- "The Brink Of War": The Horror Of The Deep State's Plan Exposed – Part 2
Authored by Jim Quinn via The Burning Platform blog,
In Part One of this article I detailed how propaganda has been utilized by the Deep State for decades to control the minds of the masses and allow those in control to reap the benefits of never ending war.
In Part Two I will discuss recent events, false flags, and propaganda campaigns utilized by the Deep State to push the world to the brink of war.
“We penetrated deeper and deeper into the heart of darkness” – Joseph Conrad, Heart of Darkness
The use of graphic images, electronically transmitted across the world in an instant, along with a consistent false narrative promoted by the captured corporate media, is the preferred means of appealing to the emotions of those who want to believe atrocity propaganda. Instigating a march to war through the use of unfounded fear, misinformation, staged photo ops, and appealing to passions and prejudices was as revolting to Albert Einstein in the 1930s as it is today to normal thinking individuals.
“He who joyfully marches to music in rank and file has already earned my contempt. He has been given a large brain by mistake, since for him the spinal cord would fully suffice. This disgrace to civilization should be done away with at once. Heroism at command, senseless brutality, deplorable love-of-country stance, how violently I hate all this, how despicable and ignoble war is; I would rather be torn to shreds than be a part of so base an action! It is my conviction that killing under the cloak of war is nothing but an act of murder.” – Albert Einstein
It seems the level and intensity of the propaganda campaigns has ratcheted up dramatically in the last half dozen years and appears to be reaching a crescendo as we speak. It’s almost as if the Deep State is frantically trying to maintain the status quo, even as the worldwide financial Ponzi scheme of debt approaches the point of collapse. The domestic conditions in Europe, North America, and Asia are deteriorating rapidly. The propaganda doled out trying to convince citizens their financial situation is not worsening has failed.
The people realize they have been screwed and continue to be screwed by the politicians, bankers and corporate fascists running the show. This is the major reason Trump was elected. People were desperate for someone who offered them a promise of economic revival and reduced government interference in their lives.
The problem is no one is capable of saving the US Titanic. The iceberg was struck sixteen years ago when the Deep State engineered a plundering campaign driving the national debt from $5.8 trillion to $20 trillion, and unfunded welfare liabilities to $200 trillion. Unpaid for tax cuts will not save us. Unpaid for shovel ready infrastructure projects will not save us. Threatening foreign countries with tariffs will not bring manufacturing jobs back. Excessively low interest rates will not spur investment, but it will create a pension crisis and impoverish senior citizens.
Devaluing your currency when every country in the world attempts the same “solution” will not work. Passing an Obamacare lite healthcare plan that keeps mega-corporation insurance companies and hospitals in charge solves nothing. The demographic time bomb of boomers turning 65 cannot be reversed. Providing the appearance of normalcy and improvement by artificially boosting the stock and real estate markets to all-time bubble highs only makes the coming crash that much more devastating.
It is clearly evident to me the drumbeat of war is louder than it has been in decades as this Fourth Turning enters its ninth year. Every previous U.S. Fourth Turning has climaxed with a more horrific war than the previous, as the technological “advances” allow the Deep State controllers to create cannon fodder more efficiently. The year 2011 seems to have been the nexus for the Deep State to create new enemies and sow the seeds of discontent and revolution around the globe. U.S. troops withdrew from Iraq in 2011, while troop levels in Afghanistan remained low.
The neo-cons were running out of conflicts to keep the profits flowing. The U.S. economy was headed back into recession as the temporary effects of the Fed’s QE heroin injection and Obama’s massive porkulus plan were leading to the inevitable drug withdrawal and fall back into recession. The Deep State managers had to act fast. They needed new enemies, more wars and more QE.
Was it just a coincidence Hosni Mubarak was overthrown in Egypt during 2011 while the U.S. stood by and did nothing? After the democratically elected replacement turned out to be a Muslim extremist, we fully supported the next coup which placed a military dictator in charge. He just got a grand welcome from Trump a few weeks ago. I guess military dictators are OK when they do what we say.
A dictator who had the nerve to not honor the U.S. dollar as the currency of choice in his kingdom, Muammar Gaddafi, was swiftly overthrown and killed by a NATO force led by the U.S. in 2011. A stable country was turned into a terrorist haven overnight. It’s now a lawless hellhole inhabited by ISIS, Al Qaeda, and various other Muslim terrorist factions. Along with the vacuum left in Iraq, Libya became a breeding ground for terrorists, armed by the U.S.
Shockingly, after decades of stability, factions within Syria began a civil war against Assad and his government in 2011. Do you see a connection yet? Just as U.S. military presence in the Middle East began to wane, all hell began breaking out across the region. McCain and his band of neo-con world changers helped arm the “moderate rebels” fighting against the suddenly evil Assad. These moderates became ISIS, who now suddenly became the new bogeyman to be feared by Americans, as professionally produced videos of beheadings and other atrocities began to be disseminated by the mainstream media.
The War on Terror had a new jolt of gusto and increased funding for more military mis-adventures. The propagandists ignored the inconvenient fact Assad was fighting against ISIS and Al Qaeda. They ignored the fact Assad ruled over a secular country – not a country run by religious American hating Muslim zealots. Fighting against Assad and ISIS doubled the arms dealers’ profits.
