Today’s News December 29, 2015

• Falling Interest Causes Falling Profits

  by Keith Weiner

   

  Most people assume that prices move as a result of changes in the money supply. Instead, let’s look at the effect of changes in interest. To start, consider a hamburger restaurant. Suppose that the average profit in the burger business is ten percent of invested capital. If MacDowell’s is thinking about expanding, it has to consider the interest rate. Why?

  Typically, most of the capital to expand a business is borrowed. MacDowell’s has to borrow the cash to build out its new store. If the cost of capital is greater than the return on capital, then it makes no sense to expand. Let that sink in, because it is vitally important. You cannot borrow at 10% to earn 8%.

  Of course not all of the capital is borrowed. MacDowell’s also puts up some of its own funds (or at least it would in a normal world without a central bank drowning the markets with liquidity). The company has to consider what else it could do with that cash. If it could earn more on a bond portfolio, why should it take business risk? Let this sink in also. You should not invest in business equity to earn less than the yield on bonds.

  We have just looked at two connections between interest and profit margins. It is both impossible and undesirable, to expand a business which earns less than the interest rate. Now let’s look at the connection in the other direction. MacDowell’s profit-seeking behavior actually affects interest.

  What happens to the interest rate if MacDowell’s borrows at two percent to build a hamburger stand that makes ten percent? The very act of borrowing pushes up the interest rate slightly (in a normal world). The very act of opening another hamburger store pushes down the rate of profits on hamburger stores.

  To oversimplify for this example, the rate of interest goes up to three and the rate of profit comes down to nine. That’s still pretty attractive, so Burger Emperor opens up a store. Interest is pushed up to four, and profit pulled down to eight. And so on, until the next would-be burger baron walks away. Certainly, if the rate is six and profit is six, then no one else will want to enter this business. The same process happens in every industry.

  Today, of course the central banks pin the interest rate down. So MacDowell’s and Burger Emperor’s borrowing do not push up the interest rate. However, they still do pull down the rate of profit. They will keep adding to the burger supply, until the rate of profit is just above the Fed-administered interest rate.

  Monetary policy claims to try to affect consumer prices—but it’s working its deadly effect on profits. Interest rates can’t go up, but profits can come down.

  It turns out that this monetary policy does affect prices, though not in the way supposed by the mainstream theory. Suppose Wednesday’s is the last burger business to borrow, the last to pull the rate of profit as close as possible to the rate of interest. How is Wednesday’s supposed to make this work? Worse yet, how is Burger Emperor staying alive with its higher interest rate, and McDowell’s with its even-higher rate?

  They are locked in a desperate scramble to squeeze out every cost. They develop processes to do without inventory, depending on just-in-time delivery. They automate and lay off as much labor as possible. Executives fly coach when they get travel budget at all. They redesign their packaging to be cheaper, etc.

  I don’t normally use the term unintended consequences. I prefer to discuss perverse outcomes, rather than emphasize policy maker real or claimed intentions. However, in this case I think it’s safe to say that the Fed is getting the opposite of what it intends. It wants prices to rise by 2 percent. What is it actually getting?

  Just look at the wreckage in the crude oil chart, copper, or even wheat markets.

   

  This article is from Keith Weiner’s weekly column, called The Gold Standard, at the Swiss National Bank and Swiss Franc Blog SNBCHF.com.

  

  

  

  

• What's In Store For Our Freedoms In 2016? More Of Everything We Don't Want

  Submitted by John Whitehead via The Rutherford Institute,

  “Those who cannot remember the past are condemned to repeat it.” – George Santayana, The Life of Reason, Vol. 1

  In Harold Ramis’ classic 1993 comedy Groundhog Day, TV weatherman Phil Connors (played by Bill Murray) is forced to live the same day over and over again until he not only gains some insight into his life but changes his priorities. Similarly, as I illustrate in my book Battlefield America: The War on the American People, we in the emerging American police state find ourselves reliving the same set of circumstances over and over again—egregious surveillance, strip searches, police shootings of unarmed citizens, government spying, the criminalization of lawful activities, warmongering, etc.—although with far fewer moments of comic hilarity.

  What remains to be seen is whether 2016 will bring more of the same or whether “we the people” will wake up from our somnambulant states. Indeed, when it comes to civil liberties and freedom, 2015 was far from a banner year.

  The following is just a sampling of what we can look forward to repeating if we don’t find some way to push back against the menace of an overreaching, aggressive, invasive, militarized surveillance state.

  More surveillance. The surveillance state is alive and well and kicking privacy to shreds in America. Whether you’re walking through a store, driving your car, checking email, or talking to friends and family on the phone, you can be sure that some government agency, whether the NSA or some other entity, will still be listening in and tracking your behavior. This doesn’t even begin to touch on the corporate trackers that monitor your purchases, web browsing, Facebook posts and other activities taking place in the cyber sphere. We are now in a state of transition with the police state shifting into high-gear under the auspices of the surveillance state. In such an environment, we are all suspects to be spied on, searched, scanned, frisked, monitored, tracked and treated as if we’re potentially guilty of some wrongdoing or other. Even our homes provide little protection against government intrusions. Police agencies, already empowered to crash through your door if they suspect you’re up to no good, now have radars that allow them to “see” through the walls of your home.

  More militarized police. Americans will continue to be rendered powerless in the face of militarized police. In early America, government agents were not permitted to enter one’s home without permission or in a deceitful manner. And citizens could resist arrest when a police officer tried to restrain them without proper justification or a warrant. Daring to dispute a warrant with a police official today who is armed with high-tech military weapons would be nothing short of suicidal. Moreover, as police forces across the country continue to be transformed into extensions of the military, Americans are finding their once-peaceful communities transformed into military outposts, complete with tanks, weaponry, and other equipment designed for the battlefield. Having already transformed local police into extensions of the military, now the Department of Homeland Security, the Justice Department and the FBI are preparing to turn the nation’s police officers into techno-warriors, complete with iris scanners, body scanners, thermal imaging Doppler radar devices, facial recognition programs, license plate readers, cell phone Stingray devices and so much more.

  More police shootings of unarmed citizens. Owing in large part to the militarization of local law enforcement agencies, not a week goes by without more reports of hair-raising incidents by police imbued with a take-no-prisoners attitude and a battlefield approach to the communities in which they serve.

  More so-called “terrorist” attacks. Despite the government’s endless propaganda about the threat of terrorism and even in the wake of the shootings in San Bernardino and Paris, statistics show that you are 17,600 times more likely to die from heart disease than from a terrorist attack. You are 11,000 times more likely to die from an airplane accident than from a terrorist plot involving an airplane. You are 1,048 times more likely to die from a car accident than a terrorist attack. You are 404 times more likely to die in a fall than from a terrorist attack. And you are 8 times more likely to be killed by a police officer than by a terrorist.

  More costly wars. The military industrial complex that has advocated that the U.S. remain at war, year after year, is the very entity that will continue to profit the most from America’s expanding military empire. The U.S. Department of Defense is the world’s largest employer, with more than 3.2 million employees. Thus far, the U.S. taxpayer has been made to shell out more than $1.6 trillion to wage wars in Afghanistan and Iraq. When you add in our military efforts in Pakistan, as well as the lifetime price of health care for disabled veterans and interest on the national debt, that cost rises to $4.4 trillion.

  More attempts by the government to identify, target and punish so-called domestic “extremists.” In much the same way that the USA Patriot Act was used as a front to advance the surveillance state, the government’s anti-extremism program will, in many cases, be utilized to render otherwise lawful, nonviolent activities as potentially extremist. To this end, police will identify, monitor and deter individuals who exhibit, express or engage in anything that could be construed as extremist before they can become actual threats. This is pre-crime on an ideological scale and it’s been a long time coming. Moreover, under the guise of fighting violent extremism “in all of its forms and manifestations” in cities and communities across the world, the Obama administration has agreed to partner with the United Nations to take part in its Strong Cities Network program and hire a domestic extremism czar.

  More SWAT team raids. More than 80% of American communities have their own SWAT teams, with more than 80,000 of these paramilitary raids are carried out every year. That translates to more than 200 SWAT team raids every day in which police crash through doors, damage private property, kill citizens, terrorize adults and children alike, kill family pets, assault or shoot anyone that is perceived as threatening—and all in the pursuit of someone merely suspected of a crime, usually some small amount of drugs.

  More erosions of private property. Private property means little at a time when SWAT teams and other government agents can invade your home, break down your doors, kill your dog, wound or kill you, damage your furnishings and terrorize your family. Likewise, if government officials can fine and arrest you for growing vegetables in your front yard, praying with friends in your living room, installing solar panels on your roof, and raising chickens in your backyard, you’re no longer the owner of your property.

  More debt. Currently, the national debt is somewhere in the vicinity of a whopping $18.1 trillion and rising that our government owes to foreign countries, private corporations and its retirement programs. Not only is the U.S. the largest debtor nation in the world, but according to Forbes, “the amount of interest on the national debt is estimated to be accumulating at a rate of over one million dollars per minute.”

  More government contractors. Despite all the talk about big and small government, what we have been saddled with is a government that is outsourcing much of its work to high-paid contractors at great expense to the taxpayer and with no competition, little transparency and dubious savings. According to the Washington Post, “By some estimates, there are twice as many people doing government work under contract than there are government workers.” These open-ended contracts, worth hundreds of millions of dollars, “now account for anywhere between one quarter and one half of all federal service contracting.”

  More overcriminalization. The government’s tendency towards militarization and overcriminalization, in which routine, everyday behaviors become targets of regulation and prohibition, have resulted in Americans getting arrested for making and selling unpasteurized goat cheese, cultivating certain types of orchids, feeding a whale, holding Bible studies in their homes, and picking their kids up from school.

  More strip searches and the denigration of bodily integrity. The Fourth Amendment to the U.S. Constitution was intended to protect the citizenry from being subjected to “unreasonable searches and seizures” by government agents. While the literal purpose of the amendment is to protect our property and our bodies from unwarranted government intrusion, the moral intention behind it is to protect our human dignity. Unfortunately, court rulings undermining the Fourth Amendment and justifying invasive strip searches have left us powerless against police empowered to forcefully draw our blood, forcibly take our DNA, strip search us, and probe us intimately. Accounts are on the rise of individuals—men and women alike—being subjected to what is essentially government-sanctioned rape by police in the course of “routine” traffic stops.

  More injustice. Americans can no longer rely on the courts to mete out justice. The courts were established to intervene and protect the people against the government and its agents when they overstep their bounds. Yet the courts increasingly march in lockstep with the police state, while concerned themselves primarily with advancing the government’s agenda, no matter how unjust or illegal. As a result, Americans have no protection against police abuse. It is no longer unusual to hear about incidents in which police shoot unarmed individuals first and ask questions later. What is increasingly common, however, is the news that the officers involved in these incidents get off with little more than a slap on the hands.

  More political spectacles. Americans continue to naively buy into the idea that politics matter, as if there really were a difference between the Republicans and Democrats (there’s not). As if Barack Obama proved to be any different from George W. Bush (he has not). As if Hillary Clinton’s values are any different from Donald Trump’s (with both of them, money talks). As if when we elect a president, we’re getting someone who truly represents “we the people” rather than the corporate state (in fact, in the oligarchy that is the American police state, an elite group of wealthy donors is calling the shots). Politics in America is a game, a joke, a hustle, a con, a distraction, a spectacle, a sport, and for many devout Americans, a religion. In other words, it’s a sophisticated ruse aimed at keeping us divided and fighting over two parties whose priorities are exactly the same.

  More drones. As corporations and government agencies alike prepare for their part in the coming drone invasion—it is expected that at least 30,000 drones will occupy U.S. airspace by 2020, ushering in a $30 billion per year industry—it won’t be long before American citizens who will be the target of these devices discover first-hand that drones—unmanned aerial vehicles—come in all shapes and sizes, from nano-sized drones as small as a grain of sand that can do everything from conducting surveillance to detonating explosive charges, to middle-sized copter drones that can deliver pizzas to massive “hunter/killer” Predator warships that unleash firepower from on high.

  More dumbed down, locked down public schools. Our schools have become training grounds for compliant citizens. Despite the fact that we spend more than most of the world on education ($115,000 per student), we rank 36th in the world when it comes to math, reading and science, far below most of our Asian counterparts. Even so, we continue to insist on standardized programs such as Common Core, which teach students to be test-takers rather than thinkers. Making matters worse is the heavy police presence in schools, which have become little more than quasi-prisons in which classrooms are locked down and kids as young as age 4 are being handcuffed for “acting up,” subjected to body searches, and suspended for childish behavior.

  More ignorance about our rights. Americans know little to nothing about their rights or how the government is supposed to operate. This includes educators and politicians. For example, 27 percent of elected officials cannot name even one right or freedom guaranteed by the First Amendment, while 54 percent do not know the Constitution gives Congress the power to declare war.

  More prisons. Our prisons, housing the largest number of inmates in the world and still growing, have become money-making enterprises for private corporations that manage the prisons in exchange for the states agreeing to maintain a 90% occupancy rate for at least 20 years. And how do you keep the prisons full? By passing laws aimed at increasing the prison population, including the imposition of life sentences on people who commit minor or nonviolent crimes such as siphoning gasoline. Little surprise, then, that the United States has 5% of the world’s population, but 25% of the world’s prisoners.

