- Artist's Impression Of GOP Presidential Nominee Race
That platform is starting to get full… of something…
Source: Townhall.com
- "Goldbug" Analysts Capitulation
Submitted by Leonard Sartoni via GoldBroker.com,
The gold market has been in a profound lethargy (at least in dollar terms) for over a year. This is as frustrating for the bulls as it is for the bears. These days we are witnessing an avalanche of bearish commentaries on the price of gold for the coming 6 to 12 months. The psychological $1,000 threshold is attracting analysts like a magnet attracts iron dust, just because an almost four-year old trend ends up drawing everybody in it!
Harry Dent (the one predicting gold at $700) is now being joined by many long-time bugs who are seeing gold plummet toward $1,000-$900… before it takes off to $5,000! I call this the final capitulation of the analysts. They are throwing the towel on this frustrating sector and their short- and mid-term predictions end up being dictated by their negative emotions.
We can see in the next three following charts that a bear market is defined by constant higher highs and lower lows. When this process ends, the bear market has stopped and a new trend can take place, as is the case actually with the gold price in terms of euros. With this currency, we’ve had to wait until 2005 for the gold bull market to be validated. Since then, the gold bull market has been validated in all currencies.
The actual lull won’t last the same time for all the currencies. As long as gold doesn’t rise above $1,310, technical analysts will remain bearish on the gold price in terms of dollars. The euro being actually much weaker than the dollar, it helped start the gold bull market sooner. But, ultimately, we will see the gold price rise again in all currencies.
I feel the same negative emotions as all the analysts and all gold investors, because we are all following this war between gold and the dollar day after day and we’d all like to see gold coming out the winner in the final battle. At this moment, one has to admit that gold is not doing too well in terms of dollars. If I were to give any advice based on my emotions, I’d say that I’m not satisfied with the gold price in this currency, with the pathetic performance of the gold miners, and that I’m not optimistic on the short term. But when everyone is starting to bet on gold and gold mining companies to go down, including the pro-gold analysts, I tell myself that we’re once again very close to a major turning point in this market. And this would only confirm the restart of the gold bull market in euros and yens!
In 2011, everyone was bullish and was seeing gold reaching $2,000, even $2,500 before the next major correction. In 2015, everyone is bearish and is seeing gold plunging to $1,000, $900 or even $700 before it can really rebound. Fear is palpable in this market. Analysts, instead of advising to fill the truck at these overly depressed levels, are recommending hopping on the selling wagon to surf on the “final devastation” of this market. Is this sound advice?
Have you ever wondered why so few commentators and analysts shout “buy” when a sector is totally depressed and on the verge of starting a spectacular bull market? And why so few shout “sell” when a sector is hyper optimistic and just about to reach its decade-long peak (just like stocks at this moment)?
It is because the price evolution during the years preceding this event keeps them from doing it! Because time has played against them. The preceding bull or bear market ended up winning over most analysts who were predicting a trend reversal. They can’t continue to fight this market, because they’ve lost all their credibility, some capital, and are about to lose all of their clients! They capitulate. They are forced to side with the trend even if fundamentals are screaming to the contrary. It is said that a financial bubble first brings ruin to those who bet against it, and then to those who feed it. This change of attitude among long-time pro-gold commentators and analysts is an important sign of capitulation, the kind of sign that is expected before a definitive trend reversal.
For the moment, if we refer to the “power of prediction” of the junior miners (GDXJ) for the future trend for gold in terms of dollars, we are again testing the 50-day moving average, and the result of this test should give us the short- and mid-term trend for the metal (6-month horizon). For the last few months, the junior miners have resisted astonishingly well to the metal’s weakness, and this is a very encouraging sign for things to come.
- Did The Classic Car Bubble Just Quietly Burst?
In May, Pablo Picasso’s De Women of Algiers (Version O) sold for a record $180 million at auction prompting us to remark that if the Fed’s bubble busting team led by Stanley Fischer was looking for runaway inflation, it could have easily found it without any particular effort at Christie’s.
We went on to compare what may eventually be go down in history as “peak Picasso” with what looks like a bubble in $100 million homes: The nearly $200 million price tag for the “riot of colors focused on scantily dressed women” is, according to WSJ, reflective of the work’s “trophy” status which it earned as a result of its “ownership pedigree”. Translated from high-end art world parlance to plain English: for billionaires who have seen their obscene fortunes balloon under monetary policies designed to inflate financial assets at the expense of everything else (including market stability), purchasing art affords the buyer an even greater opportunity to “boast” than hoarding $100 million homes because after all, there a lot of mega mansions, but there’s only one vibrant, multi-hued Picasso riff on a Delacroix, so really, $180 million is a bargain, especially when most of the purchase price will be recouped by S&P 2,500, or SHCOMP 6,000 (depending on the nationality of the unnamed buyer).
But it’s not just rare art and obscene homes that appear to be reaching peak insanity, it’s collector cars as well which, incidentally, speaks to the same dynamic that’s driving the art and mega mansions markets: namely, the relentless, central bank-fueled run up in financial assets has given the ultra rich more money than they know how to spend, leading directly to hyperinflation in the types of things billionaires buy when they get bored. Take the 1955 Mercedes 300SL Gullwing, which has outpaced the six-year US equity rally:
Here’s some color from Jalopnik:
What you’re seeing here, courtesy of the collector car market wizards over at Hagerty, is the price of a 1955 Mercedes 300SL Gullwing as compared to three major stock market indices and the price of gold. While the economy has been soaring for some, it’s been a rocket ship to the greater reaches of the Universe for the world’s obscenely wealthy.
And perhaps nowhere is that reflected greater than the price of one little old German car. For reference, one sold last August for $2,530,000.
(1955 Mercedes 300SL Gullwing)
So we’re left to wonder the reasoning reasoning behind all the massive jump in valuations, and with much of economics, it’s complex. First, and perhaps most apparent, there looks to be some sort of bubble economics at play. As Hagerty analyst Dave Kinney points out:
There continues to be some speculation that prices simply cannot continue this arc for much longer, though the “if” of this question is less insightful than the “when.” That million-dollar answer is yet to have consensus.
[One big factor] .. is the .. rise in income inequality. As the wealthiest get even richer, they can afford to bid higher and higher prices on the highest-end of collector items.
As for broader market trends, here’s a look at how well German collector cars have fared in the now ubiquitous Keynesian trickle down ‘wealth effect’ monetary regime…
…and 1950s American “classics” have done even better…
But the bubble may now be showing signs of fatigue as Hagerty’s “market rating” (a weighted algorithm to calculate the strength of the North American collector car market), just suffered its largest one month decline in 14 months.
Via Hargerty:
- Following May’s record high, the Hagerty Market Rating recorded its biggest decline of the last 14 months, falling a third of a point.
- May saw a 1/3 reduction in the number of cars offered at auction compared to May 2014, primarily due to single-collection sales tapering off.
- Following a strong year, private sales recorded the smallest gain this past month of the past 12 months.
- Insured values again set record highs, but month-over-month changes in both the broad and high-end markets slowed for the second consecutive month.
And some specifics from Jalopnik:
Hagerty uses its own proprietary market rating system which takes into account the difference between the value cars are insured for and how much they actually sell for, and according to the insurance company, the dip is fueled mostly by a drop in single-collection big sales. But it’s also fueled by big drops in sale prices of specific, popular cars as well:
1967-1973 Mercury Cougar – average sale price dropped 21% year-over-year and percent selling above insured value fell from 36% to 23%
Jaguar XJ-S – average sale price dropped 15% year-over-year and percent selling above insured value fell from 40% to 4%
Still, as you can see below, the bubble looks to be largely intact, and why shouldn’t it be? After all, there was no surprise ‘liftoff’ today and based on the record $141 billion in buybacks US corporates announced in April (that’s up 141% Y/Y in case you were wondering), stocks may trend even higher on the way to their date with 1937.
