Submitted by Thad Beversdorf via First Rebuttal blog,
Lately, we hear a lot about Orwell’s “1984″ and Rand’s “Atlas Shrugged” but perhaps the best crystal ball to our current state of affairs is Plato’s Republic. You see both Rand and Orwell were describing a world outside of themselves. A world they couldn’t understand or accept. And while those works are brilliant and incredibly prophetic, I expect that to understand a world borne of narcissistic sociopathy one must examine the construct of such a world by a narcissistic sociopath. Fortunately Plato, perhaps the world’s most (in)famous narcissistic sociopath, provided us a vivid illustration and explanation of his ideal state in “Plato’s Republic”. Plato provides us the why to Orwell’s and Rand’s ‘unideal’ states.
Plato provides the arguments for the philosopher kings. He also describes various levels of reality, arguing that each societal demographic must live within the reality level delegated to them. He argues each demographic has a limited intellectual capacity and thus can only handle the reality level provided to them. With the philosopher kings being the only societal demographic with the right to and capacity for absolute truth. Likewise, the philosophers kings in the world we find ourselves today control each and every aspect of life including our subsequent perception the world. There is no such thing as happenstance.
The market moves a certain direction not because of unexplained market forces but because the philosopher kings have made it so. Economic policies are creating incredible wealth for the already wealthy while destroying the middle class not because of honest misjudgements or the need for more time but because the philosopher kings make it so. The Fed dropped the U3 unemployment rate as a benchmark because it does not meet their standard of truth but expects the rest of us to consider that true unemployment. Declining GDP is ignored while adjusted indicators signalling GDP is healthy are paraded all over the street because the philosopher kings make it so. A Malaysian airliner is shot out of the sky not by things yet unknown but because the philosopher kings make it so.
As in Plato’s Ideal State, today’s philosopher kings are the only ones with the right to and capacity for (as decided by them) absolute truth. The rest of us live within the realities provided for and to us. We are handed the explanations and when the explanations don’t suffice the subject matter disappear altogether; refer to Ukraine, Ebola, Malaysian airliner, Benghazi, Fast & Furious, IRS criminality, NSA, Breitbart and the Constitution, etc. We the people take what we are fed in stride and in line with our respective places in the hierarchy of truth. If we dare challenge the hierarchy of truth, as men like Snowden have attempted, we are exiled with a bounty on our head. Or for minor offences such as providing the truth behind declining same store sales your career is taken from you like Bill Simon, ex Walmart CEO who was fired for stating that Americans are buying less because they have less income than before. The philosopher kings make it so.
The facts are we will never know the facts.
We will know but a shadow of truth as ascribed to us by the philosopher kings as described by Plato’s Cave Parable. This is how a handful of men and women control billions of people, the same way 20 cowboys control 30K head of cattle. We are provided food, shelter, safety and fear and in return we are provided a certain reality from which we must live. So long as we remain within our respective realities we will be granted comfort. However, if we attempt to break through a level of truth or worse bring others with us, the heavy hand of the philosopher king will find us by way of the guardian class. In our world we become a threat to national security and once we adorn that scarlet letter all rights that were once guaranteed by the Constitution disappear. The Constitution states no person or law supercedes it, however, by way of executive order the chief philosopher king has granted the philosopher kings a level of authority that supercedes that of the Constitution. And as comfortable cattle do, we paid no attention but strode forward with the herd.
So for those inclined to not only reflect on the prophetic worlds of Orwell and Rand but to understand the arguments for such a world by the philosopher kings themselves, refresh yourself with a read of Plato’s Republic. For wars are won not by force of might but by force of knowledge. Plato was correct in understanding that freedom is found in knowledge. If we accept a shadow of truth we will enjoy a shadow of freedom. But if we fight for absolute truth we will win absolute freedom.
In the final part of Hugh Hendry's 3-part (part 1 and part 2 here) interview with MoneyWeek's Merryn Somerset Webb the sanguine Scot, perhaps surprisingly to some given his previous negativity - though fitting with his world view of fiat currency destruction - believes "to bet against China or Chinese equities, or the Chinese currency is to bet against the omnipotence of central banks. One day that will be the right trade, just not ready or sure that that is the right trade today."
Merryn Somerset Webb: That brings us, I guess, to China. You were one of the first to point out the native problems in China. Your rather amazing video wandering around empty housing estates, etc, which I think was pretty well watched. What’s your view now?
Hugh Hendry: I think my view would surprise you. Before I surprise you, I would like to seek legitimacy of my view by telling you that I have made money. It’s been my most successful profit centre in the year to date, and we’ve made over 5% trading in China-related macro themes. In terms of surprising you, I am more sanguine about China. Actually I’ve been rather impressed by their policy responses over the last two years.
When I look at China, China has got two components. It’s got this manic investment gross capital formation and in something which has been deepening these global deflationary fears, because they kept expanding over capacity industries such as cement and steel and undermining prices in the rest of the world. That in itself lowers these inflation figures below Central Bank targets. It becomes reflexive and then the central bank says “Crikey, I’ve got to be radical here. I’ve got to buy equities”. So there’s been that going on.
On the other hand, there’s been a robbing Peter to pay Paul, and China’s had a decade which has been very, very similar to that of the US in the 1920s. The US, people forget this, but Liaquat Ahamed – I’ve just destroyed his name, forgive me, but the Lords of Finance author – I reread it recently and I was very taken by the notion of how mean the Fed had been in the 1920s.
Again, I say it to you with cathartic crisis, the response of the rest of the world is to be long dollars invested in America and that was certainly the case in the 1920s. But America was recovering nicely from the Great War and it had this incredible productivity revolution. There was great demand for credit and so it was fine on its own.
But the rules of the gold standard meant that, as Europe pushed all this easy credit to America via the manifestation of these gold bonds, the US growth should have been even more intense. But the Federal Reserve had a moral obligation, as part of the game of the gold standard, to let loose that gold into the economy via bank lending. It didn’t. It was very, very ‘hard money’ doctrinarian and it withdrew that gold and it buried it deep in the vaults.
It’s never really been reflected upon. Because we just know that America boomed. The argument is it should have boomed even more, and if it had done so with even greater ferocity, and this is counter-factual, Niall Ferguson will kill me, but…
Merryn: It’s all right. He’s not here.
Hugh: …but if it had, then perhaps it could have resuscitated, especially poor old England or Britain, which had got on the gold standard in 1925. A desperately poor moment. It would have given it the rationale that you went on for the rules and the other guy, the big guy who didn’t play the rule, he got squashed. So counter-factual. And, I think it would have created more price inflation. So the US race would have spent a decade on the floor, and asset prices, they would still have bubbled, but I think the bubble would have been earlier and it could have been dealt with. Counter-factual.
Merryn: We’ll never know about that. But how is that connected to China?
Hugh: So the meanness… China’s had a very similar decade where such were the huge returns on investment on offer because land prices are low, labour’s low. You can borrow money. The currency’s cheap, so you wanted to manufacture. You want to have business in China. So the rest of the world en masse, it’s like that gold transfer from the 20s, this time there’s going to be a fiat money in institutional portfolio allocations into China. So China should have boomed.
Yes, it did. It boomed. But it should have boomed even more. Rather than growing at 10%, it should have been 20%. I’m making these figures up. The reason it didn’t was that they, as I said, they rob Peter to pay Paul and they took the great bounty of the productivity leap that their household sector, their workers were achieving, they got paid more. But they should have got paid way more and their currency appreciated, but it should have appreciated way more.
And they’ve got negative interest rates when they put this hard-earned capital back into this system. So they got screwed, if you will, on three fronts. As a result consumption declined. It didn’t decline because they were just more cautious and these incredible Asians that just want to save. Nonsense. Their income got constrained versus its capability. So consumption incredibly lowers the potential GDP and this manic deflationary Capex boom, very high. The last three years it looks as if they’ve sought to challenge them.
The bullish take on China is this 35% of DP, through proper husbandry, that could continue to expand 10% per annum. That underwrites a 4% floor to the Chinese economy if you do the maths. So how would you do that? Well, you would take away these negative interest rates. Tick, they’ve done that. Either in the misfortunate means of the higher risk from these wealth management products, but with these internet platforms offering money market rates.
So there is a movement. The currency has appreciated, much to the chagrin of those at the beginning of the year who said, “Well, it’s going to devalue” and they’re going to tell you that it’s going to devalue.
On the currency, again valuations, fugazi, pugazi. When I look at it, I see an economy where the urban population’s fully employed. I don’t see an inflation problem and it seems to be able to compete in the world and it’s finely balanced. So is the currency overvalued, undervalued? It’s kind of close to fair value, yeah. We’re long in the currency usually.
