- Paying In A Broken World
Submitted by Tom Chatham via Project Chesapeake,
It is a common reaction to ask, how much is that, when we see something we want or need. The question is answered with some monetary figure that people will recognize and use to determine if they can afford it. But what happens when the monetary system we know becomes so dysfunctional that common monetary values mean little.
This could happen due to massive inflation, currency collapse or a frozen banking system that prevents you from accessing your funds. If you have no way to pay for something, it does not matter how much or little it costs. It will be out of your reach unless you have some means to pay.
Some people keep cash on hand for just such a problem. They know they will be able to pay cash when everything else stops working. That will work for a time but eventually paper currency will be looked on as a diminishing asset as physical goods become more valuable to those that need them. Paper currency is not much different than a check you write on your account. If the account is empty your check is no good.
The same can be said for those entities that issue paper money. If they are bankrupt or shut down, the value of their printed certificates will be worth the same as the bad check. Nobody will want to accept it after they realize it may not be honored for the value it supposedly holds. While a local store may accept it out of habit, eventually businesses will figure out the truth.
In times like this alternative forms of money may become more viable to local individuals such as gold and silver. But, that may take some time and most people will not own any of these precious metals for trade. Some may resort to direct barter with some of the things they have amassed over the years to get the necessities they need and under these circumstances values will be variable and disconnected from reality at times.
Some people have stored barter items for this eventuality rather than precious metals and there is nothing wrong with that if it gives them the feeling of safety they desire. One of the reasons they desire goods instead of metals is the fear that governments will call in precious metals as they did in 1933 and that is a legitimate fear but must be taken with some reflection on the facts.
In 1933, gold and silver coinage was the circulating currency in the nation meaning most people had some in their possession. That is not the reality today as very few people have any knowledge of the value of metals and do not have them in their possession. The fact that the government can call in metals does not mean they will be able to relieve you of them.
In 1933, on the river where I grew up, there was a store on the bank of the river that did a good business with all of the ships that came by. When the gold was called in in 1933, the store owner did not want to turn it in so he kept it hidden away. At the time he had a small chest full of gold coins. He kept that chest of coins until the 1970’s when gold was legal to own again and then he sold it for a good profit. This is a true story and just one example of how hard it would be for the government to call in all of the metals in private hands.
It does not matter what you hold your savings in only that it will retain value when conventional paper currencies become a despised possession. When that happens you need the ability to buy the things you need with what you physically have on hand. The question you must answer is what will you have on hand when that day comes.
- XOM
- The World Map Of Hubris & Humiliation
The journey from hubris to humiliation in EM has taken roughly 5 years. As BofAML notes, despite muted asset returns, 2015 has seen the emergence of two big trends: the risk of a bubble in US health care & technology; and the crash in EM/Resources/Commodities. The two trends are best exemplified by the "Map of Hubris & Humiliation" which shows among other things that the market cap of MSCI Russia is currently equivalent to Intel’s, while the market cap of Netflix equals that of MSCI Chile.
Back in late 2010, when Sepp Blatter announced that Russia & Qatar would follow Brazil as hosts of the FIFA World Cup, both China & India were on course for >10% GDP growth, EM spreads were significantly lower, and the market cap of EM ($3.7 trillion on December 1st 2010) was twice the market cap of US banks, and exceeded the combined market cap of US tech & health care.
Today, the market cap of EM equities is the same, while the combined market cap of US tech, health care and banks is over $10 trillion.
Source: BofAML
- Ron Paul: "All Wars Are Paid For Through Debasing The Currency"
Submitted by Mac Slavo via SHTFPlan.com,
And at some point, all empires crumble on their own excess, stretched to the breaking point by over-extending a military industrial complex with sophisticated equipment, hundreds of bases in as many countries, and never-ending wars that wrack up mind boggling levels of debt. This cost has been magnified by the relationship it shares with the money system, who have common owners and shareholders behind the scenes.
As the hidden costs of war and the enormity of the black budget swell to record levels, the true total of its price comes in the form of the distortion it has caused in other dimensions of life; the numbers have been so thoroughly fudged for so long now, as Wall Street banks offset laundering activities and indulge in derivatives and quasi-official market rigging, the Federal Reserve policy holds the noble lie together.
Ron Paul told RT:
Seen from the proper angle, the dollar is revealed to be a paper thin instrument of warfare, a ripple effect on the people, a twisted illusion, a weaponized money now engaged in a covert economic warfare that threatens their very livelihood.
The former Congressman and presidential candidate explained:
Almost all wars have been paid for through inflation… the practice always ends badly as currency becomes debased leading to upward pressure on prices.
“Almost all wars, in a hundred years or so, have been paid for through inflation, that is debasing the currency,” he said, adding that this has been going on “for hundreds, if not thousands of years.”
“I don’t know if we ever had a war paid though tax payers. The only thing where they must have been literally paid for, was when they depended on the looting. They would go in and take over a country, and they would loot and take their gold, and they would pay for the war.”
As inflation has debased the currency, other shady Wall Street tactics have driven Americans into a corner, overwhelmed with debt, and gamed by rigged markets in which Americans must make a living. The economic prosperity, adjusted for the kind of reality that doesn’t factor into government reports, can’t match the costs of a military industrial complex that has transformed society into a domestic police state, and slapped Americans with the bill for their own enslavement.
Dr. Paul notes the mutual interest in keeping the lie going for as long as the public can stand it… and as long as the gravy keeps rolling in:
They’re going to continue to finance all these warmongering, and letting the military industrial complex to make a lot of money, before it’s admitted that it doesn’t work, and the whole system comes down because of the debt burden, which would be unsustainable.”
Unsustainable might be putting it lightly. The entire thing is in shambles from the second the coyote looks down and sees that he’s run out over a cliff.
- Goldman Warns "The Global Economy Is Going Round In (Smaller & Smaller) Circles"
Amid the collapse in commodities, crashing Chinese stocks, the weakest US wage growth in US history, and a data-dependent Fed; Goldman Sachs fears the new normal is 'shorter-and-faster' business cycles with no persistence primed by monetary policies. Most wprryingly, they conclude, will short business cycles beget shorter business cycles?
As Goldman notes,
Cycles: Shorter and faster
Another factor keeping capex weak is poor visibility on global growth.
The rate of change in our economists’ Global Leading Indicator, which tracks ten early indicators of global activity, suggests that cycles are becoming shorter over the last few years, i.e. neither positive nor negative data points persist for too long.
This uncertainty provides a reason for companies to delay long-term capex and instead opt for as-a-service alternatives that provide greater flexibility. But, extending this argument on outsourcing capital intensity to its extreme would also imply shorter capex cycles for the users. If the advent of ERP software led to more efficient supply chains and shorter inventory cycles, we wonder if the rise in tech-driven services business models could do the same for capital investment cycles.
In other words, will short business cycles beget shorter business cycles?
- The IMF Experts Flunk, Again
Submitted by Steve Hanke via The Cato Institute,
My Globe Asia column in May was titled “Greece: Down and Probably Out.” Well, it’s out. Yes, Greece descended from drama to farce rapidly.
If all goes according to plan, the left-wing Greek government will come to an agreement with the so-called troika — the European Commission (EC), the European Central Bank (ECB), and the International Monetary Fund (IMF) — over the details of a third bailout program by August 20th. This rescue package will probably be worth €86 billion (U.S. $94.5 billion). So, since 2010, Greece will have received three bailouts worth a whopping €430 billion (U.S. $472.2 billion). This amounts to a staggering €39,000 (U.S. $42,831) for every man, woman, and child in Greece.
Like past bailouts, the third one will fail to stop Greece’s economic death spiral. The experts from the EC, ECB, and particularly those from the IMF have been wrong about the prospects for the Greek economy since day one. The experts have failed to embrace a coherent theory of national income determination. Indeed, they have often engaged in ad hoc theorizing that has, at times, appeared to be convoluted and politically motivated. The result has been a series of wildly optimistic forecasts about the course of the Greek economy followed by wrongheaded policies.
