- Connecting The Nuclear 'Dots'
With Iran back in the headlines once again thanks to the US government's shady cash payments surrounding the nuclear deal and hostage release, we thought it worth considering the warnings of GeoStrategic Analysis' Dr. Peter Huessy:
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Iran seeks to do us grave harm, potentially with ballistic missiles and nuclear weapons. The threat warnings are clear and we have strong evidence — Iran has attacked us repeatedly over the past 30 years.
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Instead of heeding the nuclear missile "dots" that are emerging all around us, we are busy promoting trade with Iran, downplaying its violations of the nuclear deal, simply ignoring its ballistic missile developments and dismissing the growing evidence of its terrorist past.
After the attacks on September 11, 2001, Congress, the Bush administration, and terrorist experts complained that the country had simply not "connected the dots" provided by prior terrorist threats.
The 9/11 Commission also concluded that the attacks "should not have come as a surprise," as "Islamist extremists had given plenty of warning that they meant to kill Americans indiscriminately and in large numbers."
The Commission then listed 10 Islamic terror plots against the US prior to 9/11:
"In February 1993, a group led by Ramzi Yousef tried to bring down the World Trade Center with a truck bomb.
"Plans by Omar Abdel Rahman and others to blow up the Holland and Lincoln tunnels and other New York City landmarks …
"In October 1993, Somali tribesmen shot down US helicopters, killing 18 and wounding 73…
"In early 1995, police in Manila uncovered a plot by Ramzi Yousef to blow up a dozen U.S. airliners while they were flying over the Pacific.
"In November 1995, a car bomb exploded outside the office of the US program manager for the Saudi National Guard in Riyadh, killing five Americans and two others.
"In June 1996, a truck bomb demolished the Khobar Towers apartment complex in Dhahran, Saudi Arabia, killing 19 US servicemen and wounding hundreds.
"In August 1998, al Qaeda, carried out near-simultaneous truck bomb attacks on the US embassies in Nairobi, Kenya, and Dar es Salaam, Tanzania. The attacks killed 224 people, including 12 Americans, and wounded thousands more.
"In December 1999, Jordanian police foiled a plot to bomb hotels and other sites frequented by American tourists…
"…US Customs agent arrested Ahmed Ressam at the US-Canadian border as he was smuggling in explosives intended for an attack on Los Angeles International Airport.
"In October 2000, an al Qaeda team in Aden, Yemen, used a motorboat filled with explosives to blow a hole in the side of a destroyer, the USS Cole, almost sinking the vessel and killing 17 American sailors."
Despite the overwhelming indications that an attack like 9/11 was around the corner, as former Secretary of State Condoleezza Rice told the country in her April 2004 testimony to the 9/11 Commission, "The terrorists were at war with us, but we were not yet at war with them. For more than 20 years, the terrorist threat gathered, and America's response across several administrations of both parties was insufficient."
Are we now better equipped to "connect the terrorist-threats by dots" than we were prior to 9/11? Certainly we are not still echoing the testimony of Richard Clarke when he told the Emerging Threats Subcommittee in the summer of 2000 that the administration "had not yet" determined how to spend homeland security funds even some eight years after the first World Trade Center bombing of February 1993.
Unfortunately, not only are we not connecting the terrorist dots, we are actively downplaying their significance. Nowhere else is this more apparent than in the virtually complete failure, on the part of the US, to hold Iran responsible for the terror attacks that have killed and maimed thousands of Americans since 1979. This failure is all the more disturbing after the numerous court decisions that have found Iran accountable for nearly $60 billion in damages owed to the victims and survivors of these attacks, including the 9/11 attacks.
The outstanding news analyst and author Melanie Phillips wrote nearly a year ago that Iran had been "…perpetrating acts of war against Western interests for more than three decades — including playing a key role in the 9/11 attacks on America." Phillips noted that a Revolutionary Guard-Iranian Intelligence (MOIS) task force
"designed contingency plans for unconventional warfare against the US… aimed at breaking the American economy, crippling or disheartening the US, and disrupting the American social, military and political order — all without the risk of a head-to-head confrontation which Iran knew it would lose."
She explained that the court testimony from former Iranian agents illustrates that Iran "…devised a scheme to crash hijacked Boeing 747s into the World Trade Center, the White House and the Pentagon. … The plan's code name was 'Shaitan dar Atash' ('Satan in flames')." Further, the court evidence revealed that Iran obtained "a Boeing 757-767-777 flight simulator which it hid at a secret site where the 9/11 terrorists were trained."