Then Russia threw a monkey wrench into the Deep State plans. They fully supported Assad as an ally because they need his ports. The real reason Assad was attacked was because Saudi Arabia and Qatar need to build their natural gas pipeline across Syria to reach Europe. Virtually all of Europe is dependent upon Russia to supply their natural gas. The Deep State’s retaliation for Putin’s support of Assad was to overthrow the democratically elected president of the Ukraine who had rejected NATO for a closer partnership with Russia. The U.S. instigated coup and installation of a subservient puppet led Putin to put Crimea under Russian control and support Ukrainian rebels as they fought the new regime. This dramatic increase in tensions between NATO and Russia again generated more profits for the military industrial complex. Missiles and troops are pouring into the NATO countries surrounding Russia.
The American propaganda specialists now had their new enemies. Syria and Russia, with Iran and North Korea providing occasional fear mongering diversions, became the focus of the neo-cons and their pliant media mouthpieces. The false flag downing of a Malaysian airliner over the Ukraine was blamed on Putin and Russia. No radar proof or physical evidence was ever presented implicating the Ukrainian rebels. They were winning the civil war and the U.S./NATO needed to turn world opinion against Putin.
The first attempt at a false flag gas attack in Syria occurred in 2013, as the U.S. backed rebels murdered over 500 innocent victims in an attempt to turn world opinion against Assad and provoke NATO involvement on par with Libya. When this atrocity propaganda failed to work, the Deep State turned to heartstring pulling photographs of dead and injured children, with a consistent narrative spewed by every media pundit as instructed by the controllers.
The first atrocity propaganda photo was in 2015, functioning as twofer on the propaganda scale. The picture of a three year old Syrian boy who drowned when his boat from Turkey to Greece capsized was spread across the world on every media outlet for a week as faux outrage against Assad and Putin was ramped up to hysterical levels. The evil Assad had caused this refugee crisis, even though it was the rebels who started the war.
The blame for this tragic death was solely due to his father’s recklessness. The entire family lived in Turkey for three years and was not forced to go to Europe. The father was being funded from a relative in Canada and wanted to go to Europe for dental work. The picture was also used to promote the continued Muslim invasion of Europe. How could Europeans turn away these nice people? George Soros’ master plan was working perfectly.
A year later Aleppo boy was the latest atrocity photo used to reverse public opinion against Assad and Putin, as their military success against ISIS, Al Qaeda and the U.S. supported rebels endangered the Deep State plan. As usual, the American public swallowed the propaganda, hook, line and sinker. The picture suddenly appeared and was disseminated on every mainstream media outlet in the country for days, with pontificating pundits tearfully portraying Assad as a butcher. No context, no proof he was injured by government forces, and no proof it wasn’t just a staged photo op like previous attempts. This last ditch attempt to convince the world to support a Syrian invasion also failed. This atrocity propaganda game loses its impact on a video game addicted, ADD ridden, SJW populace fairly quickly.
Private citizen Donald Trump was unequivocal in his opposition to Syrian intervention before being elevated to the presidency, as shown in these tweets:
Many Syrian ‘rebels’ are radical Jihadis. Not our friends & supporting them doesn’t serve our national interest. Stay out of Syria!
Don’t attack Syria – an attack that will bring nothing but trouble for the U.S. Focus on making our country strong and great again!
Trump’s non-interventionist rhetoric regarding Syria and unwillingness to declare Putin an evil enemy of America during the campaign resulted in an all-out assault by the Deep State to derail his candidacy, falsely claiming he was a puppet of Russia. These unsubstantiated claims and vitriolic propaganda campaign against Trump to elect Deep State candidate of choice – crooked Hillary – led to a heroic effort by the alternate media across the internet countering the mainstream media propaganda with facts and reason.
When the corporate media shills rolled out the “fake news” storyline to discredit the alternate truth telling media, it immediately blew up in their faces, as the majority of the public began to realize the fake news was being plied by CNN, MSNBC, CBS, and the rest of the captured corporate legacy media.
The discontent with the status quo among the normal people in flyover America was so great, it overcame all the Deep State propaganda, fake news, vast sums of money behind Clinton, and liberal urban strongholds, to elect Donald Trump as an agent of change who would kick the bums out of Washington. The undermining of Trump’s presidency began before he took office as the propaganda machine kicked into overdrive, with non-stop media squawking about Russia hacking the U.S. election in favor of Trump.
There were no facts, no evidence, no substance, but plenty of innuendo, plenty of unfounded accusations, and fake news reports at a fanatical level by faux journalists being paid millions to do their part. Putin as an evil manipulator, controlling Trump, was the meme flogged 24 hours a day by the Deep State to keep Trump on the defensive.
The only question at this point is whether Trump has already been co-opted by the Deep State military industrial complex or whether he is being manipulated through false flags and traditional propaganda techniques. Based on the slow progress on his domestic agenda of immigration reform, Obamacare repeal, tax cuts, infrastructure spending, and trade reform, it appears Trump decided to take the advice of neo-cons within and outside his administration and distract the masses with some new military adventurism.
