Obamacare architect Gruber a promoter of abortion-facilitated eugenics that targets poor black families
By: Chris at www.CapitalistExploits.at
I'm going to paraphrase a conversation I had recently with a Venture Capitalist whose focus is on the tech industry:
Me: "Eyeballs, that's what founders are telling me. How will this company monetize them?"
VC: "Don't know, they haven't figured that out yet."
Me: "Right. Then how do you come up with your current valuation?"
VC: "That's industry standard."
Me: "Industry standard?"
VC: "Yeah, it's based on what other companies are getting funded at presently."
Me: "Companies are being funded on eyeballs at the moment. So it's based on eyeballs?"
VC: "Yeah. Well, they're not there yet. It's projections of eyeballs."
Me: "Right, projections of eyeballs which they don't yet know how they'll monetize?"
VC: "I don't think they need to monetize them."
Me: "Really? How does the company make money for shareholders?"
VC: "Exit will be a trade sale."
Me: "Right. Who's going to buy them?"
This went on for a little while. I say a little while because I don't have time to waste on deals I'm not interested in.
No offense meant to my VC colleague. This is endemic right now. When you're a 20-something or maybe early thirties and haven't been through a business cycle, which is typically roughly 7 years, let alone a major secular cycle which is on average 26 years in length, then "eyeballs" seems like a perfectly valid way to value a business into the billions. This is how we can get an app valued at more than one of the fastest growing countries in the world right now.
This goes deeper than stupid ideas turned into stupid companies, run by stupid people selling equity to other stupid people, with the anticipation that even stupider companies, run by even stupider people, will buy out this stupid company. Following me?
The reason I say it goes deeper is because it's a reflection of how our world works now!
Technology has drastically changed how we interact with one another. Twenty years ago I couldn't operate as I do now. I am communicating with you, our lovely readers on a MacBook from a beach resort town in New Zealand. I've had conference calls throughout my day with people in Hong Kong, Beijing, Thailand, Los Angeles and New York. This is a normal day for me. My average day doesn't look distinctly different when I'm in Singapore or anywhere else. Information flows are now near seamless and instant.
At the same time there is a plethora of people fighting for my attention, and the only way I can function is to remain focused. I say this because I don't loathe or love technology. It is a tool, nothing more. This tool is unlike a shovel however, since a shovel can't direct you and use you. You control the shovel and use it for your purposes. Technology is different. If you're not careful you can be used by it or by those who are controlling it.
Remaining focused is how successful people become successful. Focus, determination, perseverance - this is a trait inherent in all the successful people I know. This, in today's world of incredible stimulation from every digital angle, is more challenging than ever.
There is a relentless drive to attract eyeballs since we are now overwhelmed with information from every angle, and for those who don't control this flow of information they simply don't know where to focus attention. Quality information struggles to find it's way into the headlines, as the newspapers have turned into porn outlets for eyeballs. They sell "news porn" now, with no real information to be gleaned. Tiny snippets of sensationalist soundbites flood the newswires.
It works. Let's take an egregious example or two shall we..? Pray tell I ask you what Paris Hilton has done for humanity? Why does she get any airtime? Or that Kardashian chic that has, as far as I can tell, become famous for f**king rappers. She's got to be one of the highest paid hookers in the world. I just Googled it, and according to one source she made $28 million last year. For what?
Paris Hilton, and numerous others like her, are completely outrageous. Intellectual dimwits who, as far as I can tell, are famous for being famous!
That's what people seem to want though. They can't keep from clicking on that link about Miley Cyrus groping Paris Hilton in front of her boyfriend. Yeah, I just found it online to prove my point. This garbage is front page news.
These are completely pointless people doing completely pointless things, but they have this figured out. They're the new kings in an age of instant short-term self-gratification. Every time Paris Hilton drops her knickers dollar bills pour out. It's like freaking alchemy!
Why? because she has eyeballs.
In an article from the Guardian newspaper I found the excerpt below.
In a world of instant gratification and where an alternative website is just a mouse click away website owners need to find ways to firstly grab the attention of a user, and then keep it for long enough to get your message across. If you don't, their cursor will be heading to the back button and on to a competitor in the blink of an eye.