In December 2011, Judge George B. Daniels found that Iran, with the participation of its Supreme Leader Ayatollah Ali Khamenei, was directly and heavily involved in the 9/11 atrocities. Khamenei instructed intelligence operatives that while expanding collaboration between Hezbollah and al-Qaeda, they must restrict communications to existing contacts with al-Qaeda's second-in-command Ayman al Zawahiri and Imad Mughniyeh — Hezbollah's then terrorism chief and agent of Iran.
Iran's Supreme Leader, Ayatollah Ali Khamenei (center), is shown meeting in May 2014 with Iran's military chief of staff and the commanders of the Islamic Revolutionary Guards Corps. (Image source: IRNA)
While the 9/11 Commission found solid evidence Iran aided the 9/11 hijackers in their travels from Iran, the "Extensive cooperation in major global terrorist activities," between Iran, Hezbollah and Al Qaeda, including the 1996 bombing of the Khobar Towers housing complex in Saudi Arabia and the 1998 East Africa US embassy bombings, escaped the 9/11 Commission's detailed attention. Notably, as long ago as in 2000, a US Defense Intelligence Agency analyst was alerting the government to a web of connections between al-Qaeda, the Iranian intelligence agencies controlled by Khamenei, and other terrorist groups.
Many press reports and analysts, cognizant of Iran's terrorist history and aware that Iran has been designated by the US Department of State as the world's premier state sponsor of terror, choose to believe the 2015 Iranian nuclear deal should not be derailed over concern of Iran's possible future terrorist plans. Especially when it is often assumed these plans are aimed primarily at Israel and groups in Syria, Iraq and Lebanon, and thus not of real concern to the United States.
Is the nuclear deal with Iran thus a good trade? We get to slow Iran's pursuit of nuclear weapons, but any serious sanctions or military effort to stop Iran's terror agenda are off the table. Let's connect the new nuclear-related Iran dots.
First, the world's expert on Iran ballistic missiles, Uzi Rubin, revealed on July 15 that Iran has five new missile capabilities: they can strike the middle of Europe, including Berlin; they can target with GPS accuracy military facilities in Saudi Arabia; they can launch missiles from underground secret tunnels and caves without warning; they have missiles that are ready to fire 24/7; and they have developed other accurate missiles whose mission is to strike targets throughout Gulf region.
Second, the Associated Press revealed that a side agreement under the Joint Comprehensive Plan of Action (JCPOA) nuclear "deal" actually allows Iran to break out of the agreement in year 11, not 15, at which point Iran will not even be six months away from having sufficient nuclear fuel to arm a nuclear warhead, and Iran will be able to install nuclear centrifuges five times more efficient than the ones they have today.
Third, according to German intelligence reports, Iran has, a few dozen times since the July 2015 nuclear agreement, sought to purchase nuclear ballistic missile technology, a violation of previous UN resolutions.
As Americans wonder who will be behind the next terrorist attacks on our country — "lone wolf" terrorists inspired by social media from Islamist groups; organized cells of ISIS, Al Qaeda, Islamic Jihad, Hezbollah; states such as Iran and Syria; or a combination of all three — we would do well to be reminded of the long-term use of terrorism by the former Soviet Union as one of their trademark elements of "statecraft."
Iran's pursuit of nuclear weapons has not been stopped and at best has been delayed. Add to that Iran's enhanced ballistic missile capability, its growing partnership with North Korea and its history of terrorist attacks on the United States, and connecting the dots reveals a stark reality — nuclear terrorism by missile may be on its way.
During the spring and summer of 2001, US intelligence agencies received a stream of warnings that Al Qaeda was determined to strike. The specific information pointed to threats from overseas. The Bush administration began developing a strategy in early 2001 to eliminate Al Qaeda in three years. The 9/11 attacks happened "too soon."
Iran seeks to do us grave harm, potentially with ballistic missiles and nuclear weapons. The threat warnings are clear and we have strong evidence — Iran has attacked us repeatedly over the past 30 years
But instead of heeding the nuclear missile "dots" that are emerging all around us, we are busy promoting trade with Iran, downplaying its violations of the nuclear deal, simply ignoring its ballistic missile developments and dismissing the growing evidence of its terrorist past.
In short, we are not connecting these dots; we are erasing them…America is apparently bent on repeating — yet again — the historic wrong turn it took in 1979 by once again embracing the radical Islamic regime in Iran. Why would the U.S. administration think doing the same thing again will have a different outcome?
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- 3 Simple Charts That Help Explain Why 9,000 Businesses Have Left California In Just 7 Years
We recently came across some simple charts from the Tax Foundation that simply and effectively illustrate why businesses are fleeing states like California by the 1,000s.