The relentless pounding of the Russian hacking narrative put Trump on the defensive. As Syria and Russia were on the verge of crushing the ISIS/Al Qaeda/“moderate rebel” resistance, a new false flag was needed. As McArthur so accurately described seven decades ago, the incessant propaganda of fear is what enriches the military industrial complex.
“Our country is now geared to an arms economy which was bred in an artificially induced psychosis of war hysteria and nurtured upon an incessant propaganda of fear.” – General Douglas McArthur
In Part Three of this article I will discuss how Trump has been co-opted by the Deep State into doing their bidding with military intervention and bullying across the globe. It’s just a continuation of imperialism run rampant. Empires always decline and fall due to military overreach and economic bankruptcy. The American empire will be no different.
- Bank Of Japan "Bought The Dip" Over Half The Time In The Last 4 Years
A year ago, we noted that The Bank of Japan (BoJ) was a Top 10 holder in 90% of Japanese stocks. In December, we showed that BoJ was the biggest buyer of Japanese stocks in 2016. And now, as The FT reports, the real "whale" of the Japanese markets is stepping up its buying (up over 70% YoY) entering the market on down days more than half the time in the last four years.
Since the end of 2010, The FT notes that the BoJ has been buying exchange traded funds (ETFs) as part of its quantitative and qualitative easing programme. The biggest action began last July, when its annual acquisition target was doubled to ¥6tn. Since then, the whale designation has seemed pretty obvious: the central bank swallows a minimum of ¥1.2bn of ETFs every single trading day (tailored to support stocks that further “Abenomics” policies), and lumbers in with buying bursts of ¥72bn roughly once every three sessions.
Some traders say the bank’s supposedly targeted buying has cushioned the whole market. Last year, foreign investors were net sellers of ¥3tn of Japanese shares – a retreat that might have decimated benchmarks had the BoJ not swum in with ¥4.3tn of support via ETFs.
In the afternoon sessions on days the BoJ comes in big, the average return on the index is about 14 basis points higher.
Since the annual quota was increased to ¥6tn, Nomura says, the BoJ has provided a cumulative boost to the Nikkei of about 1,400 points.
But, as we've noted in the past, it appears to be the flow, not the stock, that is the big driver…
As in a casino, The FT's Joe Lewis concludes, the whale definition may hinge less on the cash on the table and more on the psychological impact on other gamblers. The BoJ has been at the game long enough for the market to know it reliably buys on weakness.
Of the 1,038 business days between April 2013 and March 2017 there were 449 sessions where the market was down: the BoJ bought on more than half of them. Whale or not, investors are now primed to think they are swimming with one.
So given that we know SNB is extremely active in stock markets, and The BoJ is the Japanese stock market, does anyone realistically doubt The Fed is/has been active?
- A New Street Drug Can Kill You By Touching Your Skin: What You Need To Know
Authored by Alice Salles via TheAntiMedia.org,
The opioid epidemic is a real tragedy. It has been devastating states like West Virginia, Vermont, and Maine – among others – and it’s been the number one factor in a major incarceration shift that is still seldom discussed by the media.
But as soon as the Centers for Disease Control and Prevention (CDC) released a new set of national standards for prescribing painkillers, yet another deadly drug threat is beginning to concern authorities in certain states.
New Hampshire Governor Chris Sununu spoke at a press conference this week, warning that a drug that’s 10,000 times stronger than morphine has made its way into the state. As a result, many first responders have been left scrambling to find a way to handle this new threat.
Carfentanil, a powerful new opioid, has already claimed three lives.
Engineered to be used as an elephant tranquilizer, the drug’s lethal dosage is 20 micrograms. Since the product can cause deadly effects just by being sprinkled on someone’s skin, authorities are highly concerned.
Manchester Fire’s EMS Director Chris Hickey is warning New Hampshire residents they must be “hyper, hyper vigilant of what is out there, hyper vigilant of where you put your hands, what you come in contact with.”
“There is nothing out there other than going on in hazmat suits on every single overdose that is going to completely protect us. We just have to be super, super careful with it,” Hickey told his own crew.
The drug is so powerful that first responders are even having a hard time reversing overdoses when they arrive at emergency locations.
On one occasion, Hickey said, one of his men had to use six to eight doses of Narcan, an overdose reversal drug, to revive a victim – twice the dose used in most cases.
As doctors and first responders notice a pattern, they are also warning the public that Narcan isn’t going to be enough from now on. So what is next?
Fear, of course.
As state and local authorities find themselves panicking over this issue, many will ask for tougher laws. Federal agencies will then intervene, adding further restrictions to the already heavily regulated drug market in the United States. Adding fuel to the fire, the drug war will continue to target opioids like heroin and opium while Congress continues the process of imposing strict limits on some opioid prescriptions.
As more restrictions are applied, users will have a harder time gaining access to the substances they are already addicted to, forcing them to turn to the black market for their fix.
With this, incidents like the ones we’re seeing in New Hampshire will become even more common, prompting further government involvement. As this snowballs into further restrictions, the opioid epidemic will reach unimaginable levels, killing a record number of people, making orphans out of countless children, and creating another boom in U.S. incarceration rates.