  More corruption. If there is any absolute maxim by which the federal government seems to operate, it is that the American taxpayer always gets ripped off. This is true, whether you’re talking about taxpayers being forced to fund high-priced weaponry that will be used against us, endless wars that do little for our safety or our freedoms, or bloated government agencies such as the National Security Agency with its secret budgets, covert agendas and clandestine activities. Rubbing salt in the wound, even monetary awards in lawsuits against government officials who are found guilty of wrongdoing are paid by the taxpayer.

  More censorship. First Amendment activities are being pummeled, punched, kicked, choked, chained and generally gagged all across the country. The reasons for such censorship vary widely from political correctness, safety concerns and bullying to national security and hate crimes but the end result remains the same: the complete eradication of what Benjamin Franklin referred to as the “principal pillar of a free government.” Free speech zones, bubble zones, trespass zones, anti-bullying legislation, zero tolerance policies, hate crime laws and a host of other legalistic maladies dreamed up by politicians and prosecutors have conspired to corrode our core freedoms. As a result, we are no longer a nation of constitutional purists for whom the Bill of Rights serves as the ultimate authority. We have litigated and legislated our way into a new governmental framework where the dictates of petty bureaucrats carry greater weight than the inalienable rights of the citizenry.

  More fascism. As a Princeton University survey indicates, our elected officials, especially those in the nation’s capital, represent the interests of the rich and powerful rather than the average citizen. We are no longer a representative republic. With Big Business and Big Government having fused into a corporate state, the president and his state counterparts—the governors, have become little more than CEOs of the Corporate State, which day by day is assuming more government control over our lives. Never before have average Americans had so little say in the workings of their government and even less access to their so-called representatives.

  More fear. We’re being fed a constant diet of fear, which has resulted in Americans adopting an “us” against “them” mindset that keeps us divided into factions, unable to reach consensus about anything and too distracted to notice the police state closing in on us.

  James Madison, the father of the Constitution, put it best: “Take alarm,” he warned, “at the first experiment with liberties.” Anyone with even a casual knowledge about current events knows that the first experiment on our freedoms happened long ago. Worse, we have not heeded the warnings of Madison and those like him who understood that if you give the government an inch, they will take a mile. Unfortunately, the government has not only taken a mile, they have taken mile after mile after mile after mile with seemingly no end in sight for their power grabs.

  If you’re in the business of making New Year’s resolutions, why not resolve that 2016 will be the year we break the cycle of tyranny and get back on the road to freedom? No matter what the politicians say about the dire state of our nation, you can rest assured that none of the problems that continue to plague our lives and undermine our freedoms will be resolved by our so-called elected representatives in any credible, helpful way in the new year.

  “We the people”—the citizenry, not the politicians—are the only ones who have ever been able to enact effective change, and there is a lot that needs to change.

  All of the signs point to something nasty up ahead.

  

  

  

  

  

• Dozens Of Protesters Swarm Disputed Island As China Demands Withdrawal Of Filipino Troops

  Two days ago, an armed Chinese ship and two other vessels entered the waters north of Kuba Island and encroached on Japanese territorial waters starting at around 9:30 a.m. Kuba is part of the Senkakus which are at the center of a longstanding dispute between Beijing and Tokyo.

  

  As BBC wrote last year, “the eight uninhabited islands and rocks in the East China Sea matter because they are close to important shipping lanes, offer rich fishing grounds and lie near potential oil and gas reserves.” Perhaps more importantly – especially in the context of what’s going on in the South China Sea – they are “in a strategically significant position, amid rising competition between the US and China for military primacy in the Asia-Pacific region.”

  Some argue that Beijing’s move to encroach on what are supposed to be jointly developed oil and gas fields (“I drink your milkshake”) may stem from Japan’s purchase of three of the islands from a private owner in 2012. Saturday’s “incident” marks “the first time that an armed Chinese vessel has intruded into the areas [around the islands] that Japan’s claims as its territory,” Bloomberg writes, adding that although the former PLA vessel “is now operated by another department, the ship was armed with an auto-cannon.” Here’s more: 

  The Japanese government protested to the Chinese embassy in Tokyo and to China’s Ministry of Foreign Affairs in Beijing, according to the foreign affairs ministry official. The entry of the three ships on Saturday was the 139th time that Chinese government vessels have entered Japan’s waters since September 2012, the official said.

   

  When Japan’s coast guard warned the Chinese to leave its territorial waters Saturday, they responded by saying that the Japanese vessel was in Chinese waters and should leave immediately, Kyodo reported.

  This comes just ten days after Reuters, citing Japanese officials, reported that Tokyo is preparing a missile blockade along the First Island chain in an effort to, i) deter what the US and Japan say is a regional maritime powergrab by China, and ii) effectively split the ocean into spheres of Chinese and US influence.

  

  All in all, the waters around China and Japan are becoming an increasingly dangerous place and in the latest kerfuffle, 50 Filipinos have occupied Pagasa in the Spratlys to protest Beijing’s island building efforts. The protesters “reached Pagasa in the Spratly archipelago on Saturday, saying they planned to stay for three days [in a demonstration against] Chinese encroachment in a Philippine exclusive economic zone,” BBC says.

  

  The island is Philippine-held, but officials were wary of the trip. “The Philippines was also concerned about China’s reaction to trip as Manila has been trying to calm tensions,” The Sidney Morning Herald wrote, earlier today.

  

  On Monday, Chinese Foreign Ministry spokesman Lu Kang called on The Philippines to leave the Spratlys altogether. Here’s the quote: 

  “We once again urge the Philippines to move out its troops and facilities from the illegally occupied islands and refrain from doing anything that would undermine regional peace and stability and also relations between our two countries.”

  You’re reminded that three years ago next month, the Philippines asked the UN Arbitration Court to settle China’s maritime claims over the South China Sea. For its part, Beijing wants nothing to do with the proceedings which China views as illegitimate.

  Lu’s declaration in the wake of the Pagasa occupation harkens back to comments made last month by Chinese Vice Foreign Minister Liu Zhenmin. Beijing has actually shown “great restraint” in the South China Sea, Liu told the press ahead of the Asia-Pacific Economic Cooperation summit held in Manila.

  China, Liu went on to explain, has tolerated the “occupation” of the disputed waters even as Beijing has “both the right and the ability to recover the islands and reefs illegally occupied by neighboring countries.” Essentially, Liu said China would be well within its rights to forcibly expel The Philippines, Malaysia, and Vietnam from the Spratlys. 

  And so, will a peaceful protest by a few dozen students be the indignity that causes China to demand, once and for all, the withdrawal of all non-Chinese military personnel from the Spratlys? Probably not, but Beijing clearly doesn’t appreciate the fact that an island which China believes is sovereign territory is occupied by Filipino soldiers and now, by Filipino activists who are essentially calling the Chinese a belligerent occupying force in the archipelago.

  

  

  

  

  

• "Political Correctness" Is About Control, Not Etiquette

  Submitted by Jeff Deist via The Mises Institute,

  I’d like to speak today about what political correctness is, at least in its modern version, what it is not, and what we might do to fight against it.

  To begin, we need to understand that political correctness is not about being nice. It’s not simply a social issue, or a subset of the culture wars.

  It’s not about politeness, or inclusiveness, or good manners. It’s not about being respectful toward your fellow humans, and it’s not about being sensitive or caring or avoiding hurt feelings and unpleasant slurs.

  But you’ve heard this argument, I’m sure. PC is about simple respect and inclusiveness, they tell us. As though we need progressives, the cultural enforcers, to help us understand that we shouldn’t call someone retarded, or use the “N” word, make hurtful comments about someone’s appearance, or tolerate bullies.

  If PC truly was about kindness and respect, it wouldn’t need to be imposed on us. After all, we already have a mechanism for the social cohesion PC is said to represent: it’s called manners. And we already have specific individuals charged with insuring that good manners are instilled and upheld: they’re called parents.

  Political Correctness Defined

  But what exactly is PC? Let me take a stab at defining it: Political correctness is the conscious, designed manipulation of language intended to change the way people speak, write, think, feel, and act, in furtherance of an agenda.

  PC is best understood as propaganda, which is how I suggest we approach it. But unlike propaganda, which historically has been used by governments to win favor for a particular campaign or effort, PC is all-encompassing. It seeks nothing less than to mold us into modern versions of Marx’s un-alienated society man, freed of all his bourgeois pretensions and humdrum social conventions.

  Like all propaganda, PC fundamentally is a lie. It is about refusing to deal with the underlying nature of reality, in fact attempting to alter that reality by legislative and social fiat. A is no longer A.

  To quote Hans-Hermann Hoppe:

  [T]he masters … stipulate that aggression, invasion, murder and war are actually self-defense, whereas self-defense is aggression, invasion, murder and war. Freedom is coercion, and coercion is freedom. … Taxes are voluntary payments, and voluntarily paid prices are exploitative taxes. In a PC world, metaphysics is diverted and rerouted. Truth becomes malleable, to serve a bigger purpose determined by our superiors.

  But where did all this come from? Surely PC, in all its various forms, is nothing new under the sun. I think we can safely assume that feudal chiefs, kings, emperors, and politicians have ever and always attempted to control the language, thoughts, and thus the actions of their subjects. Thought police have always existed.

  To understand the origins of political correctness, we might look to the aforementioned Marx, and later the Frankfurt school. We might consider the work of Leo Strauss for its impact on the war-hungry think tank world. We might study the deceptive sloganeering of Saul Alinsky. We might mention the French philosopher Foucault, who used the term “political correctness” in the 1960s as a criticism of unscientific dogma.

  But if you really want to understand the black art of PC propaganda, let me suggest reading one of its foremost practitioners, Edward Bernays.

  Bernays was a remarkable man, someone who literally wrote the book on propaganda and its softer guise of public relations. He is little discussed in the West today, despite being the godfather of modern spin.

  He was the nephew of Sigmund Freud, and like Mises was born in Austria in the late nineteenth century. Unlike Mises, however, he fortuitously came to New York City as an infant and then proceeded to live an astonishing 103 years.

  One of his first jobs was as a press agent for President Woodrow Wilson’s Committee on Public Information, an agency designed to gin up popular support for US entry into WW1 (German Americans and Irish Americans especially were opposed). It was Bernays who coined the infamous phrase “Make the World Safe for Democracy” used by the committee.

  After the war, he asked himself whether one could “apply a similar technique to the problems of peace.” And by “problems,” Bernays meant selling stuff. He directed very successful campaigns promoting Ivory Soap, for bacon and eggs as a healthy breakfast, and ballet. He directed several very successful advertising campaigns, most notably for Lucky Strike in its efforts to make smoking socially acceptable for women.

  The Role of “Herd Psychology”

  Bernays was quite open and even proud of engaging in the “manufacturing of consent,” a term used by British surgeon and psychologist Wilfred Trotter in his seminal Instincts of the Herd in Peace and War published in 1919.

  Bernays took the concept of herd psychology to heart. The herd instinct entails the deep seated psychological need to win approval of one’s social group. The herd overwhelms any other influence; as social humans, our need to fit in is paramount.

  But however ingrained, in Bernays’s view the herd instinct cannot be trusted. The herd is irrational and dangerous, and must be steered by wiser men in a thousand imperceptible ways — and this is key. They must not know they are being steered.

  The techniques Bernays employed are still very much being used to shape political correctness today.

  First, he understood how all-powerful the herd mind and herd instinct really is. We are not the special snowflakes we imagine, according to Bernays. Instead we are timorous and malleable creatures who desperately want to fit in and win acceptance of the group.

   

  Second, he understood the critical importance of using third party authorities to promote causes or products. Celebrities, athletes, models, politicians, and wealthy elites are the people from whom the herd takes its cues, whether they’re endorsing transgender awareness or selling luxury cars. So when George Clooney or Kim Kardashian endorses Hillary Clinton, it resonates with the herd.

   

  Third, he understood the role that emotions play in our tastes and preferences. It’s not a particular candidate or cigarette or a watch or a handbag we really want, it’s the emotional component of the ad that affects us, however subconsciously. 

  What We Can Do About It

  So the question we might ask ourselves is this: how do we fight back against PC? What can we do, as individuals with finite amounts of time and resources, with serious obligations to our families, loved ones, and careers, to reverse the growing tide of darkness?

  First, we must understand that we’re in a fight. PC represents a war for our very hearts, minds, and souls. The other side understands this, and so should you. The fight is taking place on multiple fronts: the state-linguistic complex operates not only within government, but also academia, media, the business world, churches and synagogues, nonprofits, and NGOs. So understand the forces aligned against you.

  Understand that the PC enforcers are not asking you, they’re not debating you, and they don’t care about your vote. They don’t care whether they can win at the ballot box, or whether they use extralegal means. There are millions of progressives in the US who absolutely would criminalize speech that does not comport with their sense of social justice.

  One poll suggests 51 percent of Democrats and 1/3 of all Americans would do just that.

  The other side is fighting deliberately and tactically. So realize you’re in a fight, and fight back. Culturally, this really is a matter of life and death.

  We Still Have Freedom to Act

  As bad as PC contamination may be at this point, we are not like Mises, fleeing a few days ahead of the Nazis. We have tremendous resources at our disposal in a digital age. We can still communicate globally and create communities of outspoken, anti-PC voices. We can still read and share anti-state books and articles. We can still read real history and the great un-PC literary classics. We can still homeschool our kids. We can still hold events like this one today.