What has been missing from the experts’ toolkit is the monetarist model of national income determination. The monetary approach posits that changes in the money supply, broadly determined, cause changes in nominal national income and the price level (as well as relative prices — like asset prices). Sure enough, the growth of broad money and nominal GDP are closely linked. The data in the following chart speak loudly to the linkage.
Greece’s monetary tune started to be played by the ECB in 2001, when Greece was allowed to adopt the euro on false pretenses. Yes, the experts at the Hellenic Statistical Authority had cooked the Greek books, and the experts at Eurostat knew the Greek data were phony. Still, Greece was allowed to enter the eurozone.
Following the Northern Rock fiasco and bank run in September 2007 and the bankruptcy of Lehman Brothers in September 2008, the ECB allowed the supply of state money to grow. Then, in 2009, Jürgen Stark, the ECB chief economist, convinced the President of the ECB Jean-Claude Trichet that state money (the monetary base) was growing too rapidly and that excessive inflation was just around the corner. In consequence, the ECB withdrew its non-standard measures (read: credit facilities) to Greek banks in the spring of 2010. As the accompanying chart shows, that fateful ECB withdrawal marked a turning point in the growth of broad money in Greece. It, and the Greek economy, have been contracting ever since. This was in spite of a massive fiscal stimulus (a fiscal deficit of 12.7% of GDP) in 2009, prior to the October elections. Money dominates. The important thing to watch is the growth of broad money.
Shortly after the October 2009 victory of the Panhellenic Socialist Movement brought George Papandreou to power, his government passed a so-called austerity budget in which the fiscal deficit was supposed to be squeezed down to 9.4% of GDP.
Greece was clearly in trouble and needed a helping hand. But, the EC and ECB were untrusting of the Greek government. So, in March 2010, the IMF was called in to negotiate loan conditions for new Greek financing. Dominique Strauss-Kahn (DSK) was the IMF’s managing director and was preparing to run for the French presidency as the Socialist candidate. DSK was more than willing to give his socialist brothers in Athens a helping hand. In 2010, Greece received a massive bailout.
Just how massive? Normally, the IMF is limited to lending up to six times a country’s IMF quota subscription to that country. However, if the IMF judges a country’s debt to be sustainable, then that country can qualify for “exceptional access,” and the IMF credit extended to such a country can exceed the 600% limit. Thanks to DSK and the IMF experts, the debt sustainability reports were rosy, until recently. The IMF, as well as the other members of the troika, extended credit to Greece, and did so generously.
The following table tells the tale. Greece holds the record for the highest IMF credit level relative to a country’s quota.
The first and second bailouts of May 2010 and February 2012 did boost the growth rate of state money. But, bank money, which accounts for the lion’s share (over 80%) of total money (M3) contracted at a very rapid rate. In consequence, the money supply (M3) has generally plunged since the bailouts, and so has nominal (and real) economic activity. And the worst is yet to come: note that the last dismal data for state and bank money in Greece are for June. Since then, things have deteriorated, with bank closures and the imposition of capital controls. This spells more trouble for Greek banks that produce over 80% of Greece’s money and for the economy.
The four big Greek banks were already in trouble (as of Q1 2015). The accompanying table presents the Texas Ratios for the four banks that make up 87% of bank assets in Greece. Ratios over 100% mean that, if nonperforming loans must eventually be written off, a bank will become insolvent. If current data were available, I believe the nonperforming loans would be much higher than in the first quarter of 2015. In addition, with the collapse of the money supply and little chance of a recovery in the production of bank money, a high percentage of nonperforming loans will be written off. In consequence, the Greek banking system will be insolvent. This means that calls for a fourth Greek bailout are right around the corner.
The IMF failures in Greece bring back vivid memories of the Asian Financial Crisis of 1997-98. On August 14, 1997, shortly after the Thai baht collapsed on July 2nd, Indonesia floated the rupiah. This prompted the IMF to proclaim that “the floating of the rupiah, in combination with Indonesia’s strong fundamentals, supported by prudent fiscal and monetary policies, will allow its economy to continue its impressive economic performance of the last several years.”
Contrary to the IMF’s expectations, the rupiah did not float on a sea of tranquility. It plunged from 2,700 rupiahs per U.S. dollar at the time of the float to lows of nearly 16,000 rupiahs per U.S. dollar in 1998. Indonesia was caught up in the maelstrom of the Asian crisis.
By late January 1998, President Suharto realized that the IMF medicine was not working and sought a second opinion. In February, I was invited to offer that opinion and began to operate as Suharto’s Special Counselor. I proposed as an antidote an orthodox currency board in which the rupiah would be fully convertible into the U.S. dollar at a fixed exchange rate. On the day that news hit the street, the rupiah soared by 28% against the U.S. dollar. These developments infuriated the U.S. government and the IMF.
Ruthless attacks on the currency board idea and the Special Counselor ensued. Suharto was told in no uncertain terms — by both the President of the United States, Bill Clinton, and the Managing Director of the IMF, Michel Camdessus — that he would have to drop the currency board idea or forego $43 billion in foreign assistance.
Why all the fuss over a currency board for Indonesia? Politics. The U.S. and its allies wanted a regime change in Jakarta, not currency stability. Former U.S. Secretary of State Lawrence Eagleberger weighed in with a correct diagnosis: “We were fairly clever in that we supported the IMF as it overthrew [Suharto]. Whether that was a wise way to proceed is another question. I’m not saying Mr. Suharto should have stayed, but I kind of wish he had left on terms other than because the IMF pushed him out.” Even Michel Camdessus could not find fault with these assessments. On the occasion of his retirement, he proudly proclaimed: “We created the conditions that obliged President Suharto to leave his job.”
As the Indonesian episode should teach us, the IMF’s management can be very political and often neither trustworthy nor competent. Greece offers yet another chapter.
- Al-Qaeda Attacks CIA-Trained Syrian "Freedom Fighters"; Commander Captured
Attempts to make sense of the prolonged, bloody conflict in Syria which threatens Turkey’s southern border and long ago spilled over into Iraq, are everywhere and always complicated by the constantly shifting alliances among the various groups fighting for control of the country.
For instance, commentators were taken off guard in April when al-Qaeda affiliate al-Nusra appeared to be working in tandem with rival ISIS in a push to control the Yarmouk refugee camp in Damascus. The siege – which transformed the camp into what Ban Ki-Moon called “the worst circle of hell” – also saw Palestinian militiamen forge awkward alliances with the Assad regime in the face of the militant assault.
Just this week, Turkey began bombing raids on ISIS targets, marking a departure from the country’s previous position and leading many to question why, given widespread suspicion that Turkey has been cooperating with ISIS for some time, Ankara would suddenly decide to go on the offensive (as we’ve shown, Erdogan’s motivation is purely political, but the official line is that a suicide bombing in Suruc forced the President’s reluctant hand). Turkey has also funnelled money to ISIS’ rivals in Syria in an effort to support any and all efforts (well, aside from those of the YPG) to overthrow Assad.
As for the US, it’s virtually impossible to say which groups the CIA has or hasn’t supported over the course of the war and indeed, many suspect US intelligence of funding and training the very militants who eventually became ISIS (a suspicion that was recently confirmed in a leaked Pentagon document).
Through it all, Syrian President Bashar al-Assad has desperately clung to power although a speech delivered last Sunday suggested that the strongman’s grip on the country had weakened materially in the face of a manpower shortage.
Amid the chaos, the one thing that is abundantly clear is this: the US, Turkey, Saudi Arabia, and other parties with a vested interest in the trajectory of Syria’s political future all want Assad gone, and for Washington, openly supporting the various groups battling the regime is now virtually impossible given the now widespread acknowledgement that nearly everyone the US has trained or armed over the course of the civil war either already was or has since become an “extremist” (however one wishes to define that admittedly amorphous term).
The US effort to recruit and allign with “moderate freedom fighters” reached peak absurdity in May when the Pentagon announced that it would train “appropriately vetted” combatants who would help “meet the needs of Syrian opposition forces.”
How has that program been going you ask?
Not well.
In fact, the US has only managed to recruit and train 54 people in three months- and that, believe it or not, is not the most embarrassing part.