While it’s easy to understand why locals in New Hampshire are afraid, the rhetoric and reality on the ground should not be used to push for more heavy-handed intervention from local and federal governments. Instead, it’s time to look deep into how the opioid crisis started, keeping in mind that the government’s own fruitless battle against drugs was the very root of what is now concerning New Hampshire authorities.
Like New Hampshire’s Drug Lab Director Tim Pifer, we agree that “this is certainly unfortunately just the tip of the iceberg.” But just like any iceberg, its base lies in dark, cold waters. Unless we’re ready to be honest with ourselves, finding the courage to dive deep to find where it begins, we will never know how huge this problem really is. And if we’re not willing to look at the root of the problem, we won’t be able to find a proper solution.
- Artist's Impression Of The Future Of Obamacare Repeal
- Axel Merk: "There's More To Investing Than Chasing Companies That Want To Make Mars Inhabitable"
Authored by Axel Merk via MerkInvestments.com,
How does one construct a portfolio in an era of seemingly ever rising and highly correlated asset prices? Years of asset prices moving higher has changed both retail and institutional investors; it has changed the industry; and, in my humble opinion, those changes spell trouble. The prudent investor might want to take note to be prepared.
I allege that for many, investing is no longer about prudent asset allocation, but about expressing themes. If you like green technology, you tilt your portfolio towards green energy. If you are socially conscious, there’s an ETF for that. I have no problem with anyone allocating money to any specific theme. However, has anyone else noticed that it doesn’t matter what theme you allocate money to? Investors are all playing the lottery and guess what: everyone’s a winner!
Now, clearly, that’s an over simplification, as not every industry does well all the time – just ask those who invested in MLPs (master limited partnerships) in pursuit of income from fracking. Let me rephrase: the more of a monkey you have been, i.e. the less you have been thinking, the better you’ve likely performed over the past nine years. “Buying the dips” has been a consistently profitable strategy.
That has created numerous oddities:
- Take the investor who diversifies, rebalancing part of a portfolio to near zero-income generating fixed income. Advisors pursing such strategies have seen their clients take money away, as they are not willing to pay a management fee for essentially holding cash.
The problem: cash is discarded even if it may be a prudent investment choice.
- Take the investor who diversifies, rebalancing part of a portfolio to alternative income streams.
The problem: Anything that generates an income in a zero-income environment is, almost by definition, risky. That is, both stock and fixed income securities in such a portfolio are so-called risk assets, i.e. I believe they are likely to move in tandem, not providing desirable diversification in a downturn.
- Take the prudent investment advisor who has allocated part of a portfolio to true alternatives, such as long/short equities or long/short currencies. While providing diversification, such portfolios have likely underperformed during the relentless rise of equities. Worse, when the markets have had a hiccup, such as in early 2016, many of those portfolios still lost money, as the volatility of risk assets overwhelmed the cushion provided by the alternatives. Read: clients have been abandoning advisors, lured by competitors showing how great their performance has been, investing 100% in equities since the spring of 2009.
The problem: Those solicitations conveniently skip the inconvenient fact that their clients lost huge in 2008.
- Take the investor who wants to participate in the upside, but be protected on the downside.
The problem: they spend a small fortune buying insurance, even when they might be better off just holding a cash buffer (again, advisors don’t hold cash, as clients would withdraw that cash at some point).
- If many want to buy insurance, someone needs to write insurance. The one thing more profitable than buying stocks may well have been to write insurance. Funds that “sell volatility”, amongst others, have been amongst the best performers in the first quarter. Mind you, we do not recommend you touch any such product with a broomstick unless you know exactly what you are doing and able to stomach some serious losses. The theory behind many of these funds is that you collect what amounts to an insurance premium when volatility is low; the periods when you have to pay up are short and intense, but those setbacks are ultimately temporary.
The problem: Earlier this year, one such fund was in the news for substantial losses, not because volatility spiked, but because portfolio management got cornered when they tried to roll derivative contracts. Let’s just say: something that looks too good to be true, may well be. Interesting things may well happen (read “contagion”) if and when these positions unwind.
- Active management is dead. Long live passive investing. Never mind that anything but an index fund on the broad market is an active investment choice. The point being that you don’t want to pay some smart cookie to try to beat the market. That’s because those so-called experts were wrong in 2008 (and many times since). What can they possibly know? Besides, your favorite green tech investment fund is doing just fine, thank you very much.
The problem: Cautions provided by active managers help one frame possible risk scenarios. Managing risk is important, even if many risks never materialize.
- Active managers are leaving the industry. Who needs anyone skilled in navigating rough waters when you have robots providing liquidity?
The problem: it may be helpful to have a captain on board when the auto-pilot fails.
- Brokers are increasingly hand-holding relationship people, with portfolio allocation decisions being made by a small group creating model portfolios. After all, why risk your job trying to go out on a limb for your client?
The problem: there’s nothing wrong per se with this trend, except that it increasingly concentrates investment decisions for huge amounts of money into very few people. We hope they are smart. Importantly, we hope investors understand who makes the investment decisions and what the conflicts are. Let’s just say: when something goes wrong, class action lawyers will have their day in court.
- An increasing number of investors are skipping advisers altogether. After all, why not cut out the middle man if they don’t know any better than you do?