Those who make the most outrageous statements, no matter how flawed their logic or how consistently wrong they may happen to be, acquire the limelight. It's increasingly a world where the idiots, the morons, the hacks, attract eyeballs and eyeballs are the new currency. Social media is where people receive their information now, but in order to get in front of you it's gotta be catchy, funny and short because remember that attention span is vanishingly thin.
This is why a YouTube video, no longer than 3 minutes in length of some stupid animated bear will receive millions of views, while a thoughtful, valuable presentation on TED about a revolutionary cure for spinal injuries receives a fraction of that.
Smarter phones and dumber people. You'll see families, groups of friends, husbands and wives, boyfriends and girlfriends going out to dinner together and they don't even bloody talk to each other. They're stuck to their phones or tablets right through dinner.
According to the National Center for Biotechnology Information, at the U.S. National Library of Medicine, the average attention span of a human being has dropped from 12 seconds in 2000 to 8 seconds in 2013. This is one second less than the attention span of a goldfish.
Here is the link to the entire article if you're interested. Shocking!
In the blogosphere fear sells better than common sense, so we find purveyors of "disaster porn" shouting out from the rooftops to beware of this, and beware of that. Not surprisingly they actually do very well. "News porn", "scare people shitless porn", "financial porn", "comedy porn".
The global advertising market hardly existed in the industrial age. It was a nascent industry. Today it's morphed into a beast of epic proportions, and we now live in a PR driven world.
I'll keep the website and the posters name out of this, however I read a column yesterday which had a really outrageous heading to it... It made one think that the world was coming to an end, and when I read through the post I realised very quickly that the authors knowledge of the facts at hand (he was attempting to discuss a move in the forex markets) were flaky at best. What was being said was so unbelievably normal for anyone that knew even the first thing about economics or financial markets that it would not even have made up more than a minutes conversation with any intelligent person versed in the topic. That didn't stop this guy however, and he'll likely be able to garner more eyeballs selling fear, apocalypse and BS.
Here is the math as I see it, and it's no different than it was before we had the Internet, smart phones, or even print media way back.
Eyeballs can be monetized. Number of Eyeballs x Conversions = Clients and Clients x Goods Sold = Revenues. Revenues - Opex = Profit.
In this entire equation the most difficult thing to do is to get the eyeballs.
The winners in this game will, as always, be those who are able to focus, because those who are constantly distracted will simply be the product. You and your eyeballs are the target. Use them wisely.
"The average TV commercial of sixty seconds has one hundred and twenty half-second clips in it, or one-third of a second. We bombard people with sensation. That substitutes for thinking." - Ray Bradbury
The political class breathed a sigh of relief Saturday when the US Senate averted a government shutdown by passing the $1.1 trillion omnibus spending bill. This year’s omnibus resembles omnibuses of Christmas past in that it was drafted in secret, was full of special interest deals and disguised spending increases, and was voted on before most members could read it.
The debate over the omnibus may have made for entertaining political theater, but the outcome was never in doubt. Most House and Senate members are so terrified of another government shutdown that they would rather vote for a 1,774-page bill they have not read than risk even a one or two-day government shutdown.
Those who voted for the omnibus to avoid a shutdown fail to grasp that the consequences of blindly expanding government are far worse than the consequences of a temporary government shutdown. A short or even long-term government shutdown is a small price to pay to avoid an economic calamity caused by Congress’ failure to reduce spending and debt.
The political class’ shutdown phobia is particularly puzzling because a shutdown only closes 20 percent of the federal government. As the American people learned during the government shutdown of 2013, the country can survive with 20 percent less government.
Instead of panicking over a limited shutdown, a true pro-liberty Congress would be eagerly drawing up plans to permanently close most of the federal government, starting with the Federal Reserve. The Federal Reserve’s inflationary policies not only degrade the average American’s standard of living, they also allow Congress to run up huge deficits. Congress should take the first step toward restoring a sound monetary policy by passing the Audit the Fed bill, so the American people can finally learn the truth about the Fed’s operations.
Second on the chopping block should be the Internal Revenue Service. The federal government is perfectly capable of performing its constitutional functions without imposing a tyrannical income tax system on the American people.