  This is not to say that bucking PC can’t hurt you: the possible loss of one’s job, reputation, friends, and even family is very serious. But defeatism is never called for, and it makes us unworthy of our ancestors.

  Use humor to ridicule PC. PC is absurd, and most people sense it. And its practitioners suffer from a comical lack of self-awareness and irony. Use every tool at your disposal to mock, ridicule, and expose PC for what it is.

  Never forget that society can change very rapidly in the wake of certain precipitating events. We certainly all hope that no great calamity strikes America, in the form of an economic collapse, a currency collapse, an inability to provide entitlements and welfare, energy shortages, food and water shortages, natural disasters, or civil unrest. But we can’t discount the possibility of these things happening.

  And if they do, I suggest that PC language and PC thinking will be the first ornament of the state to go. Only rich, modern, societies can afford the luxury of a mindset that does not comport with reality, and that mindset will be swiftly swept aside as the “rich” part of America frays.

  Men and women might start to rediscover that they need and complement each other if the welfare state breaks down. Endless hours spent on social media might give way to rebuilding social connections that really matter when the chips are down.

  More traditional family structures might suddenly seem less oppressive in the face of great economic uncertainty. Schools and universities might rediscover the value of teaching practical skills, instead of whitewashed history and grievance studies. One’s sexual preferences might not loom as large in the scheme of things, certainly not as a source of rights. The rule of law might become something more than an abstraction to be discarded in order to further social justice and deny privilege.

  Play the Long Game

  I’m afraid it might not be popular to say so, but we have to be prepared for a long and hard campaign. Let’s leave the empty promises of quick fixes to the politicians. Progressives play the long game masterfully. They’ve taken 100 years to ransack our institutions inch by inch. I’m not suggesting incrementalism to reclaim those foregone institutions, which are by all account too far gone — but to create our own.

  PC enforcers seek to divide and atomize us, by class, race, sex, and sexuality. So let’s take them up on it. Let’s bypass the institutions controlled by them in favor of our own. Who says we can’t create our own schools, our own churches, our own media, our own literature, and our own civic and social organizations? Starting from scratch certainly is less daunting than fighting PC on its own turf.

  Conclusion

  PC is a virus that puts us — liberty loving people — on our heels. When we allow progressives to frame the debate and control the narrative, we lose power over our lives. If we don’t address what the state and its agents are doing to control us, we might honestly wonder how much longer organizations like the Mises Institute are going to be free to hold events like this one today.

  Is it really that unimaginable that you might wake up one day and find sites with anti-state and anti-egalitarian content blocked — sites like mises.org and lewrockwell.com?

  Or that social media outlets like Facebook might simply eliminate opinions not deemed acceptable in the new America?

  In fact, head Facebook creep Mark Zuckerberg recently was overheard at a UN summit telling Angela Merkel that he would get to work on suppressing Facebook comments by Germans who have the audacity to object to the government’s handling of migrants.

  Here’s the Facebook statement:

  We are committed to working closely with the German government on this important issue. We think the best solutions to dealing with people who make racist and xenophobic comments can be found when service providers, government, and civil society all work together to address this common challenge.

  Chilling, isn’t it? And coming soon to a server near you, unless we all get busy.

  

  

  

  

  

• 2015 – The Year Of FX Reserve Rundowns (Or Playing The "Fool's Game")

  2015 was the year of considerable FX drawdown as desperate EM central banks attempted to rescue themselves from reality.

  

   

  As Barry Eichengreen noted,

  "Intervening to support an exchange rate that’s fundamentally overvalued is a fool’s game and a no-win situation, akin to a sovereign attempting to sustain an unsustainable debt burden rather than yielding to inevitable restructuring."

  Goldman holds on to some hope as EM central banks’ reserves appear to have stabilized on aggregate, at least for now.

  In October (the latest month of comprehensive EM data from the IMF), declines in reserves ex gold in Saudi Arabia, Argentina, and to lesser extent Mexico and Russia, were offset by modest accumulation in a number of other emerging markets, led by India and—somewhat surprisingly—China. (The People’s Bank of China or PBOC unexpectedly reported an $11n increase in reserves in October, but factoring in other data suggests that FX outflow persisted that month at an estimated $26bn.)

  But China’s FX reserves have on balance continued to decline, albeit at a slower pace. The latest reports from the PBOC (more recent than the IMF reporting for EMs discussed above) showed a large $87bn decline in FX reserves in November. However, more than half of this may be attributed to valuation effects given relative currency moves; indeed, our reading of a broader set of data from the State Administration for Foreign Exchange (SAFE) suggests that FX outflow amounted to about $39bn—up from October but still well below the monthly average of $144bn in August-September. This likely reflects the effect of a tightening in administrative control (including intensified crackdown on underground outflow), as well as some possible frontloading of corporate FX hedging activity and a slight moderation in bearish RMB sentiment.

  US Treasury yields continue to show little impact from reserve selling. We maintain that a 1pp decline (roughly equivalent to US$125bn in net flows) of the share of Treasury stock held by the foreign official sector increases US 10-year yields by around 5bp, all else equal. However, macro drivers often dominate this effect. In the 16 months between the peak of EM FX reserves in June 2014 and October 2015, the roughly 2pp decline in the share of US Treasuries held by the foreign official sector has likely added around 10bp to the level of 10-year yields. This reduction in holdings, however, has not prevented 10-year Treasury yields from falling 30bp over the corresponding period.

  Some observers attributed negative spreads between US interest swaps and underlying Treasury yields to central bank reserve selling, along with bank funding and balance sheet strain.

  Quantitative tightening (QT) fears have faded for now. With EM reserve decumulation fading somewhat for now, fears that central bank reserve selling could offset the easing impact of central bank asset purchases—and ultimately tighten developed market financial conditions—seem to have subsided.

  But this is what Goldman says to look for in 2016…

  An environment that remains conducive for EM reserve drawdowns, or at least less friendly for reserve accumulation, amidst rising US interest rates, low commodity prices, and the ongoing bumpy deceleration in China’s growth.

  • Oil exporters: Expectations of still-low oil prices through 2016 suggest that reserve assets of the oil economies with pegged currencies (e.g., SAR) should remain under pressure, albeit likely at a slower pace, as the required fiscal adjustment is starting to kick in. Further downside to oil prices would clearly mean faster reserve declines. Oil exporters with floating currencies (RUB, MXN, COP) will likely continue to allow their currencies to bear the burden of adjustment in case of any fresh terms of trade shocks.
  • China: Pressures on reserves will likely continue to arise occasionally as growth decelerates, the PBOC responds with monetary easing, and currency uncertainty lingers, although pressures should not be as severe as during summer 2015. However, efforts to stabilize the currency, such as potential movement towards targeting a basket of currencies (which could be on the table, given the publication of the trade-weighted CNY index by the authorities), may reduce currency uncertainty and, in turn, outflow and reserve drawdown risk, barring implementation difficulties.

  Some headwinds to US Treasuries from FX reserve selling, though this factor will remain secondary to macro drivers.

  A potential resurgence in QT fears should reserve selling pick-up again, especially in China.

  *  *  *
  So more "Fool's games" and more unwind risks for massive carry trades.

  

  

  

  

  

• Offshore Yuan Tumbles As China Devalues Fix To Weakest Since June 2011

  On the heels of the collapse in China ‘B’ shares last night, and continued stress in money-markets, China weakened the the Yuan fix to its lowest since June 2011 tonight. This has sent offshore Yuan spiraling lower breaking above 6.5700 for the first time since the August devaluation’s collapse. Chinese stocks are on the weaker side, extending losses, and we now await the money-markets to see if this stress is escalating.

  PBOC fixes the Yuan at new June 2011 lows…

  

   

  Sending offshore Yuan tumbling…

  

   

  The devaluation implied in offshore Yuan is back to recent cycle wides…

  

   

  Charts: Bloomberg

  

  

  

  

  

• Caught On Tape: Russia Unleashes Massive Bombing Raid On Militant Convoy

  There’s been some debate over the last two months about whether the concerted effort on Moscow’s part to release hundreds upon hundreds of MoD clips depicting airstrikes in Syria on the way to embarrassing Washington paints an accurate picture of what’s really going on. 

  That is, if one simply compares the Russian footage to what we know or have seen with regard to America’s 15-month air campaign against Islamic State, it would be easy to conclude that the US simply hasn’t been trying very hard – or at least not compared to The Kremlin. 

  While that’s probably an accurate assessment, it’s not always easy to tell what exactly the Russians are hitting when it comes to the targets being vaporized in the videos (although it’s pretty clear in the clips depicting strikes on oil tankers) and the US contends that one reason The Pentagon has been cautious is that Washington is concerned with civilian casualties, especially as it relates to the drivers in the crude truck convoys. For those who follow the US’s exploits in the Mid-East that’s a hard pill to swallow given what we know about collateral damage in drone strikes and given what happened in October in Kunduz, but the point is, taking Moscow at its word when Russia’s intent is quite clearly to make a mockery of the West’s efforts is just as dangerous as taking Washington at its word when The White House swears the US is doing everything in its power to fight terror. 

  All of that said, there’s also been what certainly feels like a marked increase in the number of independently released videos since Russia began bombing rebel and extremist targets. That is, in addition to what Moscow has released on social media, there have been dozens upon dozens of videos shot from the ground which depict either Russian airstrikes themselves or the aftermath. Although it’s not always easy to discern what precisely is going on in the amateur footage, there almost unquestionably seem to be more videos from on the ground cameramen then there were prior to the Russian intervention which in turn suggests that when it comes to the war on terror, Moscow, not Washington, is clearly taking the lead.

  With all of that in mind we present the following clip which purports to show a Russian strike on a “militant convoy.”

  

  

  

  

• The Odds Are Never In Your Favor

  Submitted by Jim Quinn via The Burning Platform blog,

  

  The irony of the phrase “may the odds be ever in your favor” is not lost on the readers of the Hunger Games trilogy of novels or the film adaption. Despite the grimness of the story, over 65 million copies of the books have been sold. The total box office take so far has exceeded $1.4 billion for the four movies. The dystopian series tackles real issues like severe poverty, starvation, torture, oppression, betrayal and the brutality of war. It doesn’t fit into the standard film making success recipe of feel good fluff, politically correct storylines and happy endings. Each film in the series gets progressively darker, with the final episode permeating doom and gloom. The books and the movies capture the deepening crisis mood engulfing the world today. And they realistically portray the world as a place where there are no good guys in positions of power. The ruling class, in all cases, is driven by a voracious appetite for supremacy, wealth, and control.

  An Ambiguous, Confusing, Dangerous World

  The world is a morally ambiguous place where those in power and those seeking power utilize the influence of media propaganda and PR campaigns built around “heroes” and “icons” to psychologically control the masses, while enriching themselves and their crony capitalist sponsors. Endless war against the latest “bad guys” further enriches the arms dealers and their political lackeys who joyfully use faux patriotism and nationalistic fervor to insist upon more boots on the ground, drones in the air, bombs dropped, and missiles launched.

  War is good for business and keeps the masses distracted, while the Wall Street financiers harvest the wealth of the citizens. The division of the country into 12 districts, sending their bounty to the capital of Panem at the point of a gun, while they are allocated a pittance to survive, is no different than our corporate fascist government as they extract hundreds of billions in taxes, fees, levies, tolls, and fines from the productive class, while regulating, enforcing, mandating, and authorizing the plebs to death.

  We live in a confusing world of anxiety, hate, greed, deceit and immorality, where governments throughout the world are nothing but rotting cesspools of psychotic despots desperately clinging to power while using any means necessary to keep the masses sedated and docile. Good people, with noble intentions, still exist in this decadent world, but they do not seek power or have any say in the governance of this world. The oppressed are hopelessly enslaved in debt, kept submissive by welfare transfers from the corrupt state, dumbed down by the state education system, amused by technological gadgets and vacuous entertainment, and kept in perpetual fear of seen and unseen enemies. We are told who to hate, who to fear, who to love, and who to believe by a nameless faceless state run by people we didn’t elect, constituting the invisible government.

  The world is a dangerous place, made more dangerous by a willfully ignorant populace who mindlessly go about their day to day existence without thinking, questioning, or considering the possibility their leaders are corrupt lying thieves. We are told Putin, Assad, China, Iran and ISIS are the bad guys. Previously we had been told Hussein, Gadaffi, Bin Laden, Mubarak, Al Qaeda and the Taliban were the bad guys. It is true that none of these men or organizations are good.

  It is also true that no one in leadership positions in Washington DC, on Wall Street, in corporate America, or in the mainstream media are good. The entire world is under the control of deceitful, cunning, egomaniacal, corruptible, psychopaths who will stop at nothing to fulfill their personal agendas. They are human beings who have allowed their dark sides to dominate their actions. There are no good guys, just varying degrees of evil imposed upon the masses by erratic unpredictable people with wildly differing levels of intelligence, patriotism and judgement.