The problem: there’s no problem with do-it-yourself investing except, just as professionals, investors owe it to themselves to make prudent investment decisions. We think that many individual investors do a better job than some professional investors these days in allocating their money. That said, that’s a very low bar.
- If you have enough money, you allocate some money to venture capital. At least you have something to talk about at cocktail parties. It might help if you knew what your venture capital fund invested in, but let’s not get distracted by details.
The problem: no problem if you can afford it. May I make the suggestion, though, that you first try to understand your overall portfolio, before you dabble in illiquid investments?
What could possibly go wrong?
Quite simply, markets do go down, not just up. In my view there is an increased risk of a flash crash in an environment where we are ever more dependent on automated liquidity providers that might withdraw liquidity the instant there’s an anomaly in the market (read: if you place a market order to sell a security, don’t complain if the market price is dramatically below the most recent trade on an exchange).
While regulators may be all over flash crashes and possibly bail you out by canceling your order, a more pronounced decline is something you might want to prepare for as well. We hear pundits proclaim that we cannot have a bear market unless there’s a recession. There are couple of problems with that:
- First, it’s not true. There was no recession during the October 1987 crash.
- Second, we often don’t know whether there’s a recession until we are well into it; there have been instances when we didn’t know there was a recession until it was over.
- Third, we’ll only know we are in a “bear market” when the market is down 20%. That’s kind of late to prepare for a bear market. Except, of course, if the market tumbles much more than that, such as the Nasdaq after 2000; or the S&P 500 in 2008.
Is there a better way?
The other day, we met with an investor who has 40% of his portfolio in cash. He doesn’t like market valuations and has decided, he’ll put money to work if the market declines by 10%; then more money to work if it declines another 10%. We think this investment philosophy beats that of many. At least, he has taken chips off the table during the good times and has money to deploy. Before readers cry out: “There’s so much cash on the sidelines, this market must go up!”, I would like to caution that this investor is a rare exception of many investors I talk to – and I talk to retail investors, advisors, family offices, to name a few. The same person, by the way, told me he is at a loss on what to advise his friends, as he doesn’t want to encourage them to get into the markets given current valuations.
Indeed, this appears to be a market where just about every pessimist is fully invested. Because folks have been wrong so many times calling the market top, we believe many market bears are fully invested.
I think there’s a better way. The better way of investing is to take the long view. Sure it’s great to have one’s stock portfolio surge, but investing, in the opinion of yours truly, isn’t about gambling, but about asset allocation with humility. Passive investing is all right for certain things, but should not replace common sense. When the likely successor to Janet Yellen (we put our chips on Kevin Warsh) has complained that asset holders have disproportionally benefited from monetary policy, and that the focus has to shift, I think it’s but one indication to do a reality check on one’s portfolio, as headwinds to asset prices may well increase.
The short answer is that investors may well look at their portfolios more like pension funds or college endowments do. Except, well, many pension funds and college endowments have fallen into the same traps individual investors and advisors have. Let me rephrase: investors might want to invest according to a philosophy a well-run endowment might have. Let me just mention a few principles here. Here’s the investment allocation of an endowment of a private college – I’m not suggesting this specific allocation is the right one for any specific person or institution, but want to provide it as food for thought:
- 31% hedged strategies
- 27% equities
- 21% private equity
- 8% real assets
- 6% cash
- 5% fixed income
- 2% equity-like credit
Note that the equity holdings are less than 30%, not the 60% often touted in a “60/40” portfolio (with 40% referring to bonds). The number can be larger or smaller for any one investor, but I believe we should get away from the notion that one needs to have a large portion invested in equities. Endowments are long-term investors, yet don’t go to 100% equities; so why should a young investor be all in equities? By allocating a far smaller portion, you don’t need to lose sleep over asset bubbles. Instead, you can indeed rebalance or make gradual shifts.
Note the biggest bucket is “hedged strategies.” We have long advocated that investors need to look for uncorrelated returns. A long/short equity strategy or long/short currency strategy might generate such returns. Importantly, this bucket of alternatives is far higher than what many advisors choose. In an era of very expensive assets, we think this may be rather prudent. This doesn’t solve the issue of how to find the right hedged strategy – remember that those strategies will have under-performed the overall market. Important here is the investment process of the underlying ETF, mutual fund or whatever product one might want to consider.
Private equity is obviously not accessible to many investors. Relevant though is that there’s a big bucket allocated to investments where one expects a long-term return without seeing the daily price moves. Sometimes it’s good not to have tick-by-tick data. An individual investor might be able to replicate this by opening another account, selecting a few long-term ideas, then throwing away the key to the account for a few years. Well, one should still review the investments periodically, but the point being: it is okay to invest different portions of a portfolio according to different philosophies. Say, be a day trader for a small portion, but do hold strategic positions. Some of this can be achieved by intentionally mixing up the styles of different investment products. If not all of them perform well at the same time, that’s a good thing!
This particular portfolio has a small allocation to “equity-like credit”; we are not making a judgment whether this is too high or too low; the point again is that there’s a very broad allocation to different asset classes. Note, by the way, that ‘equity-like credit’ is likely to perform, well, like equities. Even with those assets added, the equity portion is still modest.