In the first chart, the Tax Foundation presents data from The Bureau of Economic Analysis to compare purchasing power of $100 depending which state you live in. Ironically, the map turned out to look eerily similar to recent electoral college maps of Presidential elections with the Democrat-leaning northeast and west coast areas getting less bang for their buck compared to the southeast and mid-west. Could it be that rather than voting their desires to cling to “guns and religion,” to quote President Obama, that Americans in the southeast and mid-west are actually voting to preserve a higher standard of life that doesn’t require them to spend $2mm on an 800 square foot apartment? But we digress.
Ironically, the second chart which illustrates tax rates by state looks very similar to the first. The highest taxed states (dark blue) are in the northeast and west coast with lower tax structures in the southeast and mid-west.
And finally a map of minimum wage by state. Note that this doesn’t reflect California’s recent minimum wage hike to $15 which will be phased in over the next 5 years. At the risk of sounding like a broken record we’ll spare you our additional commentary.
Could it be that these charts have something to do with the mass exodus of businesses from the State of California to more “friendly” locations like Texas and Nevada? As pointed out by the Dallas Business Journal, a study conducted by Joseph Vranich, a site selection consultant and president of Irvine, California-based Spectrum Location Solutions, found that roughly 9,000 California companies moved their headquarters or diverted projects to out-of-state locations in the last seven years due to the Golden State’s “hostile” business environment. As the DBJ points out, companies are fleeing California to escape escalating costs and regulations and states like Texas and Nevada with no income tax and high relative purchasing power are the key beneficiaries:
It’s typical for companies leaving California to experience operating cost savings of 20 up to 35 percent, Vranich said. He said in an email to the Dallas Business Journal that he considers the results of the seven-year, 378-page study “astonishing.” “I even wonder if some kind of ‘business migration history’ has been made.”
Companies continue to leave California because of rising costs and
concerns over the state’s “hostile” business environment, according to the study, which also names companies and provides details of business disinvestments in the state.Here are some highlights of the study:
- Texas ranked as the top state to which businesses migrated, followed by: (2) Nevada, (3) Arizona, (4) Colorado, (5) Washington, (6) Oregon, (7) North Carolina, (8) Florida, (9) Georgia and (10) Virginia. Texas was the top destination for California companies each year during the seven-year study period.
- Los Angeles led the Top 15 California counties with the highest number of disinvestment events, followed by: (2) Orange, (3) Santa Clara, (4) San Francisco, (5) San Diego, (6) Alameda, (7) San Mateo, (8) Ventura, (9) Sacramento, (10) Riverside, (11) San Bernardino, (12) Contra Costa tied with Santa Barbara, (13) San Joaquin, (14) Stanislaus and (15) Sonoma.
Turns out you really do get what you vote for.
For those who would like to review the full study, which the author summarizes as “California’s Forty Year Legacy of Hostility to Business,” by Spectrum Location Solutions, it can be viewed below:
- Only In China: Companies Become Banks To 'Solve' Financial Difficulties
Submitted by Valentin Schmid via The Epoch Times,
China is desperate to solve several problems it has due to its debt to GDP ratio being north of 300 percent. It may have found a pretty unconventional one by letting companies become banks, according to a report by the Wall Street Journal.
With profits headed south, heavily indebted Chinese heavy-machinery giant Sany Heavy Industries said this week it won approval to set up a bank in the Hunan Province city of Changsha. With 3 billion yuan ($450 million) of registered capital, it will be a relatively large institution as Chinese city-based banks go. Sany plans to join forces with a pharmaceutical company and an aluminum company.
Sany already operates an insurance and finance division with the goal of internal financing and insurance services for clients.
Sany Heavy Industries already operates a Finance and Insurance arm, although it’s unclear what gold has to do with it. (Company Website)Debt Problem
One problem is that companies are defaulting on bond payments and there is no adequate resolution mechanism for bad debts, at least according to Goldman Sachs.
“A clearer debt resolution process (for example, how debt restructuring on public bonds can be achieved, how valuation and recovery on defaulted bonds are arrived at, the timely disclosure of information and clarity on court-sanctioned processes) would help to pave the way for more defaults, which in our view are needed if policymakers are to deliver on structural reforms,” the investment bank writes in a note.
By becoming or owning banks, the companies can just shift debt around different balance sheets to avoid a default, although this is probably not the resolution that Goldman Sachs had in mind when talking about structural reforms.
Another problem is that the regime has more and more difficulties pushing more debt into the economy to grease the wheels and keep GDP growth from collapsing entirely.