Lastly, just on that, wages. Wages have grown at a tear. So the consumer is enjoying a dramatic relative improvement in its lot. I think that’s one argument that doesn’t get a mention. So the notion of a Chinese devaluation would be exactly the wrong policy. Because, of course, you would then be killing the household sector again. The goose that could lay the golden egg has to be cherished, and it needs a rising currency, I would argue.
Merryn: But you’re assuming that the correct policy will be followed.
Hugh: Well, it has been to date. That they haven’t panicked and gone into that crazy splurge in 2009-2011, they haven’t done that. Then the other point with China it’s a bit like the US It’s had its excess. The problem in the US was it was felt intently with the private banking system which went bankrupt. But, and this is not counter-factual, what if you owned, what if the state is the banking sector? Does it have a Minsky moment? I’d say it doesn’t.
So the whole game with Fed QE was to underwrite the collateral values, to keep the credit system moving. So it aimed its fire at mortgage obligations more than Treasuries. The whole deal with LTROs in Europe has been again when investors at volume banks at 40%-60% discounts to asset volume, the central bank’s coming in and saying, “Actually we’ll buy it from you at full value or something higher. So we are going to endorse the collateral of your assets.”
In China it’s the same deal. They’re fiat currency and they can get away with this. So to bet against China or Chinese equities, or the Chinese currency is to bet against the omnipotence of central banks. One day that will be the right trade, just not ready or sure that that is the right trade today.
Merryn: So yes, what are your China trades now? This is a technical trade, but we have been paying interest rates in the offshore market.
Hugh: So interest rates, the Chinese currency for many, many years has appreciated at an incredibly un-volatile manner. So you’ve been able to borrow money very, very cheaply by going long with CNH. Then through surreptitious means, such as the over-collateralising of bills of credit, or using commodities. But, through guile, if you can take that cheap money and get it onshore, then you can invest in a wealth management product from the guy down the street at 15%.
So it costs you, it costs the capitalists 1%. It’s 15% when you go to pay it back in a year’s time your liability’s been diminished because it was the biggest, biggest carry trade of all time.
Our argument was, you know, China, still has this insatiable desire and indeed requirement for capital. It needs money. So it made sense as we looked at it at the beginning of the year. They had to form a legitimate bridge to tap this cheap money that was residing offshore and bring it, through a legitimate manner, onshore. And if you can do so and the latest incarnation of that would be this ‘Connect’ scheme, between the Shanghai and the Hong Kong markets.
But they’ve also developed enterprise zones where you can do that free exchange from the offshore to the onshore and a host of other developments. The net result of that is that you would get a rates convergence and a great, great macro trade of 15-20 years ago was the European rates convergence. They were very high in the periphery and you’d come down to the centre.
There was a notion that these very low rates in China offshore would come up to the levels that prevailed domestically. That’s pretty much come to pass. We’ve made money from that trade. But why we’ve especially liked it, is that because you’re paying rates, if I’m wrong with my sanguine take on where China is today and there truly is a liquidity crisis and a banking crisis, what do you get? You get these shy bodies inter market rates. They shoot up, and the liquidity gets withdrawn from the offshore market. I’m paying those rates, so if they go up… I made a lot of money.
Merryn: So the trade works either way.
Hugh: Either way. Which is, really if we started this conversation define what makes it either macro or a good macro it’s finding trades of that nature.
Merryn: Okay. And other trades in China?
Hugh: Well, I guess the other prominent trade… Well, we have the currency. The currency we are in the grips of evaluating whether we are moving onto this, a new bull market for dollars and clearly the sensitivities, as we discussed on the renminbi. We’re long the renminbi via options, and again because vol was so low, I can get a big exposure. But should it be that the dollar begins to precede the crisis, the renminbi we can turn that into vol trade and vol is very low. So if you were to get an event… I don’t think you’ll get an event.
But if China was to have the misfortune of Korea or Thailand, etc, in the late 1990s and you had a 40%-50% devaluation, the volatility would go from like 2.50% to 82%, you’d just make a fortune. So we can tailor… so we have that. We don’t think that’s going to happen and we think the most likely path is the currency appreciates. But we can rapidly adjust it, if that view changes and suddenly there’s this huge vol and we’re protected.
Merryn: It’s another trade that works both ways really.
Hugh: Yeah. And then the last trade which works only one way is that if we are correct in our notion that the terms of trade are dramatically improving for the Chinese household sector. Then what’s your closest proximity to the household spending bonanza in China and it’s the Internet giants. So we’re in long the Baidus and Tencents of this world, we just think, and again, valuations are high, but the growth rates are high.
Merryn: It’s another area where you don’t care about the valuations at the moment.
Hugh: Not at this moment. No.
Merryn: OK. Tell me what your favourite of all those trades are? Not just the Chinese ones, every one. Everyone has a most loved trade and a most loved market.
Hugh: I don’t. That’s a hard question.
Merryn: Okay. Let me turn it round. What would make you saddest if it failed?
Hugh: I deal with failure all the time. Failure is part and parcel, it’s moving on from failure. What would make me saddest and again it’s this notion of good hedge funds is that you never fear that the consequences of your risk taking. You don’t fear the consequences of being wrong. And such is the way we put our book together that’s the space I am in.
So I struggle to answer the question because a failure for me is not being contentious. It’s not being actively engaged because if you can put it together properly in your portfolio, who cares if you’re wrong? It’s boring. Move on to the next. There’s always another trade.
Merryn: There’s always another trade. Thank you, Hugh.
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The thoughtful, wordy Scot has given investors a lot of contrarian food for thought so we figured a re-reading of his "throw in the towel" letter to investors would be worthwhile...
To date, the experiment with economic growth in Asia has succeeded as an almost direct result of the re-leveraging of the American economy since interest rates began to fall in the early 1980s.
The Japanese authorities blazed a trail on this for everyone to follow. It kicked off with (yet) another credit cycle gone wrong. In the 1970s there was a bubble in lending to Latin American governments. That was popped by Paul Volker's tightening of US monetary policy. Latin American currencies tumbled and sound currencies soared. Except the yen. Japan had a central plan for economic self-sufficiency - one that required a positive current account and endless rounds of domestically funded investment. They did not want a strong currency, low cost imported goods and a consumer boom or anything else that might have risked future trade deficits. So they worked to keep the yen from appreciating too fast, too soon. How? The Bank of Japan created yen and bought Treasuries. This money found its way into the local banking system (as new money does) where it was soon turbo-boosted by foreign capital inflows: overseas investors were attracted by the corporate profits produced from the loose policy and pretty pleased with the way in which a persistently undervalued exchange rate made asset prices cheap to foreign investors. Chuck in fractional reserve banking, and risk-seeking bankers and it was inevitable that asset prices would surge. The rest is history. Equity prices, ignoring all qualitative objections to bubble valuations, quadrupled. Then they crashed.
First Japan. Now China.
To understand today's story we have to leave Japan (reluctantly — we'll come back to it), and travel 20 years later to China, where the same pattern has been repeating itself.
Just be long. Pretty much anything.
So here's how I understand things now that I am no longer the last bear standing. You should buy equities if you believe many European banks and their sovereign paymasters are insolvent. You should buy shares if you put a higher probability than your peers on the odds of a European democracy rejecting the euro over the course of the next few years. You should be long risk assets if you believe China will have lowered its growth rate from 7% to nearer 5% over the course of the next two years. You should be long US equities if you are worried about the failure of Washington to address its fiscal deficits. And you should buy Japanese assets if you fear that Abenomics will fail to restore the fortunes of Japan (which it probably won't). Hey this is easy...
And then it crashed
I have not completely lost my senses of course. Eclectica remain strong believers in the most powerful force in the universe - compounding positive returns - and avoiding large losses is crucial to achieving this.
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As recently reported by the Project On Student Debt, 7 in 10 seniors who graduated from public and nonprofit colleges in 2013 had student loans, with an average debt load of $28,400 per borrower. This represents a two percent increase from the average debt of 2012 public and nonprofit graduates. It is also a new record high.
Those curious about the geographic breakdown of the student debt burden by state, can do so at the following interactive map:
It goes without saying that while student debt is bad, record student debt - which at the Federal level amounts to over $1.2 trillion and rising exponentially - is worse.
In fact, as shown previously, the unprecedented debt burden on the Millennial generation has been used to explain why the largest generational cohort in US history is unable to carry the weight of the economy on its shoulders, why the Millennials are perhaps the most financially disenfranchised generation, and why the labor force participation rate has collapsed in the past five years, as older workers rush back into the work force (thanks to ZIRP crushing the value of their savings) while young Americans chose to remain in university (where they can take remedial high school classes among other things) and out of the labor force in hopes of holding out a better job market (for the 6th year in a row).
However, since all college educations are most certainly not created equal, one outstanding item has been the debt breakdown by field of study, or major.