Not mentioned in this particular portfolio, as least not in the headline numbers, is an allocation to precious metals or commodities. Those who have followed us for some time know that we encourage investors to consider gold as a diversifier. We have often referred to gold as the “easiest” diversifier because it’s easier to understand than some exotic long/short strategy. In our analysis, the price of gold has had a near zero correlation to the S&P 500 since 1970; however, over shorter periods, correlations can be elevated. In our analysis, gold has done well in every bear market since 1971, with the notable exception of the bear market in the early 1980s when then Fed Chair Volcker raised interest rates rather substantially.
The point of all of this is not to suggest that investors need to add equity-linked credit or private equity to their portfolio. No, the point is that there’s more to investing than chasing high flying companies that promise to make Mars habitable.
You might have also noticed that I squeezed in the word “humility” in asset allocation above. Have some respect that things that go up can also go down. Having respect means that one doesn’t adjust one’s lifestyle (expenditures) as a reaction to rising asset prices. Investors can control expenses more so than income. So maybe we should be spending far more time talking about how we spend our money rather than how we invest it. But I digress…
- Crisis Meet China – China Meet Crisis
By Chris at www.CapitalistExploits.at
Earlier this week, Kyle Bass spoke on Bloomberg about the reckless expansion of the credit system in the Middle Kingdom.
He warned about the ballooning asset-liability mismatch in the shady $4-trillion wealth management products (WMPs) market.
And went on to say “this is the beginning of the Chinese credit crisis” while admitting it could take some time for things to really start unraveling.
A fair call…
How many of us have figured the trend out, only to allocate too much capital to a trade and even lose on a trade which finally works… eventually? I know I have. I’m pretty sure Kyle’s position sized pretty well. After all, this is far from his first rodeo.
In the interview Kyle referenced an SCMP article from a few weeks ago that went largely unnoticed by most. It was on the Chinese government coming up with more and more creative ways to stem the capital outflow underway since mid-2014:
“China’s foreign exchange regulator, SAFE, has asked for cooperation from multinationals, including Sony, BMW, Daimler, Shell, Pfizer, IBM and Visa, to manage and control the flow of capital out the country.”
This all feels a bit deja vu-ish.
Long-time readers will know we’ve been bearish on China and the renminbi for well over 2 years now. Back in October 2014 we said that:
“I don’t know exactly how a breakdown in the renminbi will play out. However, it is a sure bet that all those markets that prospered over the last 15 years or so on the back of a China will do badly. Where things become shady is the collateral damage to other markets that have had nothing to do with the Chinese economic miracle.”
A few months later, we took a closer look at the cracks appearing in China’s interbank lending market, indeed feeling (correctly in hindsight – lucky us) that timing had arrived to short the currency cross via the options market:
“The interbank lending market is an integral part of any country’s banking system as it is where banks maintain their short-term liquidity requirements. Often a bank will have a mismatch between between short-term assets and obligations and as such they will have to enter the interbank lending market to maintain optimal liquidity. If a bank has excess short-term reserves they may want to lend these out to other banks who have a shortfall in short-term reserves. The opposite also occurs where a bank, with a short-term funding deficit, will enter the market to borrow funds to match short-term liabilities.
The behavior of the interbank lending market can provide one with a good appreciation for the liquidity of the banking system as a whole. If there is a lot of liquidity in the system (more short term assets than liabilities) the interbank rate will fall, if there is scarcity of short term assets relative to liabilities then rates will rise. So a rising interbank rate is generally associated with contracting liquidity conditions. Rapid rises in interbank lending rates are often associated with banking or credit crisis. This happened in the lead up to the GFC. What happened was that as banks began to fear the ability of other banks, who are their counter-parties, to make good on their obligations they demanded higher rates especially from banks already facing liquidity problems which only compounded their original the situation.
A rapid rise in a country’s interbank lending market is also a good predictor of the direction of a country’s currency, or at worst a confirming indicator. Let’s have a look at the interbank lending market of a few emerging nations over the last 12-18 months and then look at what is happening with the renminbi. I think it is instructive for what we have been positioning for in our funds.”
In truth, it was an easy bet to make.
Volatility was around 2%! NOT buying put options would have been like having Scarlett Johansson invite you into her bed and then falling promptly asleep. You just couldn’t do that. And so you had to buy.
Taking a look at the Chinese interbank lending today:
Not yet getting critical but worth watching.
And pricing of the options:
So a 6.6% move to make 100%. Seems reasonable but nowhere near as good as it looked in late 2014 – unfortunately.
The problem – if there is one – is that 12 months is a long time to date an ugly girl, work for a nasty boss, or drive a Lada. But it isn’t a particularly long timeframe to hold an option for.
And yet that’s the best the option market gives us.
Sure, you can throw your towel into the ring in the futures markets but if, like me, you dislike leverage and margin calls (because you WILL get it wrong at some point), then you’re going to have to figure some better way to ride this pony.
The answer, I think, is this.
– Chris
“What you see when the liquidity dries up is people start going down… and this is the beginning of the Chinese credit crisis.” — Kyle Bass
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- College Enrollment Is Surging But Is It Really Worth It? (Aside From The Frat Parties, Of Course)
College enrollment has been surging over the past 4 years with 67.4% of high school men enrolling directly in college after high school in 2016 versus only 61.3% in 2012.
