-Ed” from Chinese media, this time courtesy of Xinhua, who will patiently explain why the “doom predictors” always get it wrong on China.

  *  *  *

  From Xinhua

  The first month of 2016 witnessed the Chinese stock market in panic selling mode and the RMB depreciating unexpectedly against the greenback. China’s GDP growth in 2015 also hit a 25-year low.

  There seems to be a new surge of predictions about the “coming collapse of the Chinese economy and the end of the Chinese model”. However, looking back at China’s development journey from the late 1970s up to today, many pessimistic predictions, especially forecasting the “China breakdown”, have been proved wrong.

  In 1996, Lester Brown, an American agricultural economist predicted that China would not be able to feed its large and fast-growing population and economic reforms would lead to malnutrition and hunger.

  In the late 1980s and early 1990s, many Chinese pessimists predicted that economic reform without political reform would lead to a total collapse of China. In the Asian Financial Crisis of 1997-98 and the World Financial Crisis of 2007-08, many Chinese pessimists predicted that the Chinese model would not be able to sustain those drastic external shocks.

  All those predictions were wrong. Since 2012, China has changed its economic development strategy from export and foreign direct investment driven to endogenous growth which emphasizes internal structural change, innovation and industrial upgrading to escape the so-called middle income trap.

  In doing so, China has to eliminate excess industrial production capacity of steel, coal and other environmentally polluting products, and to promote high-end manufacturing, services, urbanization and rural modernization.

  Economic slowdown is an inevitable outcome of the new development strategy, but given the tough external economic environment and surging domestic factor costs, China’s growth of 6.9% in 2015 was still the best among the world’s 10 largest economies except India. In particular, while the Russian and Brazilian economies are contracting sharply, and while many other developed economies are still struggling to move out of their own crisis, China continues to be a potent engine of growth for the global economy.

  So why do doom predictors always get it wrong when it comes to China?

  Firstly, some pessimists always look at China’s short term challenges and ignore its long term development capability and potential. Short term challenges and difficulties are temporal, they can be overcome if the government and the people have a strong will for success.

  Secondly, some pessimists do not understand that the Chinese government is far better than they thought, and that political stability is the basic foundation of China’s success.

  Thirdly, doom predictors of China underestimate the ability and determination of the Chinese people who are not only hard working and intelligent, but also resilient to all kinds of challenges and shocks.

  China today is different from its past. The economy is well above 10 trillion US dollars, second only to the US, twice as large as Japan, and four times as large as India. A 6.9% growth is more than one-quarter of India’s annual GDP, and bigger than a medium-sized economy in the world.

  China’s richest city, Shenzhen, erected from a small fishing village in 1980, now has a population of over 10 million people. Its per capita GDP is higher than that of Taiwan and is still growing at nearly 8% per year. China’s biggest city by population, Chongqing, has over 30 million people. The city’s GDP expanded by 11% in 2015 and the government’s plan is to achieve 10% growth in 2016.

  The Chinese economic fundamentals are sound and robust: unemployment rate is low, people’s incomes are growing faster than GDP, income inequality is narrowing and energy intensity is declining.

  If those pessimists were in China, they would see that all the Chinese regions are still ambitious in making their 13th Five Year Plan, which is to sustain China’s economic growth at a much higher rate than many other economies in the world. The policy objective is to build an all-round well-off society and to eliminate absolute poverty by 2020.

  

  

  

  

  

• Hyperinflating Venezuela Used 36 Boeing 747 Cargo Planes To Deliver Its Worthless Bank Notes

  The weeks ago, when we showed “What The Death Of A Nation Looks Like: Venezuela Prepares For 720% Hyperinflation“, we said that after looking at a chart of Venezuela’s upcoming hyperinflation…

  

   

  …  a hyperinflation in which the soaring stock market has failed to keep pace with the collapsing currency, thereby mocking all erroneous thought experiments that under hyperinflation being long the stock market is a sure hedge to currency destruction…

  

   

  … we joked that it is unclear just where the country will find all the paper banknotes it needs for all its new currency.

  After all, central-bank data shows Venezuela more than doubled the supply of 100-, 50- and 2-bolivar notes in 2015 as it doubled monetary liquidity including bank deposits. Supply has grown even as Venezuela has fewer U.S. dollars to support new bolivars, a result of falling oil prices.

  This question, as morbidly amusing as it may have been to us if not the local population, became particularly poginant yesterday, when for the first time, one US Dollar could purchase more than 1000 Venezuela Bolivars on the black market.

  

   

  And, as if on cue, the WSJ answered. As it turns out we were not the only ones wondering how the devastated “socialist paradise” gets its exponentially collapsing paper currency, which in just the past month has lost 17% of its value.

  The answer: 36 Boeing 747s.

  From the WSJ:

  Millions of pounds of provisions, stuffed into three-dozen 747 cargo planes, arrived here from countries around the world in recent months to service Venezuela’s crippled economy.

   

  But instead of food and medicine, the planes carried another resource that often runs scarce here: bills of Venezuela’s currency, the bolivar. 

   

  The shipments were part of the import of at least five billion bank notes that President Nicolás Maduro’s administration authorized over the latter half of 2015 as the government boosts the supply of the country’s increasingly worthless currency, according to seven people familiar with the deals.

  More planes are coming: in December, the central bank began secret negotiations to order 10 billion more bills, five of these people said, which would effectively double the amount of cash in circulation. That order alone is well above the eight billion notes the U.S. Federal Reserve and the European Central Bank each print annually—dollars and euros that unlike bolivars are used world-wide.

  This means that Venezuela’s hyperinflation, already tentatively estimated at 720%, will likely add on a few (hundred) zeroes by this time next year. It is also quite likely that Venezuela the country, as we know it now, will no longer exist because once any country is swept up in hyperinflationary rapids two things occur like clockwork: social uprisings and political coups.

  But before it gets there, Venezuela’s president Maduro will be busy liquidating the nation’s roughly $12 billion in gold reserves, which his late predecessor fought hard in 2011 to repatriate back to Caracas. Sadly that gold was never meant to stay in Venezuela after all.

  Meanwhile, life in Venezuela is disturbingly comparably to that under Weimar Germany, wheelbarrows of cash and all:

  While use of credit cards and bank transfers is up, Venezuelans have to carry stacks of cash as many vendors try to avoid transaction fees. Dinner at a nice restaurant can cost a brick-size stack of bills. A cheese-stuffed corn cake—called an arepa—sells for nearly 1,000 bolivars, requiring 10 bills of the highest-denomination 100-bolivar bill, each worth less than 10 U.S. cents.

   

  Rigid state price controls have only made matters worse, economists say, generating a thriving black market for just about every good, from car tires to baby diapers, in which cash is the preferred form of payment.

  Adding insult to injury the very process of printing the almost instantly worthless currency costs Venezuela hundreds of millions of dollars.

  “The bank-note buying spree is costing the cash-strapped leftist government hundreds of millions of dollars, said all seven of the people, who have been briefed on the deals Venezuela has entered with bank-note producers.”

  But it gets even more ridiculous for the government where the largest bill in denomination is 100 Bolivars:

  The high cost of the printing binge is an especially heavy burden as Venezuela reels from the oil-price collapse and 17 years of free-spending socialist rule that have left state finances in shambles.

   

  Most countries around the world have outsourced bank-note printing to private companies that can provide sophisticated anticounterfeiting technologies like watermarks and security strips. What drives Venezuela’s orders is the sheer volume and urgency of its currency needs.

   

  The central bank’s own printing presses in the industrial city of Maracay don’t have enough security paper and metal to print more than a small portion of the country’s bills, the people familiar with the matter said. Their difficulties stem from the same dollar shortages that have plagued Venezuela’s centralized economy, as the Maduro administration struggles to pay for imports of everything, including cancer medication, toilet paper and insect repellent to battle the mosquito-borne Zika virus.

   

  That means Venezuela has to buy bolivars from abroad at any cost. “It’s easy money for a lot of these companies,” one of the people with details on the negotiations said.

  Venezuela’s misery means a hefty pay day for those who end up printing its worthless currency, among them, the same company which printed Weimar’s own currency:

  The huge order for 10 billion notes can’t be satisfied by a single firm, the people familiar with the deals said. So it has generated interest from some of the world’s largest commercial printers, each vying for a piece of the pie at a time when low profits in bank-note printing have pushed many of them to cut back on capacity.

   

  According to the people familiar with the deals, the companies include the U.K.’s De La Rue, the Canadian Bank Note Co., France’s Oberthur Fiduciaire and a subsidiary of Munich-based Giesecke & Devrient, which printed currency in 1920s Weimar Germany, when citizens hauled wheelbarrows of cash to buy bread. More recently, the German technology company was the source of security paper for Zimbabwe when it was stricken in 2008 with a hyperinflation episode in which prices doubled daily.