China needs 11.9 units of new debt to create one unit of GDP growth. At the same time, the velocity of money or the measure of how often one unit of money changes hands during a year has fallen to below 0.5, another measure of how saturated the economy is with uneconomical credit. If the velocity of money goes down, the economy needs a higher stock of money to keep the same level of activity.
(Macquarie)So if companies can’t pay back loans, old banks don’t want to give out loans, and consumers don’t want to circulate the money, you can just let some companies become banks to prevent them from defaulting and maybe even issue new loans to themselves.
It would not be the first time China has tried a circular financial arrangement to solve some structural issues.
Sany Not Alone
According to the Wall Street Journal report, the Sany Heavy Industries case is only one of a few. Other companies in the tobacco and travel sectors, for example, have taken over banks or formed new ones.
ChinaTopix reports that the China Banking Regulatory Commission (CBRC) has already awarded five licenses for private banks and received another 12 applications during the past year. It also mentions that industrial firms are behind this move:
“One bank, Fujian Huatong Bank, which has a registered capital of Rmb3 billion ($450 million), was promoted by 10 Fujian-based companies in different sectors, including retail, manufacturing and real estate.”
We don’t know if the regulator had this in mind when they launched the initiative to boost private banks in China in 2014 in order to improve lending to the technology sector, but it did explicitly mention that private companies should form banks.
“Qualified private enterprises shall be encouraged to set up private banks. The innovation of products, services, management, and technology by private banks will inject new vitality into the sustainable and innovative development of the banking sector,” the CBRC states in an undated report.
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It remains to be seen whether this is a long-term sustainable solution.
- Politicians Gone Wild: Underage Strip Poker, Meth For Sex, & White Males Need Not Apply
Just when you thought the Presidential election was spiraling out of control and politics couldn’t get any more surreal, we present to you a trio of lesser-known politicians that took things to a whole new level this week…
Strip Poker with Mayor Silva:
Our first Politician Gone Wild is Mayor Anthony Silva of Stockton, California, who was arrested on Thursday on charges of playing strip poker and providing alcohol to minors at a youth camp he runs for impoverished children. An FBI investigation of Silva led to the discovery of a video saved on Silva’s cell phone which the District Attorney’s office discussed with NBC:
“The audio of the surreptitious recording clearly indicates that the participants did not want to be recorded. Witnesses also informed FBI agents that Silva provided alcohol to the participants, all of whom were underage, including a minor.”
Mayor Silva has since been released on bail and intends to plead not guilty.
Meth for Sex with Mayor Silverthorne:
Next there is Fairfax City, Virginia Mayor R. Scott Silverthorne, a supporter of Hillary Clinton, who was arrested Thursday after allegedly giving methamphetamine to an undercover police officer in exchange for sex, according to HeatStreet.
According to Fairfax County police, they encountered Silverthorne after learning of an individual who was distributing meth through a website used to arrange male-on-male sexual encounters.
An undercover detective created a profile on the site and was contacted by Silverthorne, who said he could provide meth in exchange for sex. They arranged to meet at a hotel, where Silverthorne was arrested for felony distribution of methamphetamine.
As if that wasn’t bad enough, Mayor Silverthorne is apparently also a substitute teacher in the Fairfax County Public School system.
White Males Need Not Apply:
Our final case comes from the Daily Caller which pointed out a job posting on Minnesota House of Representatives Member Keith Ellison’s (D) website seeking interns for the fall. Within the posting the Democrat describes that he’s seeking “interns who are curious, hardworking, and passionate about serving Minnesota’s 5th district.” But there’s one small catch, per the posting:
“People of color, LGBTQ individuals, women, and people with disabilities are strongly encouraged to apply.”
Well that pretty much covers anyone that isn’t a straight, able-bodied, white, male. Got it.
- Fissures In The Empire
Authored by Paul Craig Roberts,
If you have been wondering what all the terror events in France and Germany are about, here is the answer: (via Strategic-Culture)
A delegation of 11 French lawmakers and senators arrived in Crimea on July 28 to take part in celebrating Russian Navy Day in Sevastopol.
There are no grounds to keep anti-Russian sanctions in place, said the head of the delegation Thierry Mariani, addressing the Crimean Parliament in Simferopol. Republican MP Jacques Myard also emphasized the importance of lifting the sanctions.
In July 2015, a group of 10 French deputies visited Crimea for the first time despite domestic and European criticism. Back then the lawmakers said that what they saw was completely different from the picture painted by Western media. They say the same thing now after having seen the situation with their own eyes.
The recent visit of French MPs is part of a trend taking place in Europe.