Ask any economics professor at an Ivy League school what is driving the trend of higher college enrollments and you’ll get a quick response that implies that our young 18-year-old snowflakes are simply hedging their future employment opportunities against the devastating consequences of globalization and a deteriorating manufacturing base in the United States.
And while their complex econometric models prove their point well beyond a shadow of a doubt (even though you’ll never understand them so don’t even try), we suspect the real answer may have something to do with the federal government throwing student loan dollars at anyone with a pulse while simultaneously offering to erase all that debt when you graduate. Call us cynics.
Meanwhile, we find it absolutely shocking that a bunch of 18-year-old boys would happily take $40,000 from the federal government every year to do this:
But, whatever the reasoning, there is no doubt that college enrollment is soaring. Per Bloomberg:
And while over-educated elitists of our liberal bastions of higher education are all too eager to explain why more kids are choosing college these days, you’ll rarely hear them comment on whether or not it’s actually worth it…it just wouldn’t progress any of their liberal narratives or serve their self interests, so why bother?
So we decided to take a quick look at the math of a college education.
First, according to Quora.com, attending college these days can cost anywhere from $22,500 per year for a public, in-state university to $75,000 for a private education. So, lets just assume that, on average, our snowflakes are spending $30,000 per year on a 4-year bachelor, or $120,000.
- Attend a public in-state university for four years, living on campus ($22,500 per year for four years) for $90,000
- Attend a public out-of-state college for four years: $35,000 per year for four years for a total of $140,000
- Attend a private four year college in an expensive area like Manhattan at $75,000 per year for a total of $300,000
So what do they get for that? Well, per the Bureau of Labor Statistics, that $120,000 degree in Anthropology will earn you roughly $464 extra dollars per week or ~$24,000 per year.
So, doing some quick math, we find that $24,000 tax-effected at a 25% tax rate equals about $18,000 of extra annual earnings for a college grad and implies a 15% return on invested capital.
Not bad…but, unfortunately, the story doesn’t end there. You see, by choosing the college route our snowflakes not only incur the cost of college, in the form of massive student loans, but also forgo 4 years of earnings, which equates to roughly $110,000 ($692*52*.75) on a tax-effected basis.
So lumping in that opportunity cost brings the true average cost of that Anthro degree up closer to $250,000, implying a roughly 7.2% ROIC.
Of course, that’s assuming that young Tripp Hollingsworth III actually graduates in 4 years and then promptly finds a job shortly thereafter rather than returning to mom’s basement.
So you decide, is a 7.2% return on invested capital sufficient to take on a life time of debt? In fairness, it is awfully difficult to calculate the present value of a frat party, which for an 18-year-old boy may be infinite.
- Mike Krieger Asks: Can Bernie Sanders Be Convinced To Launch A New Political Party?
Authored by Mike Krieger via Liberty Blitizkrieg blog,
I am 100% in the camp that supports Bernie Sanders severing himself completely from the hopelessly captured and corrupt Democratic Party and launching an entirely new movement. I’ve spent a lot of time since the 2016 election writing about how worthless the Democratic Party is and why it will never fundamentally change. The sad truth when it comes to American politics at the moment is “we the people” have no political representation whatsoever. Both the Republican and Democratic parties are corporate and oligarch donor owned, and will never push forward the sort of sweeping change average Americans need in order to enjoy a higher quality of life.
This post isn’t meant as an endorsement of Sanders or all of his policies, but it’s an endorsement of creating something new so that the public can enter a new era in which the needs of the people are addressed. Truth be told, we’ve been fooled into thinking that we have two distinct political parties proposing vastly different policy solutions to help the public. The reality is we have two political parties proposing various solutions to help the donors. Nobody represents the people. We need to discard these parties and form new ones, and the sooner we do so, the better.
As I wrote in the post, In Defense of Populism:
Despite my refusal to self-identify, I am comfortable stating that I’m a firm supporter of populist movements and appreciate the instrumental role they’ve played historically in free societies. The reason I like this term is because it carries very little baggage. It doesn’t mean you adhere to a specific set of policies or solutions, but that you believe above all else that the concerns of average citizens matter and must be reflected in government policy.
Populism reaches its political potential once such concerns become so acute they translate into popular movements, which in turn influence the levers of power. Populism is not a bug, but is a key feature in any democratic society. It functions as a sort of pressure relief valve for free societies. Indeed, it allows for an adjustment and recalibration of the existing order at the exact point in the cycle when it is needed most. In our current corrupt, unethical and depraved oligarchy, populism is exactly what is needed to restore some balance to society.
Whether people identify as on the “right” or the “left” there’s general consensus (at least in U.S. populist movements) of the following: oligarchs must be reined in, rule of law must be restored, unnecessary military adventures overseas must be stopped, and lobbyist written phony “free trade” deals must be scrapped and reversed.
Trump was the first President in my lifetime to win the office on a populist wave. Unfortunately, his actual style of governing in practice looks a lot like authoritarian-corporatism, an ideology and mindset which I find nauseating and dangerous. As such, the best chance of an alternative populism in the near-term would come from a Bernie Sanders led party.
I seriously hope he takes the plunge, because as recent reports from a Florida lawsuit against the DNC demonstrate, the Democratic Party is beyond repair.