  Wait a minute, why not just print a single 100,000,000 Bolivar note instead of one million 100 bolivar bills? After all the savings on the printing, let along the air freight, to the already insolvent country will be tremendous and allow it to pretend it is not a failed nation for at least a few more days? It is here that the sheer brilliance of the rulers of this socialist paradise shines through:

  Currency experts say the logistical challenges of importing and storing massive quantities of bank notes underscore an undeniable truth: Venezuela is spending a lot more than it needs because the government hasn’t printed a higher-denomination bank note—revealing a misplaced fear, analysts say, that doing so would implicitly acknowledge high inflation the government publicly denies.

   

  “Big bills do not cause inflation. Big bills are the result of inflation,” said Owen W. Linzmayer, a San Francisco-based bank-note expert and author who catalogs world currencies. “Larger bills can actually save money for the central bank because instead of having to replace 10 deteriorated notes, you only need five or one,” he said.

   

  The Venezuelan central bank’s latest orders have been exclusively only for 100- and 50-bolivar notes, according to the seven people familiar with the deals, because 20s, 10s, 5s and 2s are worth less than the production cost.

   

  Mr. Maduro and his allies say galloping consumer prices reflect a capitalist conspiracy to destabilize the government.

  Well, no, but at this point one may as well sit back and be amused by the idiocy of it all. But at least we will give Maduro one thing: he has done away with the pretense that when push comes to shove, the state and the central bank (and thus commercial banks) are two different things: “the president in late December changed a law to give himself full control over the central bank, stripping congressional oversight just as his political opponents took control of the National Assembly for the first time in 17 years.”

  Finally, while the rest of the world is wrapped up in such deflationary monetary madness as negative interest rates, Venezuela is subject to monetary lunacy too, only of a far more familiar, hyperinflationary kinds:

  A color photocopy of a 100-bolivar bill costs more than the note. In an image that went viral on social media, a diner is shown using a 2-bolivar note to hold a greasy fried turnover because it is cheaper than a napkin.

  And before we close this latest chapter on our ongoing chronicle of Venezuela’s complete economic disintegration, we are delighted to find that Kyle Bass’s “nickel” idea has made its way even in this Latin American socialist paradise:

  On a recent day, a 46-year-old slum-dweller named Mario walked the streets of a wealthy district of Caracas with a megaphone, calling on residents to sell him their coins, which he gathered into a rolling water cooler. The idea: to melt it down later.

   

  “You can make an amazing ring,” said Mario, who wouldn’t give his last name but said he preferred to go by his nickname, Moneda, or “Coins.”

  Now if only Venezuela had a way of exporting some of its hyperinflation to the rest of the world, drowning in “deflation” the result of a few hundred trillion in debt. Actually, fear not: ultimately hyperinflation is easy to achieve – Venezuela is a good example of this; what is difficult is to admit when the current system has failed and when importing 36 Jumbo Jets full of cash is the only solution.

  With every passing day, the rest of the “Developed Word” gets one step closer to recreating Venezuela’s experience.

  

  

  

  

  

• A Distracted Society Keeps The Police State In Power

  Submitted by John Whitehead via The Rutherford Institute,

  Big Brother does not watch us, by his choice. We watch him, by ours. There is no need for wardens or gates or Ministries of Truth. When a population becomes distracted by trivia, when cultural life is redefined as a perpetual round of entertainments, when serious public conversation becomes a form of baby-talk, when, in short, a people become an audience and their public business a vaudeville act, then a nation finds itself at risk; a culture-death is a clear possibility. — Professor Neil Postman

  If there are two spectacles that are almost guaranteed to render Americans passive viewers, incapable of doing little more than cheering on their respective teams, it’s football and politics – specifically, the Super Bowl and the quadrennial presidential election.

  Both football and politics encourage zealous devotion among their followers, both create manufactured divisions that alienate one group of devotees from another, and both result in a strange sort of tunnel vision that leaves the viewer oblivious to anything else going on around them apart from the “big game.”

  Both football and politics are televised, big-money, advertising-driven exercises in how to cultivate a nation of armchair enthusiasts who are content to sit, watch and be entertained, all the while convincing themselves that they are active contributors to the outcome. Even the season schedules are similar in football and politics: the weekly playoffs, the blow-by-blow recaps, the betting pools and speculation, the conferences, and then the final big championship game.

  In the same way, both championship events are costly entertainment extravaganzas that feed the nation’s appetite for competition, consumerism and carnivalesque stunts. In both scenarios, cities bid for the privilege of hosting key athletic and political events. For example, San Francisco had to raise close to $50 million just to host the 50th Super Bowl, with its deluxe stadium, Super Bowl City, free fan village, interactive theme park, and free Alicia Keys concert, not including the additional $5 million cost to taxpayers for additional security. Likewise, it costs cities more than $60 million to host the national presidential nominating conventions for the Republicans and Democrats.

  Don’t get me wrong. I’m not suggesting that there is anything wrong with enjoying the entertainment that is football or politics.

  However, where we go wrong as a society is when we become armchair quarterbacks, so completely immersed in the Big Game or the Big Campaign that we are easily controlled by the powers-that-be—the megacorporations who run both shows—and oblivious to what is really going on around us.

  For instance, while mainstream America has been fixated on the contenders for the Vince Lombardi Trophy and the White House, the militarized, warring surveillance state has been moving steadily forward. Armed drones, increased government surveillance and spying, SWAT team raids, police shootings of unarmed citizens, and the like continue to plague the country. None of these dangers have dissipated. They have merely disappeared from our televised news streams.

  In this way, television is a “dream come true” for an authoritarian society.

  Television isolates people so they are not joining together to govern themselves. As clinical psychologist Bruce Levine notes, viewing television puts one in a brain state that makes it difficult to think critically, and it quiets and subdues a population. And spending one’s free time isolated and watching TV interferes with our ability to translate our outrage over governmental injustice into activism, and thus makes it easier to accept an authority’s version of society and life.

  Supposedly the reason why television—and increasingly movies—are so effective in subduing and pacifying us is that viewers are mesmerized by what TV-insiders call “technical events.” These, according to Levine, are “quick cuts, zoom-ins, zoom-outs, rolls, pans, animation, music, graphics, and voice-overs, all of which lure viewers to continue watching even though they have no interest in the content.” Such technical events, which many action films now incorporate, spellbind people to continue watching.

  Televised entertainment, no matter what is being broadcast, has become the nation’s new drug high. Researchers found that “almost immediately after turning on the TV, subjects reported feeling more relaxed, and because this occurs so quickly and the tension returns so rapidly after the TV is turned off, people are conditioned to associate TV viewing with a lack of tension.”

  Not surprisingly, the United States is one of the highest TV-viewing nations in the world.

  Indeed, a Nielsen study reports that American screen viewing is at an all-time high. For example, the average American watches approximately 151 hours of television per month. That does not include the larger demographic of screen-watchers who watch their entertainment via their laptops, personal computers, cell phones, tablets and so on.

  Historically, television has been used by those in authority to quiet citizen unrest and pacify disruptive people. In fact, television-viewing has also been a proven tactic for ensuring compliance in prisons. “Faced with severe overcrowding and limited budgets for rehabilitation and counseling, more and more prison officials are using TV to keep inmates quiet,” according to Newsweek. Joe Corpier, a convicted murderer, when interviewed said, “If there’s a good movie, it’s usually pretty quiet through the whole institution.”

  In other words, television and other screen viewing not only helps to subdue people but, as Levine concludes, it also zombifies and pacifies us and subverts democracy.

  Television viewing, no matter what we’re collectively watching—whether it’s American Idol, the presidential debates or the Super Bowl—is a group activity that immobilizes us and mesmerizes us with collective programming. In fact, research also shows that regardless of the programming, viewers’ brain waves slow down, thus transforming them into a more passive, nonresistant state.

  As such, television watching today results in passive group compliance in much the same way that marching was used by past regimes to create group indoctrination. Political advisor Bertram Gross documents how Adolf Hitler employed marching as a technique to mobilize people in groups by immobilizing them. Hitler and his regime leaders discovered that when people gather in groups and do the same thing—such as marching or cheering at an entertainment or sporting event—they became passive, non-thinking non-individuals.

  By replacing “marching” with electronic screen devices, we have the equivalent of Hitler’s method of population control. Gross writes:

  As a technique of immobilizing people, marching requires organization and, apart from the outlay costs involved, organized groups are a potential danger. They might march to a different drum or in the wrong direction….TV is more effective. It captures many more people than would ever fill the streets by marching—and without interfering with automobile traffic.

  Equally disturbing is a university study which indicates that we become less aware of our individual selves and moral identity in a group. The study’s findings strongly suggest that when we act in groups, we tend to consider our moral behavior less while moving in lockstep with the group. Thus, what the group believes or does, be it violence or inhumanity, does not seem to lessen the need to be a part of a group, whether it be a mob or political gathering.