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Several EU countries, including Austria and Hungary, have expressed interest in lifting, or at least softening, sanctions, as they can no longer afford to miss out on trade with Russia. Having failed to influence Russia’s foreign policy, the sanctions are useless anyway. Nobody gains and everybody loses in this sanctions war – it’s a no-win policy.
All summed up, it looks like opposition within the EU to the sanctions further renewal may now be close to achieving critical mass. All the indications are that the sanctions would not be extended anymore. The French lawmakers visit to Crimea is just another event to confirm this fact.
Washington has raised the cost of being a member of its Empire too high. Vassals such as France and Germany are beginning to exercise independent policies toward Russia. Observing the cracks in its Empire, Washington has decided to bind its vassals to Washington with terror. Most likely what we are witnessing in the French and German attacks is Operation Gladio.
Washington’s policy toward Russia, which has been imposed by Washington on all of Europe, benefits no one but the handful of American ideologues known as neoconservatives. Neoconservatives are crazed psychopaths willing to destroy Earth in behalf of American hegemony.
A delegation of members of the French National Assembly and Senate went to Crimea to participate in Russian Navy Day on July 28. Thierry Mariani, the head of the French delegation, addressed the parliament in Crimea and said that there are no reasons for France to continue to support Washington’s illegal sanctions on Russia.
As the Strategic Culture Foundation reports, this “is part of a trend taking place in Europe.”
“On June 8, the French Senate voted overwhelmingly to urge the government to gradually reduce economic sanctions on Russia amid growing opposition to the punitive measures across Europe. The French National Assembly voted for lifting the sanctions in late April.”
Politicians in Italy, Belgium, and Cyprus are taking the same tack. Politicians in Greece and Hungary have also questioned the sanctions.
So does Donald Trump, and that is why the servile American press is trying to drive him into unacceptability and out of the race.
Democratic websites are spreading the rumor that Trump never intended to win the nomination. His goal was to come in second. His campaign was just an elevation of his name recognition to help him in his deals. But he and his advisors misjudged the disaffection of the voters from the Establishment parties and Trump won.
Democratic websites claim that Trump is trying to get himself so opposed by criticizing Muslim families of war heros and women for abortions that he can withdraw, thus allowing the RNC to select a candidate that can rival Hitlery in appeal to the ruling oligarchs and pressitute media.
Considering the degeneration of America, this could possibly be true.
But for now we must doubt it and ascribe it to the effort to undermine Trump with his supporters. The evil that rules in America is determined to have in the White House its own servant, and that servant is Hitlery.
- Rigged Game: Ever Wonder How Wall Street Analysts Are So Good At Forecasting? Hint, It's Not Their Excel Skills
Our readers should have little doubt at this point about our view on the integrity of wall street and equity markets. In fact, we just spoke yesterday about all the little accounting games that companies play to “beat” earnings estimates in a post entitled “Mind The “GAAP” (Or How The Game Is Really ‘Rigged’).”
Well, CFOs can’t bear the full burden of earnings management, they need complicit “independent” counterparts on wall street as well. A recent article in the Wall Street Journal points out how public companies use wall street analysts to manage quarterly earnings expectations and ultimately their stock prices. The article summarizes the quarterly dance played out between wall street analysts and investor relations teams to “manage” earnings down to a level that is ultimately “beatable” and thus produces a nice stock bounce on earnings day. Analysts, of course, are willing partners in the game because being a “team player” means better access to management teams, better attendance at bank-hosted conferences and the added benefit of very “accurate” forecasting for hedge fund clients that pay handsomely for their efforts. As the WSJ points out:
Analysts whose forecasts are far from what companies end up reporting risk losing credibility with clients and could get less access to company management. Those are reasons to listen if a company calls with a suggestion, according to analysts.
Roger Freeman, who left the stock-research industry in 2014 and now works at a technology startup, says: “If someone is trying to get your numbers down, they will highlight all the negatives and not positives, and you’ll come away thinking: ‘Gee, that sounds pretty bad,’ and sometimes take your numbers down.”
To prove the point, the WSJ reviewed over 6,000 earnings reports from 1Q13 through 1Q16 to see just how frequently companies manage to “beat” earnings estimates. “Shockingly” an overwhelming number of companies manage to report earnings that are exactly in-line or slightly above analyst expectations. But hey, maybe the analysts are just really good at modeling.