America’s militaristic foreign policy should certainly be high on the shutdown list. The troops should be brought home, all foreign aid should be ended, and America should pursue a policy of peace and free trade with all nations. Ending the foreign policy of hyper-interventionism that causes so many to resent and even hate America will increase our national security.
All programs that spy on or otherwise interfere with the private lives of American citizens should be shutdown. This means no more TSA, NSA, or CIA, as well as an end to all federal programs that promote police militarization. The unconstitutional war on drugs should also end, along with the war on raw milk.
All forms of welfare should be shut down, starting with those welfare programs that benefit the wealthy and the politically well connected. Corporate welfare, including welfare for the military-industrial complex that masquerades as “defense spending,” should be first on the chopping block. Welfare for those with lower incomes could be more slowly phased out to protect those who have become dependent on those programs.
The Department of Education should be permanently padlocked. This would free American schoolchildren from the dumbed-down education imposed by Common Core and No Child Left Behind. Of course, Obamacare, and similar programs, must be shut down so we can finally have free-market health care.
Congress could not have picked a worse Christmas gift for the American people than the 1,774-page omnibus spending bill. Unfortunately, we cannot return this gift. But hopefully someday Congress will give us the gift of peace, prosperity, and liberty by shutting down the welfare-warfare state.
Editor’s Choice: No preparedness and survival plan is complete without considering the types of self defense armaments you’ll require should all hell break loose. You’ve likely read scores of informative articles on close range weapons, long range rifles, calibers, accessories and modifications. But in the following article SHTFschool.com founder Selco takes, as is often the case, a different approach. Rather than worrying so much about stopping power or having the most expensive firearm money can buy, Selco suggests that you should look ahead to the time when you may need to use that weapon. What types of conditions will exist?
Selco survived One Year In Hell when his city was besieged during the Balkan War and by all accounts it was literally hell on earth. Thousands were being killed by trained military regulars. Snipers were shooting passers-by as they scrounged for food and supplies. Neighbors and friends were turning on each other.
Such events would wear on even the most hardened of individuals. Your mental and physical capacity to perform as efficiently as possible would be significantly lessened. Your emotional state could be one of extreme stress or deep depression. As Selco notes, even walking from one place to another could become a monumental task as your body breaks down from lack of sustenance.
Will you or those you depend on to keep you safe be able to effectively use their weapon during high-stress conditions? And perhaps more importantly, when they raise their rifle to neutralize an enemy target, will it even fire? Or will months of dirt, debris, lack of cleaning, or poor maintenance render their weapon useless?
It is with these factors in mind that Selco discusses choosing the right post-collapse weapon in the following article.
The AK 47 My Weapon of Choice
By Selco (One Year In Hell)
“The Zastava M-70 is an assault rifle developed and produced in Yugoslavia, nowadays Kragujevac, Serbia by Zastava Arms company. The design of the M-70 was based on modified Soviet AK-47 and AKM assault rifles and it became the standard issue weapon in the Yugoslav People’s Army in 1970. The M-70 is an air-cooled, magazine-fed, selective fire rifle. This weapon is also available as a modern sporting rifle in the US without select fire capabilities.”
This above sounds like someone is trying to say something interesting, but he failed in that. It is simply dry facts about something that meant lot for us in those times, thing that saved many lives, and took many too.
Of course nobody calls it M70, type A, B or whatever type there was. Not too many people call it AK, few call it Kalashnikov, or simply shorter and more familiar name:“Kalash“. Like we were talking about kids nickname or your favourite uncles name.
Favourite name was „gipsy woman“ or „gipsy lady“.
In the beginning of the war, all kind of weapons were in use. Some of those artefacts were used more to instil fear in enemy then to harm someone.
So in one period it was normal to see guy with his grandpa hunting rifle, two belts of bullets for bird hunting on his waist, and even green hat on his head with bird feather on it.
He was looking more like he is going to some party with barbecue and lot of alcohol where he is going to sing a lot and fire few bullets in the air while singing songs than like someone who is shooting people.
And of course all kinds of weapons were pouring in through illegal channels. Most of that was simply junk that some warlords from some other country were trying to get rid of in country where war just started and everyone wants some kind of weapon.