Here’s The New York Times with more:
A Pentagon program to train moderate Syrian insurgents to fight the Islamic State has been vexed by problems of recruitment, screening, dismissals and desertions that have left only a tiny band of fighters ready to do battle.
Those fighters — 54 in all — suffered perhaps their most embarrassing setback yet on Thursday. One of their leaders, a Syrian Army defector who recruited them, was abducted in Syria near the Turkish border, along with his deputy who commands the trainees. They were seized not by the Islamic State but by its rival the Nusra Front, an affiliate of Al Qaeda that is another Islamist extremist byproduct of the four-year-old Syrian civil war.
The abductions illustrate the challenges confronting the Obama administration as it seeks to marshal local insurgents to fight the Islamic State, which it views as the region’s biggest threat.
So al-Nusra which, as The Times also notes, “dealt a more serious blow to the CIA program last year, attacking and dismantling its main groups, the Syrian Revolutionaries Front and Harakat Hazm, and seizing some of their American-supplied, sophisticated antitank missiles,” has now captured the commander and deputy commander of the new US “force”, marking a terribly humiliating blow to the latest ill-fated CIA -backed effort to locate and train the “good guys.” Reuters has more on the story:
Al Qaeda’s Syria wing said on Friday it had detained members of a Syrian rebel group who had just returned from U.S. training, in a direct challenge to Washington’s plan to train and equip insurgents to combat the hard-line Islamic State group.
In a statement that appeared to contradict comments from the Pentagon, Nusra Front said the men it was holding had entered Syria several days prior and had been trained under the supervision of the Central Intelligence Agency.
It described them as agents of America and warned others they should abandon the programme. It also said a U.S.-led coalition had mounted air strikes against Nusra Front positions during fighting between the group and the rebels.
Syrian opposition sources and a monitoring group said earlier this week that Nusra Front had detained the leader of the U.S-trained rebel “Division 30” and a number of its members. The Pentagon cast doubt on the reports on Thursday, saying no members of the “New Syrian Force” had been captured or detained.
“We warn soldiers of (Division 30) against proceeding in the American project,” Nusra Front said in a statement distributed online. “We, and the Sunni people in Syria, will not allow their sacrifices to be offered on a golden platter to the American side.”
So ultimately, the CIA’s newest band of “freedom fighters” who are supposed to be fighting ISIS, are now fighting al-Nusra which is receiving funding from Turkey which as of last week, is now allied with the US in a fight against ISIS, only Turkey isn’t really fighting ISIS, it’s fighting the PKK which backs YPG which is really fighting ISIS and everyone involved is fighting Assad who would probably find the whole thing comically absurd were it not for the fact that it is ultimately his head that everyone is after.
It goes without saying that all of this serves to make Washington look absolutely ridiculous and indeed, this may mark a new record low for US foreign policy gone horribly awry.
- Bernie, The Koch Brothers, & Open Borders
Submitted by Jeff Deist via The Mises Institute,
Presidential hopeful Bernie Sanders recently raised the ire of both progressives and libertarians with his remarks concerning immigration:
“Open borders? No, that’s a Koch brothers proposal,” Sanders said. “That’s a right-wing proposal, which says essentially there is no United States.”
“It would make everybody in America poorer — you’re doing away with the concept of a nation state, and I don’t think there’s any country in the world that believes in that,” Sanders said. “If you believe in a nation state or in a country called the United States or (the United Kingdom) or Denmark or any other country, you have an obligation in my view to do everything we can to help poor people.”
In just a few sentences, Sanders manages to demonstrate a hodgepodge of nativist, nationalist, protectionist, and socialist sentiments. But for anyone wondering why he wandered off the progressive narrative on immigration, it’s because protectionist labor unions pay him better than, say, La Raza.
If Bernie Sanders sounds like Donald Trump when it comes to “taking our jobs,” consider that both are statists who reflect the widely and deeply held belief that nations are defined by states. This may be an uncomfortable reality for libertarians, but it is reality nonetheless.
National borders by definition are political boundaries. They mark the edge of a particular territory over which a political entity — a state — claims exclusive jurisdiction.
Since political borders require states, “open borders” is an oxymoron. Nothing controlled by government is “open,” whether we’re talking about the New York City taxi market or federal ethanol subsidies or the Brownsville, Texas border bridge.
Open borders can exist only if states do not exist. States require borders because they are defined by borders.
So from the statist perspective, Sanders is right: you can’t have large centralized states and unregulated borders, because those borders are at the heart of the state’s identity and its raison d’etre: control. The political technocrats who run modern nation-states have zero incentive to cede control over the flow of humans entering (or in some cases leaving) their territories. If anything, the political impulse is ever and always to expand the state’s zone of control by pushing borders outward.
Immigration is a tricky issue for libertarians precisely because the very concepts of states, borders, and “public” land (the commons) are wholly inconsistent with a political and legal philosophy based on self-ownership and property rights. It’s hard to speak rationally about immigration under the present circumstances, because we’re so far from a free society that we risk piling one kind of illibertarian “solution” upon another.
While the understandable libertarian impulse is to comport our principles with the innately human desire for free migration, we too often forget that the Noble Immigrant archetype is rooted in a statist view of immigration: one controlled by the state, in which public space trumps private property and free association. The benefits and detriments of immigration are weighed only in terms of their impact on the state.
In a libertarian society, there is no commons or public space. There are property lines, not borders. When it comes to real property and physical movement across such real property, there are owners, guests, licensees, business invitees, and trespassers — not legal and illegal immigrants.
Admittedly, it might be quite difficult to establish rightful (lawful) property owners under some sort of Lockean homesteading analysis — even in a nation as young as the US. While libertarians generally are absolutist regarding unfettered immigration, they will entertain “halfway” arguments about the most libertarian path available in a statist world on other topics (for example, see Sheldon Richman’s cogent argument analogizing access to public roads with access to publicly-issued marriage licenses). But if Hans-Hermann Hoppe offers an interim argument for dealing with the societal costs imposed by immigrants given our current system of “public goods” and entitlements, he is considered a wrongheaded statist. The same progressives and left-libertarians who champion tort liability for corporations when it comes to environmental damage fall strangely silent on the externalities caused by human migration.
Let’s be clear: the tendencies of a society based on property rights may well make progressives and left-libertarians quite unhappy. Such a society necessarily entails freedom of association and its corollary, the right to exclude. Free association might well result in regions that develop naturally based on (gasp) shared familial, economic, linguistic, social, and cultural interests. Contra the DNC, government is not “the only thing we all belong to.”
This is not to say that a libertarian concept of naturally arising “nations” entails a clannish retreat into suspicious enclaves. Surely a free society would have regions where market demand for the cosmopolitan benefits of life in a multicultural society prevails (imagine a stateless Singapore). But multicultural social democracies with vast welfare states, like Western Europe and the US, did not arise through the “market.” They are big-government constructs, and they are quickly becoming unsustainable. Multicultural welfare states are a recipe for disaster.
Unfortunately, it appears for now we are stuck with the likes of Mr. Sanders and his faulty concept of nation-states. But if we want to advocate for a freer society, we need to apply first principles rather than sentimentality. There is a deep-rooted and natural human preference for the familiar face over the stranger, and human migration in a free society is likely to reflect this reality.
- Should It Be A Crime To Shoot Down A Drone Over Your Property?
A Hillview man has been arrested after he shot down a drone flying over his property – but he's not making any apologies for it. "I just think you should have privacy in your own backyard," said William Merideth, 47, "I went and got my shotgun and I said, "I'm not going to do anything unless it's directly over my property."" That moment soon arrived, "within a minute or so, here it came… it was hovering over top of my property, and I shot it out of the sky." Merideth was arrested and charged with first degree criminal mischief and first degree wanton endangerment…
As WDRB reports, Hillview Police say they were called to the home of 47-year-old William H. Merideth after someone complained about a firearm, Sunday night at a home on Earlywood Way, just south of the intersection between Smith Lane and Mud Lane in Bullitt County, according to an arrest report.
When they arrived, police say Merideth told them he had shot down a drone that was flying over his house. The drone was hit in mid-air and crashed in a field near Merideth’s home.
Police say the owner of the drone claimed he was flying it to get pictures of a friend’s house — and that the cost of the drone was over $1,800.