  The Power of Propaganda

  It’s a tribute to the propagandists who have taken Edward Bernays’ teachings to another level as they have molded the minds of millions, consciously manipulating the opinions and beliefs of the masses to further their agenda of world domination. Once the Cold War ended, the ruling class sought enemies to keep their military industrial complex and Wall Street financiers enriched and happy. 9/11 was used to further that agenda as war on a tactic (terror) will never end. Perpetual conflict is a chief goal of the establishment. Orwell would be impressed with how our keepers have perfected the “We‘ve always been at war with Eastasia” propaganda tool to perpetuate their goals. Both parties continue to promote war and increase the profits of the military industrial complex.

  The U.S. invaded Afghanistan fourteen years ago to get bin Laden and rid the country of the Taliban. Bin Laden was supposedly killed in 2011, but no documentary evidence has been revealed to substantiate that claim. The Taliban is stronger than ever in Afghanistan after hundreds of billions in expenditures and thousands of lives lost. The occupation continues. The neo-cons convinced the dimwitted Bush to invade Iraq in 2003 because Hussein was a bad guy with weapons of mass destruction. Amusingly, he was our buddy when he was fighting our Iranian enemies and we provided him with the WMD (gas) he used on the Kurds.

  After spending $1 trillion, we left Iraq as a festering quagmire of religious zealots with a bombed out infrastructure and a corrupt incompetent puppet running the show on our behalf. Then it was on to leaving Libya in a state of chaos because we overthrew another bad guy. We didn’t like the democratically elected leader of Egypt after we overthrew Mubarak, so we overthrew Morsi and installed another military dictatorship. The propaganda storyline is always about democracy and getting rid of bad guys, not the truth about securing oil resources, weakening the enemies of Israel, and keeping the profits flowing to our “vital” defense industry.

  It seems the empire ran into a bit of a snag with their plan to remove the latest “bad guy” in Syria. Another “bad guy” – Vladimir Putin – saw through the American plan to eliminate Assad and have their co-conspirators in Saudi Arabia and Qatar build a gas pipeline to Europe. After overthrowing the democratically elected president (and friend of Russia) of the Ukraine and waging an unsuccessful war against Russian backed rebels in Eastern Ukraine, Europe was left at the mercy of an angry Putin as far as not freezing to death during the upcoming winter.

  Putin is a strongman leader of a country with a nuclear arsenal capable of blowing up the earth several times over. He will do what is in the best interest of his country and will not blink when confronted with the likes of corrupt feckless toadies like Obama, Kerry, Hollande, Merkel, and Edrogen. His counter measures and revelations about the true nature of U.S. and Turkish actions in Syria and Iraq have blown the lid off of U.S. plans in the Middle East.

  The latest fear mongering propaganda device for the vested interests has been the dreaded ISIS. The captured mainstream corporate media fails to mention the U.S. created, armed and continues to fund ISIS as part of their master plan to overthrow Assad. The U.S. left Iraq in such a state of chaos and lawlessness, fanatical Islamist radicals used the vacuum of power and the billions of dollars’ worth of top notch U.S. military hardware to create a safe space for themselves within Iraq and Syria. The U.S. has been funding and arming the supposed “moderate” Islamic radicals fighting Assad for the last few years, while attempting to use a false flag gas attack to wage all-out war. The U.S., Saudi Arabia, and Turkey created ISIS in order to further their economic and political interests. Lead neo con warmonger, Maniacal McCain, even had a photo op with his ISIS homies.

  

  Once Putin decided to fully support Assad and actually concentrate on destroying ISIS, it became clear the U.S. was turning a blind eye to the billions in illicit oil profits being earned by ISIS refining, transporting and selling oil to Turkey. Putin began to destroy the oil infrastructure of ISIS and immediately saw a passenger plane blown out the sky and a bomber shot down by Turkey. So the organization we created is now the most feared terrorist organization on the planet, but we refuse to cooperate or coordinate its defeat with Assad or Putin because they are “bad guys”.

  Turkey financially supports ISIS and is fighting hardest against our allies the Kurds, but we fully support their crazed dictator leader Erdogan. Iran is fighting ISIS, but more than half of Congress and all presidential candidates want to obliterate them on behalf of Israel. Virtually all domestic terrorism has a link to Saudi Arabia, they treat women like cattle, behead anyone not following Islamic law and are pumping oil at a prodigious pace in an effort to destroy the U.S. shale industry, but they are considered a close ally in the Middle East. It is quite clear there are no good guys running the show in this bizarro world of unholy alliances, backstabbing, revenge, and fear mongering.

  A Lot of Hope is Dangerous

  No one in positions of power can be trusted. Betrayal, violence, money, power and war are the weapons of the state. Loyalty, courage, sacrifice, love and hope are the domain of the people. The state walks a fine line between keeping the masses controlled through entertainment, debt, fear and hope. If the people lose all hope, despair leads to anger as those with nothing to lose take to the streets. President Snow of Panem explains the fine line between control and revolution:

  “Hope. It is the only thing stronger than fear. A little hope is effective. A lot of hope is dangerous. Spark is fine, as long as it’s contained.”

  

  In the Mockingjay portion of the Hunger Games trilogy you are left with the evil President Snow attempting to maintain the status quo, with Panem ruling over the formally subservient districts, while President Coin leads the rebels in attempting to overthrow the rotting immoral government of Snow. Both sides use the power of media propaganda, symbolism, false heroes, and despicable tactics to win. In the standard good guy/bad guy plot used to entertain the American masses, the rebels would be the good guys fighting for a noble cause.

  Their symbolic mockingjay leader – Katniss Everdeen – is portrayed as the fearless revolutionary of the people. She is the hope which ignites a revolution and turns despair into a war against the oppressive state and the wealthy vested interests in Panem. The rebels have the moral high ground, but the underlying feeling of distrust is always evident. The good guys might not be so good.

  The central question of the final episode was, real or not real? Who can be believed? Are heroes really heroes or are they just created by public relations propaganda specialists? When an icon used to inspire a revolution has served their purpose, will the “good guys” purposefully sacrifice them for the good of the establishment? Can any government be trusted? Can any politician be trusted? Can the media be trusted?

  The truth is that no one in a position of power can be trusted. The only people who can be trusted are family and friends. And even they can turn on you with enough monetary incentive. It’s a confusing, brutal world driven by greed, endless military conflict, religious zealotry, and controlled by shadowy unelected men using their ill-gotten wealth to pull the strings on all aspects of society. We are living in a dystopian nightmare where the masses have been induced to love their enslavement.

  Katniss undergoes a metamorphosis after seeing her sister blown up while rushing to the aid of victims and later confronting President Snow after the rebels succeeded in overthrowing his regime. President Coin, the leader of the “good guys”, reveals herself to be even more duplicitous and evil than the leader of the “bad guys”. She used the deep-seated characteristic of human compassion to kill Katniss’ sister along with hundreds of children and rescue workers as a tactic to turn the war in her favor. Those in positions of power will use any means necessary to gain or maintain power.

  When Coin proposes a last Hunger Games sacrificing the children of the previous regime’s leadership, Katniss realizes Coin is going to just replace Snow as a dictator, perpetuating the despotic policies which created the rebellion in the first place. Katniss rightly decides that killing innocents, and especially children, is never justifiable. Therefore, she decides to kill Coin, while the rioting crowds kill Snow. She sacrifices her status as a national hero in order to give her country a chance to regain its former glory as a republic. The personal sacrifice on behalf of her country is almost unbearable, but ultimately sacrifice, courage, love, strength and hope for a better future are able to sustain her during the dark days.

  Turnkey Tyranny

  As the former Republic known as America has descended towards the tyranny of a corporate fascist surveillance state, there have been two true patriots who have dedicated their lives to inspiring a revolution in thought and action to help this country regain its former glory based on the U.S. Constitution. One patriot is young and the other patriot old, but their message is the same – we must resist and oppose the ever growing oppressive power of a tyrannical state systematically dismantling the Constitution and stripping the people of liberty and freedom. Their words speak for themselves.

  

  

   

  “The great fear that I have regarding the outcome for America of these disclosures is that nothing will change. People won’t be willing to take the risks necessary to stand up and fight to change things… And in the months ahead, the years ahead, it’s only going to get worse. The NSA will say that… because of the crisis, the dangers that we face in the world, some new and unpredicted threat, we need more authority, we need more power, and there will be nothing the people can do at that point to oppose it. And it will be turnkey tyranny.” – Edward Snowden

  “The original American patriots were those individuals brave enough to resist with force the oppressive power of King George. I accept the definition of patriotism as that effort to resist oppressive state power. The true patriot is motivated by a sense of responsibility and out of self-interest for himself, his family, and the future of his country to resist government abuse of power. He rejects the notion that patriotism means obedience to the state.” – Ron Paul

  Edward Snowden is our modern day Paul Revere, but instead of riding across the countryside warning “the British are coming”, he used the power of modern technology to warn the world “the NSA is watching, listening, and monitoring”. He sacrificed his citizenship, high paying job, freedom, and possibly his life (if the U.S. government had its way) in order to blow the whistle on the blatant destruction and disregard for the Fourth Amendment being perpetrated by the NSA, with the full knowledge and approval of the executive, legislative and judicial branches of the U.S. government.

  He knew his revelations would result in his persecution, attempted apprehension and ultimate imprisonment, as the corrupt malevolent establishment and their mass media mouthpieces would brand him a traitor for revealing the truth about the illegal malfeasance being conducted at the highest levels of government. He realized true patriotism is sacrificing your life for something bigger.

  “I had been looking for leaders, but I realized that leadership is about being the first to act. I understand that I will be made to suffer for my actions, and that the return of this information to the public marks my end.” – Edward Snowden

  Snowden’s revelations exposed the U.S. government for what it really is, a corporate fascist organization designed to benefit a chosen few while oppressing the masses through debt, currency debasement, and perpetual war, while implementing Orwellian surveillance measures designed to capture dissenters and critical thinkers. The sustenance of the welfare/warfare state requires a dumbed down, passive, distracted populace who can be manipulated and controlled through propaganda and baubles.

  Thus far, the vested interests have successfully convinced more than half the population that Snowden is a traitor. The power of propaganda in conjunction with a willfully ignorant public is a potent combination. Even though Snowden’s disclosures have not spurred a revolution yet, they have sparked an underlying dissent that has been growing, as trust in government, politicians, bankers, media and corporate leaders wanes.

  “I can’t in good conscience allow the US government to destroy privacy, internet freedom and basic liberties for people around the world with this massive surveillance machine they’re secretly building. I do not want to live in a world where everything I do and say is recorded. That is not something I am willing to support or live under. Everyone everywhere now understands how bad things have gotten — and they’re talking about it. They have the power to decide for themselves whether they are willing to sacrifice their privacy to the surveillance state.” – Edward Snowden

  Snowden worked within the system until his conscience made it unbearable for him to support an immoral, rogue organization bent on trashing the U.S. Constitution at the behest of leaders’ intent on retaining their power, control and wealth through any means necessary. Ron Paul has taken a different, but equally noble path as one of the few patriots who worked within the system, but never became corrupted by the system. He has been a voice in the wilderness for decades, condemning the relentless march towards tyranny that he saw firsthand while in Congress.

  The establishment, media and leadership of both political parties have scorned and ridiculed him as ineffective and inconsequential. There was never a piece of legislation with his name on it that passed during his time in Congress. His nickname was Dr. No, as he voted against anything that added to the national debt or took away freedoms or liberties.

  This disparagement reveals the fallacy of what constitutes success in Washington D.C., as there are now over 5,000 Federal laws, 180,000 pages of Federal regulations, $18.8 trillion of Federal debt, $200 trillion of unfunded Federal liabilities, and every politician of both parties completely captured by corporate and special interests. There is one ruling party and the appearance of choice is nothing but a farce designed to make the masses think they have a say in the governance of their country.

  “We’ve slipped away from a true republic. Now we’re slipping into a fascist system where it’s a combination of government, big business and authoritarian rule, and the suppression of the individual rights of each and every American citizen. When it comes to any significant differences on foreign policy, economic intervention, the Federal Reserve, a strong executive branch, a welfarism mixed with corporatism, both parties are very much alike.  The major arguments in hotly contested presidential races are mostly for public consumption to convince the people they actually have a choice.” – Ron Paul

  The vitriol and bile hoisted upon Snowden and Paul expose the weakness of the ruling class, as truth, honesty, personal courage, and sacrifice for a higher purpose are attributes they cannot subvert or buy off. It’s the words and actions of men like Edward Snowden and Ron Paul that provide hope for critical thinking liberty minded citizens. The ruling class knows a lot of hope is dangerous, so they must undermine the messages of these patriots. Ideas matter. Words matter.

  These two men have inspired me and an unknown number of other citizens who still believe in the Constitution and will do everything in our power to provoke a revolution of reason, truth and honesty. The odds will never be in our favor. Carroll Quigley understood the odds were stacked against the American people over 50 years ago. The domination of the world by central bankers representing private interests has never been more evident than it has since the Federal Reserve created 2008 financial crisis and the traitorous actions taken by politicians and central bankers in the last seven years.

  “The powers of financial capitalism had a far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland; a private bank owned and controlled by the world’s central banks which were themselves private corporations. Each central bank… sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world.” – Carroll Quigley

  Even though the odds are never in our favor, there is still hope. Not everyone has to make the extreme sacrifice like Edward Snowden or dedicate their life to the message of liberty like Ron Paul in order to contribute to the revolution. There are thousands of small acts which will weaken the establishment. Arm yourself. Stop watching and listening to the mainstream media. Take your money out of Wall Street banks. Grow your own food. Barter with others and starve the beast. Reduce your tax footprint. Buy locally and boycott mega-corporations. Build relationships with neighbors and reduce your dependency on the government.