Whenever someone asks me did I see some weapon or use it in war, I said yea, I saw and did. But most were bad weapons.
So you could see lot of weapons that were „strange“ to this region. Some of those items fell apart after first hundred of rounds. Sometimes killing the newborn warrior who finally had this first weapon.
Also there were events where some grandpas digged out old German MP gun, taken some 45 years ago from German soldiers and carefully hidden somewhere under meters of earth because „you know we live in Balkan and you never know“.
So in one period it was confused mix of all kind of small weapons usually too old and in very bad shape and used by people who are not so familiar with weapons. Accidents happened daily.
It was like some futuristic computer game where you could see fighter jets bombing area and at the same time guy with 100 years old rifle trying to shoot that plane.
But pretty soon after that, after the army barracks were taken, and I guess better warlords jumped in on the trade, „gipsy woman“ took over.
For ordinary folks it was rifle that somehow was easy to get into, it was easy to use, and easy to handle. Some of the reasons why AK 47 has become so popular everywhere in the world.
Most of the folks did not take care of it too much. I mean even if it was cleaned it was not cleaned in proper way and with proper equipment. And yes it was mistreated, dirty, left in dust or rain, kicked, fell on ground many times and thrown away when we were jumping for cover.
Do not misunderstand me, it was not something that created instant warriors, but it was the perfect rifle for that time and people who used it.
There were mant accidents and stupid events, like a guy who had adrenaline rush and forgot that he needed to switch safety so he tried and tried to shoot, but nothing. At the end he beat the other man with rifle like he was holding a baseball bat and not a rifle, luckily the other guy was confused more than him so this worked.
People made lots of mistakes in that time. Knowledge about weapons and knowledge about fighting was very low, so that was another reason why folks loved that rifle. Easy to handle and easy to kill.
Real event from that time was that after one group broke in military storage they took cases with rifles, but nobody touched guided anti tank missiles. At that moment nobody had a clue how they worked. Too heavy to carry and rifles had real value. Another urban legend is that some folks tried to fire one of the rockets but they failed to understand how to operate the small joystick so they blew themselves and their buddies up.
Later I lay my hands and used for some time „other“ favourite weapon that folks like compare with popularity of AK. My first impression was „oh man, this is so nice, easy and cute“ but again, maybe I am stubborn, I prefferer AK.
It is about me only maybe, it is simply a heavy duty tool for me. Tool that is reliable and can make you being violent more effective.
There are endless discussion which one is better, and endless list of arguments, and many people spend more time reading weapon magazines than preparing or learning new skills for survival. Again I keep saying it is not about which one is better.
It is which one is better for you, for your region, your size, your knowledge but like with all survival equipment make sure it is weapon that can take a beating. Just like with camping equipment today there are very light tents that are very high tech but they are not good for real survival scenarios when we talk about maybe months of use.
The next step is thinking about how to fix your weapon. Again just like a good tent can be fixed with normal stuff, you should be able to fix your weapon if you have to.
Today situation is different than 20 years ago, world is getting smaller, it is easier to get your hands on weapons that you like and at least promise to make you so much more dangerous for enemies. That’s better, we all can see or try many different types or weapon, we can actually feel how it works before we obtain it at shooting ranges.
Think about your weapon not in perfect time and surroundings, try to imagine yourself in your worst moments of your life. You are cold, hungry, in pain or fear, when your kid is home sick without medication and you feel like some very heavy weight is pressing down on you from all the pressure. Standing up to this sort of challenge is what makes survival hard and lets strong people survive. So it will not be weapon only and if you choose your weapon make sure it is something that you can still operate in the worst mental, physical and maybe also natural conditions. At times when you are almost too exhausted to walk but you know you have to.
What is your go to weapon for SHTF and why? Please share in comments or on our community forum.
Also From Selco:
The 16th of September 1992 will go down in infamy as the day intervention failed and the British government lost control. By the end of Black Wednesday, George Soros had made a billion dollars and the UK Treasury, Bank of England had blown through taxpayer money in a manner never before seen.