This is where the latest project and research paper from the Hamilton Project, which comes in handy. It examined earnings for approximately 80 different majors and as the NYT summarizes, allows people to look up typical debt burdens by major, over the first decade after college – which is when people tend to repay their loans.
The project authors note that for the graduate with typical debt level and earnings, payments under the standard 10-year repayment plan take up 14.1% of earnings in the first year, but gradually fall to only 6.5% of earnings in the tenth and final year. This repayment strategy, however, can place a particularly heavy burden on graduates from majors whose earnings start low before rising later in the career. For these students, college may not provide the cash flow needed to easily pay off loans in years immediately following graduation.
The study's four conclusions:
- Debt burdens vary a lot across majors. In the sixth year of repayment, typical drama, music, religion and anthropology majors are still devoting more than 10 percent of their earnings to loan repayment. Other majors with fairly high early repayment burdens include philosophy, psychology and education. By contrast, engineering, computer science, economics and nursing majors are paying 6 percent or less of earnings in their sixth year.
- In the first five years after earning a bachelor’s degree, the typical student receives a 65 percent raise. (This rise for an individual person, as she ages and becomes more experienced, is occurring even as pay growth across the economy is weak. Today’s 30-year-old is making more than he did at 25, but not much more than a 30-year-old was five years ago.) Unfortunately in recent years, wage increases have become deminimis, suggesting that this may no longer be uniformly true.
- Many of the majors that pay the least directly out of college also have the biggest raises in the first few years. Graduates who major in therapy professions, nutrition or fine arts, for instance, all make less than $20,000 coming out of college, but all see their pay more than double in the first five years. A typical nurse, by contrast, makes almost $45,000 in the first year but receives about a 20 percent raise over the next five years.
- The growth of earnings for most college graduates means that some of the discussion about student debt has the wrong focus. The overall amount of debt isn’t a problem for most graduates: The typical debt, for someone who has debt, is about $26,500, a manageable sum in most college-graduate careers. The problem for many, instead, is when they must repay their loans: early in their careers, when they’re making the least. In some majors, including health education and drama, the typical graduate with debt must devote an imposing 25 percent of her earnings in the first year out of college to loan repayment. “Repayment issues for the bulk of students,” Mr. Hershbein says, “are a matter of timing, not the amount of student debt.”
And since more and more students seek the safety of college to avoid the "hardship" of a job that pays less than your average Millennial expected, or though they were worth, and thus are forced to dilute their field of study and pick increasingly less monetizable majors, it becomes a Catch 22 whereby students increasingly find it impossible to overcome a staggering debt burden early on in their career, which in turn hinders normal career formation, and skews the economy adversely leading to such unintended consequences as the Fed looking at a sub-6% unemployment rate, while the slack-filled economy has rarely if ever been weaker and real wages are at same level as during the Lehman collapse.
Below is the student loan repayment calculator that shows the share of earnings necessary to service traditional loan repayment for 80 majors. Readers can choose or search from each of these majors, as well as change the size and features of the student loan using the selection boxes above. By default, loan features reflect the experience of a typical graduate borrower, and earnings include part-time workers and those who experience unemployment throughout the year (but exclude those with graduate degrees, as these individuals often accumulate additional debt).
Feel free to play around with the interest rate selector: it shows yet another reason why the regime simply can not afford to send interest rates levitating higher despite the optical effect it would have on expectations for an "economic recovery."
In retrospect it is clear why 24% of Millennials (and rising) "Expect" student loan forgiveness, and why increasingly more private (and soon public) lenders are starting to grant it.
First off let me make this statement plain and simple before one reads any further. This is not a hit piece, nor an effort to take swipes at Tony Robbins or worse, some feeble attempt at click-baiting.
I have been a true fan since he first hit the motivational stage decades ago. However, just as I am what many would call an Apple™ “fan-boy” (which I am) it doesn’t stop me from pointing out issues where I see a compelling reason to do so.
As I’ve stated before, I mean it in a manner the same way one would criticize a family member when they are either doing something that doesn’t make sense, or something other. Nothing more, nothing less.
I don’t know Mr. Robbins personally, but for this discussion please excuse the liberty I take with using “Tony.” It just makes the writing easier.
Like many I was intrigued to see Tony has a new book. His first in over 20 years. When I read the title, “MONEY Master the Game: 7 Simple Steps to Financial Freedom,” (2014 Simon & Shuster) I was both intrigued as well as apprehensive. Why?
It’s basically this: I’m also in the same field (e.g. entrepreneur, motivational speaker, coach, et al) as Tony. And my writings and thoughts on money or markets sometimes appear in some of the same arenas. e.g., Business Insider™, MarketWatch™, et al. Which is precisely where I read his thoughts as well as a few questions he was asking some of today’s Wall Street titans. e.g., Warren Buffet, Paul Tudor Jones, Carl Icahn and others.
In an article written by Tony on Business Insider, “Tony Robbins Shatters The 9 Most Common Investing Myths” As I read I and was left shaking my head.
The article goes on to discuss that there are nine “myths.” And you can read them for yourself rather than me list or counter each. However, to demonstrate in a real example of what I’m trying to get across, I’ll use the first in that series.
“Myth 1″ starts with quoting Warren Buffett and sums the premise in this paragraph.
“So instead of buying all the stocks individually, or trying to pick the next high-flying hotshot fund manager, you can diversify and own a piece of all 500 top stocks simply by investing in a low-cost index fund that tracks or mimics the index.”
The true myth is that what is actually in the index as a business, its economic makeup, its validity as a true business, or anything else that we once understood as what a business “is.” Is – no longer and doesn’t mean squat.
The only “is” that now matters is this : Is – the index one that has a bulls-eye that the Central Banks deem important? i.e., they will buy it directly or fund its purchase via their proxies. Period.
Want a little proof to put behind that statement you say? Fair enough. Remember when then Federal Reserve Chair Ben Bernanke pointed out in meeting after meeting as to answer the efficacy of the Central Bank’s then quantitative easing programs: “Just look at the Russell 2000™?”
That was then – and now since he’s gone and that’s no longer the Fed’s key “go to” point of reference I’ll state: “Just look at the Russell 2000.”
What “indexing” prowess would one use to describe or answer the current lackluster relative showing as every other index hits another nosebleed level?
To reiterate what I’ve said so many times prior: Since the financial crisis of 2008 not only has the financial markets changed – they no longer resemble what many still believe, let alone think.
As I’ve stated over, and over, and over (did I say over?) again: Without the direct interventionist policies continuing to take place within the financial markets via the Federal Reserve and now other Central Banks such as Japan’s with the unleashing of “Banzainomics” there is no market.
The sad reality in regards to “myth 1″ lies the realization that the true unsettling answer is – the markets are the myth. That’s the true revelation. Sorry to sound harsh, but it’s true.
Even Mr. Icahn himself has been expressing some very onerous or cautionary overtones of late. As stated in an article on ZeroHedge™ during a recent Reuters™ Investment Outlook Summit in New York Mr Icahn stated:
“I am still concerned that one day you’ll see a break like you had a few weeks ago but it won’t come back.”
This is what I truly want to hear more of as well as articulated more in-depth as to know what an “investing billionaire” is thinking, doing, contemplating, positioning, and more.
The real issue at hand from my point of view is this: Looking for answers to both financial safety as well as financial freedom in the same light or viewpoint where it seems one only needs to “think like a billionaire” or “tweak” or “slightly modify” perceptions on how one approaches these financial markets today – will hurt more than it will help.
The markets for all intents and purposes are no longer for the “average” person looking to make gains in any form today. What is needed now more than ever is a direct understanding that safety – safety above all else – is paramount. And exactly how one can achieve it. Or get as close to the proverbial “cash in the mattress” understanding of it as humanly possible.
The idea of “diversification” is a great sounding idea in principle and theory. However, it is one of the greatest myths when it comes to protecting one’s assets in today’s financial market place aka Wall Street.
During the financial crisis of 2008 when the markets were in a free-fall and panic was ensuing “a diversified portfolio” did little if anything to help stem the tide. As a matter of fact, many found the “diversification” side of their portfolio which was to help “protect” not only fell just as far in value, but the ability of many to even remain solvent going forward was questioned.
The safest of all presumed “investments” were money-market accounts where many prudent investors with the ability to sell and go to cash were left sitting nervously when it was realized these very funds had begun to “break the buck” and was fueling the panic fire even more so than adding gasoline.
Forget the gasoline reference – it was more like nuclear fuel. Only when the Federal Reserve along with the FDIC stepped in with some bold actions which stemmed the tide within the money-market funds did we finally begin to see some form of stabilization come back into the markets.
Until that point all – and I do mean all – bets were off. Diversification was meaningless.