  So what does this have to do with the Super Bowl and the upcoming presidential election?

  If fear-based TV programming—or programming that encourages rivalries and factions—makes people more afraid and distrustful of one another, then our current television lineup is exactly what is needed by an authoritarian society that depends on a “divide and conquer” strategy.

  Moreover, according to Levine, authoritarian-based programming is more technically interesting to viewers than democracy-based programming. War and violence, for example, may be rather unpleasant in real life. However, peace and cooperation make for “boring television.”

  What this means is that Super Bowl matches and presidential contests are merely more palatable, less bloody, manifestations of war suitable for television viewing audiences.

  This also explains why television has become the medium of choice for charismatic politicians with a strong screen presence. They are essentially television performers—actors, if you will. Indeed, any successful candidate for political office—especially the President—must come off well on TV. Television has the lure of involvement. A politically adept president can actually make you believe you are involved in the office of the presidency.

  The effective president, then, is essentially a television performer. As the renowned media analyst Marshall McLuhan recognized concerning television: “Potentially, it can transform the presidency into a monarchist dynasty.”

  If what we see and what we are told through the entertainment industrial complex—which includes so-called “news” shows—is what those in power deem to be in their best interests, then endless screen viewing is not a great thing for a citizenry who believe they possess choice and freedom. Mind you, the majority of what Americans watch on television is provided through channels controlled by a corporate elite of six megacorporations with the ability to foster a particular viewpoint or pacify its viewers on a large scale.

  Unfortunately for us, the direction of the future, then, may be towards a Brave New World scenario where the populace is constantly distracted by entertainment, hooked on prescription drugs and controlled by a technological elite.

  Freedom, as I make clear in my book Battlefield America: The War on the American People, is an action word. It means turning off your screen devices—or at least greatly reducing your viewing time—and getting active to take to stave off the emerging authoritarian government.

  Aldous Huxley, George Orwell, and the countless science fiction writers and commentators have warned that we are in a race between getting actively involved in the world around us or facing disaster.

  If we’re watching, we’re not doing.

  As television journalist Edward R. Murrow warned in a 1958 speech:

  We have currently a built-in allergy to unpleasant or disturbing information. Our mass media reflect this. But unless we get up off our fat surpluses and recognize that television in the main is being used to distract, delude, amuse, and insulate us, then television and those who finance it, those who look at it, and those who work at it, may see a totally different picture too late.

  

  

  

  

  

• German Professor Says All Students Should Be Required To Learn Arabic

  Late last month, we reported that Austria may cut social benefits for asylum seekers who fail to attend “special integration training courses” and more specifically, for refugees who don’t make an honest effort to learn German.

  “Those who are not willing to learn German, who do not want to be part of the labor market, who are not ready to attend an integration course, will face social benefits cuts,” Foreign Minister Sebastian Kurz said in Davos.

  The “integration courses” are an example of how, in the absence of a bloc-wide “solution” to the migrant crisis, EU nations are increasingly turning to country-by-country solutions, a situation that French economy minister Emmanuel Macron recently said marks “the beginning of the dismantling [of the euro] for sure.”

  Those who have followed Europe’s bungled attempt to resettle millions of asylum seekers fleeing war in the Mid-East know that EU officials are having a hard time deciding just who it is that should learn to adapt.

  On the one hand, various countries – including Austria and Germany – have published pictographs and cartoon strips which are designed to teach refugees societal norms. Randomly grabbing women’s behinds and beating small children feature prominently in almost all of the “guides.”

  

  

  On the other hand, some officials have suggested that perhaps it is Europeans who need to adapt. Cologne mayor Henriette Reker for instance, drew universal condemnation for saying that it is German women’s responsibility to adopt a “code of conduct” that wards of would-be rapists and Bad Schlema mayor Jens Müller caused an uproar at a town hall meeting when he said that if schoolgirls wanted to avoid cat-calls from the windows of the city’s refugee home, they should take the long way to class.

  In the same vein, one German computer science teacher says Arabic should be compulsory for all students through high school. Here’s Spiegel (translated):

  Not only refugee children who come from the Middle East to Germany should learn in school, a new language but also German children. The calls of the president of the private Kühne Logistics University in Hamburg, Thomas Strothotte. “In this country should be added that the German children learn Arabic,” writes the computer science professor in a commentary for the weekly newspaper “Die Zeit”.

   

  German and Arabic should therefore be obligatory for all students until graduation.A German core competence “, access to the Arab world possible. We would therefore appreciate to be a country of immigration and a multilingual society” would like that.

  And here’s Die Welt (translated):

  The Hamburg computer science professor Thomas Strothotte calls for the introduction of Arabic as a language school in Germany. This would allow access to the Arab world, the president of the Hamburg Kühne Logistics University writes in “Die Zeit”.

   

  German and Arabic should be mandatory for all students through high school.“We would appreciate it, to be a country of immigration and a multilingual society.”

   

  It to use German and Arabic as equal languages ??of instruction is even more demanding, writes Strothotte. Thus the children would now prepare

  for the profound transformation process in the Middle East.

   

  By learning the Arabic language, the young generation of Germany as a great economic, cultural and political partner to accompany this transformation process.

  To be sure, there are practical and intellectual benefits that accrue to those who speak multiple languages. That is, no one is going to argue that being bilingual wouldn’t be a good thing for German students.

  The question is whether mandating that the second language be Arabic is a good idea – especially considering the palpable tension in Germany, which took in more than 1 million refugees in 2015.

  Expect this to reinforce the notion – perpetuated by the likes of Hungary’s Viktor Orban – that Europe is becoming “Islamicized”. And expect that, in turn, to add fuel to the nationalistic fires burning across the bloc.

  

  

  

  

  

• Congress Wants To Turn The US Postal Service… Into A Bank

  Submitted by Simon Black via SovereignMan.com,

  It’s news that seems ripped from the pages of The Onion. Or perhaps Atlas Shrugged.

  But incredibly enough it’s actually true: earlier this week, Congress proposed a new law authorizing the US Postal Service to provide banking and financial services.

  It’s called the “Providing Opportunities for Savings, Transactions, and Lending” Act, abbreviated as… wait for it… the POSTAL Act.

  And it provides explicit authorization for them to provide banking services including checking and savings accounts, money transfers, and “other basic financial services as the Postal Service deems appropriate in the public interest.”

  Bank of the Post Office. It’s incredible when you think about it.

  The US Postal Service hasn’t turned a profit in a decade.

  As a matter of fact, its total accumulated losses now exceed $51 billion, easily ranking it among the least successful companies in history.

  And the only way USPS can continue to maintain its operations is with regular bailouts from the American taxpayer.

  The statistics are just horrendous. Mail volume is down dramatically, which means that revenue continues to fall.

  Yet the Postal Service’s expenses and pension costs keep growing, along with its debt.

  Just like the US government, the US Postal Service has its own debt ceiling that’s set by Congress.

  USPS reached this debt ceiling back in 2012 and has remained at that level for years.

  The only way they survive is by moving liabilities off-balance sheet and regularly going back to Congress with hat in hand.

  Wow, talk about a responsible financial partner– this sounds like EXACTLY the place we should want to deposit our hard-earned savings!

  Seriously, why would these people even consider an idea so absurd as to let an organization with a history of failed operations take over people’s savings?

  Simple. It’s a cheap source of capital.

  The Postal Service desperately needs cash. So what better way to raise capital than to sucker unsuspecting Americans into opening up Postal bank accounts?

  When you deposit money in a bank, you are effectively loaning the bank your money.

  In exchange, they pay you a whopping 0.01% interest.

  This is what almost all banks do– they borrow money from depositors and (hopefully) make credible investments and loans with other people’s money.

  Except in this case, the Postal Service needs to ‘borrow’ depositors’ savings to cover losses from its other operations.

  There’s a term for this. It’s called a Ponzi Scheme.

  

  

  

  

  

• The Cozy Relationship Between The Treasury And The Fed

  Submitted by David Howden via The Mises Institute,

  Last year was a tough one for investors. Gold was down 10 percent. The Dow Industrials fell 2.5 percent, and most bond indexes finished down by at least that much.

  One institution that performed remarkably well in 2015 was the Federal Reserve. It just finished its most profitable year on record. The $100 billion in net income earned last year was a slight improvement over the previous year. That total was also roughly three times higher than the Fed’s income from 2007, the last year before it initiated its Quantitative Easing programs in the wake of the financial crisis.

  Since the Fed does not exist to generate profits, some may be confused as to how it could have such a great year at doing so.