"We planned to intervene on a scale that would ensure the market knew we were intervening, " but as the government intervened one trader notes, "it was incredible, you could hear wave after wave of selling being met by resistance from the Bank of England."
As the Treasury waited for news, fear began to spread, "we waited minute by minute on updates from the market and then we learned that the billion or so [of taxpayer money] we had put aside Tuesday to defend the pound up to the weekend had gone in a few minutes on Wednesday morning," shattering the myth of government omnipotence.
Ironically the recent collapse in the Ruble is significantly worse than the collapse in the pound at the time...
Full BBC Black Wednesday documentary:
Jeff interviews independent journalist Luke Rudkowski of We Are Change, topics include: independent journalism making the mainstream media irrelevant, the death of the mainstream media, speaking truth to power, the future is live streaming, Change Media University at Anarchapulco, full power journalism training, simple affordable tools, Change Media is also a support network, quality production lends credibility, ditching your job and living your dream. The time to act is now!Click here or on thumbnail
The First Sellside Reactions Trickle In: "17% Rate Hike Not Enough" According To Citi, JPM ; Goldman Positive: "Removes CBR Uncertainty"
Two short hours ago Russia shocked everyone with an unprecedented rate hike sending the nation's various interest rates some 650 bps higher. Well, according to the initial sellside responses, as shocking as the move was, it is not nearly enough.
Here is Citi:
Many market participants are looking at Russia’s hike from 10.5% to 17.0% and saying “wow”.
However, speaking with one of our senior RUB traders, the move is likely not aggressive enough for the medium-term. “Hiking the key rate to 17.0% is not enough to get a hold of a currency that can drop 10% in one day,” he says. “On top of that, the FX repo size needs to be much larger than it is at the moment…however, the hike might give RUB a few days of breathing space.”
One wonders just which "chatroom" Citi's FX traders decide what the fair value of the Rub(b)le should be.
And while we wonder, here is JPM which already appears to have exchanged notes in chatroom XYZ with Citi:
The rate hike occurred after today's 10% depreciation of the RUB despite attempts by the CBR to intervene earlier in the day. The decision was aimed at "limiting substantially increased ruble depreciation risks and inflation risks" according to the CBR. This emergency move suggests to us that household deposit dollarisation had increased significantly (official October data had already suggested dollarisation re-accelerated again). Tonight's large rate hike should in the short term help to slow retail dollarisation demand. However rate hikes do little to help the underlying demand for USD from corporates and banks who continue to front load their demand in order to apy their FX debt payments further down the line. With limited access to USD funding markets and oil having yet to find its bottom, the perceptions of local banks and corps on RUB continues to be negative, fuelling this hoarding behavior. In this context, there is a real possibility that even such a significant rate hike may not be enough in the medium run to stem RUB depreciation. The central bank in our view needs to announce a package of measures alongside rate hikes which also aim to lam local fears of USD scarcity. This will most likely involve making available a sizeable amount of FX reserves (we have suggested around USD100bn in our piece) through a combination of deposits in state banks and the CBR's existing repo facility. The CBR however continue to be unwilling to commit their FX reserves, with their focus still primarily concentrated on defending the sovereign balance sheet. As part of a package of measures, the CBE may also look to cap local bank open FX position limit down from the current 20% of capital as well as raise FX RRRs to help stem deposit dollarisation. Further pressure can also be put on corporates to convert their FX proceeds faster.
Bottom line: expect the market to react positively to the rate hike in the short run, but further measures are needed from the CBR for us to turn more bullish on RUB in the medium run, particularly in the absence of improved geopolitical risks and higher oil prices.