Today, I believe one must worry even more about safety than what one thought just 5 years ago, for what many still believe or thought about “money-markets” no longer applies.
Why would I say such a thing? Is it because you thought or presumed there’s even more improved safety since the crisis? Where we learned how to make one’s money-market account even safer? Or maybe even a more pragmatic willingness to step in and save probably the most astute financial class in the markets today such as someone prudent enough, or smart enough, to hold cash in a 401K or such? Nope.
Today (which I’ve written and warned about previously) in such an event where if the markets were to once again go haywire there’s no need for the Fed. to step in and help stem the tide of the money-markets. They can let them adhere to the same market forces as the stock markets themselves.
For as one may not be aware or remember, the new rules are that they can now “break the buck” without having to sell assets to protect that breaking quite so hastily.
Another way to state that is: the “dollar” value in your “cash” account doesn’t have to be worth a “dollar” any longer.
Nor if you want that “dollar” (which for whatever reasons could now drop to Oh, let’s say 50 cents or yes lower) you may not even be “allowed” access to it.
Why? Because these new rules also let the custodians of your cash “gate” your cash. i.e., Sorry, no money for you. Just visit our website, or reread that “updated” agreement you received which you probably slid in a drawer with the other five thousand “notices” of fine print you received and “accepted.” Thanks for banking with us!
That’s just handling the myth side discussed in this article. In another article (he just released a book so it’s more than customary to write more than one release article at the same time) that appeared on Market Watch™, Tony went into questions he asked of some very big players known by many on Wall Street. e.g. Mr. Icahn. Mr. Jones, and others.
Again, I understand Tony’s objective in trying to figure out answers to some very intriguing questions by these Wall St. players. Yet, as I stated earlier, I believe he’s asking the wrong questions.
In an opinion piece titled,“Tony Robbins tells you how to make money like a billionaire” Tony tries to get to the underlying premise as to answer how people can control their money and gain financial freedom. In it he makes a statement which I believe he’s sincere,
“After watching the global financial system almost melt down, I began an amazing journey several years ago to find a way for individual investors to take control of their money in a system that seems rigged against them.”
Here is where I both found myself asking the very same question Tony had been asking at the very same time. However, although we are both in the motivation business, and we’re both the same age. We both came to two diametrically opposite viewpoints on how one should proceed in anything financially related. (as far as anything Wall Street is concerned)
Personally I had the unique benefit as well as motivator to find or seek true answers. For I had just retired less than 36 months prior to the financial crash and had a real vested interest in finding those desperately needed “real answers” because, at that time, all the so-called “experts” were not only not making sense – they were more like deer in the headlights. I was then 45 years old.
I have great respect for Paul Tudor Jones, Carl Icahn, and the others he questioned. But here comes that word again; “however,” the questions are more or less in my opinion irrelevant and maybe of little value other than “mindset” type thinking for entrepreneurs.
The reasoning why is this: What they are doing is of little value to the average investor to use via making money in the markets or protecting one’s assets from harm. Especially in today’s “markets.”
For as I’ve reiterated over, and over again. “These markets are so adulterated with Central Bank imposed manipulations it would make Larry Flint blush.
The questions that should be asked in my opinion are far removed from what most will ask. Yet, I believe, there are some that not only should be asked, rather – it’s in their true answers that can or may help provide true insight.
An example of these might go like this: As far as exploring a “myth,” the right question for a myth might revolve around answering questions that people like myself and others find themselves in after they just cashed out, retired, whatever and went through the crisis of ’08. e.g., How do you do anything with your money safely where you also need that money to generate income to now pay your bills? And - you have absolutely no trust in what the markets resemble or have become today?
When I first retired you could easily (what was believed to be then) “safely” with “no risk” put your money in funds that would generate 5% (or more) interest. Today? That vehicle doesn’t exist. It only exists in name only i.e., “CD’s” “Direct savings” or “money-market savings” type accounts.
With the Federal Reserve now into another year of a zero interest policy environment now .5% is like “whoo hoo!”
Think I’m off base? Don’t take my word for it. In a recent interview on Bloomberg Surveillance™ another true hedge fund legend Julian Robertson founder of Tiger Management™ stated in a reply to an answer about trying to safely manage one’s own money as in a savings account type vehicle, (I’m paraphrasing) “Take the entrepreneur that sold his business and now has let’s say $3 million dollars in proceeds. Today, that money only produces $60K a year. And that’s before taxes. This is what many now find themselves up against in today’s zero interest rate environment.”
Just 5 years ago if you cashed out with $3 million from “Main St. you thought “Easy St.” was just another boulevard connected to “Wall St.” Today? Wall St. is now a thoroughfare seemingly located in a very high-priced area where at any moment it could turn into “Panic City.” Where the streets are lined with Wall St. styled hotels that sing a different extended version of a tune most know, “You can checkout any time you like – but you may never leave – with your money!”
Today the prudent are squarely focused on another old mantra; It’s no long “a return on” after 2008 it’s now “a return of” that dominates almost any – if not all my questions when it pertains to money. And I know – it’s not just me.
As we once again hit “new never before seen in the history of mankind all time highs” the outflows are still predominately outweighing the inflows. Nobody’s buying these markets – except for Central Banks.
A person I wish was asked questions who is also a top-tier status hedge fund manager that I believe could give some real answers or valuable insights to entrepreneurs and others of all stripes which they could apply is people like Hugh Hendry of Eclectica Asset Management.
Mr. Hendry known to many as a no-nonsense contrarian styled fund manager moved from the proverbial “bear camp” and changed his thinking as well as asset allocation to what’s known as the “bull camp.” His reasoning, and a whole lot more he expressed in his thoughts going forward in 2014:
“Last bear standing? Not any more… I know what you are thinking. You are thinking that the last bear is capitulating. It isn’t a good sign. Maybe it is that simple. But I think it is a little more complicated.”
Although I’m also a Hugh Hendry fan, I myself found his reasoning’s at first blush conflicting. That said, the real insightful answer to a question such as: “How hard was it to go against nearly everything you’ve thought or believed when dealing in the financial arena – to then basically change your business model and investment criteria in the exact opposite direction?
Not only that – in a direction that basically you’ve also railed against and made cogent arguments against that very viewpoint or investment stance?
Or: How exactly are you handling the stresses and strains having to basically push sound fundamental theories or market underpinnings aside and now trade and position money at risk based solely on what some Central Bank will do next?
This is the avenue I wish Tony had driven or sought.
Another relevant question I believe that would have brought greater insight would be to ask principal and veteran Wall St. trader Joseph Saluzzi of Themis Trading™ how he handled the backlash and dismal by industry mavens, as well as the financial media at large, with his nascent warnings that trading as we all once knew it – was no longer present. And – had morphed into what many now would call the greatest financial monster threatening the stability of the financial markets in a way never before imagined. Known today as High Frequency Trading (HFT).
I remember as I was trying to wrap my own head around the distortions that perplexed me I would watch Mr. Saluzzi take barb after barb laced “C’mon, you can’t be serious” brush offs from one after another Wall St. financial media commentator.
Everyone including the very regulatory bodies in charge dismissed his clarion call. Then to be vindicated overnight suddenly for everyone to see when Michael Lewis’ Flash Boys: A Wall Street Revolt (2014 W.W. Norton & Co.) came out and rocked the proverbial house of cards being built.
Personally I remember one exchange that still sticks with me when one show host quipped to Mr. Saluzzi: (I’m paraphrasing) “What proof do you have?” And the reply was, “Proof? All I have to do is look at my screens!” It really was a noteworthy reply. However, at that time, no one listened – let alone would acknowledge the possibility.
Remember, this was a person working on Wall St. Imagine the sort of peer pressure alone and handling it, while not abandoning your conviction to what everyone (and I mean everyone) wants you too just keep quiet about – and play along. That is a question worth hearing the answer to for my money.
Again these are the forms or types questions that I personally would like to both know, as well as fully comprehend all the intricacies. For I feel there would be real pragmatic, useful insights any entrepreneur, as well as anyone watching their own money should hear.
I say it because just like Tony I feel it is something that anyone looking for financial freedom as to control their own monetary aspects needs to know the answers to.
Today I feel it is more important than ever. And Tony is a giant in more ways than one and commands a very big stage. It’s just what I’ve seen and read so far of the questions posed appears to have missed an opportunity. I could be wrong for I have not read the book, just what I’ve read in his most recent articles. And – it’s only my opinion. Nothing more.
The Wall Street everyone believes they are dealing with today is just in name and memory. What made sense just 6 years ago not only doesn’t but rather if you try to apply any sense that resembles “common sense” you might as well be asking the Cheshire cat for a more straight answer.
And as we stand today, the only place seemingly left thinking this meme of “Wall Street still leads to Easy Street” is Silicon Valley. Where many of today’s newly minted “billionaires” believe 2014 or ’15 “Is different this time” than it was in 1999 or ’00. It is – but is isn’t.