(Hagerty Market Index)
* * *
We’ll leave you with what we said last month about greater fool-driven, billionaire trophy hunting: Neither art nor cars pay any dividends, so any purchase is merely a gamble on further price appreciation driven by even greater asset bubbles in the future.
Rest assured DM central banks will do their very best to ensure that these gambles pay off.
- California Labor Commission Pops The Uber Bubble, Says Workers Are Employees
Submitted by Daniel Drew of Dark Bid
California Labor Commission Pops The Uber Bubble, Says Workers Are Employees
The California Labor Commission ruled that Uber is “involved in every aspect of the operation,” which means drivers are employees and not independent contractors. Uber says it’s “nothing more than a neutral technology platform.” The shift to employee status for California drivers threatens Uber’s obscene $50 billion valuation in the private market as they face increased labor costs. The ruling could also spark an avalanche of similar lawsuits across the country.
Uber is just one example of the exploitation business model. From Washio to Airbnb, companies in the so called “sharing economy” seek to avoid licensing, regulation, insurance, standard labor costs, and basic business responsibility. This trend threatens the average worker and fosters the development of a peasant class.
The misclassification of employees as independent contractors is one of the most widespread employer abuses. The Department of Labor published a report to summarize the employment relationship under the Fair Labor Standards Act. Here are the parts that Uber clearly violated:
The extent to which the work performed is an integral part of the employer’s business. If the work performed by a worker is integral to the employer’s business, it is more likely that the worker is economically dependent on the employer and less likely that the worker is in business for himself or herself. For example, work is integral to the employer’s business if it is a part of its production process or if it is a service that the employer is in business to provide.
The nature and degree of control by the employer. Analysis of this factor includes who sets pay amounts and work hours and who determines how the work is performed, as well as whether the worker is free to work for others and hire helpers. An independent contractor generally works free from control by the employer (or anyone else, including the employer’s clients).
Without its drivers, Uber wouldn’t have a business. The drivers are the backbone of the enterprise. Uber, with its “God view” monitoring system and volatile, sky-high surge pricing, definitely controls pricing and how the work is performed. Once Uber starts acting like a real business and faces normal business costs, we’ll see how profitable they actually are. Until then, they are just a millennial sweatshop.
* * *
PS this clearly bad news for Uber is bullish for NYC taxi medallions, which have seen their prices tumble in recent years as a result of the Uber threat.
This might just be the second coming of the good, old, unsocial, unnetworked Yellow Cab. Interested readers can look at recent Medallion prices at the following website.
- Texas Gold Repatriation Bill Has One Message To Feds: "Come And Take It"
As the mainstream media begins to come to terms with just what Texas' decision to repatriate its gold from the Federal Government in its own Gold Depository, the details of Republican State Rep. Giovanni Capriglione's bill protecting gold from confiscation become clear…
In an interview with The Epoch Times, Caprigilione explains why he pushed the bill and its far-reaching implications…
Epoch Times: What did you do to make the bill pass?
Giovanni Capriglione: I grabbed the banner last session. I was a freshman and it was difficult. Part of the problem was that it has a lot of verbiage that had nothing to do with law. Things like the case of an economic meltdown.
This is a principle part of why the bill was created, but it made it a distraction trying to pass the bill. Because then you get into: Do you think the economy is going to collapse, blaming the president, blaming the banks. What I did in this version of it, I stripped all kinds of stuff out other than the bill itself.
Epoch Times: Why did you go for it?
Mr. Capriglione: I have a vision, I would like for Texas to compete with Manhattan or the exchanges in Chicago. Here in Texas we have oil, we have natural gas, we have our own electric grid. To me having a bunch of metal commodities in the mix is something else that helps Texas to be able to become a marketplace for a lot of different items. Part of the idea of the depository is just another Texas thing. I’m still a little stunned that it happened.
I wrapped all of it together and I love to do economic development. I just want Texas to really be able to grow economically.
Former Texas Gov. Rick Perry previously said, “We are telling the whole entire world that Texas has a billion dollars worth of gold.” Gov. Abbott too, wants to attract businesses to our state.
Epoch Times: What were some of the difficulties?
Mr. Capriglione: My initial goal was to create a state everything, to have that completely run by the state. The issue with that was that it became a budget item. They were not keen on developing a completely new piece of [transaction] software. If the state had done it from scratch it would have just been too large.
The state would have developed the infrastructure to do [gold] deposits. We wanted the state to build the depository. We wanted the state to provide the security. It’s just very expensive. One of the things in Texas, because we are so conservative, if you have a bill that costs money its chances go way down.
I worked to do this without a fiscal note or a budget expense. We were able to do that by privatizing a significant portion of the depository. So we don’t have to build one, someone can go and say: we want to run it. We don’t have to run our own electronic software, someone else smarter than the state within the business can and will—and probably already has—developed the software to run [this operation].
This time I got put on the investment and financial services committee where this bill went through. It made it a lot easier to get it through the system. I was pretty shocked it passed the house with 137 to 1.
Now our office is getting calls and people are offering their services. I got some very interesting high network individuals who are thinking about putting their gold in Texas now. The response has been really, really good.
Epoch Times: What do you say about the anti-seizure clause, do you think the federal government will interfere with the gold and silver stored in the depository?
Mr. Capriglione: I think that what we have done is completely constitutional, we’ve looked at precedents, I have looked at Article 1, Section 10 of the Constitution so I think we are in good standing.
If the federal government were to try and do something like that, the reality is: There is a motto in the office of almost every state legislator in Texas, and it’s a flag that we have [from the Texas Revolution], it’s below a cannon and what the motto says is, “Come and Take it.”
That would be my response. We are on good solid legal footing to be able to not only have this depository, but to be able to do the transactions that are stated in the bill.
It was written with the idea that the federal government is a construct of the states. As long as we are following the Constitution as this law does, we won’t have any issues. The federal government can sue all they want, and I hope they don’t, because I think they will lose.
We created this in the state to provide depositors the protection I just spoke of. That’s a critical part of why this was created. Can a private depository do this? A private depository cannot do what we were able to do because the Constitution is pretty clear in terms of the rights states have.
Epoch Times: What do you think about using gold and silver as money?
Mr. Capriglione: It’s something that’s allowed. Back in 2008 when you go and look at the crisis, it may have been rooted in subprime, but at its core what it is there is a lack of business confidence. People get scared and worried and that kind of cycle feeds on itself. [The idea is to] have something that is stable and that you can touch as opposed to being ephemeral like paper or bank money.
One of the issues in 2008 was that people would start withdrawing their deposits, which to some extent happened. And there just isn’t enough actual backing of that. What we have in this is something that people can rely on. The way we structured the bill is there are no forwards, future derivatives, lending contracts on the bullion that’s placed inside the depository. What you see is what you have. Nothing will be created, nor destroyed.
That stability helps confidence and it also provides a flight to sound money, this is going to be it.
Epoch Times: Is Texas going to have its own money?
Mr. Capriglione: Article 1 Section 10 [of the Constitution] states that this will be prohibited and we would never coin our own money. I think that’s unconstitutional.
I have bitcoins and I use it as an alternative as well. Every individual should have as many options as possible to be able to transact business. The more options individuals have the more liquidity there is, the more comfort there is, and the more stability. We don’t—and I have no intention to create our own currency, we don’t have to.