  Here’s how it works. Every time the Fed expands the money supply it buys an asset. Typically the asset is a financial security, like a US Treasury bond, and the counterparties are typically large banks. Figure 1 gives a simplified look at the Fed’s balance sheet at the end of 2015 and how it evolved over the year:

  

  Figure 1: Simplified Federal Reserve Balance Sheet (in millions of dollars)

  Compared to previous years, 2015 was relatively uneventful at the Fed. Having completed the tapering of its Quantitative Easing programs in October 2014, the Fed’s asset holdings held constant over the year. This was in stark contrast to the previous six years, during which the Fed purchased $3.5 trillion of assets. The Fed earns interest on its assets but most of its liabilities are non-interest bearing, like the $1.4 trillion worth of Federal Reserve notes crumpled in people’s pockets or buried under our mattresses. The Fed does pay interest on Reserve Bank balances, but at the current rate of 0.5 percent, this figure was a drop in the bucket relative to its total income. (Almost all of the Fed’s assets earn interest, while it incurs an interest expense on less than half of its liabilities.

  What Does the Fed Do With All That Income?

  The question that arises is what the Fed does with its profits.

  Each year, the Fed remits to the US Treasury its net income, and thus provides the federal government with an important source of funding. Figure 2 shows how this figure has evolved since 2001.

  

  Figure 2: Treasury Interest and Fed Remittances (in billions of dollars)

  A decade ago, back when the Fed was a smaller size, Fed remittances were fairly steady, in the neighborhood of $20 billion a year. This all changed after 2008 as the Fed’s Quantitative Easing programs increased the amount of interest-earning assets that would generate funds to transfer back to the Treasury. This year’s figure of $97.7 billion is more than four times the amount transferred just ten years ago, an annual growth rate of more than 16 percent. (At least something is growing quickly in this economy.)

  Big Bucks for the US Treasury

  For the US Treasury, Fed remittances are something of a free lunch. When someone buys a Treasury bond, the government must pay them interest. This applies to the Fed as well, but then at year-end the Fed remits the interest back to the Treasury.

  The federal government paid out $223 billion in interest payments last year. The Fed remitted almost $100 billion back, leaving the net interest expense at around $125 billion. It’s not just historically low interest rates that are making it easier for the Treasury to borrow in a way that, if it were done by anyone else, would classify them as subprime. The Fed is also chipping in and helping out where it can.

  Also shown in figure 2 is the percentage of the federal interest expense that is remitted back by the Fed. For 2015, this figure neared 45 percent. That figure is a good way to think about the free lunch that the Fed gives to the Treasury.

  In more “normal” times (i.e., prior to 2008) around 10 to 15 percent of the Treasury’s interest payments were paid back to it by the Fed. This figure has grown to almost four times that amount over the past seven years and it doesn’t look likr this trend will abate anytime soon.

  Implications for Fed “Independence”

  As much as economists talk about the independence that the Fed holds from Congress, these remittances represent a strong link. In fact, since they enable federal spending they create a form of quasi-fiscal policy for the Fed to use, in addition to its more common monetary policy options.

  Consider that since Treasury debt is almost never repaid in net terms (old issues are retired but replaced with new debt issuances), the true cost of financing the US government’s borrowing is not the gross amount of debt outstanding but the annual interest expense it faces. Viewed this way, nearly half of the Treasury’s borrowing was financed by the Fed last year. Absent these Fed remittances, Congress would need to look at either an alternative funding source (though I am not sure how many takers there are for the Fed’s $2.5 trillion Treasury holdings) or make some serious cuts.

  How serious? NASA’s operating budget was roughly $18 billion last year, so a lack of Fed remittances would cause the Treasury to cut around five NASA-sized programs. Alternatively, the governments Supplemental Nutrition Assistance Program (previously known as “food stamps”) cost $70 billion in 2014. Without the Fed’s remittances, Congress would have to stop paying out all food stamp recipients plus it would be forced to defund almost two NASAs.

  More important in many Americans’ hearts is their monthly social security check. In 2014, $830 billion of social security checks were mailed out. Without Fed remittances, retirees might see their monthly check cut by about 12 percent.

  For those concerned with the burgeoning size of the federal government, putting a stop to Fed remittances would put a serious dent in public finances and force some serious thought as to what programs need to be cut.

  

  

  

  

  

• Closing In: Russia, Iran, Assad "Encircle" Syria's Largest City As Peace Talks Collapse In Geneva

  Back in October, we previewed the “promised” battle for Aleppo, Syria’s largest city prior to the war.

  By the time Russia began constructing an air base at Latakia, the city – which is immensely important both from a strategic and psychological perspective – was controlled by a hodgepodge of rebels and militants including al-Qaeda, the Free Syrian Army, and ISIS.

  As we noted four months ago, if Russia and Hezbollah manage to recapture the city, it would effectively restore the Assad government in Syria even if the east of the country is still controlled by Islamic State.

  In many ways, the city is emblematic of the wider conflict. Here are a few visuals which underscore the extent of the desolation and utter sorrow that plague this once thriving urban center.

  

  

  

  And for anyone who might have missed it, here’s a look at nighttime light emissions in the city along with a few visuals from “a night in Aleppo“:

  

  

  

  Despite the fact that the city – like many others across the country – has been reduced to a smoldering pile of rubble, it’s key to Russia and Iran’s plans to consolidate Assad’s power in the west of the country.

  As noted above, if the SAA can retake Aleppo, Assad will have control of most of the country’s major urban centers, effectively restoring his grip on power. 

  So critical is the city, that when the SAA, Hezbollah, and a variety of Shiite militas were gearing up for the push north, Quds commander Qassem Soleimani himself showed up to rally the troops (he was later injured on the frontlines).

  

  Fast forward four months and it appears that after a protracted fight, Russia and Hezbollah are indeed poised to recapture the city where militants are now surrounded. Critically, Russia and Iran have now cut off supply lines from Turkey. 

  “Backed by Russian firepower and Hezbollah militants, Syrian government troops have cut off rebel supply lines between the northern city of Aleppo and Turkey,” Bloomberg writes. “Taking Aleppo, Syria’s former commercial hub, would give Russia, Iran and Assad more bargaining power at any future settlement talks and more say in how the region will be redefined.”

  Speaking of settlement talks, negotiations in Geneva brokered in part by John Kerry were suspended on Wednesday as a Saudi-backed rebel coalition voiced anger over Russia’s airstrikes near Aleppo. On Thursday, Kerry demanded that Moscow halt the offensive so peace talks could resume. Although America’s top diplomat swears his phone call with his Russian counterpart Sergei Lavrov was “robust” Lavrov said on Wednesday The Kremlin doesn’t see why the campaign against “the terrorists” should stop. “I can’t see any reason why we should halt our aerial operations until the terrorists shall be defeated”, Lavrov said, flatly.

  “On the ground, nearly 40,000 people have fled an offensive this week by President Bashar al-Assad’s regime north of the city of Aleppo,” AFP said on Thursday, citing the Syrian Observatory for Human Rights (or in other words, “citing one guy in London”). “Assad’s forces also entered two Shiite villages that were under siege by rebels, prompting what state news agency SANA called ‘mass celebrations’ in the streets of Nubol and Zahraa.”

  

  For their part, the Turks are of course blaming the Russians for the stalled peace talks. 

  “Russia continues to kill people in Syria. Could there be such a peace gathering? Could there be such peace talks?” President Tayyip Erdogan asked in a speech in Peru.”In an environment where children are still being killed, such attempts do not have any function apart from making things easier for the tyrant,” he said.

  And trust us, Erdogan knows something about what makes “things easier for a tyrant.”

  In any event, the urgency expressed by the US, Saudi Arabia, and Turkey shouldn’t be mistaken for some kind of benevolent regard for the lives are lost each and every day the war drags on. Rather, Washington, Riyadh, and Ankara know that if Aleppo falls, that’s it for the “moderate” opposition.

  Sure there will still be elements of the FSA and other groups explicitly backed by the West and its regional allies, and they’ll undoubtedly wage a long war of attrition against the SAA. But once the urban centers are secured, Assad can begin the slow process of rebuilding his security apparatus and restablishing some semblance of normalcy in the country’s west.

  As for eastern Syria, the fate of Raqqa and Der al-Zour still hangs in the balance.

  Once the west is solidified, the question will be: can the US, France, and Britian swallow their pride and coordinate with Russia and Iran to oust Islamic State? 

  Or perhaps the more important question is this: what will Russia and Iran discover if they manage to liberate Raqqa before the West has time to bury the bodies (figuratively speaking) and burn all the evidence?

  

  

  

  

  

• What Happens Next?

  Excerpted from Stephanie Pomboy's MacroMavens.com,

  Putting it all together, the chart below overlays the simplest barometers of economic and financial duress (gold/copper) and risk appetite (stocks/bonds). It would be hard to find better proof that the canary in the coalmine is singing and that his song is landing on ears deafened by 6 years of BTFD behavior than this.