Merideth was arrested and charged with first degree criminal mischief and first degree wanton endangerment. He was booked into the Bullitt County Detention Center, and released on Monday.
WDRB News spoke with Merideth Tuesday afternoon, and he gave his side of the story.
“Sunday afternoon, the kids – my girls – were out on the back deck, and the neighbors were out in their yard,” Merideth said. “And they come in and said, ‘Dad, there’s a drone out here, flying over everybody’s yard.'”
Merideth’s neighbors saw it too.
“It was just hovering above our house and it stayed for a few moments and then she finally waved and it took off,” said neighbor Kim VanMeter.
VanMeter has a 16-year-old daughter who lays out at their pool. She says a drone hovering with a camera is creepy and weird.
“I just think you should have privacy in your own backyard,” she said.
Merideth agrees and said he had to go see for himself.
“Well, I came out and it was down by the neighbor’s house, about 10 feet off the ground, looking under their canopy that they’ve got under their back yard,” Merideth said. “I went and got my shotgun and I said, ‘I’m not going to do anything unless it’s directly over my property.’”
That moment soon arrived, he said.
“Within a minute or so, here it came,” he said. “It was hovering over top of my property, and I shot it out of the sky.”
“I didn’t shoot across the road, I didn’t shoot across my neighbor’s fences, I shot directly into the air,” he added.
It wasn’t long before the drone’s owners appeared.
“Four guys came over to confront me about it, and I happened to be armed, so that changed their minds,” Merideth said.
“They asked me, ‘Are you the S-O-B that shot my drone?’ and I said, ‘Yes I am,'” he said. “I had my 40 mm Glock on me and they started toward me and I told them, ‘If you cross my sidewalk, there’s gonna be another shooting.'”
A short time later, Merideth said the police arrived.
“There were some words exchanged there about my weapon, and I was open carry – it was completely legal,” he said. “Long story short, after that, they took me to jail for wanton endangerment first degree and criminal mischief…because I fired the shotgun into the air.”
Merideth said he was disappointed with the police response.
“They didn’t confiscate the drone. They gave the drone back to the individuals,” he said. “They didn’t take the SIM card out of it…but we’ve got…five houses here that everyone saw it – they saw what happened, including the neighbors that were sitting in their patio when he flew down low enough to see under the patio.”
Hillview Police detective Charles McWhirter says you can’t fire your gun in the city.
“Well, we do have a city ordinance against discharging firearms in the city, but the officer made an arrest for a Kentucky Revised Statute violation,” he said.
According to the Academy of Model Aeronautics safety code, unmanned aircraft like drones may not be flown in a careless or reckless manner and has to be launched at least 100 feet downwind of spectators.
The FAA says drones cannot fly over buildings — and that shooting them poses a significant safety hazard.
“An unmanned aircraft hit by gunfire could crash, causing damage to persons or property on the ground, or it could collide with other objects in the air,” said FAA spokesman Les Dorr.
Merideth said he’s offering no apologies for what he did.
“He didn’t just fly over,” he said. “If he had been moving and just kept moving, that would have been one thing — but when he come directly over our heads, and just hovered there, I felt like I had the right.”
“You know, when you’re in your own property, within a six-foot privacy fence, you have the expectation of privacy,” he said. “We don’t know if he was looking at the girls. We don’t know if he was looking for something to steal. To me, it was the same as trespassing.”
For now, Merideth says he’s planning on pursuing legal action against the owners of the drone.
“We’re not going to let it go,” he said. “I believe there are rules that need to be put into place and the situation needs to be addressed because everyone I’ve spoke to, including police, have said they would have done the same thing.”
“Because our rights are being trampled daily,” he said. “Not on a local level only – but on a state and federal level. We need to have some laws in place to handle these kind of things.”
So, should it be a crime to shoot down drones over your private property?
* * *
Finally, as an addenda, we note, as The BBC reports, the law isn't always in favour of drone pilots.
Over the weekend, Californian officials agreed to offer a total of $75,000 (£48,000) in rewards for information that would help catch drone operators who flew their vehicles over recent wildfires in San Bernardino County.
The flight of hobbyists' drones near to wildfires caused firefighting aircraft to be grounded for safety reasons, leading to the faster spread of the fires.
District attorney Mike Ramos said in a statement: "We want to know who was flying drones, and we want them punished.
"Someone knows who they are, and there is $75,000 waiting for them."
* * *
- NATO Member Busted Supporting ISIS … Now Declares War Against ISIS, But Instead Bombs Its Political Rival (the Main Force …
Turkey Enabling ISIS
NATO member Turkey has been busted supporting ISIS.
The Guardian reported this week:
US special forces raided the compound of an Islamic State leader in eastern Syria in May, they made sure not to tell the neighbours.
The target of that raid, the first of its kind since US jets returned to the skies over Iraq last August, was an Isis official responsible for oil smuggling, named Abu Sayyaf. He was almost unheard of outside the upper echelons of the terror group, but he was well known to Turkey. From mid-2013, the Tunisian fighter had been responsible for smuggling oil from Syria’s eastern fields, which the group had by then commandeered. Black market oil quickly became the main driver of Isis revenues – and Turkish buyers were its main clients.
As a result, the oil trade between the jihadis and the Turks was held up as evidence of an alliance between the two.
***
In the wake of the raid that killed Abu Sayyaf, suspicions of an undeclared alliance have hardened. One senior western official familiar with the intelligence gathered at the slain leader’s compound said that direct dealings between Turkish officials and ranking Isis members was now “undeniable”.
“There are hundreds of flash drives and documents that were seized there,” the official told the Observer. “They are being analysed at the moment, but the links are already so clear that they could end up having profound policy implications for the relationship between us and Ankara.”
***
However, Turkey has openly supported other jihadi groups, such as Ahrar al-Sham, which espouses much of al-Qaida’s ideology, and Jabhat al-Nusra, which is proscribed as a terror organisation by much of the US and Europe. “The distinctions they draw [with other opposition groups] are thin indeed,” said the western official. “There is no doubt at all that they militarily cooperate with both.”
***
One Isis member says the organisation remains a long way from establishing a self-sustaining economy across the area of Syria and Iraq it controls. “They need the Turks. I know of a lot of cooperation and it scares me,” he said. “I don’t see how Turkey can attack the organisation too hard. There are shared interests.”
While the Guardian is one of Britain’s leading newspapers, many in the alternative press have long pointed out Turkey’s support for ISIS.
And experts, Kurds, and Joe Biden have accuses Turkey of enabling ISIS.
Has Turkey Changed Its Ways?
On Tuesday, Turkey proclaimed that it will now help to fight ISIS.
Don’t buy it …
Colonel Lawrence Wilkerson – former chief of staff to Colin Powell, and now distinguished adjunct professor of Government and Public Policy at William & Mary – asked yesterday:
What is [Turkish president] Erdogan’s ultimate purpose? He hates Assad. He’d love to bring him down. Is that why he’s doing this?
There’s also the Kurds …
As Time Magazine pointed out in June:
Ethnic Kurds—who on Tuesday scored their second and third significant victories over ISIS in the space of eight days—are by far the most effective force fighting ISIS in both Iraq and Syria.
And yet Turkey is trying to destroy the Kurds. Time writes:
Since [Turkey announced that it was joining the war against ISIS] it has arrested more than 1,000 people in Turkey and carried out waves of air raids in neighboring Syria and Iraq. But most of those arrests and air strikes, say Kurdish leaders, have hit Kurdish and left wing groups, not ISIS.
***
Kurds are an ethnic minority that live in parts of Syria, Iraq, Turkey and Iran. They have been persecuted for decades — from Turkey’s suppression of Kurdish identity and banning of Kurdish language to Saddam Hussein’s use of chemical weapons on Kurdish communities. Their leaders, from the numerous different parties and rebel groups that represent them, have long sought an independent Kurdish state encompassing that territory and have fought against their respective governments to try to achieve that.