By creating this depository what we are able to do is people are able to make their transactions through our depository, completely in conformance with the Constitution.
Epoch Times: How would this work?
Mr. Capriglione: It’s done electronically, we won’t actually move a block [of gold in the depository] because we want to have the fractional equivalents to be able to move it over. But it’s essentially being moved over. Individuals, corporations, and government entities will do their transactions through the use of gold.
I’ve looked at [having our own currency] and we would be into a lot more trouble. This accomplishes what the point is. In this world, there is so much stuff that happens electronically and you are not really sure what’s in your account. With this you can take possession of what is in your account at any time, within five days it will be subject to delivery.
Epoch Times: What did the governor think of the bill?
The governor is great to work with, he only has had 12 bill signings, and the gold was one of them. He came in and I was waiting for him to do the press signing thing and he said, “We are about to make national news, aren’t we?” and I said: “Yes, we are.” I’m thankful that he did it.
Epoch Times: In fact, it was he who also set forth the motion to repatriate the gold of Texan institutions such as the $1 billion the University of Texas endowment fund owns and currently stores with HSBC in New York.
Mr. Capriglione: Technically we have all these different agencies, but the governor has a lot of sway in the matter.
* * *
Times are changing for sure.
- Destroying The Data-Dependent Dot-Plots, Here's Janet Yellen's Real "Surprises" In 2 Simple Charts
But don’t worry Steve Liesman is certain it’s all good in the ‘dots’…
Surprise!!! (Soft data – surveys and business cycle indicators have collapsed)
Surprise-erer!!! (Hard data – all economic data has plunged with a very modest bounce from depression lows)
So exactly which data is the Fed dependent on?
Charts: Bloomberg
Source: Thad Beversdorf via FirstRebuttal.com
- Greek Citizens Threaten To "Take The Heads" Of "Grave Digging" Creditors
Why there’s quite a bit of ambiguity surrounding Greece’s protracted (and increasingly absurd) negotiations with creditors, one thing is clear: the Greek populace faces a lose-lose scenario.
Striking a deal with creditors means accepting more austerity including pension cuts and a VAT hike. Failure to reach a deal means redenomination and, in all likelihood, an outright economic collapse as Greece is digitally bombed back to a barter system.
The combination of austerity and economic depression has hit the country’s pensioners especially hard, and times would get even tougher should PM Alexis Tsipras choose to concede to the troika’s so-called “red lines.” In April, pension payments were delayed by some 8 hours in what Athens claimed was a “technical glitch” and the Greek government’s move to borrow from pension funds in order to pay the bills not only represents yet another in a series of ridiculously circular funding schemes, but also demonstrates the extent to which pensioners are imperiled by Greece’s increasingly desperate situation.
Their backs against the wall, some Greeks have had enough and say further cuts to pensions and/or an increase in the VAT would lead some citizens to revolt (and that’s putting it mildly). WSJ has more:
As Greece lurches toward climb-down or collision with its creditors, an exhausted population is bracing for more economic pain—either way.
Panagiotis Koupalidis, a 68-year-old retiree, is supporting his wife as well as their three grown children, who lost their jobs in Greece’s depression, on a pension of €700 ($790) a month. That is just over half what it was before the austerity measures imposed by creditors as the condition for bailout loans..
“The creditors are acting like grave diggers,” he says. “They want to send us pensioners to an early grave.” Pension cuts and sales-tax increases—which would inflict the most pain on low-income families already living hand to mouth—are the most politically explosive demands from Greece’s creditors, who see them as essential to restoring Greece’s long-term financial stability.
(Communist-affiliated union members at the finance ministry last week)
Mr. Tsipras told lawmakers from his left-wing Syriza party that Greece can’t accept the terms on offer, but tried to sound optimistic. “I believe that we are now in the final stretch. The real negotiations are starting now,” he said on Tuesday.
Failure to reach a deal could lead to even-more pain through capital controls, further economic meltdown and a turbulent exit from the euro.
The prospect of sharp hikes in value-added tax, a form of sales tax, are threatening to hurt Greece’s battered business sector further. Lenders want to simplify Greece’s exemption-ridden VAT system and raise some rates to boost revenues by 1% of GDP a year.
The IMF is insisting on the measure through even though it thinks Greece’s economy is already overtaxed, because it sees extra revenues as essential for paying down Greek debt if Europe—which holds the bulk of it—won’t write it down.
“How can a deal that raises VAT even more be a good deal?” said Christos Lousis, a 53-year-old entrepreneur whose window-installation business had 26 employees before the crisis.
Years of recession have forced him to lay them all off, while his sales have fallen by nearly 90%. Now struggling to service his mortgage and the loans on his shrunken business, the father of two also fears that Greece will strip away homeowners’ protection from repossession by banks—which Greece’s creditors have pushed for to protect the banking system.
“They are going to turn us into murderers,” Mr. Lousis says. “If they come to seize my house I’m ready to take the head of whoever is standing there—and I’m not the only one thinking this way.”
And, in what is perhaps the best explanation of why talks between Athens and Brussels have hit a wall, Kathimerini reports that despite the fact that pensions account for some 18% of spending (the most in the EU), pensioners still find themselves struggling to stay above the poverty line.
The plight of 79-year-old Athenian Zina Razi and thousands like her strikes at the heart of why talks between Greece and its creditors have collapsed. She lives off a pension system that helps to consume a huge proportion of state spending and can appear overly indulgent – but still she’s broke.
Razi barely keeps up with her power and water bills, and since her middle-aged son lost his job, supports him as well. “I am always in debt,” she said. “I can’t even imagine going to the cinema or the theatre like I did in the past.”
Five years of austerity policies imposed at the creditors’ behest have helped to turn a recession into a full-blown depression, and still they want more. Athens has flatly refused to achieve further savings by raising value-added tax on essential items or, crucially, slashing pension benefits.
(‘high stakes’ pensioner poker)
As it inches closer to default and a potentially calamitous exit from the euro zone, the government has dismissed such demands as “absurd” or designed to pummel Greeks’ morale.
To the lenders, the pension system is still too generous compared with what the country can afford. Greece spent 17.5 percent of its economic output on pension payments, more than any other EU country, according to the latest available Eurostat figures from 2012.
With existing cuts, this figure has since fallen to 16 percent.
The lenders have denied asking for specific pension cuts. But the Greek side said among their suggestions was slashing a top-up payment that supports some of the poorest pensioners. For Razi, that would mean losing 180 euros ($203) out of her 650-euro monthly pension.
The average Greek pension is 833 euros a month. That’s down from 1,350 euros in 2009, according INE-GSEE, the institute of the country’s largest labour union. Moreover, 45 percent of pensioners receive monthly payments below the poverty line of 665 euros, the government says. With more than a quarter of Greek workers jobless, many rely on parents and grandparents for financial support.
“They can take our money, but they cannot take our hearts and souls. We live for our dignity,” Razi said.
Considering the above, we don’t think it’s unreasonable to suggest that social unrest could be just around the corner in Greece, especially if Tsipras manages to somehow convince Syriza hardliners that compromising on pension cuts and the VAT is preferable to a Grexit.
Then again, saving face with voters means standing firm in the face a redenomination-fueled economic collapse which, as mentioned above, would effectively impoverish the entire country, an eventuality that could very well also lead to social upheaval.
The question then, would appear to be this: with Greece caught in an economic Catch 22, is a popular revolt now assured?
* * *
- America, You're Fired!
Submitted by Simon Black via Sovereign Man blog,
Before leaving the house early one morning in 63 BC, an anxious Julius Caesar told his mother, “Today thou shalt see thy son either pontifex maximus… or an exile.”