  

  If it isn’t already, this image should sit framed on the desks of Ben Bernanke, Mario Draghi and Haruhiko Kuroda as a shining testament to their success in training investors to buy risk on any and every sign of weakness. It is a success made all the more impressive by the fact that, unlike dogs, sentient human beings are supposed to be above this kind of psychological manipulation.

  Of course, central banks can’t take ALL the credit. The institutional investor framework provided a major assist. The positive reinforcement central banks provided to be ‘long’ risk was matched in equal measure by eviscerating professional punishment for failing to do so. The penalty for refusing to BTFD, after all, wasn’t simply a loss in short-term performance, but quite often a loss of career. The unsurprisingly upshot of all this is that we sit here today with institutional investors their most disinclined to take risk off the table while those risks are already higher than they were on the eve of the financial crisis … and rising fast.

  Should the portents offered by the charts herein begin to bear fruit, 2008 would begin to look more and more relevant. As harrowing as the similarities to that episode may be, the DIFFERENCES are what will really shake Wall Street to the core. One difference particularly. With global policy rates at, near, or in some cases BELOW 0% and QE already well in progress in the major global economies, there’s precious little monetary ammunition left to fight whatever economic and financial foe awaits. Of course, one might reasonably wonder why that matters if it hasn’t accomplished anything in the first place! ‘One’ might. But central bankers won’t. Convinced of their own omnipotence they will do the only thing left—print, print, print.

  As global central banks take turns clanging that bell, the BTFD impulse will eventually be sublimated to concerns that all of this naked currency debasement is accomplishing nothing… save perhaps the destruction of the entire fiat money regime.

  

  

  

  

  

• Gold in the Year of Fear Feb. 4, 2016 (Video)

  

   

   

  By EconMatters

  The Gold Market has had a nice run in 2016 so far, and may have considerable more upside to go before encountering serious resistance. This year has been the year of Fear in financial markets so far in 2016, and Gold has benefitted immensely as a result of the ‘scared rabbits’ effect by investors.

   

   

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

  

  

  

  

• Trump Drops 9 Points In National Poll After Losing In Iowa As Rubio Rises, Cruz Steady

  Going into the Iowa caucuses, Donald Trump was riding high.

  The brazen billionaire was not only the clear frontrunner for the GOP presidential nomination, he had also managed to pull ahead of his closest rival, senator Ted Cruz, in Iowa for the first time since August.

  Make no mistake, nine months ago the idea that Trump could be competitive in Iowa was laughable. But the only one laughing going into the caucus was Trump.

  And then, something went wrong.

  Perhaps it was the publicity stunt Trump pulled last Thursday when he skipped the final debate before the caucus in order to hold his own, competing event right up the street, or perhaps some voters lost their nerve at the last minute, but whatever the case, the man who “hates losers” lost.

  Initially, Trump showed a rare bit of humility. “I’d like to congratulate Ted,” he said, before saying he was “just honored” to have been competitive.

  Humble Trump quickly receded back into the blonde hair piece however, once Trump discovered that Cruz may have sent out “deceitful mailers.” “Ted Cruz didn’t win Iowa, he stole it,” Trump tweeted on Wednesday.

  Ted Cruz didn’t win Iowa, he stole it. That is why all of the polls were so wrong and why he got far more votes than anticipated. Bad!

  — Donald J. Trump (@realDonaldTrump) February 3, 2016

  Maybe so, but the latest national poll conducted by PPP shows that although Trump is still the frontrunner, he fell nine points after losing in Iowa. His lead over Ted Cruz in the national poll has narrowed to just 4 points.

  “PPP’s newest national poll finds the race on the Republican side tightening considerably in the wake of Donald Trump’s surprise loss in Iowa on Monday night. Trump’s lead has fallen to just 4 points- he’s at 25% to 21% each for Ted Cruz and Marco Rubio, and 11% for Ben Carson,” Public Policy Polling said on Thursday.

  As PPP goes on to note Marco Rubio may be set to make a run at the top spot. “Rubio is the candidate with the real momentum in the race,” PPP remarks, adding that “he’s up 8 points from his 13% standing in a poll right before Christmas.” Here’s more:

  Beyond that he’s seen a large spike in his favorability rating- it’s improved a net 28 points from +15 at 49/34 to +43 at 64/21. That ties him with Ben Carson as being the most broadly popular candidate on the Republican side.

   

  Things also bode well for Rubio as the field gets smaller in the coming weeks. In a four candidate field he gets 32% to 31% for Trump, 23% for Cruz, and 8% for Bush. In a three candidate field he gets 34% to 33% for Trump and 25% for Cruz. And in head to heads he leads both Trump (52/40) and Cruz (46/40). As other candidates drop out of the race Rubio is the most likely destination of their supporters.

  In other words, when this gets down to a three person race (and it will in fairly short order) Rubio will be ahead. If polls are to be believed.

  PPP goes on to call the GOP race “very fluid,” as fully half of would-be voters say they’re open to changing their mind about the candidates between now and the ballot. 

  Can Trump reclaim the momentum in New Hampshire? Will Marco Rubio prevail in the end as voters decide that when it comes right down to it, they’d rather go mainstream than go out on a political limb? Stay tuned to find out.

  Full results below

  PPP Release National 20416

  

  

  

  

  

• The Golden Age

  Submitted by Shane Obata & Richardson GMP

  The Golden Age

  Some people say that gold is dead. They point to deflationary pressures and a bear market that started back in September of 2011. The bulls have been wrong for years; however, that may be about to change…

  At present, there a multiple reasons to consider gold:

  • Sentiment is very negative and almost everyone is underweight
  • Supply & demand fundamentals are positive
  • Chinese demand continues to rise
  • Gold is a means to portfolio diversification
  • The main risks to prices are overblown

  In the next sections, we will examine the bull case for gold and the risks facing it. In conclusion, we will try to answer the following question: Is this the beginning of a new golden age?

   

  Sentiment & Positioning

  In the latest Barron’s Big Money Poll, only 3% of respondents thought that gold was the most attractive asset class. Moreover, 71% were bearish on the yellow metal. Volume traded in $GLD (the SPDR Gold Trust ETF) has come down dramatically, which indicates a lack of interest in gold bullion. Volume traded in $GDX (miners) and $GDXJ (junior miners) has been increasing; however, interest in “gold mining stocks” has been falling since mid-2011. This suggests that traders are trying to catch the falling knife, even though investors are not convinced that gold is undervalued.

  In terms of positioning, market participants are heavily underweight materials and commodity stocks. Is this a contrarian buying opportunity? It could be. Especially because the current bear market is getting old. The following table shows the 5 most recent bull and bear markets:
  

   

  Gold prices fell by 44% over the 52 months from September of 2011 to January 7^th of 2016. Those numbers match the median length and average cumulative return of the previous 4 bear markets. Gold may continue to fall from here; however, we are probably closer to the end of the bear market than to the beginning…

   

  Supply & Demand

  ~46% of gold production is FCF negative at current prices. In other words, $1100 is not the equilibrium price. If we stay at these levels then supply will likely decline. Analysts at Credit Suisse ($CS) are projecting a deficit to begin in 2016. They expect that mine supply will fall by 11.5% from 2015 to 2018:
  

   

  Even at higher prices, gold miners will be unable to replace all of their depleting reserves. Also, it will be very expensive for them to bring new projects online. Lastly, it is important to note that major gold discoveries have become scarce. These trends are negative for supply and positive for prices.

  On the demand side, Asia and Europe should continue to support the market. Total bar and coin demand (in tonnes) increased 33% YoY from Q3’14 to Q3’15. Furthermore, consumer demand was up across the board, with exceptionally big numbers in the US. According to the World Gold Council (WGC), “coin sales by the US mint during the quarter were on par with that of Q4 2008.” Another key source of demand is central banks. They have continued to buy as they look to diversify their reserve assets. This speaks to gold’s utility as a portfolio diversifier. Total demand has been falling; however, the quarterly numbers suggest it could be stabilizing. Going forward, consumer demand is likely to offset ETF outflows.

  India & China are the main drivers of demand for gold. In 2014, they accounted for ~1710 tonnes of demand. To put that in perspective, 1700 tonnes = 53% of total consumer demand:

   
  

   

  Gold is a big part of both India’s and China’s culture. As such, it is likely that demand will remain strong.

   

  China’s Gold Market

  There is an interesting divergence taking place in the physical gold market. China’s demand numbers, as measured by withdrawals from the Shanghai Gold Exchange (SGE) are much higher than those reported by the World Gold Council (WGC). SGE withdrawals exceeded the WGC’s demand estimates by 3,193 tonnes from 2007 to 2014.

  The following passage is from Bullion Star’s Koos Jansen helps to explain the discrepancy. “The difference was labeled as net investment (in the CGA Gold Yearbook 2013 at 1,022.44 tonnes), which is calculated by the China Gold Association (CGA) as a residual between what is withdrawn from the SGE vaults and gold sold at retail level (jewelry shops and banks). The WGC doesn’t count net investment on its demand balance, but only measures what is being sold at retail level. Net investment, which roughly equals the difference, can only be caused by direct purchases from individual and institutional customers at the SGE that withdraw their metal.”