And the issue here is when the realization kicks in that the once “billion dollar darlings of Wall St.” realize they are no longer loved or sought after as vehemently as they were just a year ago, now that the Fed, has ended the open spigot hot money supply aka QE. What happens then?
There’s also another question that should be answered but this one comes from Tim Knight owner and prolific blogger of one of the top “bear focused” trading blogs on the web today: Slope Of Hope™.
He lives smack dab in the hottest real-estate market in Silicon Valley – Palo Alto CA. Where his neighbors are Mark Zuckerberg of Facebook™, and Marissa Mayer of Yahoo™, just to name a few.
He openly opines he’s trying to find a workable answer to a very relevant question as these markets are hitting these all time highs. His question?
“I wish there was a way I could buy a put option on my house value, because this place is just nuts!”
There’s a lot of answers to many questions about Wall St. in that above statement alone.
As The West shows its fortitude (and apparent philanthropy) with mere 32-degree Fahrenheit ice-bucket-challenges, Russian chemistry professor Yury Zhdanov goes 290-degrees better...
Nikolay Novosyolov, founder of a science popularization project, poured a bucket of liquid nitrogen, which temperature was minus 322 degrees Fahrenheit (minus 197 Celcuis), as part of the #IceBucketChallenge campaign, taking the world's social media charity craze to a whole new level.
It is surprising how little attention academic literature has devoted to understand equity market returns around the turn of the month, despite the observations of Lakonishok and Smidt (1988) and McConnell and Xu (2008) among others that most of the returns accrue during a four-day period, from the last trading day to the third trading day of the month.
We find that the market returns are abnormally high also on the three days before the turn of the month.
In fact, combining the two observations, we find that since 1926, one could have held the S&P 500 index for only seven business days a month and pocketed almost the entire market return with forty percent lower volatility compared to a buy and hold strategy.
Since 1987, all of the positive equity returns have accrued during these seven trading days, and the average returns during the rest of the month have been negative. Odgen (1990) relates the high returns at the beginning of the month to the monthly payment cycle – the fact that large part of investors’ cash receipts are obtained on the last or the first business day of the month. Our findings lend additional support to this hypothesis.
In "Dash for Cash: Month-End Liquidity Needs and the Predictability of Stock Returns" -working paper we explore the turn of the month phenomenon further and discover new, previously unidentified patterns in equity returns.
In short, while Reagan and Bush worked closely with Congress to implement the comprehensive legislation that Congress had passed (in the case of Reagan) or would pass shortly thereafter (in the case of Bush), Obama is bypassing Congress entirely. He is unconstitutionally revising existing law and, without congressional approval, imposing new ones that have been explicitly rejected by Congress time and time again, thereby setting himself up as a kingmaker (or king) on immigration policy.
By doing so, the president is establishing a dangerous precedent that violates fundamental principles of separation of powers that serve as a bulwark to protect our liberties and that established a government of laws and not of men.
Because nothing says "living The American Dream" like looting an abandoned Doritos truck in the middle of a Buffalo, NY snow storm...
According to The Public, several social media users have reported seeing a Doritos truck in South Buffalo, apparently abandoned by its driver in the lake effect snow storm. The vehicle appeared to be stuck in several feet of snow.
Photos showed several people entering the back of the truck, and leaving with snacks.
"Just saw apparently some people stole Doritos out of an abandoned truck. Doritomageddon?" Eddie Lee wrote on Twitter.
Jeremy Cohn of Toronto's Global News tweeted that he "saw several men stealing chips from inside this abandoned Doritos truck" as well. He also posted a picture of the vehicle with its back door wide open.
"Just some people casually robbing the Doritos truck on Seneca Street. How typical," Angela Oestereich of Buffalo added on Facebook, along with photos of the alleged perpetrators.
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Stay classy South Buffalo...
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Anyone who looks at central bankers speak can sense the fear behind their absurd bravado, and the dishonesty of their public confidence.
The extraordinary disconnect between soaring stock markets and stagnating real economies has been gleefully embraced by all who benefit from the disconnect:
The financial media, brokerages, investment banks, politicos who have made stocks the barometer of "prosperity" and of course the top 5% who own roughly 3/4 of the financial assets of the nation.
Even more extraordinary is the rise in central bank fear that has unleashed extremes of monetary policy. If the real economy is as great as advertised, then why are central banks dropping monetary neutron bombs on a nearly weekly basis?
What are they so afraid of? And if they're not afraid of something, then why are they constantly hyping their threadbare commitment to "do whatever it takes," pushing real interest rates into negative territory and buying stocks and bonds hand over fist?
I've prepared a chart depicting central bank fear, the stock market and the real economy. As central bank fear/panic pushes higher, the banks have unleashed a torrent of PR and monetary programs that have dragged stocks higher with every phony pronouncement and every new free money for financiers chumming of the stock market.
No wonder the feeding frenzy never stops--the central banks are clearly terrified of what will happen should they stop dumping monetary chum in the waters.
What is equally extraordinary is the abject failure of all the central banks' free money for financiers to move the needle of the real economy. Virtually every bright spot in the economy results not from organic growth but from the expansion of a new credit bubble: for example, subprime auto loans.
After tens of trillions of dollars in stimulus and trillions squandered on asset purchases to suppress interest rates and prop up the stock market, the real economies are drifting into recession or stagnation.
The central bank response to this abject failure? More free money for financiers.
Anyone who looks at central bankers speak can sense the fear behind their absurd bravado, and the dishonesty of their public confidence. They're not just afraid--they're in a panic. Every press conference and every announcement is supposed to express confidence, but what they really express is terror: terror that doing more of what failed spectacularly will not just stop working--it will trigger the collapse of the entire rotten, corrupt system of central banks and free money for financiers.
Guest Article by J. D. Heyes
Researchers — psychologists and social scientists, mostly — in the U.S. and United Kingdom say data indicate that, contrary to those mainstream media stereotypes, “conspiracy theorists” appear to be more sane than people who accept official versions of controversial and contested events.
(NaturalNews) If you’re a conspiracy theorist, then you’re crazy, right? That’s been the common belief for years, but recent studies prove that just the opposite is true.
Researchers — psychologists and social scientists, mostly — in the U.S. and United Kingdom say data indicate that, contrary to those mainstream media stereotypes, “conspiracy theorists” appear to be more sane than people who accept official versions of controversial and contested events.
The most recent study was published in July 2013 by psychologists Michael J. Wood and Karen M. Douglas of the University of Kent in the UK. Entitled “‘What about Building 7?’ A Social Psychological Study of Online Discussion of 9/11 Conspiracy Theories,” the study compared “conspiracist,” or pro-conspiracy theory, and “conventionalist,” or anti-conspiracy, comments on news websites.
The researchers noted that they were surprised to find that it is now more conventional to leave so-called conspiracist comments than conventional ones.
“Of the 2174 comments collected, 1459 were coded as conspiracist and 715 as conventionalist,” the researchers wrote.
‘The research showed that people who favored the official account of 9/11 were generally more hostile’
So, among people who comment on news articles, those who discount official government accounts of events like the 9/11 attacks and the assassination of John F. Kennedy outnumber believers by more than two-to-one. That means the pro-conspiracy commenters are those who are now expressing what is considered conventional wisdom, while the anti-conspiracy commenters represent a small, beleaguered minority that is often scoffed at and shunned.
Perhaps becoming frustrated that their alleged mainstream viewpoints are no longer considered as such by the majority, those who are anti-conspiracy commenters often showed anger and disgust in their posts.
“The research… showed that people who favoured the official account of 9/11 were generally more hostile when trying to persuade their rivals,” said the study.
Also, it seems that those who do not believe in the conspiracies were not just hostile but fanatically attached to their own conspiracy theories as well. The researchers said that, according to the anti-conspiracy holders, their own theory of 9/11 — one which says 19 Muslims, none of whom could fly commercial airliners with any proficiency, pulled off an amazing surprise attack under the direction of a man on dialysis (Osama bin Laden) who was living in a cave somewhere in Afghanistan — is unwaveringly true.
Meanwhile, “conspiracists,” on the hand, did not have to pretend to have a theory that completely explained the events of 9/11. “For people who think 9/11 was a government conspiracy, the focus is not on promoting a specific rival theory, but in trying to debunk the official account,” the researchers said.
As reported by Veterans Today:
In short, the new study by Wood and Douglas suggests that the negative stereotype of the conspiracy theorist — a hostile fanatic wedded to the truth of his own fringe theory — accurately describes the people who defend the official account of 9/11, not those who dispute it.
A conspiracy theory about a conspiracy theory
The study also found that conspiracy believers discuss historical context, like viewing the JFK assassination as a precedent for 9/11, more than the antis. It also found that conspiracy believers do not like to be labeled as such.