  Don’t be a slave to debt. Live beneath your means and accumulate some physical silver and gold. Don’t vote for candidates selected by the vested interests. Spread the message of liberty and freedom to anyone who will listen. Support the alternative media and send pertinent articles to family, friends and acquaintances. Think critically. Do not trust your government. Prepare for the inevitable collapse of this rotten, fetid, corrupt paradigm. Hope, love, courage, and persistence will ultimately win. The tide is turning. Panem will fall. What replaces the existing social order will be up to us.

  

  

  

  

  

• Ship Carrying Over 11 Tons Of Low-Enriched Uranium Leaves Iran For Russia

  Earlier today, a ship carrying over 25,000 pounds (11,000 kg) of low-enriched uranium materials allegedly departed from Iran for Russia, in what was dubbed a key step in Tehran’s implementation of this year’s historic nuclear accord with world powers. According to John Kerry this was “one of the most significant steps Iran has taken toward fulfilling its commitments.”

  “I am pleased to report that we have seen important indications of significant progress towards Iran completing its key nuclear commitments under the deal,” Kerry said in a statement.

  The Russian foreign ministry confirmed the report after Ali Akbar Salehi, head of Iran’s Atomic Energy Organization, told the ISNA news agency: “The fuel exchange process has taken place.”

  The shipment included the removal of all of Iran’s nuclear material enriched to 20 percent that was not already in the form of fabricated fuel plates for the Tehran Research Reactor, he said.

  Monday’s shipment more than triples the previous two- to three-month breakout timeline for Iran to acquire enough weapons grade uranium for one weapon, Kerry said, hailing it “an important piece of the technical equation that ensures an eventual breakout time of at least one year by Implementation Day” according toa  Xinhua report.

  

  AFP adds that according to ISNA’s report, Iran had sent 8.5 tons of low-enriched nuclear material to Russia and received “around 140 tons of natural uranium in return.”

  State Department spokesman Mark Toner described the cargo as a 25,000-pound “combination of forms of low-enriched uranium materials” including five and 20 percent enriched uranium, scrap metal and unfinished fuel plates.

  “So that actually constitutes, I think, almost all of Iran’s current stockpile of enriched uranium,” he added.

  Under the nuclear deal reached by Iran and world powers in July, Iran is required to ship out all except 300 kilograms of low-enriched uranium.

  The French media outlet adds that under the deal struck in July in Vienna between Iran and the P5+1 group of world powers, Tehran agreed to cut its low-enriched uranium (LEU) stockpile to less than 300 kilograms (660 pounds).

  This would mean that it would not have enough fuel on hand to rapidly enrich enough to the levels needed to build a nuclear weapon — lengthening its so-called “breakout time” to more than a year.

   

  Kerry said that Iran’s shipment to Russia had already tripled the amount of time it would take to produce enough fuel for a bomb from two or three months up to six or nine.

   

  And he dubbed it “a significant step toward Iran meeting its commitment to have no more than 300 kilograms of low-enriched uranium by Implementation Day.”

  Kerry promised that the United States would repeal its nuclear-related sanctions once Implementation Day arrives. But he warned “we will remain vigilant to ensure that its implementation achieves exactly what we set out to do from the very beginning of these negotiations, to ensure that Iran’s nuclear program is and always remains exclusively for peaceful purposes.“

  Meanwhile, even though the IAEA was not able to independently verify Iran’s claim, it was said the atomic agency would be given greater access to Iranian facilities for its inspectors, “and will install seals and monitoring devices to ensure there is no backsliding.” The United States would wait until the UN agency makes a ruling to say formally whether Washington now accepts that Iran has less than 300 kilos of LEU.

  In other words nobody actually knows whether or not Iran did as it says it did.

  So, in a nutshell, this is how Iran’s compliance with Obama’s historic nuclear deal took place:

  • Iran, whose parliament has still not signed the “landmark” historic deal, has self-inspected a ship loaded with 11 tons of low-enriched uranium which has been dispatched toward Russia, or so Iran promises.
  • The Russian foreign ministry, which is supposed to receive Iran’s 11 tons of low-enriched uranium, or “almost all of Iran’s current stockpile of enriched uranium”, has taken Iran’s word for what is on the ship and has confirmed that the exchange process has taken place.
  • This is the same Iran, which has already breached the terms of the nuclear deal (which it has not signed) by launching a ballistic missile test several weeks ago.
  • Assuming the ship is indeed loaded with weapons-grade uranium, Putin is quite grateful as he just got a free gift of enough material to create another several nuclear warheads assuming of course, Russia does not just turn around and send back the Iran cargo under a different ship, one which will not be “self-reported” by Iran.

  Finally, assuming Iran has complied with the nuclear shipment, once this has been verified, the United States and its allies will begin to dismantle the sanctions imposed on Tehran in response to its nuclear program. This means all those 30 million barrels of Iran oil currently loaded up on tankers somewhere around the globe, just waiting for the official lifting of sanctions, will promptly flood the physical market and send the price of oil plunging even more.

  

  

  

  

  

• What Are The Chances For Peace In 2016?

  Submitted by Ron Paul via The Ron Paul Institute for Peace & Prosperity,

  Each year more than one trillion dollars goes up in smoke. More accurately, it is stolen from the middle and working classes and shipped off to the one percent. I am talking about the massive yearly bill to maintain the US empire. Washington’s warmongers have sold the lie that the military budget has been gutted under President Obama, but even when the “Sequester” was in effect military spending continued to increase. Only the pace of increase was reduced, not actual spending.

  None of this trillion dollars taken from us is spent to keep us safe, despite what politicians say. In fact, this great rip-off actually makes us less safe and more vulnerable to a terrorist attack thanks to resentment overseas at our interventions and to the blowback it produces.

  The money is spent to maintain existing conflicts and to create new areas of conflict overseas that in turn feeds the demands for more military spending. It is an endless cycle of theft and deceit.

  Billions were spent not long ago overthrowing an elected government in Ukraine and provoking Russia. A new Cold War is a bonanza for the military industrial complex, the pro-war think tanks, and the politicians. NATO is on the move in eastern Europe, placing heavy weapons right on Russia’s border and then blaming the Russians when they complain about the rising militarism. NATO military exercises on Russia’s border have increased and become more confrontational.

  In the Middle East, more billions have been spent attempting to overthrow the secular government of Syria over the past five years. The big winners in this grand scheme have been the Islamist extremists, who are funded directly and indirectly by the US and its allies. NATO is planning to go back into Libya, an admission that its 2011 “liberation” of that country has been a disaster.

  In Asia, the US empire challenges and provokes China, sending military ships and aircraft into territory China claims in the South China Sea. How much will they continue to escalate before China gets fed up?

  The more money sent to the Pentagon and other parts of the Washington war apparatus, the more danger we are in.

  Meanwhile, almost all of the presidential candidates promise more military spending and more war if they are elected. Did no one tell them we are broke and making enemies fast with our interventions? Do they think Fed-created money will really continue to fuel the US empire indefinitely?

  What are the prospects for a u-turn toward peace and prosperity in 2016? We must be realistic. Presently the numbers are not on our side. But the good news is we do not need a majority to succeed in our fight for peace and liberty. We need only a dedicated and uncompromising critical mass to make great headway.

  What can we do to work for peace in 2016? First we must tune out the lying propaganda served up by the US mainstream media. We must educate ourselves so that we can help educate others. We can be sure to tune in and support alternative sources of news and analysis. We can tell others about the wealth of truth available to those who seek and question. We must not compromise and never accept the lesser of two evils.

  If the people demand peace, the politicians will follow. Let’s demand peace in 2016!

  

  

  

  

  

• The Fed's Rate Hike Trickles Down: JPM To Hike Deposit Rates… For Its Wealthiest Clients

  Moments after the Fed announced it would hike rates for the first time in 9 years on December 16, the ink on Yellen’s statement was not yet dry and one after another bank announced it would hike its respective Prime rate – the benchmark rate on everything from small business loans to credit card monthly fees – from 3.25% to 3.50%.

  Yet while banks scrambled to increase how much they collect courtesy of the Fed’s rate hike, none showed any interest in boosting the interest they pay on deposits, a rate which currenly averages below 0.1% across the US financial system. 

  As the WSJ put it two weeks after us, “hours after the Fed’s decision earlier this month, the largest U.S. banks announced increases in the prime rate, a reference rate for a variety of loans including credit-card debt. But most banks didn’t make any corresponding hikes to the interest they pay to depositors. The moves signaled that at least for now most banks hoped to pocket the gains from the Fed’s move.”

  And this is what we said two weeks ago, “those who have savings at US banks, please don’t hold your breath to see any increase on the meager interest said deposits earn: after all banks are still flooded with about $2.5 trillion in excess reserves, which means that the last thing banks care about is being competitive when attracting deposits.”

  We were wrong: some should certainly have held their breath, because as the WSJ reports today, “some bank customers won’t have to wait much longer to reap benefits from the Federal Reserve’s decision to raise interest rates.”

  Case in point: J.P. Morgan, which will begin raising deposit rates for some of its “biggest clients” in January. “Biggest” clients, of course, is a universal euphemism for “wealthiest.”

  The WSJ adds that J.P. Morgan’s deposit-rate increase will affect most institutional clients and the size of the increases will vary, the person said. They will apply to “operating” deposits, which are deemed stickier and less likely to be withdrawn in a crisis.

  Operating deposits are more attractive to banks than so-called excess or “nonoperational” deposits, which are considered riskier. New regulations require that banks hold bigger capital cushions for deposits considered riskier such as noninsured balances held by hedge funds.

  Another word for nonoperational deposits are “those held by 99% of the population”, or those who actually would benefit from an increase in the deposit rate.

  Banks in the U.S. have moved aggressively in the past two years to reduce those nonoperational deposits. State Street Corp. earlier this year took the unusual step of charging some clients for large deposits and J.P. Morgan cut that type of deposit by more than $150 billion in 2015.

  The decision to pay its wealthiest clients is a first, or as the WSJ calls it, “an early mover among its American rivals.”

  Representatives for Bank of America Corp. , Wells Fargo & Co. and Citigroup Inc. said there has been no change to deposit rates at the banks. A representative for Goldman Sachs Group Inc. had no immediate comment, while one for Morgan Stanley declined to comment.

  However, now that a first-mover has emerged, expect every other bank to follow suit, since as much as they don’t need deposits now, they are well aware that when (if) the Fed drains the $2.6 trillion in excess reserves and banks have to rely on deposit funding once more, those banks which lost the most clients with “operating” deposits will be severely disadvantaged.

  Unfortunately, for all those who have less than a few hundred thousand parked in a deposit account collecting nothing (and at a constant risk of “bail-in”) and are thus considered “nonoperational” accounts by the management teams of banks bailed out by taxpayers just a few years ago, you can continue holding your breath for a long time until the trickle-down generosity of Janet Yellen bathes you in the most immaterial of deposit rate hikes.

  

  

  

  

  

  

• ISIS Flees Ramadi, This Is What They Left Behind: Photo Album "From The Devil's Grasp"

  Last Tuesday, Iraqi troops made a concerted effort to retake Ramadi, which is around 60 miles west of Baghdad. 

  The city fell to Islamic State back in May when, according to Ash Carter’s assessment anyway, the army showed no will to fight in the face of the advancing ISIS hordes. Once the army, with the help of Sunni tribal fighters, retook a strategic command center they began to advance on a government complex where, according to sources, some 100 militants were dug in. 

  

  Despite sniper fire, suicide bombers, and IEDs the Iraqis were able to capture the government complex, marking the latest in a string of strategic and psychological victories for Baghdad’s much maligned forces. 

  Ramadi has been “fully liberated,” Brig. Gen. Yahya Rasool said on Monday. Here’s the statement from the Joint Operations Command:

  “Yes, Ramadi city has been liberated and security forces, like the heroes of the counter terrorism forces, flew the Iraqi flag over the government compound building in Anbar. The flag is flying now to write a new history, and with the grace of God, the rest of the cities will be liberated.”

  As you can see from the map shown above however, merely retaking the government complex doesn’t mean the city is an “ISIS-free zone” (to use the ridiculous term the US and Turkey made up for the area north of Aleppo and West of the Euphrates in Syria). “Operations continued Monday to clear remaining Islamic State militants from other areas of Ramadi, security officials said, particularly in the eastern suburbs where many of the group’s holdouts had fled the day before as Iraqi forces advanced,” WSJ notes.

  “Gen. Ismail al-Mahlawi, head of military operations in Anbar, quickly clarified that government forces had only retaken a strategic government complex and that parts of the city remained under IS control,” AP writes, adding that although “IS fighters have retreated from about 70 percent of city, [they] still control the rest and government forces still don’t fully control many of the districts from which the IS fighters have retreated.”

  Right. And it’s unlikely that they’ll ever regain “full control” of the city where “ever” means sometime in the foreseeable future. There’s been talk of stationing the Sunni tribesmen in captured areas to ensure “the terrorists” don’t come back. Ramadi is Iraq’s Sunni heartland and thus Abadi isn’t keen on enlisting the assistance of Iran’s Shiite militias either to help with the fight or to occupy the city once it finally is fully liberated. 