As the Observer reports:
On April 28 the transcript was released from the most recent hearing at a federal court in Fort Lauderdale, Fla., on the lawsuit filed on behalf of Bernie Sanders supporters against the Democratic National Committee and former DNC chair Debbie Wasserman Schultz for rigging the Democratic primaries for Hillary Clinton. Throughout the hearing, lawyers representing the DNC and Debbie Wasserman Schultz double down on arguments confirming the disdain the Democratic establishment has toward Bernie Sanders supporters and any entity challenging the party’s status quo.
Shortly into the hearing, DNC attorneys claim Article V, Section 4 of the DNC Charter—stipulating that the DNC chair and their staff must ensure neutrality in the Democratic presidential primaries—is “a discretionary rule that it didn’t need to adopt to begin with.” Based on this assumption, DNC attorneys assert that the court cannot interpret, claim, or rule on anything associated with whether the DNC remains neutral in their presidential primaries.
Later in the hearing, attorneys representing the DNC claim that the Democratic National Committee would be well within their rights to “go into back rooms like they used to and smoke cigars and pick the candidate that way.” By pushing the argument throughout the proceedings of this class action lawsuit, the Democratic National Committee is telling voters in a court of law that they see no enforceable obligation in having to run a fair and impartial primary election.
That’s your “Democratic” Party.
As a result of the obvious sham, there’s a new movement afoot to “Draft Bernie” into a new political party. Its founder is Nick Brana, and here’s a great interview of him by Jordan Chariton.
Here’s my bottomline. If Sanders doesn’t do something like this and do it fast, the Democrats are going to nominate another corrupt loser in 2020, and Trump will win a second term no matter how unpopular he might be.
- California Wants To Give More Money To Eric Holder To Fight Trump
California Attorney General Xavier Becerra apparently doesn’t think that $858 million is nearly enough taxpayer money to fight the Trump administration. That is precisely the amount that California’s state budget proposal, laid out by Governor Jerry Brown in January, allocated to Becerra’s Justice Department but in testimony before the Senate Budget committee yesterday Becerra said he needs even more to attract and keep qualified lawyers to defend the state. Per The Hill:
“No one anticipated the extent to which federal executive actions would impact the people of California and the Department of Justice. Who knew that the federal government would play so fast and loose with the law and taxpayers’ pocketbooks?”
“I am operating with a budget that was assembled without addressing the needs of current mandates and before our new reality of dealing with federal executive orders,” Becerra said. “If it feels like the attacks are constantly coming, it’s because they are.”
After taking over the state Justice Department in January, Becerra has joined or initiated several lawsuits challenging the Trump administration over everything from an immigration to changes to federal fuel efficiency standards.
Meanwhile, after the passage of the Obamacare repeal bill yesterday, Becerra issued a statement defining healthcare as a “right” of all Americans and suggesting that the next front in his legal war against the Trump administration could come over the Republicans’ efforts to undo Obama’s legacy.
“I believe health care is a right. Today’s House vote takes a dangerous step towards jeopardizing the health security of millions of people in our state and throughout the country.”
“As a Member of Congress, I was proud to help expand health coverage and lower costs for hardworking Americans. Every Member of Congress who voted for today’s bill must answer why it is good to take away an American’s access to his or her doctor. Would they do this to themselves or their family?”
“As California’s Attorney General, I will use every legal tool at my disposal to safeguard the healthcare the people of our state depend on.”
And while we would never question Becerra’s brilliant legal mind, we would love it if he could point us to the specific language in the U.S. Constitution that guarantees every U.S. citizen the “right” to healthcare.
Of course, the additional funding request from Becerra is even more questionable in light of the fact that California recently retained the law firm of Obama’s former Attorney General, Eric Holder, to also fight the Trump administration. You just have to wonder how much of that incremental funding over and above $858 million will make its way into Holder’s pocket? Per our post from January:
“With the upcoming change in administrations, we expect that there will be extraordinary challenges for California in the uncertain times ahead. This is a critical moment in the history of our nation. We have an obligation to defend the people who elected us and the policies and diversity that make California an example of what truly makes our nation great.”
“Having the former attorney general of the United States brings us a lot of firepower in order to prepare to safeguard the values of the people of California,” Kevin de León, the Democratic leader of the Senate, said in an interview. “This means we are very, very serious.”
Meanwhile, the sole Republican on California’s budget committee asked what would seem like the most logical question following Becerra’s request, namely why should taxpayers provide more money to Becerra to fight laws that could ultimately result in the state losing access to millions of dollars of federal funding.
State Sen. Joel Anderson, R-Alpine, the budget subcommittee’s sole Republican, pressed Becerra to quantify how much money his office receives from the federal government and how much could be put at risk by state policies, such as those embodied in Senate Bill 54, the “sanctuary state” bill.
“It makes no sense to give you an increase if your sole focus is to pursue policies that cut off” potentially hundreds of millions of federal dollars. “I don’t see why I would want to backfill someone hellbent on having their budget cut.”
Here’s a radical idea Mr. Becerrra, how about you just do your job and simply enforce the laws of the land rather than trying to bend them to fit your own personal political beliefs. It would save California taxpayers a whole lot of money.
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