***
Hoshang Waziri, a political analyst based in Erbil, says the Kurds’ recent territorial gains in Syria along Turkey’s border and their increasing political legitimacy in the eyes of the West, have made the Kurds a bigger threat to Turkey than ISIS. “The fear of the Turkish state started with the Kurdish defeat of ISIS in Tel Abyad,” says Waziri.
***
“The image in the West of the Kurds as a reliable ally on the ground is terrifying for Turkey,” says Waziri. “So before it’s too late, Turkey waged its war — not against ISIS, but against the PKK.”
***
Some see the war against ISIS simply as a cover for an attack on Kurdish groups. Of the more than 1,000 people Turkey has arrested in security sweeps in recent days, 80% are Kurdish, associated either with the PKK or the non-violent Kurdish Peoples’ Democratic Party (HDP), says ?brahim Ayhan, a member of parliament for the HDP.
***
Ayhan says the AKP needs a state of “chaos” to perusade voters that it is the only bulwark against chaos. As of yet no new government has been formed in Turkey and if that doesn’t happen in the next few weeks, new elections will be called. By that time Ayhad fears many of the leaders of his HDP party will be in jail and some even worry the HDP will be outlawed. At the same time, Erdo?an and his AKP hope they will have shown only they can defend Turkey from internal and external threats.
The Wall Street Journal reports:
Turkey’s military activity against Islamic State does not stem from sudden realizations about threats from ISIS but appears designed to elicit international support for its fight against the Kurds.
The Kurdish Workers’ Party, known as the PKK, was locked in a bloody war with the Turkish state from the mid-1980s until 2013. The cease-fire has, for all intents and purposes, been destroyed. Turkey is battling both ISIS and the PKK under the guise of fighting terrorism. Yet Turkish attempts to conflate ISIS and the PKK–even in the wake of the suicide bombing in a Kurdish border town that killed 32 young people–effectively ask people to overlook some salient facts:
The Kurds are Islamic State’s ideological opposites. The Kurds have been fighting ISIS in Syria and Iraq for some time; in particular, the Kurdish People’s Protection Unit (YPG) in northern Syria has been among the most effective forces at repelling ISIS efforts to take control of the Syrian-Turkish border. Kurdish military resistance in Syria and, to a lesser extent, the Kurdish autonomous government in Iraq have shouldered the lion’s share of the ground conflict against Islamic State, standing their ground at high cost and with limited support from the Western coalition.
***
A declaration of a state of emergency in Turkey would give the Justice and Development Party (or AKP), which lost its parliamentary majority in June elections, more flexibility to crack down on political opponents such as the Kurdish majority People’s Democratic Party. More than 1,300 people have been detained recently under the guise of cracking down on domestic PKK and ISIS elements in Turkey.
The AKP has declared the peace process with the Kurdish separatists dead and is trying to discredit the only recognized political representatives of the Turkish left and the Kurdish population; the Kurdish People’s Democratic Party won a 13% share of the Turkish parliament in the June elections–a sign of its rising popularity not only among Kurds but also with increasingly disgruntled Turkish liberals.
***
If a governing coalition isn’t formed, early elections will be held. The AKP appears to be hoping for that–under the thinking that a majority of voters would seek to maintain the status quo in a time of uncertainty and potential civil war, and that AKP’s standing in parliament would, in turn, be strengthened.
So Turkey isn’t really going after ISIS … instead, the ruling party is going after its main political threat – the Kurds – and continuing its long-term effort to overthrow Syria’s Assad.
- Congress Passes Bill In 15 Minutes To Revoke Americans' Passports Without Due Process
Submitted by Mike Krieger via Liberty Blitzkrieg blog,
The “war on terror” is a status quo fraud perpetuated by the oligarch-controlled mainstream media and authoritarian members of Congress as a way to systematically strip the American public of its freedom and civil rights in the name of fighting an outside enemy. This tried and true tactic has been used by statists throughout history, and history is indeed repeating itself here in the “land of the free.”
Of course, I’ve spent innumerable hours writing on this topic for many years, even before I started this website. Here are a few recent examples:
The “War on Terror” Turns Inward – DHS Report Warns of Right Wing Terror Threat
More “War on Terror” Abuses – Spying Powers Are Used for Terrorism Only 0.5% of the Time
How the Department of Homeland Security Monitored and Tracked Peaceful “Black Lives Matter” Protests
Moving along, today’s story is so incredible it’s almost hard to believe. It appears our so-called “representatives” recently took fifteen minutes to pass a bill that allows the Secretary of State to revoke Americans’ passports with no due process. Did you know about this? Well neither did I, and what’s worse, these members of Congress are so cowardly they passed the bill with a voice vote to avoid going on record. Talk about anti-American.
First, from Reason:
On Tuesday, without much notice, and after a whopping 15-minute debate, the U.S. House of Representatives passed via voice vote the Foreign Terrorist Organization Passport Revocation Act of 2015. Its intent: “To authorize the revocation or denial of passports and passport cards to individuals affiliated with foreign terrorist organizations, and for other purposes.” Some of the bill’s sparse details:
The Secretary of State may refuse to issue a passport [or revoke a previously issued one] to any individual whom the Secretary has determined has aided, assisted, abetted, or otherwise helped an organization the Secretary has designated as a foreign terrorist organization
How does today’s John Kerry or tomorrow’s John Bolton make such a determination? The bill doesn’t say.
Don’t we have laws, courts and due process in this country? Guess not.
It was also covered by Police State USA:
A bill passed by the U.S. House of Representatives would allow the government to restrict Americans’ travel through the revocation of passports based upon mere suspicions of unscrupulous activity. This bill represents another dangerous step forward in the war on terror and the disintegration of American due process.
H.R. 237, the “FTO (Foreign Terrorist Organization) Passport Revocation Act of 2015,” will allow the U.S. Secretary of State the unchecked authority to prohibit individuals from traveling internationally. According to the bill, the Secretary may unilaterally revoke (or refuse to issue) a passport from “any individual whom the Secretary has determined has aided, assisted, abetted, or otherwise helped an organization the Secretary has designated as a foreign terrorist organization pursuant to section 219 of the Immigration and Nationality Act (8 U.S.C. 1189).”
The bill did not bother to define what the terms “aided, assisted, abetted, or otherwise helped” actually mean, in legal terms. The power has been left open-ended so that it can mean whatever the secretary wants it to mean. Needless to say, a bill like this would be easily abused.
The travel restriction requires no presumption of innocence for the targeted individual; no explanation; no public presentation of evidence; no opportunity for a defense; no checks and balances on the power. The bill does not outline any appeals process for the targeted individual. The only stipulation is that the Secretary of State must issue a report to the Senate Committee on Foreign Relations and the House Committee on Foreign Affairs — “classified or unclassified.” The bill does not state that either committee can reverse the secretary’s decisions.
What’s really disturbing though, is that as I was researching this bill, I came across the fact that Congress is also sneaking in a provision to the highway-bill that would allow the IRS to revoke Americans’ passports if they owe the agency $50,000. Here’s some excellent coverage on the matter from the Ron Paul Institute:
Just the other day we wrote about a US House “suspension” bill that would give the Secretary of State the authority to cancel your passport if he decided that you had “aided” an organization that he rules is terrorist. There is no definition of what “aided” means, no chance to dispute the Secretary’s decision, no trial or presentation of evidence, and in fact any evidence the government has can be classified as secret so that you may not see it. In effect the Secretary of State can unilaterally consign you to internal exile and there is nothing you can do about it.
Because Members of the US House were too cowardly to go on record voting for such an anti-American piece of legislation, the bill passed by a voice vote.
Today the US Senate plans to one-up its counterparts on the lowlier side of Capitol Hill. Buried inside the US highways funding bill is a provision to revoke or deny issuance of a US passport to anyone who has a large outstanding tax debt to the US Internal Revenue Service. According to a Senate Finance Committee summary (PDF) acquired today, the measure provides for:
Revocation or denial of passport in case of certain unpaid taxes. This provision would authorize the Federal government to deny the application for a passport when an individual has more than $50,000 (indexed for inflation) of unpaid federal taxes which the IRS is collecting through enforcement action. It would also permit the Federal government to revoke a passport for such individuals. Before revocation, however, the Federal government would be allowed to limit a previously issued passport only for return travel to the United States or to issue a limited passport that only permits return travel to the United States. The provision would be effective on January 1, 2016, and is estimated to raise $0.398 billion over 10 years.As can be seen from the summary, this measure threatening to imprison Americans within (or outside) US borders is simply viewed as a means by which to raise revenue. The hoped-for increase in revenue coming from this threat is considered an “offset” to the money being spent on the highway bill — in other words the threat to imprison US citizens within their own country or freeze them out is considered appropriate incentive to force them to pay what the government claims it is owed.