  In short, Iraq doesn’t want the city to descend into sectarian violence in the wake of the ISIS withdrawal, but the Sunni fighters are undertrained and ill-equipped which leads one to question how effective they’ll ultimately be when it comes to defending captured ground. 

  In any event, here are some images which depict the aftermath of the latest fighting and should give you a good idea of what the Iraqis found when they entered the city which The Daily Mail says has been wrenched from the “Devil’s grasp”:

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  Source: AFP via DailyMail

  So there you have it. A smoldering pile of rubble is 70% of the way “liberated.” Hallelujah.

  Don’t forget that the scenes shown above are from a city that is just an hour by car from the capital of a country the US supposedly “saved” from a bleak future under a brutal dictator more than a decade ago. This, we suppose, is what a thriving democracy looks 12 years after a US intervention. 

  Next on the list is Mosul. In light of the following image which appeared in a piece of ISIS propaganda released earlier this year, we’re interested to see what the city actually looks like now that the group has been in control for some 18 months…

  

  

  

  

  

• Voluntary Enslavement

  Submitted by Jeff Thomas via InternationalMan.com,

  In recent years, I’ve been predicting that the governments, particularly those of the EU and US, will seek to eliminate paper currency. The objective will be to make monetary transactions between private parties as difficult as they can, by requiring that all transactions take place through financial institutions. If they can do this, they will effectively make a run on banks impossible in the future as the banks will simply shut off the money tap, as the Greek banks did. This power will additionally make negative interest rates and confiscations more possible.

  A few years ago, this forecast was seen by most as poppycock, but the prelude has now begun, with most of the world’s banks disallowing large transfers and some lowering these amounts over time. Many governments are aiding the effort, requiring reporting on some transfers.

  At some point, governments and banks will seek to eliminate paper currency, completing the encirclement of private party monetary transfer. From that point on, it would be illegal for any transfer of money to be undertaken except through a financial institution (most probably through the use of a plastic card or smartphone).

  At about the same time as I began predicting the above, I also began forecasting what I considered to be a companion campaign against virtual currencies, such as Bitcoin. Such currencies will prove to be a threat to a bank-only transfer system as they would provide an alternate method of payment between private parties – one that does not come under the control of any government. Governments and financial institutions will therefore seek to eliminate virtual currencies, or make them too difficult to use.

  The greatest weakness inherent in virtual currencies, in my view, is that they’re intangible. Unlike precious metals which, once physically possessed, exist forever, virtual currencies exist only as an idea. Like all fiat currencies, they have value only as long as two parties continue to have faith in their value. If one party decides that the value has ceased to exist, the other party is out of luck. The value of a virtual currency can go to zero if a willing recipient cannot be found.

  Presently, virtual currencies pass from one hand to another but, at some point, are often transferred into something tangible, such as paper banknotes, in order to deal with those who will not agree to accept the virtual currency. I believe the attack against Bitcoin will begin at this point – banks and/or governments would make Bitcoin unacceptable for transfer into some other form of money.

  Recently, the EU began a plan to crackdown on virtual currencies, with specific attention to Bitcoin. The European Commission plans to, “strengthen controls of non-banking payment methods such as electronic/anonymous payments and virtual currencies and transfers of gold, precious metals."

  The justification for the crackdown, as stated by EU ministers, is, “to curb more effectively the illicit trade in cultural goods." Clearly, this has been in the works for a while, but the EU has been waiting for a suitable event to occur that will help the public to believe that the crackdown is justified. Not surprising, then, that the crackdown was announced shortly after the Paris attacks.

  The two predictions described above are therefore coming together in quite a surprising way:

  • The EU proposes to eliminate electronic money transfer by Bitcoin, as electronic money transfer encourages and enables terrorism.

  • The EU proposes to convert all retail banking to electronic money transfer, as electronic money transfer discourages and disables terrorism.

  As blatantly self-contradictory as this is, the public will only absorb the claim that both measures are meant to kerb terrorism. Out of fear for their safety, they will blindly support both measures. Both measures will then take a portion of their freedom away.

  And that’s the point of this article – the recognition of methods governments utilise to push through policies that, when examined, are clearly not in the interests of freedom.

  One hundred years ago, in his Satyagraha campaign in South Africa, Mohandas Gandhi came before General Smuts, head of the Transvaal Government. He said quietly, “I want you to know I intend to fight against your government.” General Smuts laughed and replied, “You have come here to tell me that? Is there anything more you want to say?” to which Mister Gandhi answered, “Yes, I am going to win.” “Well,” said General Smuts, “and how are you going to do this?” Mister Gandhi replied, “With your help.”

  Mister Gandhi did win. His method was to get the General to work against his own interests without knowing that he had lost control of them. Mister Gandhi understood that, if he undertook specific actions, the General would respond with knee-jerk reactions, not realising that he was being led down Mister Gandhi’s desired path until he no longer had any wiggle-room.

  Today, leaders and policymakers are acutely aware of the complacency of the majority of people. Rather than use force to get people to give up their freedoms, they use the populace’s inclination to pay scant attention to the details of new policies – to instead follow the easy-to-absorb rhetoric instead. In this fashion, leaders can remove freedoms one after the other, no matter how transparent or even blatantly contradictory the methodology (as in the imposition of electric money transfers).

  It is the Nature of the State to Seek to Dominate the Populace

  Freedom is one of the most precious and hard-won of all conditions in life. A government applies the removal of freedoms in a ratchet effect; once a freedom has been taken away from a population, it’s rarely returned. Therefore, freedom tends to deteriorate over time in any nation, no matter how idealistically-founded it may have been. As an illustration, we may review the British Magna Carta of 1215, or the American Constitution of 1787, and find that virtually all the “inalienable rights” contained in them have been either removed or watered-down dramatically through subsequent legislation. Neither the UK nor the US qualifies as a “free” state at this point.

  But, if the reader is a UK or US citizen, he may not wish to accept this statement. If not, he might benefit from the advice of one Thomas Jefferson, who maintained that, "When governments fear the people, there is liberty. When the people fear the government, there is tyranny.” Today, in both countries, people are free to criticise candidates for election but, if they question the validity of the state to rule over them, they tend to look over their shoulder before speaking too loudly.

  To repeat: “Freedom is one of the most precious and hard-won of all conditions in life.” Freedom is not static. Those citizens who hope that it will simply remain intact if unattended will be mistaken, for the State will always seek to remove freedoms over time. It’s therefore the chore of every citizen to remain ever vigilant and to question everything that his government seeks to do to initiate change. It’s often a dull, tedious task, but a very necessary one if the citizen values his remaining freedoms.

  None of us can fully escape the more predatory tendencies of governments. We can, however, question their every move and adjust our lives so that the State’s impact on us is minimised.

  

  

  

  

  

• "It Really Brings It All Out": Seized Documents Detail Depth Of ISIS Bureaucracy

  On Saturday, we brought you “Secret” Documents Show ISIS May Be Flesh-Eating, Organ Harvesters, US Says,” in which we highlighted “Fatwa 68”, a decree handed down by Islamic State’s Research and Fatwa Committee and recovered in the raid that killed the group’s “gas minister” back in May. 

  Fatwa 68 sanctions organ harvesting from enemy captives when it would mean saving the life of an ISIS fighter. Amusingly (in a morbid kind of way), the group’s “scholars” justify pulling organs out of prisoners by noting that “a group of Islamic scholars have permitted, if necessary, one to kill the apostate in order to eat his flesh, which is part of benefiting from his body.” In short, if you can eat an enemy combatant, it’s not clear why you should be allowed to harvest his organs. 

  

  The document was part of a cache of evidence discovered in the raid, Reuters contends. More specifically, the US allegedly seized “seven terabytes of data in the form of computer hard drives, thumb drives, CDs, DVDs and papers.” 

  We suspected at the time that we’d likely see more of these “top secret” documents in the days and weeks ahead as the US attempts to provide the public with a plausible excuse for why – gun to our heads – America will be forced to take a more active role in Syria and Iraq in order to eradicate “the terrorists.”

  Sure enough, Reuters is out with more leaked ISIS papers including – hilariously – a fighter application form. Here’s more:

  Islamic State has set up departments to handle “war spoils,” including slaves, and the exploitation of natural resources such as oil, creating the trappings of government that enable it to manage large swaths of Syria and Iraq and other areas.

   

  They provide insight into how a once small insurgent group has developed a complex bureaucracy to manage revenue streams – from pillaged oil to stolen antiquities – and oversee subjugated populations.

   

  “This really kind of brings it out. The level of bureaucratization, organization, the diwans, the committees,” Brett McGurk, President Barack Obama’s special envoy for the anti-IS coalition, told Reuters.

   

  For example, one diwan, roughly equivalent to a government ministry, handles natural resources, including the exploitation of antiquities from ancient empires. Another processes “war spoils,” including slaves.

   

  “Islamic State is invested in the statehood and Caliphate image more so than any other jihadist enterprise. So a formal organization, besides being practical when you control so much contiguous territory and major cities, also reinforces the statehood image,” said Aymenn al-Tamimi, a fellow at the Middle East Forum think tank and an expert on IS’s structure. 

   

  In the documents, there is a ruling on proper procedure for filling out the personal details of prospective fighters: name, gender, and communications method – telephone, telegram, Skype or the mobile messaging service WhatsApp.

  So once again, we’re to understand ISIS not as a brazen band of desert bandits armed and funded by Washington’s regional allies for the sole purposes of destabilizing the Assad regime, but rather as an organized quasi-state with multiple levels of government and a hierarchy of officials who control everything from “natural resources” to the slave trade.

  The punchline, of course, is the contention by Brett McGurk that the US needed these documents to understand that there’s an bureacratic element to Islamic State’s operation. After all, it was The Pentagon which said the following more than three years ago:

  “…there is the possibility of establishing a declared or undeclared Salafist Principality in eastern Syria (Hasaka and Der Zor), and this is exactly what the supporting powers to the opposition want, in order to isolate the Syrian regime.”

  So while the establishment of a proto-state located in the exact same place that ISIS currently operates was “exactly what the supporting powers to the opposition wanted” in 2012, Washington is somehow surprised at the “level of bureaucratization.”

  And while we’re skeptical of Reuters’ contention that the stash of documents “provide insight into how a once small insurgent group has developed a complex bureaucracy” (because again, that was the goal all along as proven by the “Salafist principality” quote), we would encourage Washington to study the “secrets” of Islamic State’s administrative structures closely because if you know anything about the bureaucracy in Washington, you know ISIS has to be doing a better job almost by default.

  *  *  *

  ISIS fighter recommendation form:

  Foreign Fighter

  

  

  

  

  

• Howard Marks Warns "Investor Behavior Has Entered A Zone Of Imprudence"

  Via Finanz und Wirtschaft's Christoph Gisiger,

  Howard Marks, Chairman and founder of Oaktree Capital, warns that investor behavior has entered the zone of imprudence and thinks that China is the biggest threat for the US economy.

  If you want to know from Howard Marks which stocks are going to do well next year, you’re going to be disappointed. The chairman of Oaktree Capital, one of the most successful investors on Wall Street, does not need to pretend that he can look into the future. Instead, he focusses on the things that are most important to investing for the long run: risk control, a good sense of market cycles and inspiration which, for example, he finds in the world of sports.

  Mr. Marks, we’re at an interesting point in time. For the first time since the financial crisis the Federal Reserve has raised the interest rate. How does the world look like from your perspective at this historical moment?
  We’re in a very strange market. Most people are doing a good job of thinking and the consensus is not necessarily wrong today. On one side, the world is a very uncertain place and I think the average investor understands that. Most people are sober and sensitive to all the uncertainty. You don’t see many people who are massively bullish. Nobody is saying stocks are going to the moon. Back in 1999 there was a book published with the title “Dow 36’000” predicting that the Dow Jones Industrial would almost triple. Well, that book is not being re-published today.

  And on the other side?
  Security prices are not low. I wouldn’t say high, but full. So people are thinking cautiously but they’re acting bullish and they’re behaving in a pro-risk fashion. While investor behavior hasn’t sunk to the depths seen just before the crisis, in many ways I feel it has entered the zone of imprudence.

  How do you explain this juxtaposition?
  The answer is that they are forced to be buyers by the central banks. The rate on money markets is close to zero and treasuries yield between one and two percent or even negative in Europe. Most investors can’t live with that. They have to move out the risk curve in order to try to get five, six or seven percent. That has induced or forced risky behavior. To me, this is the most important thing that’s been going on over the last few years, and it still is here at the end of 2015.

  There are a lot of risks lurking out there: Monetary policy divergence between the US and Europe, a high degree of stress in the emerging markets and the specter of further terrorist attacks. What’s the most important risk for investors?
  Academics say risk equals volatility and the nice thing about volatility is that it gives them a number they can manipulate and use in their formulas. But I don’t worry about volatility and I don’t think most investors are worried about volatility. We know prices will go up and down. But if something is going to be worth a lot more in the future than it is today we’re going to buy it regardless. So people don’t worry about volatility. What they worry about is the potential of losing money.