But Goldman is less negative on the move: "The decision clearly removes the uncertainty over the CBR's strategy that in our view was a major driver of the recent Ruble volatility and hence is positive. "
What happened: The Ruble traded above Rub72 vs. the basket and for the first time sharply outside our fair valuation metrics at current oil prices. Similarly the Ruble price of oil, which underlies next year's budget (Rub3700/bbl) and is closely tracked by the market, moved to its highest level yet. This was despite the oil price being fairly stable on the day and no significant news around other risk factors. The CBR responded to the sharp Ruble move post Moscow trading hours by raising its key rate from 10.5% to 17%, raising the key rate spread for loans against non-marketable collateral from 25bps to 175bps meanwhile extending their maturity by up to 18 months, though the wording of the CBR's publication is quite unclear on the latter point. Additionally the limit for the 28-day fx repo auction was raised from USD1.5bn to USD5 bn while the CBR also announced that it will hold the 12-month fx repo auction on a weekly basis. This policy response of raising the repo rate to fight the Ruble is against our expectations of the CBR likely to allow much higher interest rate volatility through tight liquidity management and we put our forecasts for rates, growth and inflation on hold and close our conviction views of being constructive on local fixed income assets and Russian credit. The decision clearly removes the uncertainty over the CBR's strategy that in our view was a major driver of the recent Ruble volatility and hence is positive. The key will be, to what extent the market believes that this strategy is credible given the likely impact on growth and the funding cost of the banking sector.
Why has the Ruble been under pressure? Fundamentally the Ruble is under pressure from sanctions and lower oil prices, and we have laid out our fair value model here (see CEEMEA Economics Analyst 14/35, 17 Oct. 2014). In our view the Ruble has recently been under pressure mostly from expectation-driven local flows. While the sanctions have been a major factor in the weakening of the Ruble earlier, we think fx liquidity in Russia is now ample despite the sanctions. This is very different from 2008/9. The banking system remains a sizeable international creditor (unlike in 2008) and even the corporates' net short-term external debt position is sizably positive, i.e. they hold more fx cash than required for debt repayments in the next year. Not surprisingly onshore short-term fx rates are close to zero. Instead, the private sector is continuing to short the Ruble with expectations heavily driven by falling oil prices. In our view this ultimately required decisive action from the CBR to raise the cost of these flows.
What triggered the recent sharp sell-off?: In our view the destabilization had been triggered by confusion about the strategy of the Central Bank. Uncertainty about where the oil price will ultimately stabilize remains high and hence the CBR can in our view not aim at stabilizing the level of the Ruble. However, it needs to ensure that excessive Ruble volatility does not destabilize expectations and potentially the financial system.
We thought this was best achieved by keeping Ruble liquidity very tight through unsterilized interventions. The cost of that strategy would have been to accept significantly higher short-term interest rate volatility, something that the CBR worked hard to dampen in the last few years. The alternative in our view and the one ultimately now chosen by the CBR has been to raise the key rate to a level where it becomes prohibitively expensive to borrow. We thought this would have been the less preferred option due to the economic costs likely to be involved and the pressure this puts on a weak banking system. Another possibility was clearly some kind of constraints on the ability of domestic agents to invest into fx. However, the latter had in our view been credibly ruled out by the authorities and this assessment is confirmed by today's rate decision.
Against the above, the CBR's signals had been difficult to read. The CBR raised its key rate last week by 100bps, as before arguing that it would use the key rate to stabilize inflation expectations. This was largely in line with our thinking, though we had only forecasted 50bps, but clearly far less than what short-term market rates were pricing.
We had forecasted that the CBR at the same time would signal very clearly that it would use liquidity measures to stabilize the Ruble instead and potentially widen the interest rate corridor. However, the CBR did not give any clear guidance apart from the fact that it extended the quantity restriction on the fx swap facility forward in time (the only lending facility that has essentially an almost unrestricted collateral pool, given the amount of fx held by the banks).
With access to the fx swap facility restricted, the way to manage liquidity would have been to allow the restrictions set by the amount of eligible collateral in the repo operations to become binding. This would have easily happened if the CBR intervened in the market without adding to the Lombard list. However, instead the CBR added a large private placement of bonds by a Russian corporate to its Lombard list, expanding the pool of collateral by close to 10% on our numbers. This effectively seemed to signal that the CBR essentially wants to restrict interest rate volatility and instead is willing to accept sizeable fx volatility, which the market duly delivered today.
Today's rate decision now signals that the CBR is willing to use the key rate to limit Ruble volatility while keeping interbank rates close to the policy rate, i.e. it is the most orthodox approach to monetary policy. This will in our view lead to a sharp sell-off in the local bond market, which is anchored by the key rate and where the yield structure depends on expectations of the future path of the key rate. While arguably today's sharp move should flatten the curve or even invert it, this largely depends on the market's perception of the credibility of the move.