The WSJ went on to provide a couple of recent examples of “managed” earnings, with AT&T’s 1Q16 numbers being the first, saying:
AT&T’s finance chief said last year’s fourth quarter included “a slowdown in the handset upgrade cycle.” He added that he “wouldn’t be surprised to see that continue.” Near the end of the first quarter, AT&T steered analysts back to Mr. Stephens’s comments at a Deutsche Bank AG conference on March 9, say five analysts who spoke to the telecom company.
Jeffrey Kvaal of Nomura Securities says AT&T’s investor-relations team “is very diligent” before earnings releases “about making sure that the comments from the executives are reflected in the commentary from the sell side.”
A week before the announcement, Mr. Kvaal cut his first-quarter sales estimate by $837 million to $40.54 billion, citing lower equipment sales. Two days before the results, the William Blair analysts cut their sales estimate by about $1 billion. With one day to go, Buckingham Research Group reduced its sales estimate by more than $1.1 billion, also noting the slower pace of upgrades.
Analyst James Breen of William Blair says he talks to investor-relations personnel at AT&T “all the time.” He adjusted his forecast because the previous estimate hadn’t taken into account the comments from AT&T’s management at several investor conferences. Mr. Breen says he also didn’t want to be an outlier compared with other analysts who follow AT&T.
Mr. Viola, AT&T’s investor-relations chief, says “companies can and do talk with analysts about their latest, publicly available information. That’s the job of investor relations, and it benefits the investing public.”
He adds: “Analysts change their estimates for many reasons, and do so throughout the quarter.” About half the changes in the first quarter were made a week or less before the April 26 earnings announcement.
We would agree with AT&T that providing earnings guidance could provide “benefits [to] the investing public.” But that’s not what’s happening here because the “investing public” does not get access to research reports published by investment banks unless they happen to be clients which is a status reserved for hedge funds and super-wealthy individuals.
But we digress. To conclude the AT&T discussion, in the ~25 days leading up to AT&T’s 1Q16 earnings release, the WSJ found that analysts cut AT&Ts revenue forecast by ~$1BN. And wouldn’t you know it…when earnings were finally released AT&T managed to “beat” on revenue by 0.19%.
And, not to leave out our favorite investment banking operation, the WSJ also commented on Goldman Sachs’ 1Q16 earnings:
This spring, many analysts were struggling to figure out how Goldman Sachs Group Inc. would fare amid the first quarter’s market turbulence. From mid-March to mid-April, 16 analysts cut their earnings estimates by an average of 41%.
Around the end of the first quarter, the bank’s investor-relations staff answered calls from analysts, many of whom routinely check in with the firm when updating their financial models and targets.
Some conversations included discussions about comments from rival executives at investor conferences during the first quarter, some analysts say.
Michael DuVally, a Goldman spokesman, says the discussions were appropriate, partly because analysts “are overloaded with data.” He adds: “Serving as a resource for public information is a sensible market practice.”
When Goldman released results April 19, it had $2.68 a share in
earnings, more than 10% higher than the lowered target. The stock rose 2.3%.
The bottom line is that the game is rigged and retail investors are the losers. We fail to understand how companies can consistently work within the confines of the law yet still “manage” analysts’ estimates to within fractions of a percent of a company’s actual quarterly results. How is it possible that a call with investor relations of AT&T convinces an analyst to take down quarterly revenue estimates by $1BN (a reduction that puts the revised “forecast” within a small fraction of actual results) yet the contents of that call are not “material” under SEC guidelines? Why do investment banks and their clients deserve better access to management teams and information? Why can’t all management presentations at conferences be open to the public? Why do wall street investors spend $1,000’s of dollars attending investment bank conferences at remote beach destinations if they’re not receiving something they deem valuable in return?
The fact is that a couple of small changes could be made to level the playing field. Corporate conferences are fine but why not require that all presentations and Q&A sessions be webcast with a transcript of discussions posted for public consumption? Same thing with quarterly update calls with analysts. If there is nothing nefarious in these discussions then why not make the process transparent and prove it? These issues are easy to solve but they never will be because the banks and corporations behind them are willing participants with economic interest in maintaining the status quo so we won’t hold our breadth waiting for change.
- "Jobs Data Nowhere As Strong As Headline" – Analysts Throw Up On Today's Seasonal Adjustment
One week ago, the BEA admitted that it had “found a problem” when it comes to calculating GDP numbers. Specifically it blamed “residual seasonality” adjustments for giving historical GDP numbers a persistent optimistic bias. This came in the aftermath of last week’s shocking Q2 GDP report which printed at 1.2%, less than half of Wall Street’s consensus.
Today, seasonality made another appearance, this time however in the much anticipated July jobs number, which unlike the woeful Q2 GDP number, was the opposite, coming in far higher than expected. In fact it was higher than the top Wall Street estimate.