  You wrote extensively about risk in one of your recent memos. What does risk mean to you?
  Most people think that there is a positive relationship between risk and return: If you make riskier investments you can expect a higher return. That’s total nonsense! Because if riskier assets could be counted on for higher returns than they wouldn’t be riskier. The reality is that if you make riskier investments you have to perceive that there will be a higher return or else you have no motivation to make that investment. But it doesn’t have to happen: If you increase the riskiness of your investments the expected return rises. But at the same time the range of outcomes becomes greater and the bad outcomes become worse. That’s risk and that’s what people have to think about.

  Where do you see potential for bad outcomes?
  Investors are not doing what they want to do. They’re doing what they have to do. They are like “handcuff volunteers”. Today, if you want to make a decent return you have to take risks. And most people have been willing to do that. And because of that money has flown into high yield bonds and leveraged loans. For example, at one time there were ninety-five straight weeks of inflows into leveraged loans mutual funds.

  Now, credit markets have become quite nervous. What goes through your mind when you look at the rising spreads on high yield bonds?
  That’s a good thing. If you’re a buyer you would rather buy at a high risk premium than on a low one, everything else being equal. Maybe the onrush of money was too strong, maybe the attitudes were too optimistic. Now people are a little more worried, especially since they already had a little bad experience in Ukraine, in Greece and in China over the summer.

  Then again, the consequences of a full blown crisis in high yield bonds could be severe.
  The riskiest thing in the world is the belief that there is no risk. When people think there is no risk, they do risky things. By contrast, when people think there is risk than they behave in a safe manner and the world becomes a safer place. That’s why I welcome the recent developments. They remind us that today the risks are substantial and they should be undertaken only with considerable forethought. My dad used to tell the story of the gambler who went to the race track and said: “I hope I break even because I need the money.” The market is not an accommodating machine. It will not go where you want it to go just because you need it to go there. So if you’re talking about money that you can’t afford to lose then you can’t say: “Just give me the highest yield.”

  Investors aren’t the only ones who behave riskily. The central banks themselves have placed venturous bets on unconventional policies like quantitative easing and negative interest rates. What’s the price we’re going to have to pay for that?
  This is one of the factors that contributes to making the world a risky place today. In the United States, we had seven years of super low interest rates to try to stimulate. That has never happened before. What are the long term effects on the economy? What’s the effect on lending behavior? And, how will that go now that the Fed has started to raise rates? What will that do to the world? The answer is very simple: We don’t know. And anybody who thinks he knows is kidding himself.

  Some kind of wild card is the steep fall in energy prices. Has oil reached a bottom now?
  There is nothing intelligent to be said about the price of oil, as I wrote in a memo at the end of 2014. Oil prices have been controlled by OPEC (editor’s note: Organization of Petroleum Exporting Countries) for the last forty years. So clearly, the past doesn’t tell you anything about the free market price of oil. There are assets we feel we can value: stocks, bonds, companies and buildings. They all have in common that they deliver a stream of cash flows that can be valued through a proper discounting process. But how do you value an asset like a barrel of oil or an ounce of gold that doesn’t produce cash flow? You can’t!

  Oil was one of the most important factors for the financial markets this year. What’s your outlook on the eve of a new year?
  Everybody would like to know what’s going to happen a year from now. What the economy, interest rates, exchange rates, earnings and all that stuff is going to. But it’s very, very hard to know. My favorite quotation on this subject comes from the economist John Kenneth Galbraith: “We have two classes of forecasters: Those who don’t know – and those who don’t know they don’t know.”

  So how should investors prepare themselves for the next year?
  The most important thing to do is to assess not the future but the present. Awareness and understanding of cycles is an essential tool for investment survival. That’s why I always say: “We may never know where we’re going, but we’d better have a good idea where we are.”

  Where are we today?
  The point is, we had a crisis in 2007-2008. The central banks all moved to stimulate the economies to get them going. But all around the world economies are growing slowly: Europe, America, Japan – and China is slowing down. That’s what’s happening today. The last six years have been slow and most people believe that the next ten or even twenty years will be slow compared to the ‘eighties and the nineties. And I must say, I am pretty convinced that they’re right. I happen to believe that the nineties especially, but maybe also the eighties, were in many ways the best of times and are not going to be duplicated. So in my opinion we’re not going back to a high growth environment.

  As a matter of fact, some people fear that the US economy could even fall into a recession.
  There will always be cycles and that means there will always be a recession coming. But is it one year away or five? That’s the question! I think we’re going to limp along in a slow growth mode. There is always a possibility of some acceleration. But there is no boom so there is no need for a bust. Booms usually create overexpansion and when it turns out that it was excessive it turns into a bust. Today, I don’t see boom and I don’t see bust. So I don’t see anything that could cause a recession in the short term, at least not in 2016 – and I’m not characterized an optimist.

  And how about further down the road?
  I don’t think the world has to worry about the US. But it has to worry about China. So if you’re asking me when the US will have a recession then the question is how long will China go without a recession?

  How come?
  China has been going for the last twentyfive years with superior growth and without a recession. It’s not going to grow 25 years in double digits again. China is going to grow in single digits and it may have ups and downs. And if China has a recession, that’s very significant for the whole world. Looking at the statistics you might say China is not too important for the US. For instance, the percentage of the profits of the S&P 500 (SP500 2053.13 -0.38%) companies that comes from China is just 1%. But a recession in China would have significant effects on other countries we sell to. The US would not be untouched. So if you need a culprit for a future recession in the US then it’s likely China will contribute.

  Another concern are weak earnings. Yet US companies are paying out dividends and buying back shares at a record pace. How healthy is that for Corporate America?
  One of the worst things is when a business behaves in a short term way. When the management does things which are not desirable just to please shareholders, either to make the stock go up or to hold on to their jobs. I’m not saying that all buybacks and dividends are wrong. But stock prices are on the high side of fair. The Price/Earnings ratio on the S&P 500 today is 19, whereas the post war average is 16. So if I wouldn’t buy the stock as an investor, why should the company be buying it? Don’t they have better use for their money?

  Obviously, there seems to be a lack of good ideas.
  There is an interesting book called “The Outsiders” by William Thorndike. He follows the careers of eight outstanding CEOs like Henry Singleton of Teledyne, Katharine Graham of the Washington Post, John Malone of Liberty Media and Warren Buffett of Berkshire Hathaway (BRK.A 199259.5 -0.93%). They all were outsiders because they behaved differently from the crowd. For example, when an industry would go through an acquisition wave these CEOs would not participate. They would think: “Everybody else is buying and that’s driving up the price of companies so we shouldn’t buy.” They were called capital allocators and they treated cash as a valuable resource. And today, with the average stock on the expensive side, these CEOs wouldn’t be buying their stocks back.

  Those CEOs were also good at investing. What does it take to be successful in investing?
  For me, the definition of a great investor is one who performs well in the good times and doesn’t get killed in the bad times. In other words: When the tide goes out he’s prepared because he has a margin of safety in his portfolio. It’s like in the world of sports: Pete Sampras for example, who is widely regarded as one of the greatest in tennis history wasn’t always an exciting player. His highlights were hard to distinguish from his low lights. But that means his worst moments were almost as good as his best moments. That would describe a terrific money manager: Consistent and not too much excitement, no big ups and downs – and that’s what we try to do at Oaktree Capital.

  In your recent memo you worte about inspiration taken from the world of sports. What else can investors learn from top athletes?
  If you want to be a superior player you have to have self confidence. The same is true for the superior investor. At some point you have to act boldly. You have to say: “This is my conviction” and you have to act on it. You can’t have five hundred different stocks and expect to have a great return because you’ll be diversified into mediocrity. Also, you have to think different from the crowd because if you think the same you act the same and you perform the same. That’s what I call second level thinking. A first level thinker says: “It’s a great company so I should buy the stock”. In contrast, the second level thinker says: “It’s a great company. But it’s not as great as everybody thinks so the price is too high and I should sell.”

  In your memo you also refer to the baseball star Yogi Berra. He was famous for saying things like “It’s too crowded, nobody goes there anymore”. What kind of trades are too crowded in today’s markets?
  Today, I don’t see any glaring exceptions. Of course, I see some asset classes that are somewhat more attractive than others. But I don’t see things that are dirt cheap or crazy high, except the possibility of social media stocks and technology IPOs. But other than that I don’t see anything glaringly wrong. I just think the whole world is priced for a better future than we have.

  So what’s your strategy in this kind of market?
  We are living in a low return world caused by the central banks pulling down the risk-free rate to zero. And yet, even though the returns are low, the risks are substantial. That’s why at Oaktree our mantra for the past four and half years has been “move forward but with caution.” The outlook today is not so bad and prices are not so high that they demand complete caution and defensiveness. But at the same time prices are not so low and the outlook is not so good that we should be aggressive. So our strategy is not maximum defensiveness, not aggressive. It’s somewhere in between, but with a significant emphasis on caution. And that means you have to select your investments carefully.

  

  

  

  

  

• One Of The Two Most Crowded "Consensus Trades" Of 2015 Just Ended With A Whimper

  Back in January we laid out the “two most crowded trades” in the hedge fund community as we entered 2015. The first was being long the US dollar, a trade which as we updated two weeks ago has gotten so big, it is now the biggest consensus trade by a factor of 3x…

  

  … one which when it finally does blow up, will wipe out many macro and micro “hedge” funds who have been frontrunning the Fed’s rate hike since mid-2014, and the second Yellen hints at a rate cut or worse the shockwave from the USD liquidation will be felt around the globe.

  For now, however, being long and strong the USD continues to be profitable in a world in which every other central bank is either desperate to crush their currency, like Europe and Japan, or even more desperate to boost it, like Nigeria, South Africa and Brazil.

  

  What about the other massive consensus trade in early 2015? Here is what we said then: 

  For the second year in a row are not only massively short the 10Y, but in fact as the latest CFTC net spec data shows, are even shorter than they were a year ago, when the 10 Year was trading about 100 bps wider. Worse: as the chart below shows the only time in history when specs were shorter the 10Y was five years ago, in early 2010. What happened then was that the 10Y went from 4% to 2.5% in the span of just a few months, facilitated largely by one of the biggest short squeezes in 10 Year history.

   

  

   

  The 10 Year is currently trading at 1.95%: a comparable short squeeze now to that that took place in 2010 would send the 10 Year yield crashing to level where the German Bund is trading now.

   

  Will that happen, and how much more pain can hedge funds absorb before they get a collective tap on the shoulder, we don’t know. We do know, however, that the unprecedented bearish sentiment toward 10Y US Treasuries among the speculative community makes it one of the two most crowded trades going into 2015.

  Since then the 10Y rose, dropped, meandered around, and is set to exit 2015 precisely where it entered it: just about 2.2%.

  One thing, however has changed.

  From being the “other” biggest consensus trade 12 months ago, hedge funds have decided there is no longer a point in “not fighting the Fed” (which as a reminder has also been desperate to push the long end of the curve higher and has not only failed, but with the curve flattening dramatically, has been told by the market it’s rate hike was a policy mistake) and have unwound their near record Treasury short position in droves.

  As Bloomberg reports, confirming what we said nearly a year ago, “hedge-fund managers and other large speculators spent December 2014 setting the biggest bets against Treasuries in four years. Fast forward 12 months and they’ve abandoned those positions.”

  “As long as U.S. inflation is stable, there’s some value in buying U.S. Treasuries,” said Kazuaki Oh’E, the head of fixed income at CIBC World Markets Japan Inc. in Tokyo.

  To be sure, the “value in buying US Treasurys” has nothing to do with stable inflation, and everything with frontrunning the recession and the Fed’s inevitable rate cut and/or QE4 (and more foreign central bank buying), which in turn will send the long end soaring as then and only then will the curve flattening trade unwind and those long TSYs will scramble to rush into equities.

  As Bloomberg further adds, “net short positions among futures traders — bets against the market — have been close to zero for the first two weeks of December, based on the latest data from the U.S. Commodity Futures Trading Commission. Shorts increased to as much as 261,282 on Dec. 30, 2014, the most since May 2010.”

  

   

  Meanwhile, never deterred by being wrong 5 years in a row in their forecasts for rising TSY yields, economists surveyed by Bloomberg project the 10-year yield will, once again, rise to 2.80% by the close of 2016, although even economists are starting to realize they can only lose so much credibility: at the start of July, the projection was for 3.3%.

  Ironically, now that the short overhang in the treasury complex is that much smaller, and as a result the threat of dramatic short squeezes is far lower, 2016 may be the first year when there is indeed a jerk higher in long end yields.

  That however, as Deutsche Bank explained a month ago in “How To Trade The Fed’s Upcoming “Policy Error” In Three Parts” will be the first part of a multi-leg move lower in yields. What  will follow this estimated blow out to as wide as 2.75% will be the buying phase, which will see the long end close 2016 at 2% if not less:

  With all else equal, the market can decide to interpret rates selloff and Fed liftoff as policy mistakes and price in the adverse impact on growth and position for further rate cuts in the future. This is the third phase, the twist of the curve – the front end remains constrained by the Fed, while the back end rallies. It is a bull flattener, after a continued rise in rates. We anticipate the 10Y UST yield to rally towards 2% after trading as high as 2.75% during the second phase. This is generally bearish for USD and for risk assets, and as such could mean higher equity vol. Given that rates vol should reach high levels during the bear-steepening phase, bull flatteners would bring back vol sellers and return of the carry trade.