Caesar was running for his first BIG elected office- pontifex maximus, the high priest of Rome. And he was a young upstart at the time.
His opponents were all older, more reputable men. And his chances were low.
But Caesar had an ace up his toga. Since he couldn’t win on merit, he planned to buy the election, blowing ridiculous sums of money to butter up the voters.
He spent lavishly on games, gifts, and feasts. And he borrowed nearly all of the funds to do it.
This was an enormous risk for him; if Caesar lost the election, he wouldn’t have been able to repay his financiers, and likely would have fled the city.
Caesar had borrowed so much money, in fact, that he single-handedly depleted cash reserves among Rome’s major lenders, causing a significant bump in interest rates.
Cicero remarks on this in a letter to a friend, writing: “Bribery’s thriving… the interest rate has doubled.”
Of course, it wasn’t technically ‘bribery’.
Ancient Rome had a very fine line between bribing voters (known as ‘ambitus’), and simply being a generous guy (‘benignitas’). Caesar insisted he was the latter.
When the votes were finally counted (or not counted), Caesar was declared the winner, thus continuing the long-standing tradition of buying your way into office and rewarding your benefactors with political favor.
* * *
He wasn’t the first to do this. And he certainly wouldn’t be the last.
In the Land of the Free today, the modern scion of the Republic, very little has changed from Ancient Rome.
One primary difference is that rather than spending campaign money on gifts and games to entertain voters, the election itself has become the entertainment.
Presidential races today are nothing more than a two-year, multi-billion dollar circus performance.
Mainstream election coverage already ranks among the most banal reality television, focusing on scandal, conflict, one-liner zingers, and hairstyle choices.
And now that Donald Trump has entered the race, the 2016 Presidential election will assuredly become the Greatest Show on Earth.
I can just imagine the media eating up his witty use of the phrase “You’re Fired” in campaign speeches that refer to his opponents.
But perhaps it’s America that’s fired.
Sure, you get to engage in the most demeaning exercise of casting a ballot so that one of these people can steal half of your money and use it to make you less free.
They call that ‘voting,’ and we’re told it’s our civic duty. But it’s just an illusion.
Just like in Caesar’s time, the election will go to the people who spend the most money.
But I’m not talking about the candidates. They’re just puppets. Entertainers.
I’m talking about the people who bankroll them.
These financiers have learned some valuable lessons since 63 BC: you never back just one horse.
Instead, they hedge their bets by heavily funding multiple candidates and buying influence over all of them.
One only need look at Hillary Clinton’s top donors to get a sense of who they are: Citigroup, Goldman Sachs, JP Morgan, etc.
Anyone who strays from their interests has his/her funding cut and is pronounced ‘unelectable’ and ‘unpresidential’ early in the circus by the media ringmasters.
This makes voting nothing more than a pointless, demeaning illusion of choice between candidates who have already been preselected by their financial backers.
It reminds me of what it used to be like wandering down the grocery store’s cereal aisle when I was a kid.
Sure it seemed like there were a ton of options.
But when you really looked closely, you could see that all the products were all packed full of the same unhealthy chemical ingredients and GMO grains.
And only about three companies produced all of them– Kellogg’s, Post, and General Mills. Not much of a choice after all.
Yet people fall for this scam every single election cycle. They think that their vote matters, and then they go to the polls and ‘choose’ whoever has the best jump shot, or whoever promises them the most free stuff.
(Remember, it’s not bribery if a candidate is just being generous!)
Curiously the country always ends up worse than before– less free, and more broke.
If you really want to vote in a way that counts, you have two far more powerful ballots you can cast.
They’re called your feet.
- Greek Central Bank: "Greece will leave the European Union"
Everybody loves a good drama or tragedy, but it very rarely evolves into a comedy like the Greek situation seems to be unfolding. On June 18th, there’s another meeting of the Eurogroup, the last one before Greece has to make a 1.5B EUR payment to the IMF. As we explained in a previous article, a solution would have had to be reached before the start of the Eurogroup meeting, as every deal would have to be ratified by the parliaments of the member states.
Even though Tsipras ‘had a plan’ last weekend and seemed to be willing to make sacrifices – especially as the most recent polls indicated a small majority of the Greek population was agreeing with the requests made by the IMF, ECB and European Union, but he seems to be pulling the plug once again.
Despite a move by the ECB to charm the Greeks – the ECB said that if Greece would accept the proposed bailout package it would make more money available and it would start to purchase Greek government bonds – both parties seem to be further away from each other than ever before in this crisis. Tsipras already said he wouldn’t hesitate to reject the final deal offered by the Eurogroup and now even the central bank in Athens has released a remarkable statement.
It says that it’s unthinkable Greece will stay in the European Union if no new agreement can be reached. That’s an obvious conclusion, but it’s surprising to see an official institution of Greece openly talk about a Grexit.
Athens can now see the bottom of its treasury as for instance the tax collection turns out to be 1.7B EUR lower than anticipated as the economy is turning sour (well, even more sour than before would be a better description here). The problem goes even further than that. Back in the fall of last year, DEI, Greece’s largest provider of electricity, said it had 1.7B EUR of bills that were due.
Right now, that amount has increased to 2B EUR, signalling the economy is doing much worse than anticipated. This could already be seen in the increase in the unemployment rate which now stands at in excess of 26% again.
Even Dijsselbloem, the president of the Eurogroup, has lost hope and thinks an agreement is ‘highly unlikely’, and if indeed no solution will be agreed upon, the European Union and the Eurozone will enter uncharted territory. If Greece goes, who will be next? Why would Spain or Italy accept to be controlled by the European Union if it’s much easier to just abandon the block and re-gain their financial sovereignty which is now in the hands of the European Central Bank.
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- Meanwhile, In Greece, The Protests Return
With capital controls set to be implemented as soon as this weekend, and with EU officials planning to convene an emergency meeting on either Saturday or Sunday, Greeks are understandably restless at the prospect of being ‘Cyprus’d‘ while they wait to hear if they will be subject to further austerity or worse, a redenomination-fueled economic collapse.
On the eve of a critical Eurogroup meeting in Luxembourg where FinMin Yanis Varoufakis says no new proposal will be tabled, Greeks are taking to the streets ahead of an anti-austerity protest planned for Wednesday evening.
Here are the visuals:
Anti austerity protestors gathering in Athens. Plenty of music, carnival atmosphere so far pic.twitter.com/15V45Grusl
— Mehreen (@MehreenKhn) June 17, 2015
Schaueble’s a popular bloke pic.twitter.com/HE1jJyEH4v
— Mehreen (@MehreenKhn) June 17, 2015
Have found the key players. Merkel, Lagarde and Schauble adorn one mans suitcase: “Stop criminals” pic.twitter.com/wOtm3gdrmi
— Mehreen (@MehreenKhn) June 17, 2015
- Flummoxed Fed Sparks Insta-Buying Binge In Bonds & Bullion, Stocks Hit By Hindenburg
Economic expectations tumbled but rate hike expectations surged… labor market hopes rose but economic growth is expected to weaken… so buy stocks you retard! Artist's impression of the last 2 days in The Eccles Building…
And furthemore… *YELLEN SAYS FED STRONGLY BELIEVES 2008 AIG ACTIONS WERE LEGAL
The result of all this confusion… A 3rd Hindenburg Omen in the last 5 days…
Futures show the full day's vol…
Futures eneded up dumped back perfectly to VWAP…
Cash Indices on the day
Since Friday, Trannies remain ugly…
While stocks are back in the green from Friday, VIX remains higher
And Credit remains thoroughly unimpressed…
Bonds bought with both hands and feet…
The Dollar was monkey-hammered…
Gold and Silver stacked… (and crude and copper playing catch up)
* * *
Post FOMC performances…
Stocks…
Bonds…
Commodities…
Charts: Bloomberg
Bonus Chart: Still Confused after today's FOMC?