Unconvinced that the US government would do such a thing? Check the bill coming to the Senate Floor. Section 52102 of the Highway Funding bill, to be taken up by the Senate today, states:
If the Secretary receives certification by the Commissioner of Internal Revenue that any individual has a seriously delinquent tax debt in an amount in excess of $50,000, the Secretary shall transmit such certification to the Secretary of State for action with respect to denial, revocation, or limitation of a passport pursuant to section 52102(d) of the Transportation Funding Act of 2015.
The use of citizenship rights as a weapon against Americans is becoming increasingly common as Washington is ever more desperate for control of its passport holders.
Indeed, Congress does seem rather obsessed in creating various loopholes by which the government can snatch American citizens’ passports and restrict travel without due process. It makes you wonder if Ron Paul was right in 2011 when he stated: “Border Fence Will Be Used To ‘Keep Us In'”
- July Jangles Markets' Nerves: Treasury Yields Tumble, Stocks Fumble, & Commodities Crumble
No excuse needed…
This seemed to sum the talking heads up today…
Everyone who loves the ECI index is now searching for another index to like
— GreekFire23 (@GreekFire23) July 31, 2015
Everything was awsome today after the worst wage growth in US history sent stocks soaring.. and then they unleashed The Bullard:
- 1408ET *FED'S BULLARD SAYS "IN GOOD SHAPE" FOR SEPT HIKE: DJ VIA CNBC
Complete chaos today…
With cash indices ending mixed (Nasdaq desparately clinging to green and Small caps ripped on biotech reach for safety lol!!!)
A complete disconnect between yields and stocks until Bullard spoiled the party…
Today across bonds, stocks, and gold…
Stocks were rolling over hard and then…
- The Market Broke – 1532ET *NYSE HAVING BINARY GATEWAY LATENCY ISSUE ON IP 159.125.64.138
And so VIX was slammed…to ensure S&P holds the all-important 2100 level…
* * *
Year-to-Date… Dow's down, Bonds down-er, Crude down-est… as The US Dollar is up 7.5%…
Trannies are still the big laggards with Nasdaq leading…
Led by Healthcare (Biotechs) as Energy remains the biggest loser…
* * *
It was quite a month!!
Bonds hot, commodities cold, stocks meh…
Bonds had their best month since January… (TLT +4.3%) – 2s30s biggest flattening (-23bps) since January
Stocks managed – after this week's epic surge – to get into the green for July…Trannies best month since Feb (up 4.1%) but Small Caps (Russell 2000) fell for the first time since April…
Commodities worst month since Sept 2011… to the lowest since April 2002
- WTI Crude's worst month since Oct 2008 (down 20.5%) – lowest close since March 2015
- Copper's worst month since Jan 2015 (down 10%) – lowest close since June 2009
- Gold's worst month since June 2013 (down 6.5%) – lowest monthly close since Jan 2010
- Silver's worst month since Sept 2014 (down 6%) – lowest monthly close since July 2009
* * *
On the week, Stocks soared…
As VIX "Matterhorn"-ed…
Bonds soared…
The dollar ended the week unchanged…
and all but silver slipped in commodities…
Did we just reach the threshold for gold short-covering?
And crude was crushed back to a $46 handle…
Finally – despite all the huffing and puffing over how China saved the world again with their intervention, Chinese stocks suffered their worst week in the last 5, crashing 9-12%…
The Shanghai Composite closed July down 14.4% – the worst month since August 2009.
Charts: Bloomberg
Bonus Chart: "Smart" Money Flow Continues To Signal Rotation To Weak Hands…
- "We Want The Names Of Anyone Who Sold" – China's Market Witch Hunt Enters Twilight Zone
Having claimed 'foreign interests' were "waging an economic war" against China, it was ironic that the most outspoken of Chinese SOEs is now under investigation for 'selling' shares when it was told not to. As Reuters reports, China is extending its dragnet for "malicious sellers" to Hong Kong and Singapore as the witchhunt blame-mongery continues, Rather ominously, the China Securities Regulatory Commission (CSRC) has demanded trading records to try to identify those with net short positions who would profit in case of further falls in China-listed shares, three sources at Chinese brokerages and two at foreign financial institutions said. Even more incredibly, as Bloomberg reports, despite total ignorance by US regulators, China is 'daring' to crackdown on market manipulation via 'spoofing'.
China is pressing foreign and Chinese-owned brokerages in Hong Kong and Singapore to hand over stock trading records, sources told Reuters, extending its pursuit of "malicious" short sellers of Chinese stocks to overseas jurisdictions.
The markets regulator, the China Securities Regulatory Commission (CSRC), wants the trading records to try to identify those with net short positions who would profit in case of further falls in China-listed shares, three sources at Chinese brokerages and two at foreign financial institutions said.
At its regular press conference on Friday, the CSRC said it had not directly contacted top executives at Hong Kong brokerages. It also noted that it was normal, in the course of an investigation, to reach out to "relevant parties".
The regulator has declared war on "malicious short sellers" or those it deems are trying to profit from a fall in share prices, rather than adopt a short position as a financial hedge.
"The implied threat by the CSRC is that anything that is not a hedge is a no-no," said a source in Hong Kong with knowledge of the requests. This person added that foreign brokers were likely to comply as best they could with the requests.
"When the CSRC makes an offer, you cannot refuse it."
…
The CSRC has no regulatory power in Hong Kong or other jurisdictions, such as Singapore and the United States, where investment products tracking mainland shares are listed, and can be legally shorted.
But market sources worry that Chinese regulators are intent on suppressing any attempt to profit from China's sliding markets, including trying to suppress even legal investment behavior by referring to it as "malicious" or otherwise irregular.
At the same time, the government is trying to rally retail investors who dominate trading in China to put money back into the market, a task made more difficult if investors offshore are making bets on falling prices.
As we have detailed in depth previously, spoofers make money by feigning interest in buying or selling at a certain price, creating the illusion of demand in an attempt to make other traders move the market. The spoofer cancels the original order and buys or sells at the new price to make a profit. And so as Bloomberg reports, spoofing has become the latest target in China’s campaign against stock-market manipulation after a $3.5 trillion selloff.
“It certainly looks like spoofing is at play here,” said Bernard Aw, a strategist at IG Asia Pte Ltd. in Singapore. “Given that this practice is seen as market manipulation, it is not surprising to see CSRC stepping in.”
The practice, which involves placing then canceling orders to move prices, is suspected in 24 accounts on the Shanghai and Shenzhen stock exchanges, the China Securities Regulatory Commission said on its microblog. The bourses have restricted the accounts and regulators are investigating program traders, who have recently had an “obvious” impact on the stock market, the CSRC said.
China’s focus on spoofing follows a probe of “malicious” short selling, part of the government’s unprecedented effort to shore up investor confidence.
“The public isn’t happy about the market plunge so the regulator needs to take some actions as a response, and that’s part of the government’s plan to prop up the market,” said Zhang Haidong, the chief strategist at Jinkuang Investment Management in Shanghai. “Whether it’ll be effective remains to be seen.”
* * *
As one trader noted,
Spoofing "works on the way up and the way down, so it’s interesting it’s only a problem when it causes equity prices to fall."
And so, just as we have remarked previously, this kind of manipulation will be tolerated in the US markets until such time as stocks begin to tumble then it will be scapegoated as the sole reason why equity confidence collapsed.
- 5 Things To Ponder: Mentally Conflicted
Submitted by Lance Roberts via STA Wealth Management,
I had a very interesting conversation with one my colleAgues yesterday about the markets and the economy. Essentially the discussion centered around the markets remaining near their all-time highs as economic data remained soft. Much like the "300" that defended Greece against the massive invading force of Persia, it is only a question of time before the battle is lost.