  In China, gold imports must pass through the SGE before entering the market place. In addition, bullion exports are prohibited. It follows that Imports + Mine Supply + Scrap = Total Supply = SGE Withdrawals. Said another way, SGE withdrawals are equivalent to domestic wholesale demand. The preceding formula is supported by reports from the CGA and the SGE. For example, the SGE reported that 2197 tonnes were withdrawn its vaults in 2013. That is the same number that the CGA reported for total demand in 2013. More evidence comes from the SGE’s chairman, Xu Luode, who said the following in 2014:

  The main conclusion is that the SGE’s measure of Chinese gold demand is much higher than the WGC’s. If the SGE’s number are correct then China is absorbing most of the world’s mine supply. Gold withdrawals from the SGE for 2015 amounted to 2596 tonnes, or 91% of world gold production:
  

   

  Diversification & Protection

  Gold has a negative correlation with US stocks during expansions. More importantly, its correlation with both global and US stocks is more negative during contractions:
  

  As a result, gold tends to rise when stocks fall, which is good for portfolio diversification.

  Gold is also an FX hedge for foreign investors. In 2015, it performed relatively well in non-dollar currencies such as the Brazilian Real, the Russian Ruble, the Chinese Yuan and the Canadian dollar. This is important because non-US countries are the main consumers of gold.

  Loose monetary policy is here to stay. This cycle, every central bank that tried to raise rates has had to reverse course. That is bad for currencies and good for gold, since no one controls its supply.

  Gold can also protect us against a rising cost of living because it tends to hold its value over time. If you look at the CPI then inflation seems relatively low. That said, the CPI is a utility index, not a measure of the cost of living. Most people would agree that cost of living is rising. For example, education and medical care costs have been outpacing the CPI for years.

   

  Risks

  Gold’s main threats are…

  1) A stronger USD

  Typically, the US dollar index and gold are negatively correlated. Said differently, when the dollar index does up, gold goes down. Even so, last year, the US dollar (USD) influenced gold prices more than it usually does. In 2015, the correlation between the two was -0.50 in 2015, much higher than -0.36, which is the 30-year average. Going forward, it’s likely that the correlation between gold and the USD will revert back to normal.

  An additional concern is rising rates. One may assume that higher interest rates are good for the dollar. Actually, that is not the case. Historically, the dollar has stopped appreciated when the US raised rates. If the USD index has peaked then that would be good for gold prices.

  2) Rising rates

  Despite the fed’s intentions, the yield curve (2s10s) has flattened to its lowest levels of the expansion. The short end has increased but the long end, which is driven by growth expectations, has not. Basically, the market is not convinced that era of low rates is over.

  Even if rates do increase, gold may perform well. According to Sundial Capital Research, gold actually does quite well in rising rate environments. Gold prices increased by an average of 25.2% in each of the rising rate environments from Dec31’76 to Dec27’13. The median gain was 5.2%, which is much less impressive but still positive. Low rates are probably better for gold than high ones. That said, it may show good returns either way.

  3) Leverage

  In the US, the paper gold market is much bigger than the physical one is. In other words, many contracts are traded but not much gold changes hands. The level of gold dilution has reached unprecedented levels. In a recent blog post, zerohedge showed that there are 40 million ounces worth of open interest but only 74 thousand ounces of register gold at the Comex. This works out to a gold cover ratio (open interest/registered gold) of 542! The takeaway point is that the amount of gold that is traded is much greater than the amount that actually exists.

  The downside risk is that supply in the futures market overshadows demand in the physical market, thereby weighing on prices. Still, there is an upside risk. If demand for physical gold remains strong and inventories continue to fall then then the Comex may run out of supply. If that happens then gold prices will rise as market participants start to question the divergence between the paper and physical markets.

   

  Conclusion

  Gold should be considered as a contra buy…

  • It is hated
  • Its fundamentals are improving
  • Demand from the east is robust
  • It is negatively correlated with stocks
  • The benefits outweigh the risks

  Gold is massively under owned. If sentiment improves then it could easily outperform other asset classes in 2016…

  

  

  

  

  

• World's Biggest Containership "Hard Aground" As Baltic Dry Crashes Below 300 For First Time Ever

  Before this year the lowest level The Baltic Dry Index had reached was 556 in August of 1986 and the highest was in June 2008 at a stunning 11,612. Today saw the freight index hit a new milestone however, crashing through the 300 barrier for the first time ever – at 298, this is almost 50% below the previous record low.

  

   

  Commodities obviously are saying something very different from "the market"…

  

  And as Dana Lyons notes, of course much of the input into the BDI comes from the price of raw materials. Considering the deflationary spiral in commodities, the drop in the BDI to all-time lows shouldn’t be a shock.

  However, the depths that the index is now plumbing is quite alarming and suggests trouble in the global trade picture.

   

  It would also suggest perhaps that the deflationary pressure is not just a supply issue. Consider every prior drop in the Baltic Dry Index down to the 500-600 level. Each time, the index immediately jumped as if latent demand was just waiting for those lower prices. That development has not yet occurred this time around, even as prices are reaching 45% below the previous record low.

   

  The Baltic Dry Index has become a trendy thing to mention in recent years when discussing global market and economic conditions. The truth is, nobody really ever knows for sure what the broader message is behind the index’s behavior. That said, this recent plunge is making it quite difficult to conceive that it means anything positive in terms of the global economy and deflationary pressures.

  And finally it's not just commodities and the Baltic Dry that stalled, as gCaptain reports, one of the world’s biggest containerships is hard aground in Germany’s Elbe River leading to the port of Hamburg.

  

  The vessel CSCL Indian Ocean ran aground Wednesday night following an apparent mechanical failure.

  An attempt to refloat the ship at around noon local time was unsuccessful.

   

  Germany’s Central Command for Maritime Emergencies (CCME) says it has been in touch with the ship owner and they are in the process of developing a salvage plan. A second attempt to refloat the ship is expected during high tide Thursday night.

   

  An overflight of the area Thursday showed no signs of pollution. There were no injuries reported.

   

  The Hong Kong-flagged ultra large container vessel (ULCV) CSCL Indian Ocean measures 399.6 meters long by 58.6 meters wide. The vessel belongs to China Shipping Container Lines, part of China Shipping Group. It is one of 5 CSCL ships with the capacity to carry a staggering 19,100 twenty foot containers.

   

  The incident has caused minor impacts to ship traffic on the Elbe River.

   

  CSCL Indian Ocean is part of a new breed of giant containerships designed to carry more than 18,000 TEUs and used to transport goods from Asia to northern Europe.

  *  *  *

  Quite an anology!!

  

  

  

  

  

• Welcome To The Recovery: 1 In 7 Americans (45.5 Million) Remain On Food Stamps

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  The following article from the New York Times is shameful in many ways. While the paper is forced to cover the undeniable fact that real wages for the lowest income Americans have plunged during the so-called “economic recovery” over the past six years, it fails to actually pin blame on the undemocratic, oligarch institution most responsible for this humanitarian crisis: The Federal Reserve.

   

  Of course, I and many others have been saying this for years, but now more than half a decade into what is supposed to be a recovery, people are finally being forced to admit what this really is —  large scale theft.

   

  In fact, Ben Bernanke and his crew of upward wealth distributing academics have pulled off the greatest wealth heist in American history. In its wake we have been left with a hollowed out, asset striped Banana Republic. Thanks for playin’ Main Street. Or more accurately, thanks for being played.

   

  – From the post: The Oligarch Recovery – Study Shows Real Wages Have Plunged for Low Income Workers During the “Recovery”

  More than six years into Dear Leader’s glorious economic recovery, 45.5 million Americans, or one in seven, remain on food stamps.

  I’d say that’s a problem, but I don’t want to be accused of “peddling economic fiction.”

  From Bloomberg:

  During the 2007-2009 recession, state and federal governments actively encouraged people like Crofoot to take advantage of the aid. Millions did, and many are still claiming benefits. Enrollment in the Supplemental Nutrition Assistance Program, the formal name for food stamps, remains near record levels, even as the unemployment rate has fallen by half.

   

  “When unemployment was rising people said enrollment would fall sharply when things got better,” said Parke Wilde, an associate professor of nutrition policy at Tufts University in Boston. “That hasn’t happened.”

   

  About 45.4 million Americans, roughly one-seventh of the population, received nutrition aid last October, the most recent month of data. Unemployment was 5 percent that month. The last time joblessness fell to that level, in April 2008, 28 million Americans used food stamps, and the program cost less than half of what the government paid out last year.

  There goes Bloomberg News, “peddling that economic fiction” again.