Someone found THE perfect gift for FOMC days. Especially when Yellen speaks -> http://t.co/h8YoYWyMoO $SPY $TLT pic.twitter.com/VeaTxqDqM6
— StockTwits (@StockTwits) June 17, 2015
- Greek Debt Committee Just Declared All Debt To The Troika "Illegal, Illegitimate, And Odious"
It was in April when we got a stark reminder of a post we first penned in April of 2011, describing Odious Debt, and why we thought sooner or later this legal term would become applicable for Greece, because two months ago Greek Zoi Konstantopoulou, speaker of the Greek parliament and a SYRIZA member, said she had established a new “Truth Committee on Public Debt” whose purposes was to “investigate how much of the debt is “illegal” with a view to writing it off.”
Moments ago, this committee released its preliminary findings, and here is the conclusion from the full report presented below:
All the evidence we present in this report shows that Greece not only does not have the ability to pay this debt, but also should not pay this debt first and foremost because the debt emerging from the Troika’s arrangements is a direct infringement on the fundamental human rights of the residents of Greece. Hence, we came to the conclusion that Greece should not pay this debt because it is illegal, illegitimate, and odious.
As we predicted over four years ago, Greece has effectively just declared that it will no longer have to default on its IMF (or any other debt – note that the dreaded “Troika” word finally makes an appearance after it was officially banned) simply because that debt was not legal to begin with, i.e. it was “odious.”
If so, this has just thrown a very unique wrench in the spokes of not only the Greek debt negotiations, but all other peripheral European nations’ Greek negotiations, who will promptly demand that their debt be, likewise, declared odious, and made null and void, thus washing their hands of servicing it again.
And another question: when Greece says the debt was illegal and it no longer has to make the June 30 payment, what will be the Troika’s response: confiscate Greek assets a la Argentina, declare involutnary default, sue it in the Hague?
Good luck.
From the full just released report by the Hellenic Parliament commission:
Hellenic Parliament’s Debt Truth Committee Preliminary Findings – Executive Summary of the report
In June 2015 Greece stands at a crossroad of choosing between furthering the failed macroeconomic adjustment programmes imposed by the creditors or making a real change to break the chains of debt. Five years since the economic adjustment programmes began, the country remains deeply cemented in an economic, social, democratic and ecological crisis. The black box of debt has remained closed, and until now no authority, Greek or international, has sought to bring to light the truth about how and why Greece was subjected to the Troika regime. The debt, in whose name nothing has been spared, remains the rule through which neoliberal adjustment is imposed, and the deepest and longest recession experienced in Europe during peacetime.
There is an immediate need and social responsibility to address a range of legal, social and economic issues that demand proper consideration. In response, the Hellenic Parliament established the Truth Committee on Public Debt in April 2015, mandating the investigation into the creation and growth of public debt, the way and reasons for which debt was contracted, and the impact that the conditionalities attached to the loans have had on the economy and the population. The Truth Committee has a mandate to raise awareness of issues pertaining to the Greek debt, both domestically and internationally, and to formulate arguments and options concerning the cancellation of the debt.
The research of the Committee presented in this preliminary report sheds light on the fact that the entire adjustment programme, to which Greece has been subjugated, was and remains a politically orientated programme. The technical exercise surrounding macroeconomic variables and debt projections, figures directly relating to people’s lives and livelihoods, has enabled discussions around the debt to remain at a technical level mainly revolving around the argument that the policies imposed on Greece will improve its capacity to pay the debt back. The facts presented in this report challenge this argument.
All the evidence we present in this report shows that Greece not only does not have the ability to pay this debt, but also should not pay this debt first and foremost because the debt emerging from the Troika’s arrangements is a direct infringement on the fundamental human rights of the residents of Greece. Hence, we came to the conclusion that Greece should not pay this debt because it is illegal, illegitimate, and odious.
It has also come to the understanding of the Committee that the unsustainability of the Greek public debt was evident from the outset to the international creditors, the Greek authorities, and the corporate media. Yet, the Greek authorities, together with some other governments in the EU, conspired against the restructuring of public debt in 2010 in order to protect financial institutions. The corporate media hid the truth from the public by depicting a situation in which the bailout was argued to benefit Greece, whilst spinning a narrative intended to portray the population as deservers of their own wrongdoings.
Bailout funds provided in both programmes of 2010 and 2012 have been externally managed through complicated schemes, preventing any fiscal autonomy. The use of the bailout money is strictly dictated by the creditors, and so, it is revealing that less than 10% of these funds have been destined to the government’s current expenditure.
This preliminary report presents a primary mapping out of the key problems and issues associated with the public debt, and notes key legal violations associated with the contracting of the debt; it also traces out the legal foundations, on which unilateral suspension of the debt payments can be based. The findings are presented in nine chapters structured as follows:
Chapter 1, Debt before the Troika, analyses the growth of the Greek public debt since the 1980s. It concludes that the increase in debt was not due to excessive public spending, which in fact remained lower than the public spending of other Eurozone countries, but rather due to the payment of extremely high rates of interest to creditors, excessive and unjustified military spending, loss of tax revenues due to illicit capital outflows, state recapitalization of private banks, and the international imbalances created via the flaws in the design of the Monetary Union itself.
Adopting the euro led to a drastic increase of private debt in Greece to which major European private banks as well as the Greek banks were exposed. A growing banking crisis contributed to the Greek sovereign debt crisis. George Papandreou’s government helped to present the elements of a banking crisis as a sovereign debt crisis in 2009 by emphasizing and boosting the public deficit and debt.
Chapter 2, Evolution of Greek public debt during 2010-2015, concludes that the first loan agreement of 2010, aimed primarily to rescue the Greek and other European private banks, and to allow the banks to reduce their exposure to Greek government bonds.
Chapter 3, Greek public debt by creditor in 2015, presents the contentious nature of Greece’s current debt, delineating the loans’ key characteristics, which are further analysed in Chapter 8.
Chapter 4, Debt System Mechanism in Greece reveals the mechanisms devised by the agreements that were implemented since May 2010. They created a substantial amount of new debt to bilateral creditors and the European Financial Stability Fund (EFSF), whilst generating abusive costs thus deepening the crisis further. The mechanisms disclose how the majority of borrowed funds were transferred directly to financial institutions. Rather than benefitting Greece, they have accelerated the privatization process, through the use of financial instruments.
Chapter 5, Conditionalities against sustainability, presents how the creditors imposed intrusive conditionalities attached to the loan agreements, which led directly to the economic unviability and unsustainability of debt. These conditionalities, on which the creditors still insist, have not only contributed to lower GDP as well as higher public borrowing, hence a higher public debt/GDP making Greece’s debt more unsustainable, but also engineered dramatic changes in the society, and caused a humanitarian crisis. The Greek public debt can be considered as totally unsustainable at present.
Chapter 6, Impact of the “bailout programmes” on human rights, concludes that the measures implemented under the “bailout programmes” have directly affected living conditions of the people and violated human rights, which Greece and its partners are obliged to respect, protect and promote under domestic, regional and international law. The drastic adjustments, imposed on the Greek economy and society as a whole, have brought about a rapid deterioration of living standards, and remain incompatible with social justice, social cohesion, democracy and human rights.