And, just like in the case of GDP, it appears that seasonal adjustments were the culprit for today’s blowout headline print which excluding the Arima X 13 contribution to the headline number, would have been notably weaker.
As Mitsubishi UFJ strategist John Herrmann wrote in a note shortly after the report, the “jobs headline overstates” strength of payrolls. He adds that the unadjusted data show a “middling report” that’s “nowhere as strong as the headline” and adds that private payrolls unadjusted +85k in July vs seasonally adjusted +217k.
In Herrmann’s view, the government applied a “very benign seasonal adjustment factor upon private payrolls to transform a soft private payroll gain into a strong gain.”
He did not provide a reason why the government would do that.
Courtesy of Southbay Research, which also blasted today’s seasonal adjustment factor, this is how the seasonal adjustments look like relative to history.
We leave it up to readers to decide just why the government may want to represent what would otherwise have been a far weaker than expected report, into a blowout number, one which merely adds to the economic “recovery” narrative, which incidentally will come in very useful to Hillary’s presidential campaign.
Yet even assuming the market has no doubts about the seasonally adjusted headline number, as appears to be the case, the other problem that has emerged for the Fed is how to ignore this strong number. As Bank of Tokyo’s Chris Rupkey writes, “Let’s see Yellen get out of this one and find something in the data to once again not raise rates in September.” (We assume he did not see the unadujsted numbers.)
As he adds, slowing 2Q GDP growth of 1.2% took Sept. rate hike “off the table” and now “the million dollar question” is whether 255k payroll jobs in July, 292k in June put it back on. As a reminder, Yellen speaks exactly in three weeks time at Jackson Hole on Aug. 26; “let’s see if she provides some guidance.” But while rate hike odds may have spiked after today’s report, it is almost certain that, as we said last night, the Fed will not dare to hike the rate in September and potentially unleash market turmoil in the most sensitive part of the presidential race.
As for a December rate hike, there are 4 months until then, and much can happen: who knows, maybe the BLS will even undo the significant seasonal adjustment boost that send July jobs soaring.
- Sheriff Raids House To Find Anonymous Blogger Who Called Him Corrupt
Authored by Naomi LaChance, originally posted at TheIntercept.com,
After a watchdog blog repeatedly linked him and other local officials to corruption and fraud, the Sheriff of Terrebone Parish in Louisiana on Tuesday sent six deputies to raid a police officer’s home to seize computers and other electronic devices.
Sheriff Jerry Larpenter’s deputies submitted affidavits alleging criminal defamation against the anonymous author of the ExposeDAT blog, and obtained search warrants to seize evidence in the officer’s house and from Facebook.
The officer, Wayne Anderson, works for the police department of Houma, the county seat of Terrebone Parish — and according to New Orleans’ WWL-TV, formerly worked as a Terrebone Sheriff’s deputy.
Anderson was placed on paid leave about an hour and a half after the raid on his house, Jerri Smitko, one of his attorneys, told The Intercept. She said that he has not yet been officially notified about why.
Smitko said Anderson denies that he is the author of ExposeDat.
But free speech advocates say the blogger — whoever he or she is — is protected by the First Amendment.
“The law is very clear that somebody in their private capacity, on private time, on their own equipment, has a First Amendment right to post about things of public concern,” Marjorie Esman, director of the ACLU of Louisiana, told The Intercept.
Larpenter told WWL: “If you’re gonna lie about me and make it under a fictitious name, I’m gonna come after you.”
Esman said the Sheriff and his deputies were forgetting something. “The laws that they’re sworn to uphold include the right to criticize and protest. Somehow there’s a piece in the training that leads to them missing that.”
ExposeDAT calls itself a “watchdog group,” posting articles that use public records to identify institutional corruption in the Parish. Since it launched in late June, it has accused various public officials and business owners of nepotism, tax evasion, polluting and misuse of government funds.
It promises to “introduce articles that explore the relationship between certain Public Officials and the flow of money in South Louisiana.”
The Sheriff’s office, in order to obtain the warrants, said the blog had criminally defamed the Parish’s new insurance agent, Tony Alford, WWL reported.
One ExposeDAT blog post titled “Gordon Dove and Tony Alford’s Radioactive Waste Dumping,” briefly describes the relationship between Alford and the parish’s president, who jointly own a Montana trucking company that has been cited for dumping radioactive waste in Montana. That citation was originally reported in the Missoula, Mont., newspaper The Missoulian.
In a post titled “You Scratch Mine and I’ll Scratch Yours,” the blog uses public records to call attention to the fact that Sheriff Larpenter gave Alford a parish contract despite that fact that his wife manages Alford’s office.