Why such a large hike? A 650bps hike is very large by any metric and is more than the market expected (short-term rate expectations had fallen back to 11-12% from above 17% post last week's rate decision judging from the FRA's. Thus the decision is largely in line with what was priced in prior to last week's rate decision. We also believe that given the limited transmission of policy rates to deposit rates in the banking system, any interest rate based response to the Ruble needed to be outsized to have a meaningful impact on the attractiveness for resident households and corporates to hold Ruble assets rather than fx.
What are the risks? Today's decisive rate hike clearly removes the uncertainty about the CBR's strategy and signals that the CBR is now willing to defend the stability of the Ruble. The decision should also alleviate some concerns about the political independence of the Bank. The risks now mostly are about the ability of the economy and most importantly the banking sector to withstand this shock to their funding cost. Unlike in 2009, a far larger share or in our view around 10% of the banking system's balance sheet is now linked to the key rate, thus today's rate decision has a meaningful impact on the funding costs of the banks. While much of their assets are at floating rates, the impact on their bottom line will in our view be sizeable either directly or through a deterioration in asset quality. For this reason, in our view, the impact of this large emergency rate hike on Russian credit spreads could ultimately prove to be negative.
So get to work, Mrs. Russian Chairwoman, unless somehow the ex-KGB spy is prepared to make good on his recent threat to personally tear off the heads of any and all FX speculators found to be short the RUB.
The proletarians have nothing to lose but their chains. They have a world to win. Working Men of All Countries, Unite!” – Karl Marx
In our dire era of increasing economic inequality, we need a symbol for the oppression of the masses. Imagery is a powerful source for inciting change. If we, as the suffering collective, are to attain the glory of perfectly equal distribution, we must find a culprit for our misery. Billionaires like Sheldon Adelson and the George Soros are not popular enough to play public villains. No, what the people need is someone of prominence. They need someone well-known who represents the pure evil of unfettered capitalism.
I think I found the answer to the desperate prayers of the poor and blighted. They want a villain to join in solidarity against. Well, I shall meet their demand. For any egalitarian warrior that wants to stick a pitchfork deep into the injustice of massive wealth accumulation, there exists a target so heinous and diabolical, it begs to be destroyed.
The sole cause of human suffering in the world exists in one entity: Grumpy Cat.
That’s right; the internet sensation “Grumpy Cat” embodies the worst aspects of the nouveau riche. The crotchety feline is a disgrace to American ingenuity. She is ungrateful and undeserving of the riches she has unjustly acquired. Her talent consists of allowing pictures to be taken of her dour countenance. Surely, this is a mockery of all working class Americans.
Grumpy Cat has done nothing to advance human wisdom or goodness. Instead, the mongrel, whose real name is Tardar Sauce, earned her wealth through sheer laziness. Worst of all, Grumpy Cat has the privilege of not being a human. There are poor children in Africa who will never have the chance to experience cat privilege. How dare she strut around in comfort and luxury without doing a thing to help her fellow citizens of the world! What kind of world do we live in where a pet can earn a better living than a bank executive? Not a fair one, that’s for sure.
For all these crimes and more, it’s time we make an example out of Grumpy Cat. There are reports that the sourpussed kitten has earned close to $100 million in just two years. The owner of Ms. Sauce alleges those figures are inaccurate. But why should we believe someone who can afford a life of opulence? The rich overclass can’t be trusted. We know from Marxist dialectics that so-called “facts” are used to keep the common people in chains.
We workers aren’t privy to the true extent of how much Grumpy Cat has earned from us. We must not lose sight of the truth that the cat is not just a harmless mascot who is looked upon fondly on the internet. She’s a veritable multimedia empire. Her face is plastered upon an immeasurable array of products. She is the star of a Lifetime Christmas movie and has hosted an episode of the masculine pageant known as WWE Raw. There’s no telling how much revenue the snobbish cat has earned. Such a gross injustice calls for action.