Chapter 7, Legal issues surrounding the MOU and Loan Agreements, argues there has been a breach of human rights obligations on the part of Greece itself and the lenders, that is the Euro Area (Lender) Member States, the European Commission, the European Central Bank, and theInternational Monetary Fund, who imposed these measures on Greece. All these actors failed to assess the human rights violations as an outcome of the policies they obliged Greece to pursue, and also directly violated the Greek constitution by effectively stripping Greece of most of its sovereign rights. The agreements contain abusive clauses, effectively coercing Greece to surrender significant aspects of its sovereignty. This is imprinted in the choice of the English law as governing law for those agreements, which facilitated the circumvention of the Greek Constitution and international human rights obligations. Conflicts with human rights and customary obligations, several indications of contracting parties acting in bad faith, which together with the unconscionable character of the agreements, render these agreements invalid.
Chapter 8, Assessment of the Debts as regards illegtimacy, odiousness, illegality, and unsustainability, provides an assessment of the Greek public debt according to the definitions regarding illegitimate, odious, illegal, and unsustainable debt adopted by the Committee.
Chapter 8 concludes that the Greek public debt as of June 2015 is unsustainable, since Greece is currently unable to service its debt without seriously impairing its capacity to fulfill its basic human rights obligations. Furthermore, for each creditor, the report provides evidence of indicative cases of illegal, illegitimate and odious debts.
Debt to the IMF should be considered illegal since its concession breached the IMF’s own statutes, and its conditions breached the Greek Constitution, international customary law, and treaties to which Greece is a party. It is also illegitimate, since conditions included policy prescriptions that infringed human rights obligations. Finally, it is odious since the IMF knew that the imposed measures were undemocratic, ineffective, and would lead to serious violations of socio-economic rights.
Debts to the ECB should be considered illegal since the ECB over-stepped its mandate by imposing the application of macroeconomic adjustment programs (e.g. labour market deregulation) via its participation in the Troïka. Debts to the ECB are also illegitimate and odious, since the principal raison d’etre of the Securities Market Programme (SMP) was to serve the interests of the financial institutions, allowing the major European and Greek private banks to dispose of their Greek bonds.
The EFSF engages in cash-less loans which should be considered illegal because Article 122(2) of the Treaty on the Functioning of the European Union (TFEU) was violated, and further they breach several socio-economic rights and civil liberties. Moreover, the EFSF Framework Agreement 2010 and the Master Financial Assistance Agreement of 2012 contain several abusive clauses revealing clear misconduct on the part of the lender. The EFSF also acts against democratic principles, rendering these particular debts illegitimate and odious.
The bilateral loans should be considered illegal since they violate the procedure provided by the Greek constitution. The loans involved clear misconduct by the lenders, and had conditions that contravened law or public policy. Both EU law and international law were breached in order to sideline human rights in the design of the macroeconomic programmes. The bilateral loans are furthermore illegitimate, since they were not used for the benefit of the population, but merely enabled the private creditors of Greece to be bailed out. Finally, the bilateral loans are odious since the lender states and the European Commission knew of potential violations, but in 2010 and 2012 avoided to assess the human rights impacts of the macroeconomic adjustment and fiscal consolidation that were the conditions for the loans.
The debt to private creditors should be considered illegal because private banks conducted themselves irresponsibly before the Troika came into being, failing to observe due diligence, while some private creditors such as hedge funds also acted in bad faith. Parts of the debts to private banks and hedge funds are illegitimate for the same reasons that they are illegal; furthermore, Greek banks were illegitimately recapitalized by tax-payers. Debts to private banks and hedge funds are odious, since major private creditors were aware that these debts were not incurred in the best interests of the population but rather for their own benefit.
The report comes to a close with some practical considerations. Chapter 9, Legal foundations for repudiation and suspension of the Greek sovereign debt, presents the options concerning the cancellation of debt, and especially the conditions under which a sovereign state can exercise the right to unilateral act of repudiation or suspension of the payment of debt under international law.
Several legal arguments permit a State to unilaterally repudiate its illegal, odious, and illegitimate debt. In the Greek case, such a unilateral act may be based on the following arguments: the bad faith of the creditors that pushed Greece to violate national law and international obligations related to human rights; preeminence of human rights over agreements such as those signed by previous governments with creditors or the Troika; coercion; unfair terms flagrantly violating Greek sovereignty and violating the Constitution; and finally, the right recognized in international law for a State to take countermeasures against illegal acts by its creditors , which purposefully damage its fiscal sovereignty, oblige it to assume odious, illegal and illegitimate debt, violate economic self-determination and fundamental human rights. As far as unsustainable debt is concerned, every state is legally entitled to invoke necessity in exceptional situations in order to safeguard those essential interests threatened by a grave and imminent peril. In such a situation, the State may be dispensed from the fulfilment of those international obligations that augment the peril, as is the case with outstanding loan contracts. Finally, states have the right to declare themselves unilaterally insolvent where the servicing of their debt is unsustainable, in which case they commit no wrongful act and hence bear no liability.
People’s dignity is worth more than illegal, illegitimate, odious and unsustainable debt
Having concluded a preliminary investigation, the Committee considers that Greece has been and still is the victim of an attack premeditated and organized by the International Monetary Fund, the European Central Bank, and the European Commission. This violent, illegal, and immoral mission aimed exclusively at shifting private debt onto the public sector.
Making this preliminary report available to the Greek authorities and the Greek people, the Committee considers to have fulfilled the first part of its mission as defined in the decision of the President of Parliament of 4 April 2015. The Committee hopes that the report will be a useful tool for those who want to exit the destructive logic of austerity and stand up for what is endangered today: human rights, democracy, peoples’ dignity, and the future of generations to come.In response to those who impose unjust measures, the Greek people might invoke what Thucydides mentioned about the constitution of the Athenian people: “As for the name, it is called a democracy, for the administration is run with a view to the interests of the many, not of the few” (Pericles’ Funeral Oration, in the speech from Thucydides’ History of the Peloponnesian War).
- PetroYuan Proliferation: Russia, China To Settle "Holy Grail" Pipeline Sales In Renminbi
Last week, in “The PetroYuan Is Born: Gazprom Now Settling All Crude Sales To China In Renminbi,” we discussed the intersection of two critically important themes which have far-reaching geopolitical and economic consequences. The first is the death of petrodollar mercantilism, the USD recycling system that has helped to buttress decades of dollar dominance and the second is the idea of yuan hegemony, a new, post-Bretton Woods world economic order characterized by the ascendancy of China-led supranational institutions.
These themes came together recently when it became apparent that Gazprom has begun settling all crude sales to China in yuan. Here’s a summary of the prevailing dynamics: Western economic sanctions on Russia have pushed domestic oil producers to settle crude exports to China in yuan just as Russian oil is rising as a percentage of total Chinese crude imports. Meanwhile, the collapse in crude prices led to the first net outflow of petrodollars from financial markets in 18 years, and if Goldman’s projections prove correct, the net supply of petrodollars could fall by nearly $900 billion over the next three years. All of this comes as China is making a concerted push to settle loans from its newly-created infrastructure funds in renminbi.
Now, it appears Russia and China will de-dollarize natural gas settlements as well.
First, a bit of history is in order.
Last month, Chinese President Xi Jinping visited Moscow, where Gazprom Chief Executive Alexei Miller and China National Petroleum Corp Vice President Wang Dongjin signed a gas export deal which paves the way for 30 bcm/y to China via a new “Western Route.”
(the Altai line)
As a reminder, the two countries ratified a “Holy Grail” gas deal last May for the delivery of up to 38 bcm/y over 30 years via an “Eastern Route.” Also known as the “Power of Siberia” pipeline, the Eastern route was billed as the largest fuel network in the world with a total contract value of around $400 billion.