“When decent, law abiding citizens try to speak out on matters of public importance, they’re treated like criminals,” Smitko said. “If this is what happens to a police officer with 12 year of impeccable service what the hell kind of justice do criminals get?”
The Sheriff’s office, the police department and the district attorney’s office did not return requests for comment.
This isn’t the first time that Louisiana law enforcement officers have challenged those who criticize them. In 2012, Bobby Simmons, a former police officer, was arrested and jailed on a charge of criminal defamation for a letter he wrote to a newspaper regarding another police officer. The charge was later dropped, and Simmons filed a civil suit alleging that his civil rights were violated.
- Carl Icahn Has Never Been More Short The Market, Is Pressing For A Crash
Three months ago, when looking at the 10-Q of Carl Icahn’s hedge fund vehicle, Icahn Enterprises, L.P. (IEP) we found something striking: Carl Icahn had put his money where his mouth was. Recall that over the past year, Carl Icahn had become one of the most vocal market bears with a series of increasingly escalating forecasts. At first, he was mostly pessimistic about junk bonds, saying last May that “what’s even more dangerous than the actual stock market is the high yield market.” As the year progressed his pessimism become more acute and in December he said that the “meltdown in high yield is just beginning.” It culminated in February when he said on CNBC that a “day of reckoning is coming.”
Some skeptics thought that Icahn was simply trying to scare investors into selling so he could load up on risk assets at cheaper prices, however that turned out to be wrong when IEP revealed that as of March 31 it had taken its net short position from a modestly bearish 25% net short to an unprecedented for Icahn 149% short position, a six-fold increase in bearish bets.
However, even as other prominent billionaires piled onto the bearish side, the market soared. And then, after Q1, it soared some more to the point where as of the end of June, following the brief Brexit dump, it was just shy of all time highs (where it is now). So there was renewed speculation if Icahn had given up on his record bearish bet. So when overnight IEP released its latest 10-Q, we were eager to find out if Carl had unwound his record short, or perhaps, added more to it. What we found is that one quarter after having a net short position of -149%, as of June 30, Icahn’s net position was once again -149%, or in other words, he has once again never been shorter the market.
This is the result of a relatively flat long gross exposure of 174% (up 10% from the previous quarter) resulting from a 166% equity and 8% credit long, and another surge soaring short book which has grown even more from -313% as of March 31, 2016 to a gargantuan 323% as of the last quarter, on the back of 301% in gross short equity exposure and 22% short credit.
This is what IEP added as detail:
Of our short exposure of 323%, the fair value of our short positions represented 24% of our short exposure. The notional value of our other short positions, which primarily included short credit default swap contracts and short broad market index swap derivative contracts, represented 299% of our short exposure.
With respect to both our long positions that are not notionalized (167% long exposure) and our short positions that are not notionalized (24% short), each 1% change in exposure as a result of purchases or sales (assuming no change in value) would have a 1% impact on our cash and cash equivalents (as a percentage of net asset value). Changes in exposure as a result of purchases and sales as well as adverse changes in market value would also have an effect on funds available to us pursuant to prime brokerage lines of credit.
With respect to the notional value of our other short positions (299% short exposure), our liquidity would decrease by the balance sheet unrealized loss if we were to close the positions at quarter end prices. This would be offset by a release of restricted cash balances collateralizing these positions as well as an increase in funds available to us pursuant to certain prime brokerage lines of credit. If we were to increase our short exposure by adding to these short positions, we would be required to provide cash collateral equal to a small percentage of the initial notional value at counterparties that require cash as collateral and then post additional collateral equal to 100% of the mark to market on adverse changes in fair value. For our counterparties who do not require cash collateral, funds available from lines of credit would decrease.
There was little incremental detail. One quarter ago, when asked about this unprecedented bearish position, Icahn Enterprises CEO Cozza said during the earnings call that “Carl has been very vocal in recent weeks in the media about his negative views” adding that “we’re much more concerned about the market going down 20% than we are it going up 20%. And so the significant weighting to the short side reflects that.”
Considering that since then the market has soared higher on wave after wave of central bank intervention, which has brought the monthly total amount of global QE to just shy of $200 billion, after the latest QE increase by the BOE…
… perhaps Icahn’s directional fears were displaced. On the other hand, since Icahn has shown no interest in unwinding his bearish position, and has kept it identical to a quarter ago, one can conclude that the financier-rapidly-turning-politician, has merely delayed his bet for a day of reckoning for the S&P500. Perhaps this time he will be right.
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