As I discussed on Monday in "When Will We Ever Learn…"
"The capacity for optimism is seemingly limitless, but the "sting" of failure is quite transient.
While it is in those failures that valuable lessons are taught, studies have shown that humans tend to suppress or substitute new memories over time.
George Santayana once said:
"Those who cannot remember the past are condemned to repeat it."
The phrasing itself certainly is catchy, and is often used in the financial media due to its underlying truth. If history is a guide to the results of previous actions, and those results were painful, then history should guide not only policy making (public and private) but our own behaviors as well.
It's hard to disagree with. Over the history of the financial markets (all the way back to the 1600's) speculative investing has repeatedly led to booms and busts.
Importantly, each of these "bubbles" involved an excessive level of speculation around some specific asset.
Of course, it is all rather obvious in hindsight. Valuations were high, the Fed was hiking interest rates and the love affair with stocks and leverage had reached historically high levels.
Today, there are many signs that the markets are once again approaching a "danger zone." Margin debt is once again at historically high levels; valuations are the second highest in history and the "love affair" with equities has pushed stocks to record highs. But these areas are really just a reflection of the excesses that are building elsewhere in the financial system."
The disconnect between economic underpinnings, market internals and "bullish" investor optimism leaves many investors/advisors "mentally conflicted." If they "sell" too soon, they might miss a further advance in the market. But if they wait too long, well, they have lived through that scenario previously.
This week's reading list is a smattering of conflicting views about the markets and the economy. As always, it is extremely valuable to analyze both sides of every argument. This reduces confirmation bias and leads to a better assessment of potential flaws that may exist in your investment thesis.
1) The US Stock Market And A Major Recessionary Warning? by Pater Tenebrarum via Acting Man Blog
"The deterioration in market internals is e.g. evident in new high/new low ratios that are inconsistent with a market making new highs, and a growing divergence between prices and advance/decline statistics. Also, an ever smaller percentage of stocks remains above important moving averages. Below is a chart depicting several of the most widely followed market internals (high/low percent, advance/decline line, S&P 500 stocks above 200 day and 50 day EMA).
What this essentially tells us, is that capitalization-weighted indexes are held up by an ever smaller number of big cap stocks. A the time of writing, a strong short term rebound in the stock market is underway. However, the underlying problems with trend uniformity and internals depicted below remain in place."
Read Also: Several Reasons To Remain Bullish On Stocks by Chris Ciovacco via Ciovacco Capital
2) "Extreme Fear" Is Back For The Stock Market by Heather Long via CNN Money
"What's going on? Investors are spooked by the same factors that have been around for months: China's slowdown, Greece's possible exit from the euro, and the Federal Reserve's first interest rate hike expected in September.
None of this is new, but it's getting real. On Monday, China's Shanghai Composite index fell a whopping 8.5% — its worst single day decline since February 2007. While America investors don't have a lot of exposure to China's stock market, they do have exposure to China's economy since so many U.S. businesses are now operating there.
China's economic slowdown is the bigger concern. The stock market plunge is seen as more of a warning sign to the rest of the world."
Read Also: The Secret For Beating The Market by Nouriel Roubini via Project Syndicate
3) The S&P 500 And Stock Buybacks by Ironman via Political Calculations
"How different would the value of the S&P 500 be if not for the amount of stock buybacks that have taken place in the U.S. stock market since the end of 2008?
What we see from our highly simplified, back-of-the-envelope math is that through the end of the first quarter of 2015, the most recent for which S&P has reported data at this writing, the value of the S&P 500 would be about 324 points, or nearly 16%, lower if not for the progressive impact of share buybacks over the last seven years."
Read Also: Putting The "Buy Back" Craze Into Context by Eric Bush via GaveKal Capital
4) When Will The Next Recession Start? by Ed Yardeni via Dr. Ed's Blog
"I doubt that the business cycle is dead, though I suspect that inflation may be dead. As inflation remains subdued and central banks continue to provide ultra-easy monetary policies, the next recession may very well be a long ways off. If inflation makes a sudden comeback, a possibility I can't dismiss, then all bets are off. A meltdown in China's financial markets and economy might also trigger a global recession, which is why I am concerned about the renewed weakness in commodity prices, as I discussed last week."
Read Also: Recession Ahead? Gross Output and B2B Data by Dr. Mark Skousen via MSkousen.com
Read Also: Leaked Fed Staff Forecast Reflects Gloomier Outlook by Binyamin Appelbaum via New York Times
5) Investors Should Raise Cash by Michael Kahn via Barron's
"But what I find more interesting is that the last time the market suffered a significant correction, aside from last year's Ebola-inspired mini-panic, the industrials broke down first. That was in the summer of 2011 and the industrial sector broke down about a week before the broad market did (see Getting Technical, "Industrial Stocks Are Shutting Down," August 1, 2011). Although we cannot make a rule out of so few observations, it probably is a good idea to keep cash levels higher than normal."
Read Also: Its A Bounce For This Key Market Gauge, Or Else by Dana Lyons via Tumblr
Other Interesting Reads
Sometimes, Investors Win By Not Losing by Joe Calhoun via Alhambra Partners
Am I Too Bearish, Or Are you Too Bullish by Jesse Felder via The Felder Report
Jeremy Grantham's 10 Issues To Watch by Jeremy Grantham via ZeroHedge
6 Great Investors Explain What Makes Stocks Rise by Lauren Rublin via Barron's
"I have always found it valuable to study my mistakes" – Edwin Lefevre
Have a great weekend.
- "You've Got Jail"
- Is This The Top? Private Equity "Exits" Surge To Record Highs
After a slow first quarter of 2015, the private equity industry experienced a revitalization in Q2-2015. Investment dipped by less than 1 percent to $112 billion, holding strong at the second highest Q2 level since 2007, fundraising fell to $30 billion. . Meanwhile, as ValueWalk details, exit volume exploded last quarter to $125 billion – the highest level on record – raising the question: "if everything is so awesome, why the smartest people in the room selling to the public at the heaviest pace ever?"
Some key metrics of the private equity industry in the second quarter of 2015 are:
U.S. Private Equity Investment Volume Decreases
Quarterly U.S. private equity investment deal volume fell slightly from $113 billion in Q1-2015 to $112 billion in Q2-2015.
Current Level – $112 B
Quarterly Change % – -1%
Equity Contributions Hold Steady
Total equity financing for U.S. leveraged buyouts remained at 42% in Q2-2015.
Current Level – 42%
Quarterly Change % – 0%
U.S. Fundraising Levels Fall
Quarterly U.S. private equity fundraising volume declined from $38 billion in Q1-2015 to $30 billion in Q2-2015.
Current Level – $30 B
Quarterly Change % – -21%
Dry Powder Increases
Callable capital reserves (“dry powder”) of global buyout funds increased from $431 billion in December 2014 to $467 billion as of the end of June 2015.
Current Level – $467 B
Quarterly Change % – +8%
Exit Volume Jumps
U.S. private equity exit volume grew from $70 billion in Q1-2015 to $125 billion in Q2-2015.
Current Level – $125 B
Quarterly Change % – +80%
Fig 1 The four-quarter average for exits took a sharp turn upwards in 2015-Q2, while the average for investments and fundraising decreased.
Fig 2 U.S. private equity investment volume contracted by 1% from the previous quarter.
Fig 3 The proportion of equity financing for U.S. leveraged buyouts remained at 42%.
Fig 4 Capital raised by U.S. private equity funds declined from the previous quarter to $30 billion.
Fig 5 Global callable capital reserves (“dry powder”) of buyout funds increased to $467 billion as of June 2015.
Fig 6 U.S. private equity exit volume grew from previous quarter levels to $125 billion.
So – to summarize – funding levels are falling, dry powder is rising, and exit volume are at record highs… Still want to buy stocks with both hands and feet!!!!
- Friday Humor: The Trump White House & Cabinet
Having told Jimmy Kimmel that he "would love to" appoint Sarah Palin to his cabinet, The Washington Post asks (and answers), just what would a trump cabinet look like?