These and other findings are contained in a new book, Conspiracy Theory in America, by political scientist Lance deHaven-Smith, which was published last year by the University of Texas Press. He explained why people don’t like to be labeled as “conspiracy theorists.”
“The CIA’s campaign to popularize the term ‘conspiracy theory’ and make conspiracy belief a target of ridicule and hostility must be credited, unfortunately, with being one of the most successful propaganda initiatives of all time,” he said.
He further noted that, essentially, those who use the term as an insult are doing so as the result of a well-documented, undisputed and historically accurate conspiracy by the CIA to cover up the JFK assassination.
You be the judge.
The post Scientific study reveals conspiracy theorists the most sane of all appeared first on PaulCraigRoberts.org.
In retrospect, when last Sunday we wrote that "China's Shadow Banking Grinds To A Halt As Bad Debt Surges Most In A Decade" in which we showed that not only had China's shadow banking credit creation stopped outright, but had - due to a decline in Banker Acceptances and Trust Loans - shifted in reverse for the past 4 months...
... it should have become clear that it was only a matter of time for the PBOC to step in and provide additional "higher-quality" liquidity, as it just did on Friday morning when it cut rates for the first time since 2012, sending the US market to all time highs.
And yet many questions remain: will the PBOC be able to "shotgun" its way in stimulating an economy that has deceleration written all over it. Remember: for all the talk of massive outside money injection in the global system by QE at this central bank or that, the total assets of the Big 4 central banks have grown far less than what just China's bank assets have risen by over the same period, something we showed a year ago in "How In Five Short Years, China Humiliated The World's Central Banks" (the chart was as of Q3 2013).
In other words, for all the talk about the Fed, the BOJ, the ECB, the real attention should have been on China, and its fungible credit growth, all long.
So when stripped of the Politburo propaganda, and economic stats that are now only more credible than those released by the US Bureau of Labor Statistics, what is really going on in China?
For one answer we go to the final dispatch by the WSJ's Bob Davis, who has just concluded his four-year assignment covering China and has allowed himself some essayistic freedom with his parting words.
He writes that "during my time in Beijing as a Journal reporter covering China’s economy, starting in 2011, China became the world’s No. 1 trader, surpassing the U.S., and the world’s No. 2 economy, topping Japan. Economists say it is just a matter of time until China’s GDP becomes the world’s largest." Alas, "my own reporting suggests that we are witnessing the end of the Chinese economic miracle. We are seeing just how much of China’s success depended on a debt-powered housing bubble and corruption-laced spending. The construction crane isn’t necessarily a symbol of economic vitality; it can also be a symbol of an economy run amok."
Davis leaves the country less than optimstic about its economic prospects:
"So why, on leaving China at the end of a nearly four-year assignment, am I pessimistic about the country’s economic future? When I arrived, China’s GDP was growing at nearly 10% a year, as it had been for almost 30 years—a feat unmatched in modern economic history. But growth is now decelerating toward 7%. Western business people and international economists in China warn that the government’s GDP statistics are accurate only as an indication of direction, and the direction of the Chinese economy is plainly downward. The big questions are how far and how fast."
Ironically, it is the US and Europe that have adopted much of the same "loose excel data" policies that had made China the butt of all economic goalseek jokes in the past decade: how long before the US is also forced to admit its own "growth spurt" is also built on quicksand?
But back to the Middle Kingdom: here are some of Davis' reasons why China, which served as the global debt-fueled dynamo during the post-Lehman collapse when the rest of the developed world tumbled into depression, and managed to grow while everyone else was flailing, is set to become the biggest deadweight to the entire developed, and developing, world:
- Most of the Chinese cities I visited are ringed by vast, empty apartment complexes whose outlines are visible at night only by the blinking lights on their top floors. I was particularly aware of this on trips to the so-called third- and fourth-tier cities—the 200 or so cities with populations ranging from 500,000 to several million, which Westerners rarely visit but which account for 70% of China’s residential property sales.
- From my hotel window in the northeastern Chinese city of Yingkou, for example, I could see empty apartment buildings stretching for miles, with just a handful of cars driving by. It made me think of the aftermath of a neutron-bomb detonation—the structures left standing but no people in sight.
- Debt paid for the boom, including borrowing by governments, developers and all manner of industries. This summer, the International Monetary Fund noted that over the past 50 years, only four countries have experienced as rapid a buildup of debt as China during the past five years. All four—Brazil, Ireland, Spain and Sweden—faced banking crises within three years of their supercharged credit growth.
- China followed Japan and South Korea in using exports to pull itself out of poverty. But China’s immense scale has now become a limitation. As the world’s largest exporter, how much more growth can it count on from trade with the U.S. and especially Europe? Shift the economy toward innovation? That is the mantra of every advanced economy, but China’s rivals have a big advantage: Their societies encourage free thought and idiosyncratic beliefs.
- Even powerful Chinese leaders have trouble enforcing their will. I reported earlier this year on the government’s plan to handle one straightforward problem: reducing excess steel production in Hebei, the province that surrounds Beijing. Hebei alone produces twice as much crude steel as the U.S., but China no longer needs so much steel, to say nothing of the emissions that darken the skies over Beijing. Mr. Xi weighed in by warning local officials that they would no longer be judged simply on increasing GDP; meeting environmental goals would count too.
- In late 2013, Hebei staged an event called “Operation Sunday.” Officials sent demolition squads to destroy blast furnaces, and imploding mills made great TV on the 7 p.m. news. But it turned out that the destroyed mills had long been out of production, so blowing them up didn’t affect output. Indeed, China’s steel industry is on track for record production this year.
And the punchline:
- The situation has become so bad... that a middle-aged investor, fearing that a local developer wouldn’t be able to make his promised interest payments, threatened to commit suicide in dramatic fashion last summer. After hearing similar stories of desperation, city officials reminded residents that it is illegal to jump off the tops of buildings...
In other words, the Chinese growth miracle may be over, but please don't kill yourselves.
The market may have been quick to cheer the action of the Chinese central bank, but China has a very long and painful climb ahead of it: one where it will be America's turn to prop up global growth when the next global depression hits. One can only hope the US is up to it... and that this winter it doesn't snow too much and subtract $100 billion from US "trendline growth."
Cordwood hotel in Ontario, Canada.
Built by Bernice and David after taking a weekend course in cordwood building at Earthwood Building School.
The War Against Putin
There is an interesting book, a pamphlet really, titled “The War Against Putin” by M.S. King available on Amazon.com. The book has 16 5-star reviews and one review accusing the book of being Kremlin propaganda. http://www.amazon.com/s/ref=nb_sb_noss/177-9732237-3985752?url=search-alias%3Dbeauty&field-keywords=M.S.+King+The+War+Against+Putin
The value of this publication is in showing how Washington operated against the Soviet Union and how Washington operates against Russia today. Readers will gain insight into the mendacity of the government in Washington and learn that the US and European media are propagandistic organizations that impose false stories on the minds of Americans and Europeans. Anyone who relies on the Western media lives inside The Matrix.
King’s pamphlet is not perfect, but it is valuable and easy to read. In his effort to put Washington’s attack on Putin’s Russia in a historical context, King’s foray into wider history is a bit idiosyncratic. For example, King writes that Hitler had to invade the Soviet Union in order to preempt a looming Soviet invasion of Germany. Such a Soviet attack seems unlikely–indeed impossible–in view of Stalin’s purge of Soviet military commanders that began two months before Hitler’s invasion. Stalin had so many senior officers executed that it is difficult to see how an invasion of Germany could have been possible.
Other explanations of Hitler’s invasion of the Soviet Union seem more plausible. For example, some historians have concluded that Hitler was frustrated by England’s refusal to end the war with a peace treaty. Hitler blamed England’s refusal to end the war on England’s hope that the Soviets could be induced to enter the war against Germany. Hitler decided that a knock-out blow against the Soviet Union would squash the English hope and bring about the end of the war.
Regardless, King is writing about Washington’s war against Russia, not about the Second World War. What King has to say is very different from what Americans and Europeans are being media-fed. The quotes from Putin are worth the price of the pamphlet.
The two-bit punks that inhabit political office in the West and the behind-the-scenes conspirators who pull their strings are overmatched by Vladimir Putin. If the Third World War is avoided, it will be entirely due to Putin’s diplomatic skills and self-control.
King’s pamphlet will help you to avoid being whipped up into a frenzy by lies that lead to war.
Submitted by Adam Taggart via Peak Prosperity,
In the past few chapters on Energy Economics, Peak Cheap Oil, and the false promise of Shale Oil, we've gone into great detail to show how our economic growth is deeply dependent on our energy systems.
Here’s how it all sums up.