(mapping the Western and Eastern routes)
(Putin autographs a pipe at the groundbreaking ceremony for the Power of Siberia line)
Once the two pipelines are operational, China will become the largest consumer of Russian natural gas.
Last year, when the countries were still hammering out the details of the Eastern line, we said the following about the implications of Western sanctions on Moscow:
If it was the intent of the West to bring Russia and China together – one a natural resource (if “somewhat” corrupt) superpower and the other a fixed capital / labor output (if “somewhat” capital misallocating and credit bubbleicious) powerhouse – in the process marginalizing the dollar and encouraging Ruble and Renminbi bilateral trade, then things are surely “going according to plan.”
If the recent move by Gazprom to settle crude exports to China in yuan wasn’t enough to prove how prescient the above cited passage truly was, then consider the following quote from Gazprom yesterday:
“As a sales contract is not signed, then, of course, the currency of payment has not yet been determined. However, the Chinese side and the Russian side are discussing today and are in intricate negotiations on the possibility of paying in yuan and rubles.”
In other words, once both routes are up and running, some 68 bcm/y in natural gas exports from Russia to China will be settled in yuan amounting to hundreds of billions in renminbi settled trade over the life of the deals.
Now recall what we said last year about the “new normal” flow of funds…
- Gazprom delivers gas to China.
- China pays Gazprom in Yuan (convertible into Rubles)
- Gazprom funds itself increasingly in Yuan.
- Russia buys Chinese goods and services in Yuan (convertible into Rubles)
…and connect the dots to what Barclays recently said about the long-term benfits to Beijing of funding infrastructure projects (like the Moscow-Kazan High Speed Railway, in which China will invest nearly $6 billion) via China’s new Silk Road Fund…
China could benefit in the short, medium and long term from achieving various levels of the targets outlined in YDYL. Medium-term: Raise demand for Chinese capital goods and Chinese products in general, effectively helping China transition to a consumption-driven economy.
Putting this all together, China, via both the settlement of energy exports from Russia in renminbi, and yuan-donminated loans from The Silk Road fund, can effectively create its own, closed-loop yuan recycling system with Russia which should, over time, serve to facilitate China’s transition away from a smokestack economy, while helping to relieve industrial overcapacity (note that earlier this month, China Railway Group won a $390 million contract for work on the Moscow-Kazan rail).
This is not conjecture. Rather, all of the above is part of a carefully crafted plan to embed the yuan in global trade and investment just as dollar dominance dies a slow death in the face of declining US hegemony and the resurgence of a multipolar economic and political order.
- Did Yellen Just Throw Greenspan/Bernanke Under The Bubble-Blowing Bus?
Reflecting on the rate hikes undertaken in the 2004-2006 period (ensuring the world not think that The Fed would repeat that) Janet Yellen appears to have thrown Greenspan and Bernanke under the bubble-blowing bus with an off the cuff comment that “with hindsight, The Fed should have hiked rates faster,” during that period…
Which is odd since we assumed it was The Fed’s job to inflate financial assets to prove the real economy was doing great?
- How to Enhance Your Circle of Competence
By Chris at www.CapitalistExploits.at
A conversation with an investment promoter, let’s call him Mr Y, from many years ago came to my mind today when reading the news. It went something like this:
Mr Y: “You HAVE to take a closer look at this.”
Me: “No, thanks. Not for me.”
Mr Y: “No, really, you have no idea what you’re missing.”
Me: That’s probably the case.
Mr Y: “This is a huge dollar payoff right here. I know the guys behind this and they’ve got incredible resumes. The thing is literally “in the bag”. You do realize that I’m offering this to you especially so as to build a long term relationship with you? I could have it oversubscribed very quickly but I’m offering you an opportunity to get an early seat at the table.
Me: It sounds very exciting. You should put some money in.
Mr Y: “F*@k man, you have to be THE most stubborn person in the world! I can’t believe you won’t even take a look at this opportunity. You’ll immediately see the potential here. I was introduced to you by X and led to believe you’re a smart investor with a keen eye for good deals but you’re being a complete ass about this.”
Me: I know. Sometimes I just don’t get it. I blame my upbringing…
I was being pitched a movie deal. I don’t do movie deals. Period. I don’t even watch movies unless on a plane. I know of exactly zero people who have ever made money on movie deals. What edge do I have in that market? Nada!
This particular gent’s critical error was that he’d not done his homework on me. Anyone who knows me knows I have no interest in movie deals and I am definitely not THE most stubborn person in the world.
There are at least 3 others more stubborn in the world. I did some research and there is a guy in Dublin who is at risk of turning in to a mule because he’s so stubborn. Then there is an old lady in Shropshire who, even under hypnosis, is unmovable in her stubbornness. And then there is a 5-year old kid in Beverly Hills who is easily more stubborn than I am.
In truth, I should never have spent more than a few seconds of time on that pitch. I should have insisted on him sending me a dropsheet before taking a call. This was a self inflicted wound. I’ve learnt a few things since then.
I was reminded of that conversation this morning when I read that rapper Snoop Dogg is looking to raise $25M for his cannabis focused VC fund aptly called Casa Verde Capital. For non-Spanish speakers amongst us, “casa verde” in Spanish means “green house”.
Entertainer and investor Snoop Dogg is looking to raise $25 million for his new venture fund, Casa Verde Capital, shows an SEC filing first flagged by Fortune’s Dan Primack.
Among the outfit’s most recent investments: Eaze, a medical marijuana delivery service in California that raised $10 million in April led by DCM Ventures.
This brings up a core tenet of successful investing: to operate within one’s core set of competencies. Snoop Dogg probably has a better chance of making money in the “pot” space than I do in the movie space.
By focusing on marijuana, Snoop Dogg is at least operating within his “circle of competence”.
Of course, investing in a dope operation, and smoking the product are far from the same thing so we’ll have to see how this all pans out.
The legendary Berkshire Hathaway’s Warren Buffett and Charlie Munger are vocal ambassadors of “the circle of competence”.
In his 1996 Shareholder Letter, Warren Buffett said:
What an investor needs is the ability to correctly evaluate selected businesses.
Note that word “selected”. You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence.
The size of that circle is not very important; knowing its boundaries, however, is vital.
One method of tackling the vast and somewhat difficult world we live in is by partnering with competent partners, colleagues and associates.
I know of few successful businesses, which are one-man bands. It’s why we tend to dislike single founder businesses.
We’re well aware of our chances being slimmer by going into it alone. We seek out people in various sectors, or countries, who are operating within their own circle of competence. This provides leverage for us since it’s not possible to be the fountain of knowledge for all things everywhere all the time.
Photo by Farnam Street
By sticking to your area of expertise, you have an information edge over other investors. And by seeking out those who are competent in their own fields of expertise, it’s possible to grow one’s knowledge base as well as leverage others skills and talents.
When I think of all the most successful people I know, from hedge fund managers to company executives, they all share the common trait of sharing knowledge and seeking out others more knowledgeable than themselves in order to share and gain knowledge.
The core premise of capitalism, true capitalism, not this half-breed mongrel of a creature that people mistakenly term capitalism, is based on sharing of knowledge where participants can interact value for value. Knowledge transfer allows for one’s circle of competence to grow and become more robust.
In sharing of knowledge, we are bound to make fewer mistakes and our chances of investment success – or any other success, for that matter – are significantly higher.
It is probably the number one reason I write and I can’t thank you enough for all the feedback provided. If I don’t reply to you it’s because I’ve not cloned myself yet, but I do read all emails.