  The uneven recovery has swelled the ranks of long-term unemployed and reduced the number of people working or looking for work, further boosting demand. Even for those with jobs, pay may be lower than in the past: In real dollars, SNAP recipients in 2014 had net incomes of $335 a month, the lowest since at least 1989.

  Read that over and over and over again. Since 1989. Now here’s a chart of what a gradual transition into oligarch serfdom looks like:

  

  Able-bodied, unemployed adults aged 18-49 who don’t have children are supposed to be limited to three months of food stamp benefits during a 36-month period. That can be extended during tough job markets, a provision that’s boosted the percentage of recipients who fit that description to 10.3 percent in 2014 from 6.7 percent in 2007.

  But isn’t the job market supposed to be strong?

  I think it’s clear who’s actually peddling economic fiction, and it’s not me.

  

  For more on the oligarch recovery, see:

  The Oligarch Recovery – U.S. Military Veterans are Selling Their Pensions in Order to Pay the Bills

  Use of Alternative Financial Services, Such as Payday Loans, Continues to Increase Despite the “Recovery”

  The Oligarch Recovery – 30 Million Americans Have Tapped Retirement Savings Early in Last 12 Months

  The Oligarch Recovery – Study Shows Real Wages Have Plunged for Low Income Workers During the “Recovery”

  Another Tale from the Oligarch Recovery – How a $1,500 Sofa Costs $4,150 When You’re Poor

  

  

  

  

  

• Will Tomorrow's Payrolls Print A Zero?

  Crazy, right? Perhaps not. For the first time since the financial crisis credit conditions have tightened for two consecutive quarters, something which have never happened without preceding a recession. That's all well and good, however, most problematic is its extremely tight correlation to nonfarm payrolls through the cycle… and that is flashing the 'reddest' since 2009.

  We have seen this pattern of last ditch desperation hiring before – at the peak in 2007…

  

   

  As we noted earlier, two consecutive quarters of tightening standards "has never happened before without it signalling an eventual move into recession and a notable default cycle. Once we have 2 such quarters lending standards don't net loosen again until the start of the next cycle."

  Still think a zero print is crazy? Sonner rather than later it's coming… and the question is – will the market see that dismal news as good news (no Fed) and buy stocks? Or does it confirm the utter impotence of central banks?

  

  

  

  

  

• Mass Layoffs To Return With A Vengeance

  Submitted by Adam Taggart via PeakProsperity.com,

  Remember the mass layoffs of 2008-2009? The US economy shed millions of jobs quickly and relentlessly, as companies died and the rest fought for survival.

  Then the Fed and the US government flooded the banks and the corporate sector with bailouts and handouts. With those giga-tons of liquidity sloshing around, as well as taking on massive amounts of new cheap debt, companies were able to finance their working capital needs, hire workers back, and even buy-back their shares en mass to make themselves look deceptively profitable. The nightmare of 2008 soon became a golden era of 'recovery'.

  Well, 2016 is showing us that that era is over. And as stock prices cease to rise, and in fact fall within many industries, layoffs are beginning to make a return as companies jettison costs in attempt to reduce losses.

  Since January 1st, here is a but of subset of the headlines we've seen:

  • Johnson & Johnson to slash 3,000 jobs
  • Wal-Mart pulls plug on smallest store format, shuts 269 stores
  • GE plans to cut 6,500 jobs in Europe
  • BP to slash thousands more jobs in face of oil downturn
  • Macy's to cut 3,000 jobs, close 36 stores
  • Sprint cutting 2,500 and closing call centers to cut costs
  • Canadian Pacific Railway plans to cut 1,000 positions
  • Brazil economy shed 1.5 million payroll jobs in 2015
  • Pearson to cut 4,000 jobs in latest restructuring
  • Barclays to slash about 1,000 investment bank jobs worldwide
  • Southwestern Energy to lay off 1,100 workers amid oil slump
  • Major banks are making cuts: Bank of America, Citi Group and JPMorgan Chase are trimming jobs and branches.
  • Autodesk to cut 10 pct of workforce
  • Caterpillar closing 5 plants, cutting 670 jobs
  • VMware posts higher-than-expected revenue, announces job cuts
  • AIG to cut jobs in sweeping overhaul
  • Monsanto to slash 1,000 more jobs, total planned cuts at 3,600
  • Instacart layoffs may be a sign of things to come
  • EMC plans layoffs as it cuts annual costs by $850M

  Note that nearly all of these companies are in the Energy, Finance and Tech sectors — the three biggest engines of growth, profits and market value appreciation within the economy over the past 7 years.

  What will the repercussions be if those three industries go into contraction mode at the same time?

  Whatever the specifics may be, the general answer is easy to predict: Nothing good.

  This topic has particular relevance to me today, as my former employer Yahoo! just announced that it's cutting 15% of its workforce (1,700 jobs) and considering putting itself up for sale. This is no shock to me, as I've long publicly predicted Yahoo!'s inexorable swirl into irrelevance, but it's timing is indicative of the new era the economy is now entering.

  With its stake in Alibaba, Yahoo! participated in the mania that drove Chinese and other emerging market shares in 2014 through mid-2015. The capital that flooded into the Tech sector in general didn't hurt, either. Both of these helped mask the business' broken fundamentals and kept the day of reckoning for its lack of demonstrable progress at bay. But no longer.

  As Warren Buffet famously quipped: Only when the tide goes out do you discover who's been swimming naked. Well, with the collapse of the Asian stock markets last year and the entire global market so far this year, the tide is fast receding and the rot at Yahoo! is now plainly visible to all. How much rot? During its earnings call yesterday, the company announced it's taking a write-down of $4.5 billion. That's nearly as much as it made in top-line revenue for all of 2015!

  Yahoo! is one of the weaker players in Tech these days, and it's now stumbling hard. Here at Peak Prosperity, we predict that collapse happens 'from the outside in', where the weaker parties fall first, followed by the demise stronger and stronger players. We've been seeing that happen internationally over the past year as smaller poorer countries succumbed first to slowing global economic growth, and we're now seeing larger and more developed countries become desperate (Japan, anyone? How about Italy?). Yahoo! is a similar harbinger for the Tech sector, and is being fast joined by the many Tech companies in the list of headlines above (by the way, there are *many* more Tech companies I could easily add to that list — like HP who announced job cuts of 85,000 last fall).

  And there's good argument to be made that mass layoffs in Tech will be worse today than back in 2008/9. Back then, there were fast-expanding private future behemoths one could jump to: Facebook, Palantir, Uber and the like. Even Google, Netflix and Amazon held up well and were still investing for growth during that period. Today, there is no ready stable of up-and-comers with similar potential to power through a recession.

  The ability for those laid-off to find open positions elsewhere will likely be more similar to the 2000 Tech bubble burst. Working in Silicon Valley back then, I was amazed at how fast 101 changed from a crawling bumper-to-bumper experience to an uncrowded freeway. The number of jobs (and thus commuters) that vaporized quickly was astonishing.

  And that's just Tech. As Chris has been warning us loudly, something is deeply amiss in the Financial sector. It's mind-boggling that the biggest of the "too-big-to-fail" banks, like Citibank and Bank of America, have lost 25% of their market value in a little over 1 month(!). Deutsche Bank has lost over 33% over the same short period. All while the general market is down about 8%.

  What these prices are telling us is that something big, ugly and damaging is happening within the banking sector. We just don't know exactly what yet. And if you remember your history, this is eerily similar to how things went south so quickly in 2008. The banks started catching the sniffles, and soon after, Hank Paulson was on his knees begging Congress for the authority to stave off a full meltdown of the banking system.

  And then there's Energy. Can it be that the price of a barrel of oil was over $70 just 10 months ago? And over $100 five short months before that? Yesterday it was below $30. As we've been warning about here at Peak Prosperity, the carnage that collapse in price is going to wreak across the highly-leveraged companies in the Energy sector is going to be biblical. Not to mention the many other sectors that service the energy industry (trucking, housing, retail, infrastructure development, etc). We are just beginning to see the very early-stage ramifications, but in the words of Bachman Turner Overdrive: You ain't seen nothin' yet.

  Conclusion

  My point here is that the worm has turned.

  All the stimulus and intervention undertaken by the Fed at all gave us five pleasant years (2010-2104) of rising stock, bond and home prices that allowed us to pretend that the 2008 credit crisis was a one-time event.

  2015 proved to be the year that reality intervened. The rocket ride we were on hit its zenith, and things hung precariously there.

  2016 is fast proving to be the year that the laws of physics are starting to matter again, and our rocket is now beginning its descent back to Planet Earth. How far we fall this year vs next is still unknown, but the direction of the trajectory is becoming increasingly hard to dispute. And as we lose altitude, we're going to start losing jobs along with it.

  So, for anyone reading this who is a salaried employee, a very important question to ask yourself is: Do I have a Plan B in place if I get unexpectedly laid off this year or next?