  Of course, in a “market” manipulated beyond recognition (as BofA said earlier today), making any predictions is stupid, as such the best bet is to wait and see which side of the curve hedge funds congregate to as they inevitably will, and just do the opposite of what the crowd of “smartest people in the room” is doing, a trade which has been profitable for 7 years running.

  

  

  

  

  

• China Crash Sparks Holiday Hangover In Stocks & Commodities, Curve Flattens To 9-Month Lows

  Today's market summed up…

   

  The post-Christmas period started badly with a Bloodbath in Beijing… Biggest drop since August collapse

  

   

  And while today's damage took the shine off the Santa Rally, the S&P remains 90 points rich to the Fed Balance Sheet…

  

   

  Bonds remain the big winner post-Fed, stocks managed to scramble back into the green post-Fed in a VIX slamming panic and crude worst…

  

   

  But on the day – from the early close on Christmas Eve, everything closed red – despite the best efforts of the machines…

  

   

  But futures show that the weakness in China weighed in US stocks but as Europe closed a magical levitation began… Nasdaq futures were face-riupped into the cash close to go green….

  

   

  FANGs were bid (after NFLX took a big beating early on)

  

   

  Energy stocks hardest hit the damage was all at the open…

  

   

  As having decoupled from oil prices…

  

   

  Stocks took their lead from VIX ETFs… but even then they were not as correlated as normal (and note the very different behavior between the 'traded' VIX ETF and VIX itself)

  

   

  And just look what happened to VIX and S&P futures at their close…

  

   

  With VIX Futures & Options Total Open Interest dropping to a critical ledge…

  

   

  Credit and stocks continued their recent decoupling…

  

   

  Treasury yields leaked lower on the day… (thogh 2Y sold off) – we note YTD that 10y/30Y is down 11bps since the end of QE3 and 2Y up 52bps – can you say "policy error"?

  

   

  And notably flattened (to 9-month lows) – as Financials ignored it…

  

   

  The USD Index limped lower only to rally back to unchanged after EU close (amid notable AUD and CAD weakness)…

  

   

  Carnage once again in oil exporter FX markets… Ruble closes at record low against dollar…

  

   

  Commodities were all clubbed today… Crude dumped after Saudi deficit was exposed suggesting increased production possible. It is also interesting once again just how correlated silver and crude are…

  

   

  Except NatGas which has now soared over 26% in the last week…

  

   

   

  Charts: Bloomberg

  Bonus Chart: In summary – more red lasers than green lasers today…

  

  

  

  

  

• Monday Humor? Christmas Day Condom Catastrophe

  As Americans stuffed their faces with food and stuffed their sacks with gifts, three young German men had another 'stuffing' on their mind. As The Guardian reports, a man died on Christmas Day in Germany after he was hit in the head by a flying piece of metal from a condom machine that he and two accomplices blew up in an apparent robbery attempt.

  The 29-year-old man was taken to hospital in the western town of Schöppingen, near the Dutch border, by the two other men who fled the scene of the explosion in a car, leaving behind condoms and money scattered around the gutted vending machine.

   

  

   

  The two men told hospital officials that their friend had fallen down the stairs, injuring his head. Suspicious of their story, the officials called the police.

   

  During questioning, police said, one of them admitted that the three had blown up the condom machine, and that their fellow conspirator was hit in the head by metal as he tried to take cover.

  *  *  *

  Somewhere in here is a circular "Darwin"-esque joke, and/or a whole new meaning to the word "blow" – but we leave that to the reader. But for now – practicing "safe sex" seems even more relevant.

  

  

  

  

  

• 7 Investment Lessons From Mom

  Submitted by Lance Roberts via RealInvestmentAdvice.com,

  When I was growing up my mother had a saying, or an answer, for just about everything…as do most mothers. Every answer to the question “Why?” was immediately met with the most intellectual of answers; “…because I said so”.

  Seriously, my mother was a resource of knowledge that has served me well over the years and it wasn’t until late in life that I realized that she had taught me the basic principles to staying safe in the world of financial investments.

  So, by imparting her secrets to you I may be violating some sacred circle of motherhood knowledge, but I felt it was worth the risk to share the knowledge which has stood well the test of time.

  1) Don’t Run With Sharp Objects!

  It wasn’t hard to understand why she didn’t want me to run with scissors through the house – I just think I did it early on just to watch her panic. However, later in life when I got my first apartment I ran through the entire place with a pair of scissors, left the front door open with the air conditioning on, and turned every light on in the house. That rebellion immediately stopped when I received my first electric bill.

  Sometime in the early 90’s, the financial markets became a casino as the internet age ignited a whole generation of stock market gamblers who thought they were investors. There is a huge difference between investing and speculating, and knowing the difference is critical to overall success.

  Investing is backed by a solid investment strategy with defined goals, an accumulation schedule, allocation analysis and, most importantly, a defined sell strategy and risk management plan.

  Speculation is nothing more than gambling. If you are buying the latest hot stock, chasing stocks that have already moved 100% or more, or just putting money in the market because you think that you “have to”, you are gambling.

  The most important thing to understand about gambling is success is a function of the probabilities and possibilities of winning or losing on each bet made.

  In the stock market, investors continue to play the possibilities instead of the probabilities. The trap comes with early success in speculative trading. Success breeds confidence, and confidence breeds ignorance.

  Most speculative traders tend to “blow themselves up” because of early success in their speculative investing habits. The speculative trader generally fails to hedge against the random events that occur in the financial markets. This is turn results in the trader losing more money than they ever imagined possible.

  When investing, remember that the odds of making a losing trade increase with the frequency of transactions being made. Just as running with a pair of scissors; do it often enough and eventually you could end up really hurting yourself. What separates a winning investor from a speculative gambler is the ability to admit and correct mistakes when they occur.

  2) Look Both Ways Before You Cross The Street.

  I grew up in a small town so crossing the street wasn’t as dangerous as it is in the city. Nonetheless, I was yanked by the collar more than once as I started to bolt across the street seemingly as anxious to get to the other side as the chicken that we have all heard so much about. It is important to understand that traffic does flow in two directions and if you only look in one direction – sooner or later you are going to get hit.

  A lot of people want to classify themselves as a “Bull” or a “Bear”. The smart investor doesn’t pick a side; he analyzes both sides to determine what the best course of action in the current market environment is most likely to be.

  The problem with the proclamation of being a “bull” or a “bear” means that you are not analyzing the other side of the argument and that you become so confident in your position that you tend to forget that “the light at the end of the tunnel…just might be an oncoming train.”

  It is an important part of your analysis, before you invest in the financial markets, to determine not only “where” but also “when” to invest your assets.

  3) Always Wear Clean Underwear In Case You’re In An Accident

  This was one of my favorite sayings from my mother because I always wondered about the rationality of it. I always figured that even if you were wearing clean underwear prior to an accident; you’re still likely left without clean underwear following it.

  The first rule of investing is: “You are only wrong – if you stay wrong”

  However, being a smart investor means always being prepared in case of an accident. That means quite simply have a mechanism in place to protect you when you are wrong with an investment decision.

  First of all, you will notice that I said “when you are wrong” in the previous paragraph. You will make wrong decisions, in fact, the majority of the decisions you will make in investing will most likely turn out wrong. However, it is cutting those wrong decisions short, and letting your right decisions continue to work, that will make you profitable over time.

  Any person that tells you about all the winning trades he has made in the market – is either lying or he hasn’t blown up yet. One of the two will be true – 100% of the time.

  Understanding the “risk versus reward” trade off of any investment is the beginning step to risk management in your portfolio. Knowing how to mitigate the risk of loss in your holdings is crucial to your long-term survivability in the financial markets.

  4) If Everyone Jumped Off The Cliff – Would You Do It Too?

  At one point or another, we have all tried with our Mom’s what every other kid has tried to since the beginning of time – the use of “peer pressure.” I figured if she wouldn’t let me do what I wanted, then surely she would bend to the will of the imaginary masses. She never did.

  “Peer pressure” is one of the biggest mistakes investors repeatedly make when investing. Chasing the latest “hot stocks” or “investment fads” that are already overvalued and are running up on speculative fervor almost always end in disappointment.

  In the financial markets, investors get sucked into buying stocks that have already moved significantly off their lows because they are afraid of “missing out.” This is speculating, gambling, guessing, hoping, praying – anything but investing. Generally, by the time the media begins featuring a particular investment, individuals have already missed the major part of the move. By that point, the probabilities of a decline began to outweigh the possibility of further rewards.

  It is a well-known fact that the market works in what is called a “herd mentality.” Historically, investors all tend to run in one direction at one time until that direction falters, the “herd” then turns and runs in the opposite direction. This continues to the detriment of investor’s returns over long periods as shown by Dalbar investor studies.

  

  This is also generally why investors wind up buying high and selling low. In order to be a long-term successful investor, you have to understand the “herd mentality” and use it to your benefit – which means getting out from in front of the herd before you are trampled.

  So, before you chase a stock that has already moved 100% or more – try and figure out where the herd may move to next and “place your bets there.” This takes discipline, patience and a lot of homework – but you will be well rewarded for you efforts in the end.

  5) Don’t Talk To Strangers

  This is just good solid advice all the way around. Turn on the television, anytime of the day or night, and it is the “Stranger’s Parade of Malicious Intent”. I don’t know if it is just me, or the fact the media only broadcast news that reveals the very depths of human sickness and depravity, but sometimes I have to wonder if we are not due for a planetary cleansing through divine intervention.

  Back to investing – getting your stock tips from strangers is a sure way to lose money in the stock market. Your investing homework should NOT consist of a daily regimen of CNBC, followed by a dose of Grocer tips, capped off with a financial advisor’s sales pitch.

  In order to be successful in the long-run, you must understand the principals of investing and the catalysts which will make that investment profitable in the future. Remember, when you invest into a company you are buying a piece of that company and its business plan. You are placing your hard earned dollars into the belief the individuals managing the company have your best interests at heart. The hope is they will operate in such a manner as to make your investment more valuable so that it may be sold to someone else for a profit.

  This is also the very embodiment of the “Greater Fool Theory,” which states that there will always be someone willing to buy an investment at an ever higher price. However, in the end, there is always someone left “holding the bag,” the trick is making sure that it isn’t you.

  Also, you need to be aware that when getting advice from the “One Minute Money Manager” crew on television – when an “expert” tells you about a company that you should buy – he already owns it – and most likely he will be the one selling his shares to you.

  6) You Either Need To “Do It” (polite version) Or Get Off The Pot!

  When I was growing up I hated to do my homework, which is ironic, since I now do more homework now than I ever dreamed of in my younger days. Since I did not like doing homework – school projects were almost never started until the night before they were due. I was the king of procrastination.

  My Mom was always there to help, giving me a hand and an ear full of motherly advice, usually consisting of a lot of “because I told you so…”

  I find it interesting that many investors tend to watch stocks for a very long period of time, never acting on their analysis, buy rather idly watching as their instinct proves correct and the stock rises in price.

  The investor then feels that he missed his entry point and decides to wait, hoping the stock will go back down one more time so that he can get in. The stock continues to rise, the investor continues to watch becoming more and more frustrated until he finally capitulates on his emotion and buys the investment near the top.

  Procrastination, on the way up and on the way down, are harbingers of emotional duress derived from the loss of opportunity or the destruction of capital.

  However, if you do your homework and can build a case for the purchase, don’t procrastinate. If you miss your opportunity for the right entry into the position – don’t chase it. Leave it alone and come back another day when ole’ Bob Barker is telling you – “The Price Is Right.”

  7) Don’t Play With It – You’ll Go Blind

  Well…do I really need to go into this one? All I know for sure is that I am not blind today. What I will never know for sure is whether she believed it; or if was just meant to scare the hell out of me.

  When you invest into the financial markets it is very easy to lose sight of what your intentions were in the first place. Getting caught up in the hype, getting sucked in by the emotions of fear and greed, and generally being confused by the multitude of options available, causes you to lose your focus on the very basic principle that you started with – growing your small pile of money into a much larger one.

  My Dad once taught me a very basic principle: KISS: Keep It Simple Stupid

  This is the one of the best investment lessons you will ever receive. Too many people try to outsmart the market to gain a very small, fractional, increase in return. Unfortunately, they wind up taking on a disproportionate amount of risk which, more often than not, leads to negative results. The simpler the strategy is, the better the returns tend to be. Why? There is better control over the portfolio.

  Designing a KISS portfolio strategy will help ensure that you don’t get blinded by continually playing with your portfolio and losing sight of what your original goals were in the first place.

  1. Decide what your objective is: Retirement, College, House, etc.
  2. Define a time frame to achieve your goal.
  3. Determine how much money you can “realistically” put toward your goal each month.
  4. Calculate the amount of return needed to reach your goal based upon your starting principal, the number of years to your goal and your monthly contributions.
  5. Break down your goal into milestones that are achievable. These milestones could be quarterly, semi-annual or annual and will help make sure that you are on track to meet your objective.
  6. Select the appropriate asset mix that achieves your required results without taking on excess risk that could lead to greater losses than planned for.
  7. Develop and implement a specific strategy to sell positions in the event of random market events or unexpected market downturns.
  8. If this is more than you know how to do – hire a professional who understands basic portfolio and risk management.

  Conclusion:

  There is obviously a lot more to managing your own portfolio than just the principles that we learned from our Mothers. However, this is a start in the right direction, and if you don’t believe me – just ask your Mother.

  

  

  

  

  

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