– Chris
“I’m no genius. I’m smart in spots – but I stay around those spots.” – Tom Watson Sr., Founder of IBM
- Did Janet Yellen Just Ban A Reporter From The Fed Press Conference For Asking "Difficult" Questions
Ripped from the pages of “House Of Cards,” it appears that the asking of difficult questions of she-that-shall-be-obeyed is entirely unacceptable to Janet Yellen and her Fed.
In March – the last Q&A session post-FOMC statement, Dow Jones reporter Pedro da Costa dared to ask about The Fed’s leaking of crucial details about FOMC decisions to a newsletter and its subsequent refusal to comply with Congressional demands for those details.
The difficult question starts at around 45:30 – look at Yellen’s face when asked the question for a clue as to her next move.
Yellen displeased:
PEDRO DA COSTA. Pedro da Costa with Dow Jones Newswires. I guess I have two follow-ups, one with regard to Craig’s question. So, before the IG’s investigation, according to Republican Congressman Hensarling’s letter to your office, he says that, “It is my understanding that although the Federal Reserve’s General Counsel was initially involved in this investigation, the inquiry was dropped at the request of several members of the FOMC.” Now, that predates the IG. I want to know if you could tell us who are these members of the FOMC who struck down this investigation? And doesn’t not revealing these facts kind of go directly against the sort of transparency and accountability that you’re trying to bring to the central bank?
CHAIR YELLEN. That is an allegation that I don’t believe has any basis in fact. I’m not going to go into the details, but I don’t know where that piece of information could possibly have come from.
PEDRO DA COSTA. If I could follow up on his question. I think when you get asked about financial crimes and the public hears you talk about compliance, you get a sense that there’s not enough enforcement involved in these actions, and that it’s merely a case of kind of trying to achieve settlements after the fact. Is there a sense in the regulatory community that financial crimes need to be punished sort of more forcefully in order for them to be—for there to be an actual deterrent against unethical behavior?
CHAIR YELLEN. So, the—you’re talking about within banking organizations? So, the focus of regulators—the banking regulators—is safety and soundness, and what we want to see is changes made as rapidly as possible that will eliminate practices that are unsafe and unsound.
We can’t—only the Justice Department can bring criminal action, and they have taken up cases where they think that that’s appropriate. In some situations, when we are able to identify individuals who were responsible for misdeeds, we can put in place prohibitions that bar them from participating in banking, and we have done so and will continue to do so.
True… and the Justice Department can also bring a criminal probe for leaks at the Fed itself as was disclosed shortly after the above exchange, a probe which may very well implicate anyone, including Janet herself hence her eagerness to avoid any “touchy” questions today.
Social media had already asked whether Mr. da Costa would be allowed back:
The big FOMC Question today: will Janet take questions from @pdacosta after he was a big meanie recently?
— Volatility B$ (@nelson3748) June 17, 2015
And his response:
@nelson3748 (Too) easy answer: @pdacosta won’t even be there.
— Pedro da Costa (@pdacosta) June 17, 2015
As a result of all this, Mr. da Costa – with no apparent reason given – was not ‘invited’ to today’s FOMC Press Conference (but had a request of his fellow press corps):
Fellow Fed reporters: Not attending today’s press conference but please don’t forget to press Yellen on handling of possibly-criminal leak.
— Pedro da Costa (@pdacosta) June 17, 2015
But why would they if merely asking the almighty Yellen what the state of the Fed’s now officially criminal investigation, is enough to get them barred?
As a reminder, two weeks ago we reported the Committee on Financial Services subpoenaed the Fed for records related to the central bank’s review. The Fed declined to comply in full citing the ongoing criminal investigation. More specifically, Yellen says the OIG has advised the Fed that providing access to the information requested by congress would risk “jeopardizing the investigation.” As in “Yellen refused to comply.”
the Fed says it cannot comply with a Congressional subpoena regarding an alleged leak due to the fact that producing the requested documents could ultimately result in… a leak.
Of course this could all be coincidence, but do we know if any other reporters who have been dis-invited? Is there a room constraint that means a Dow Jones reporter is squeezed out by BuzzFeed or TMZ?
And now back to praising the freedom of speech and press in the land with the great and almighty First Amendment… which is granted to everyone as long as they remember to never actually use it.
That, and of course hearing the “questions” of that other WSJ/Dow Jones staffer, Jon Hilsenrath, who will surely be present and maybe ask Yellen for a follow up to his legendary op-ed asking why US consumers are so “stingy” despite 7 years of Fed central planning and “wealth effect.”
- FOMC Press Conference: Yellen Explains Why Everything Will Be Awesome In The Future – Live Feed
Upgrades to labor market (despite downgrades to economic growth), upgrades to rate hike expectations (despite IMF warnings and downgrades to economic growth) and upgrades to being beyond the law (despite Congressional lambasting)… But do not be confused, Yellen will explain how it all makes sense (and if she can’t will mumble and curse and move on)…
- *YELLEN: WAITING TOO LONG TO RAISE RISKS OVERSHOOTING INFLATION (in financial assets?)
- *YELLEN SAYS POLICY MOVES TO DEPEND ON WIDE RANGE OF DATA (any excuse)
- *YELLEN: WHAT SHOULD MATTER TO MARKETS IS THE ENTIRE POLICY PATH (Do Not Sell!)
- *YELLEN SAYS THERE HAS BEEN SOME PROGRESS ON INFLATION (but do not sell)
- *YELLEN SAYS DOLLAR APPEARS TO HAVE LARGELY STABILIZED (with extreme volatility)
- *YELLEN SAYS FED DOESN’T EXPECT TO FOLLOW MECHANICAL RATE MOVES (because evereyone knows this will go pear-shaped)
- *YELLEN SAYS IT MIGHT HAVE BEEN BETTER TO TIGHTEN FASTER 2004-06 (ya think!!!)
- *YELLEN SAYS FED TRIES TO BE TRANSPARENT, ACCOUNTABLE (apart from when Congress asks)
We are waiting for The Congressional Leak Probe question…
Live Feed begins at 1430ET (with Q&A shortly after)…
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Next Question: How awesome are you? A little bit, medium amount, or freakin’ epically awesome? pic.twitter.com/j7Nhte4pO8
— Rudolf E. Havenstein (@RudyHavenstein) June 17, 2015
- Broad Decline In "Dot Plots" Suggest Fed Rate Hike Confidence Shaky
While virtually every single word change from the June statement compared to the April document shows a Fed that is increasingly more confident in the economy, the reason why the dollar has encountered a sudden air pocket following the Fed release is not due to the statement but what is in the Fed’s projection materials, where the Fed unambiguously cut its 2015 GDP central tendency forecast from 2.3%-2.7% in March to just 1.8%-2.0%, coupled with a pick up in the unemployment rate from 5.0%-5.2% to 5.2%-5.3%, suggesting quite implicitly that while on one hand the Fed is more optimistic, when it comes to quantitative metrics it just got that much more bearish.
But nowhere is the Fed’s ambivalence more evident than in the latest dot, or dart as we call them, plots of where every single FOMC member expects the Fed Funds rate at the end of 2015 and 2016. The wholesale drop in FF expectations, from 1.875% in March to 1.625% currently for 2016, is quite clear and suggests that while 15 people said it was time to hike rates in 2015 (vs 2 in 2016), their conviction is even lower than 3 months ago.
2015 dot plot:
And 2016:
And for those asking, here is the 2015 dot plot from June of 2014 compared to the latest one.
- FOMC Reaction: Bonds & Bullion Bid… Dollar Dumped
Update: Stocks reverting…
The kneejerk reactions so far are Dollar down hard and bullion, bonds, and stocks bid… let’s see if Yellen can keep that going…
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