Because Trump is busy poring over poll numbers and reviewing tape from focus groups, we went ahead and cobbled it together for him.
Vice President: Oprah Winfrey, per Trump's past suggestion. Would she run with Trump? If Donald Trump can convince the Hispanic vote to come out for him, which he insists he can, he can certainly convince Winfrey to join his ticket. He has great negotiators.
Secretary of the Interior: Sarah Palin. Granted, Palin would probably like something a little more substantive than this, but what other candidate can brag about having toured the country hunting various animals for a TV show? In case Palin declines, maybe reach out to that dentist.
Attorney General: His go-to counsel, Michael Cohen.
Secretary of Homeland Security: Joe Arpaio. Trump's campaign shot into the stratosphere after his appearance with Arpaio at an immigration event in Arizona. This has the added benefit of helping to keep the Department of Justice off Arpaio's back.
Secretary of State: We know that Trump thinks that Hillary Clinton was the worst secretary of state in American history. He clearly wants the opposite of that. So how about Vladimir Putin, whom Trump has repeatedly praised? He's pretty opposite.
Secretary of Housing and Urban Development: Ivanka Trump. Public housing is basically just a no-frills hotel, right?
Secretary of Health and Human Services: Dr. Oz.
Secretary of Transportation: Christophe Georges, president of Bentley Motors.
Secretary of Energy: Manoj Bhargava.
Secretary of Education: Michael Sexton, former president of Trump University, which was a thing.
Secretary of Agriculture: Secretary of Agriculture: Tom Fazio, Trump's golf course architect. Who knows more about proper watering and vegetation maintenance than this guy? Also, the imminent desertification of swaths of California sounds much better if you think about the process as "the creation of challenging new sand bunkers."
Secretary of the Treasury: Donald Trump. Sure, it's more common for the president to appoint someone else to this position, but who's better at managing money than Donald Trump? No one. He's the best.
Secretary of Veterans Affairs: Donald Trump. Sure, it's more common to etc., etc. But who cares more about the veterans than Donald Trump? No one.
Secretary of Defense: Donald Trump. Sure, etc., etc., etc., ISIS, etc. No one.
Secretary of Labor: Position will be left unfilled.
Interest in Trump is rising notably…
And finally…
Artist's impression of The Trump White House…
- Will FTC Probe Of Largest For-Profit College Lead To Another Billion Dollar Taxpayer Bailout?
In late April we predicted that for-profit college closures would trigger the next multibillion dollar taxpayer-sponsored bailout in America.
At the time, Corinthian Colleges had abruptly shuttered what remained of its campuses, marking an unceremonious end to a slow motion wind down that had been in the works for quite some time.
As we noted then, delinquencies and defaults on student loans are far worse for borrowers that attend for-profit colleges. This, along with poor graduation rates and allegations of deceptive marketing practices, has led to increased government scrutiny of the for-profit sector, scrutiny which ultimately caused Corinthian to wind down operations last year amid allegations it falsified job placement rates.
The company received nearly $1.5 billion per year in financial aid funding from the government, meaning the US taxpayer was subsidizing federal loans to students who very well may have been getting a subpar education and were thus even more likely to get behind on their loans and eventually default. Corinthian was able to sell off many of its campuses in November and although the writing had been on the wall for quite sometime, the sudden closure of its remaining physical campus still came as a surprise to students and faculty.
The reason this matters is that the law allows students to apply for debt relief from the Department of Education when the school they attend is closed and found to have defrauded attendees. Here’s an excerpt from a Reuters piece that ran shortly after the closures:
More than 50 consumer and labor organizations sent a joint petition on Tuesday to U.S. Secretary of Education Arne Duncan, urging him to cancel federal student loans owed by 78,000 who attended Corinthian schools.
The groups, including the National Consumer Law Center, said the Department of Education had the authority because Corinthian misrepresented its job placement rates and defrauded students by enrolling them in high-cost, low-quality classes.
What’s critical to understand here is that, as noted last month, “these institutions rely heavily on federal student loans for their very existence [and] tuition rates at for-profit colleges are, on average, double the rates charged by large public universities, a fact which explains why nearly 90% of students at for-profit schools have taken out loans to pay for their education.”
So these students are i) almost certain to have borrowed from the government, and ii) their loan balances are almost certain to be higher, on average, than loan balances for students at public universities.
When you combine this with the government’s ongoing crackdown on the for-profit sector and the fact that if the government closes a for-profit school, the students are eligible for debt relief, you have the perfect recipe for massive taxpayer-funded bailouts of heavily indebted students.
Anyone who thought we were exaggerating when we predicted a multibillion dollar hit for taxpayers got a rude awakening when, early last month, the government announced plans to write off nearly $4 billion in loans for students that attended Corinthian.
The takeaway, as we wrote way back in April, is this: The real question now is whether continued pressure on for-profit colleges will result in further closures and more petitions from hundreds of thousands of students with hundreds of billions of loans they now know can be legally discharged.
Well, sure enough, the government is now looking into University of Phoenix parent Apollo Education. Here’s Bloomberg:
Apollo Education Group Inc., owner of the University of Phoenix for-profit college chain, fell as much as 9.4 percent after U.S. regulators began investigating possible unfair advertising and marketing.
The Federal Trade Commission demanded information on enrollment, recruiting, financial aid, tuition and other business practices from 2011 to the present, Phoenix-based Apollo said in a filing with the Securities and Exchange Commission. Apollo said it will cooperate fully.
The FTC and other government agencies are examining the practices of for-profit colleges amid concerns they are recruiting students with misleading pitches about the value of their education. Downers Grove, Illinois-based DeVry Education Group Inc., another for-profit college chain, received a similar notice from the FTC last year and said it is cooperating.
From the filing:
Apollo Education Group, Inc. announced that it received yesterday a Civil Investigative Demand from the U.S. Federal Trade Commission. The Demand indicates that it relates to an investigation to determine if certain unnamed persons, partnerships, corporations, or others have engaged or are engaging in deceptive or unfair acts or practices in or affecting commerce in the advertising, marketing, or sale of secondary or postsecondary educational products or services or educational accreditation products or services. The Demand requires Apollo to produce documents and information regarding a broad spectrum of the business and practices of its wholly-owned subsidiary, University of Phoenix, Inc., including in respect of marketing, recruiting, enrollment, financial aid, tuition and fees, academic programs, academic advising, student retention, billing and debt collection, complaints, accreditation, training, military recruitment, and other compliance matters, for the time period of January 1, 2011 to the present.
We’re quite sure we’ll be discussing this extensively sooner rather than later, but for now we’ll close with an excerpt from US News & World Report on Corinthian’s bankruptcy and a screenshot from Apollo’s latest 10-Q. Bearing in mind that the Corinthian closure may cost taxpayers $3.6 billion, see if you can determine why a government mandated shutdown of Apollo could present a problem.
In court documents, Corinthian listed total assets of $19.2 million and total debts of more than $143 million. At its peak during 2013, the company operated more than 100 campuses in states such as Arizona, California, Hawaii and Oregon, and enrolled more than 81,000 students, according to court documents.
- Spot The Greek Referendum
When fiat fragility shows its fecklessness, it appears people turn to the alternatives…
As Grexit fears loomed, Bitcoin transactions surged, as we noted here, amid efforts to avoid capital controls. As Reuters reported,
Using bitcoin could allow Greeks to do one of the things that capital controls were put in place this week to prevent: transfer money out of their bank accounts and, if they wish, out of the country.
"When people are trying to move money out of the country and the state is stopping that from taking place, bitcoin is the only way to move any value," said Adam Vaziri, a board member of the UK Digital Currency Association.
"There aren't any other options unless you buy diamonds, and that's very difficult to move."
But Marinos said the bitcoin buyers' main aim was to shield their money against the prospect that Greece might leave the euro zone and convert all the deposits in Greek banks into a greatly devalued national currency. If voters reject the demands of international creditors in a referendum on Sunday, this becomes much more likely.
"A lot of people are keeping all the bitcoins they buy on our platform, until they understand what to do with them," Marinos said. "In their eyes, now they have bitcoins, they're safe."
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Source: Goldman Sachs
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