There are some knowns:
We know that energy is required for both growth and complexity. We know that surplus energy is shrinking. We know that the age of cheap oil is over. And we know that because of this oil costs will consume an ever-greater proportion of our total budget.
And with these known facts, come along specific risks.
There is the risk that our exponential money system will cease to operate in a world of declining energy surplus. It is designed for a world without limits – a world of endless growth.
And there is the risk that our society will be forced to become less complex - a loaded statement if ever there was one.
Each one of these known facts adds to each one of the stated risks and that is what The Crash Course is about: assessing those risks and deciding what, if anything, a prudent adult should do about adapting to these realities and facing these risks.
Putting these together, the predictions in video below become so easy to make they don't feel like predictions at all; just inevitable facts.
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For those who simply don't want to wait until the end of the year to view the entire new series, you can indulge your binge-watching craving by enrolling to PeakProsperity.com. The entire full new series, all 27 chapters of it, is available -- now-- to our enrolled users.
The full suite of chapters in this new Crash Course series can be found at www.peakprosperity.com/crashcourse
And for those who have yet to view it, be sure to watch the 'Accelerated' Crash Course -- the under-1-hour condensation of the new 4.5-hour series. It's a great vehicle for introducing new eyes to this material.
Editor’s Note: The following guide has been provided by survival and preparedness expert Joel Skousen. It has been contributed for by the Strategic Relocation web site.
In previous briefs we covered several key aspects of relocation, including How To Position Yourself To Survive A Major TEOTWAWKI Event and The Reality Of Survival Communities and Ready Retreats. There’s also an incredibly insightful guide on the The Gut Wrenching Reality of Bugging Out.
In this analysis Skousen identifies the key problems facing those living in big cities as they relate to the feasibility of either moving to or maintaining a more remote location outside of highly populated areas.
Have you considered the terrain or cover required for perimeter defense? What about the growing climate; will you have the ability to grow food or raise animals in the middle of winter? Where will you get water in hot climates? If you’re not around to watch over your supplies will you bury them or secure them in a basement? All of these are important factors that help make up a whole and complete relocation strategy.
Whether you are looking for a permanent homestead outside of the big city or an emergency retreat to which you can escape in the event of a widespread emergency, the following considerations will be invaluable as you search for your perfect property. Whatever your preference, whether it be a mountain retreat, a farming homestead or just a cabin in the woods, it is important to understand the benefits and drawbacks that you’ll face should you ever have to utilize your property as a survival base.
Joel Skousen, as always, points us in the right direction and provides some critical guidelines that must be taken into account before you make your move.
It can be a daunting task finding that perfect homestead or retreat – if you have questions we urge you to contact the professionals at Survival Retreat Consulting. This is what they do. Don’t be afraid to reach out to them for assistance.
The need for a retreat strategy and a physical place to go in a crisis is a core concept of preparedness, and the reason is simple: Most people live in unsafe major metropolitan areas and can’t relocate because they are tied to a job, and the jobs are tied to the city. Sadly, all metro areas are unsafe simply because hundreds of thousands of people are concentrated in one area and completely dependent on a fragile set supply infrastructure that will someday fail in a major way.
Even people with a lot of money who still work often can’t afford to live in rural safety full time because of the time, expense and impracticality of commuting long distance to work. Even if they did choose to do that, the breadwinner(s) is at risk of being trapped in the city at the workplace (or in transit) when something big goes down.
A popular phrase among preppers is to prepare to “bug-out” (bug-out bag, bug-out vehicle, bug-out location, etc.). It’s not my favorite concept because it implies having to get out of town in a hurry because you got surprised like everyone else by the sudden crisis. And, that puts you at risk of being caught in the inevitable Katrina-like traffic jams—and you know how that turned out.
I, for one, want as much advance notice as possible so I don’t get stuck trying to “bug-out” at the last minute. That’s why I keep track of what’s going on in the world, in detail, and not just from alternative sources, which are often filled with disinformation. I especially like to track what the Powers That Be are planning for us in their hidden agenda related to global control and the continual wars they create in order to give them the excuse to diminish liberty. That’s the primary reason why I publish the weekly World Affairs Brief. Any of you can get a free sample copy just by emailing me at “editor” @ worldaffairsbrief.com.
Preparing to bug-out, of course, is better than nothing (and usually the cheapest part of preparing), but you really need someplace to go that is prepared as a retreat, complete with shelter and long-term food and water supplies. That can be as simple as a camp you’ve prepared in advance with buried supplies (a tough go in the winter) or a cabin in the mountains you’ve prepared perhaps together with relatives or like-minded friends, which is a whole different level of expenditure.
The rural mountain retreat in a forested area is the first thing people think about in a retreat strategy, and it does provide safety from the masses when you select a location not visible from any paved roads and concealed among trees. But there are two major risks in choosing a remote mountainous location:
1) You have to be able to get there, and distance and terrain can present a problem.
2) You must have concealed, hardened basement space for your storage and significant security features on windows, walls and doors to ensure your stockpiles will still be there when you arrive.
Lonely cabins in the mountains are often targets for theft and break-ins from hunters or others simply taking advantage of the isolated situation where detection of crime is improbable.
The main disadvantage of the mountain cabin retreat is that such properties are rarely suitable for growing, either because of altitude or rocky, sloped soil. This is especially true in the West. In the East most of the mountains are low in enough that altitude is not a problem, but tree shading and sloping rocky soil is.
So, while the mountain retreat offers great short term retreat safety, it may be a problem during a long-term famine that is very likely during a major social breakdown caused by the grid going down or a nuclear war. Don’t disregard the war scenario out of hand. Anyone who is watching the growing aggression of Russia and China can see that this coming threat as a grim future reality, despite the continual denial by government and the establishment media. But, it is telling that our government (and retired insiders) are making major preparations for nuclear war, so they know something they aren’t telling the rest of us about.
Stored food supplies are limited depending on how much you can afford and how much secure storage space you have, in a secure location. The longer the period of social unrest lasts—and it will get worse the longer public services are out of commission—the increased likelihood that your stored supplies will run out and you’ll have to revert to growing food. Those who are relying upon a suburban garden plot for food during a widespread famine and social unrest will find their efforts overrun with hungry, desperate people stealing food even before it is ripe.
All of this points to the need for a rural farm retreat is to be able to grow food during the first or second growing season during war or as the result of long term social unrest when urban infrastructure and supplies are halted. A farm retreat can serve the same purpose as a mountain retreat if it is far enough away from major refugee flows and hidden from view. That’s harder to do with a farm because farmland requires large sunny open areas and relatively flat land, as well as access to irrigation or well water. But it can be done.
One of the most important features to look for in a survival farm is privacy. Good farm land is usually in the proximity of other farms. Try to find land that has fairly dense forested areas between the fields and any passing roads. Southern Missouri and Southeastern Oklahoma are a couple of the best states for finding prime farmland interspersed with hills and trees. Parts of eastern Kansas also are good.
In those states the tree cover is mostly deciduous, meaning they lose their leaves in winter, diminishing your privacy. So, you may have to augment the tree cover with dense bushes or conifer trees that provide cover even in winter. Fencing and gates are also important to deter entrance, and to give you one more important confirmation that any intruder found on your property just didn’t wander across unimpeded.
Farms out in the Far West don’t have a lot of tree cover, except in northern Idaho and Montana, where fir and pine trees abound at lower altitudes. And, make sure the farmland comes with irrigation water rights.
In some of the desert states you even have to have a water right to give up in order to obtain a permit to drill a well for a home and garden. Have the soil tested for fertility and mineral composition. And, avoid land that has GMO crops planted on it—especially the “Round-up Ready” variety. Round-up pollutes the soil and some of its chemicals permanently bind to soil minerals. Remediation is costly.
Check out Strategic Relocation for the latest private listing on farm and mountain retreat land where many new Colorado properties have come on the site and contact Todd Savage to get confidential referrals to Survival Realtors.
Survival Retreat Consulting: Remember to keep the defensive criteria in mind as you shop around for your property. Sometimes it can be easy to get enchanted with a spectacular stream or beautiful meadow and building spot and not realize that the property may have defensive issues. After you have found that perfect retreat be sure and check out these two informational articles on OPSEC and Retreat Defense.
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If anyone needed proof that golf and economics don't mix, it is the following two back-to-back tweets, one just sent out by Obama (or rather his teleprompter) attempting to do economics in under 140 characters, and the other describing what Obama is doing this very moment during his Las Vegas weekend trip.
FACT: President Obama's #ImmigrationAction will boost the U.S. GDP by tens of billions of dollars.
— Barack Obama (@BarackObama) November 22, 2014
Pres Obama's foursome today includes Derek Jeter, Las Vegas Sun CEO Brian Greenspun & businessman Stephen Cloobeck.