  I'm not trying to frighten anyone unnecessarily. But I do see the probability of wide-scale jobs losses as materially higher this year than it was just a few short months ago. And with the headlines in the news today, things can easily accelerate further from here.

  If you do not have a confidence-inspiring Plan B lined up yet, remember that the best time to plan for crisis is before it arrives. Spend time asking yourself what you would do in the aftermath of a pink slip. Save a greater percentage of your income, line up professional contacts, conduct informational interviews, and develop any needed new skills now — so that if you ever do need to turn to them, they're already there to support you. A lot of the process for doing this is detailed in our book on career transition, and our related podcasts with career coach Jennifer Winn and the Johnson O'Connor Foundation are helpful resources, too.

  Investing in the other Forms of Capital (besides money) that we detail in Prosper! will only help add to your resilience, as well. Especially Emotional Capital. Dealing with job loss is stressful by itself, but potentially doing so in the midst of another punishing Great Recession would place challenging strain on any of us. Working to improve our emotional ability to deal with setback, as well as perhaps doing the same with Social Capital — ensuring you have a community to support you through any tough times, just makes good sense.

   

  

  

  

  

  

• Four Days After Predicting Oil Will Double, T. Boone Pickens Sells All Oil Holdings

  Just four days ago, on Monday afternoon, “legendary” oilman T Boone Pickens said that crude has hit bottom at $26 per barrel, and predicting that prices should double within 12 months.

  Pickens then doubled-down on his wrong call from last year, telling CNBC’s “Squawk Box” that oil prices will rise to at least $52 per barrel by the end of the year. That said, he was at least honest enough to admit that his virtually identical call from last year, when he thought prices would strongly rebound, was wrong.

  Whether it’s $50 or $70 by the end of 2016 will largely be determined by the global economy, he added reiterating the same flawed thesis he used to justify his bullishness a year ago: “We’re still building inventories, and we will for the next several months. And then we’ll start to draw,” Pickens said. “Once you start to draw, you’re not going to start back building again. The draw will come here in the next few months. It’ll become pretty clear.”

  He was wrong then, and he will be wrong this time again for the simple fact that while historically OPEC exercised a rational production strategy, as of the 2014 OPEC Thanksgiving massacre, there is no more OPEC, as can be seen by the relentless attempts by roughly half the members to call an OPEC meeting unsuccessfully, confirming what we said in late 2014 – OPEC no longer exists, which means it is every oil produer for themselves.

  Putting T Boone’s forecasts in context, in a CNBC commentary in October, Pickens conceded his prediction for $70 oil by the end of 2015 wasn’t going to happen, because worldwide demand did not go up as much as he thought and supply did not markedly go down. Oil closed the year at $37: his prediction was off by 50%.

  * * *

  Yet while being merely wrong is excusable, being a “legendary” hypocrite is not.

  Earlier today, literally days after he predicted oil would double from its $26 “bottom”, Pickens told Bloomberg that he has cashed out.

  But, but, what happened to oil prices will double from their bottom? And did he just liquidate all his holdings just $4 above this so-called bottom?

  Well… yes.

  Pickens has sold all his oil holdings and is waiting for the best moment to get back in, he said Thursday in an interview on “Bloomberg Go.” With prices low, mid-size U.S. oil companies such as Pioneer Natural Resources Co., Anadarko Petroleum Corp. and Apache Corp. are acquisition targets for larger firms like Exxon Mobil Corp., he said.

  So low, that he would be delighted if others first took advantage of these low, low, offers.

  But what is most fascinating is that the broken record continues:

  “The low is in,” he said. “Just don’t get in a rush here. You’re going to have plenty of opportunity. The market is going to be volatile. it’s not going to go straight up, so there will be good entry points.”

  And, at least as far as Pickens is concerned, exit points.

  So for anyone who listened to the CNBC and BBG commentator, and bought oil thinking he knows what he is talking about, our condolences: 

  Pickens won’t start investing again until crude inventories start to fall. In the U.S., commercial stockpiles have risen in 16 of the past 19 weeks and now stand at more than 500 million barrels for the first time since 1930, at the height of the East Texas oil boom.

   

  “I will not re-enter, I’m sure, until we start to draw on inventories,” Pickens said. “That’s a key point.”

  And just like that another rider of the dumb-luck momentum trade has been exposed for the “expert” charlatain he is.

  Those who wish to waste 10 minutes of their life, can watch the clip below.

  

  

  

  

  

• US, Japan, Canada, Australia and 8 Other Countries Sign Trans Pacific Partnership Agreement

  The Trans Pacific Partnership (TPP) would be horrible for Americans and the people of the world.

  But most politicians are thoroughly corrupt.  Neither the Democratic or Republican parties represent the interests of the American people. Elections have become nothing but scripted beauty contests, with both parties ignoring the desires of their own bases.

  So today, 12 countries – Brunei, Chile, New Zealand, Singapore, Australia      Canada, Japan, Malaysia, Mexico, Peru, United States and Vietnam – signed the TPP.

  They never followed through on their promise of an open and lively debate.

  Only by raising hell can we stop this monster.

  

  

  

  

• More "P"onzi-2-"P"onzi Blowups "Just A Matter Of Time" In China, Experts Warn

  In early December, Ding Ning and his girlfriend Zhang Min were planning to make a run for it.

  The couple had come to the end of the road with the massive fraud they were running through P2P lender Ezubo, which bilked some 900,000 people out money making it the largest ponzi scheme by number of victims in history.

  

  Ultimately, the amount of money coming in was no longer sufficient to cover interest payments to existing clients. The pair attempted to bury the evidence in the backyard (literally) but police, using two excavators, managed to dig up 80 bags of documents buried 20 feet underground. 

  As a reminder, the company lured investors in with the promise of returns between 9% and 14%. In the end, nearly all of the “projects” featured on the site turned out to be fictitious.

  We documented the story on Monday when we warned that this was just the type of event that could serve as the straw that breaks the camel’s back for a populace that’s already on edge thanks to a horrendous equity market meltdown and worries about the prospects for China’s currency and economy. Sure enough, the very next day, a bulletin began to make the rounds on Chinese social media calling for defrauded Chinese to “rise up” and stage nationwide protests until their money is refunded. The demonstrations would be called the “rights protection movement.” 

  “So stay tuned, because judging from the tone of the ‘rights protection movement’ bulletin the villagers are restless in China,” we said, before noting that Ezubo is probably just one of many P2P frauds in the country given that by November, there were over 3,600 such platforms in operation.

  Bloomberg is out with a bit of color on China’s internet financing industry which was apparently allowed to flourish as Beijing attempted to figure out how to rein in shadow banking without choking off credit growth as the economy decelerated.

  “China’s plan in allowing online lenders to flourish was to allow additional ways for small business to get financing rather than turn to back-alley shadow bankers — a shady world that was flourishing outside of government control when P2P lending began taking off in China in 2012 and only 3 percent of China’s 42 million small business owners could get bank loans,” Bloomberg wrote on Wednesday. “Online lending was a way for the government to encourage further economic stimulus in an economy growing at the slowest rate in a quarter century, and in theory it should be more transparent to regulators because it uses a real-time digital ledger of accounts.”

  Yes, “in theory.” But in reality, these outfits are just as opaque as WMPs, trusts, channel loans, and the laundry list of other vehicles China uses to keep the credit impulse alive. 

  “I think the government allowed this all to happen because it was desperate to pump money into the private economy as all the other slowdowns started to happen,” Steve Dickinson, a Qingdao-based lawyer for Seattle firm Harris Moure PLLC, told Bloomberg by e-mail. “It is likely that the regulators at the top simply turned a blind eye to the risks in the desperate hope that this kind of lending vehicle would get them through a rough patch.”

  “It was just a matter of time before we saw something this big keel over,” Zennon Kapron, managing director of Kapronasia, remarked.

  And that means it’s “just a matter of time” before it happens again. Indeed, out of the 3,600 P2P operations in China, around 1,000 of them are deemed “problematic,” the China Banking Regulatory Commission says.

  According to Xinhua, transactions on Chinese P2P sites topped $150 billion in 2015 up nearly 300% from the previous year. Sensing trouble, the CBRC published draft rules in December designed to control risk. “Due to the lack of necessary regulation, many P2P platforms play in the area between legal and illegal, using Internet concepts to brand themselves, fraudulent advertising and illegal deposit-taking to hurt public interest,” the body said.

  “The harm is obvious. It’s going to damage financial reforms, cause social unrest and destabilize the regime to some extent,” Yang Dong, vice-dean at Renmin Law School and an expert on finance and securities law told Reuters this week.

  We close with the following rather inauspicious headline from Bloomberg which hit the wires Thursday afternoon:

  Bocom Halts Payments From Clients to Chinese P2P Lender

  

  

  

  

  

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