— Mark Knoller (@markknoller) November 22, 2014
The news this week of China's largest corporate bankruptcy - Haixin Iron & Steel Group - amid crashing iron ore and steel prices was followed by analysts noting it "will be followed by others," as the major flaw of producers of iron ore, the most traded commodity after oil, is they tend to be "over-bullish." Distressed debt funds are starting to circle in preparation for what they expect to be a bloodbath as Bloomberg reports, bad debts in China are well underestimated because authorities persist in propping up weak companies and bailing out local investors, according to DAC Management, "we've yet to see it because if you look at corporate defaults, they keep getting covered by the government. At some point, they can’t cover every single one." Most worryingly though, as KPMG points out, "when you see restructuring advisers getting hired by SOEs... you know it's coming."
“Instead of reorganization efforts conducted by local governments, this is an inevitable trend that China will take more ailing steel mills to the courts to protect creditors,” Xu said by phone from Beijing.
But apart from the entire Steel industry being on the verge of bankruptcy... China is doing great!
“There has to be a restructuring of the Chinese steel industry,” Eder said.
“The iron-ore producers are getting more and more aware that their growth expectations have to be redefined. There are enormous over-capacities and more is coming on stream. This will increase the pressure.”
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And as Bloomberg reports, as far as distressed debt in China - you ain't seen nothing yet!
Bad debts in China are well underestimated because authorities persist in propping up weak companies and bailing out local investors, according to DAC Management LLC.
The Chicago-based asset management and advisory firm, which focuses on distressed credit and special situations in China, says the worst is yet to come, and that means lots of opportunities for the world’s biggest distressed debt traders.
“They keep reporting such a low number for so many years, there’s only one way it can go -- up,” DAC founder Philip Groves said in an interview in Hong Kong yesterday. “We’ve yet to see it because if you look at corporate defaults, they keep getting covered by the government. At some point, they can’t cover every single one.”
Oaktree Capital Group LLC, the world’s biggest distressed debt investor, joined with China Cinda in November 2013 to tap what it said were “unique opportunities” in the country’s real estate market.
“In China, we see a lot of opportunities out there, especially among Chinese banks,” Hanson Wong, Hong Kong-based chief executive officer of Belos Capital (Asia) Ltd. said in an interview. “They are facing some difficulty right now, they cannot keep extending their loans time and time again.”
“When you see restructuring advisers getting hired by state-owned enterprises and Big Four accounting firms helping banks to get rid of distressed assets, you know it’s coming,” he said.
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Is it any wonder the PBOC cut rates? But of course - as we noted previously - this does nothing to cover the gaps in these companies overbloated balance sheets or extend their credit any further...
Submitted by David Stockman via Contra Corner blog,
The global financial system has come unglued. Everywhere the real world evidence points to cooling growth, faltering investment, slowing trade, vast excess industrial capacity, peak private debt, public fiscal exhaustion, currency wars, intensified politico-military conflict and an unprecedented disconnect between debt-saturated real economies and irrationally exuberant financial markets.
Yet overnight two central banks promised what amounts to more monetary heroin and, presto, the S&P 500 index jerked up to 2070. That is, the robo-traders inflated the PE multiple for S&P’s basket of US-based global companies to a nose bleed 20X their reported LTM earnings.
And those earnings surely embody a high water mark in a world where Japan is going down for the count, China’s house of cards is truly collapsing, Europe is plunging into a triple dip and Wall Street’s spurious claim that 3% “escape velocity” has finally arrived in the US is soon to be discredited for the 5th year running. So it goes without saying that if “price discovery” actually existed in the Wall Street casino, the capitalization rate on these blatantly engineered earnings (i.e. inflated EPS owing to massive buybacks) would be decidedly less exuberant.
In truth, nothing has changed about the precarious state of the world since yesterday. Except….. except the Great Bloviator at the ECB made another fatuous and undeliverable promise—- this time that he would do whatever he “must to raise inflation and inflation expectations as fast as possible”; and, at nearly the same hour, the desperate comrades in Beijing administered another sharp poke in the eye to China’s savers by lowering the deposit rate to by 25 bps to 2.75%.
Let’s see. Can it possibly be true that European growth is faltering because it does not have enough inflation? Or that China’s fantastic borrowing and building boom is cooling rapidly because the People Bank of China (PBOC) has been too stingy?
The answer is not on your life, of course. So why would stocks soar based on two overnight announcements that can not possibly alleviate Europe’s slide into recession or the collapse of China’s out-of-control investment and construction bubble?
It can’t be a case of debatable data. Europe’s real GDP is no higher today than it was in the third quarter of 2006. Self-evidently, the temporary slowdown in consumer inflation during recent months owing to plunging oil prices and the transient impact of exchange rates cannot possibly explain this long-standing trend of going nowhere.
Indeed, during this same period, Europe’s CPI has risen by nearly 20%. Where is it written or proven that an average of 2% annual inflation causes economic growth to grind to a halt? There is not a shred of evidence for that proposition—so Draghi’s pledge to restore 2%/year shrinkage in the value of the wages and bank accounts of European households cannot possibly mean more growth, more profits and more S&P market cap.
In fact, the whole clamor about “deflation” and Draghi’s overnight pledge to do whatever it takes to get inflation rising quickly has to do with a transient blip in the price index during the last 12-18 months. But is this the first time that a shift in the global commodity cycle and the euro exchange rate has caused a temporary dip in short-run consumer price trends? The historic data indicate a resounding no.
In fact, the only manner in which weakening inflation could possibly impact short-run real GDP growth is if European consumers were to sharply raise their savings rate, waiting for lower prices tomorrow. This is the hackneyed claim of the Keynesian money printers, of course, but where’s the evidence? After a temporary surge in Europe’s personal savings rate during the Great Recession, it has regressed to its recent historical average, and has remained on the flat line, even as inflation rates have decelerated since 2012.
The idea that the hard pressed households of France, Italy, Spain and even Germany have gone on a buyers strike and are hoarding cash is a flat-out lie. But it is one that suits the convenience of the desperate Keynesian apparatchiks pulling the levels in Brussels and Frankfurt. And, yes, it also makes for the kind of headline policy announcements that robo-traders can snatch with blinding dispatch.
No, the problem in Europe is not too little inflation in the short-run; it is staggering levels of taxes, public debt and interventionist dirigisme that represents a permanent, debilitating barrier to growth. Draghi already has driven deposit rates through the zero bound at the ECB deposit facility, and now its spreading rapidly through the banking system to businesses and consumers.
So precisely who will finance this soaring mountain of public debt at negative real returns when the fast money is flushed out of the ECB’s now plummeting euro? The “algos”, needless to say, didn’t get to that question during this mornings frenzied buying.
Likewise, last night”s signal from China was a warning to take cover, not to get all giddy in the casino. The People’s Printing Press of China has been on a rampage for this entire century, and has expanded its balance sheet by an incredible 9X since the year 2000.
Now, even the hapless masters of red capitalism taking shelter in Beijing recognize that this colossal money printing spree has fueled fantastic levels of over-building, over-investment and mind-boggling real estate speculation throughout the land.
The fact that—despite their better judgment—-they have had to once again open the monetary spigot is evidence that China’s addiction to the printing press is terminal, and that a hard landing is only a matter of time. No one told the algos that, either.
The real downward trajectory in China is tracked by the canary in the iron ore pit. Like almost everything else, China’s iron and steel industry is massively overbuilt. It has 1.1 billion tons of capacity but in the order of 600 million tons of sustainable “sell-through” demand. That is, need for steel for use in consumer products and capital replacement, not the current one-time construction binge.
Stated differently, China’s excess steel capacity is greater than the combined output of the US, Japan and the EC combined. Accordingly, when its real estate and construction bubble finally collapses, the world market will be inundated with cheap steel and every manner of goods made from it, including automobiles. During the current year alone, China will export more steel than the US industry will produce, and it is just getting started on the greatest “dumping” campaign the world has ever seen.
In short, there is a tidal wave of industrial deflation coming down the pike—- owing to two decades of world-wide central bank financial repression that has fueled vast malinvestments in mining, manufacturing, transportation and trade. That, in turn, will trigger a monetary race to the bottom by the central banks—a race that is already underway owing to Japan’s Halloween Massacre of the yen. Soon the rest of East Asia—and especially China— will have to join the exchange rate plunge or find their export based economies hitting the shoals.
Then will come more desperate maneuvers from the ECB, as even the German export machine falters in the face of collapsing growth in China and competitive devaluation all around the world. Stated differently, last night’s central bank announcements were the starting guns for a monetary implosion that will soon shock financial markets and real production, trade, employment and incomes on a world-wide basis.
Someone should reprogram the algos. Otherwise, one of these days they will snatch a headline which says sell, sell, sell!