Everyone knows income inequality threatens the stability of Western countries. Former Federal Reserve chairman Alan Greenspan, whose brilliant foresight and financial acumen did nothing to prevent the financial crisis, considers “income inequality the most dangerous part of what’s going on in the United States.” Economist Thomas Picketty, whose famed calculations on worldwide capital are without flaw, also says inequality poses a threat to Western civilization. Surely, these two brilliant minds can’t be wrong!
There are those who will say that Grumpy Cat poses no threat to societal tranquility. They will say that she is a harmless feline whose natural gifts provide endless amounts of joy for many. They will claim that our worries are childish, and that a household pet should be free to earn its owner as much money as possible, provided the animal is kept away from harm. We must not be swayed by this bourgeoise logic. Reason is the enemy of the human spirit. Our envy and emotions are our greatest weapons against the entrenched inequities in this country. We must not allow the forces of rationality to interfere with our mission of eating the rich.
Now is the time for hasty thought and even hastier action. Tearing down our capitalist overseers requires a firm commitment to take no prisoners. Grumpy Cat, whose wealth is far beyond the reach of the unwashed masses, must be punished. She must be used as a symbol to rile the middle and lower classes out of their stupor. With a small push, we can convince the hoi polloi that their interests are at the heart of our sacred battle.
Let no apprehension toward chaotic revolution fool you. The wisdom of tradition must be cast off if we’re to achieve progress. Edmund Burke was a member of the white aristocracy; his words do not pertain to the struggle against the capitalist order. We must allow the moral arc of history to be our guide. When the French revolutionaries tore down the noble class, the only victims were those who deserved it. When the Bolshevik Revolution occurred, it ushered in a communist harmony devoid of human suffering. The same goes for Mao’s Great Leap Forward – another achievement in mankind’s flourishing.
Now is time for a new revolution. All the talk of the American entrepreneur is bullcockey. Warnings about human complexity and the need for peaceful cooperation is just a smokescreen for tyranny. Our freedom lies in tearing down those better and more well-off than us. We are the glorious heirs to the brave candlemakers who sought to block out the sun. Where our French brethren fought for freedom from natural competition, we fight for the liberty of not feeling inadequate next to an adorable feline. It is the most noble of causes. For if inequality is a crime, then Tarder “Grumpy Cat” Sauce is hostis humani generis.
There is only one solution that will begin the process of establishing a more equitable and more just social system: we must send Grumpy Cat to the guillotine. Her obscene amount of wealth is proof enough of guilt. Off with her head!
China faces epic unintended consequences in its efforts to 'manage' everything. As Bloomberg rhetorically asks, what if a central bank cut interest rates and borrowing costs rose?
Well that didn't work out as expected, eh?
The reason is simple - the leveraged-speculative surge into Chinese stocks triggered by the "easy" rate-cuts sparked a major rotation from bonds into stocks - which forced the PBOC to stymie leveraged-trading and implicitly tighten financial conditions dramatically for the stressed corporate bond market.
Since the People’s Bank of China surprised markets with the first benchmark rate reduction in two years on Nov. 21, the five-year sovereign bond yield climbed 15 basis points, that for similar AAA corporate notes surged 37 and AA debt yields jumped 76. While finance companies did start charging less for mortgages, their funding costs rose as the one-week Shanghai interbank lending rate added 37 basis points.
The PBOC move misfired as it triggered an 18 percent surge in the Shanghai Composite Index (SHCOMP) of shares, prompting investors to raise cash by selling bonds and seeking loans, driving interest rates higher. Costs for riskier issuers of notes rose as regulators banned the use of riskier debt as collateral for financing. Investors dialed back expectations for further monetary easing as policy makers seek to cool the stock rally.
“Financing costs moved in the opposite way than the central bank wished,” said Deng Haiqing, Beijing-based chief fixed-income analyst at Citic Securities Co., China’s biggest brokerage.
“The fund flows into the stock market could nurture prosperity in the capital market, but the real economy may not necessarily benefit in the short term,” Haitong Securities Co. analysts led by Shanghai-based Jiang Chao wrote in a note on Dec. 7. “On the contrary, it could lead to further scarcity of funds, leading to an increase in interest rates.”
“The stock market’s siphoning of funds may have threatened deposits even at big banks,” said Li Miaoxian, Beijing-based economist at Bocom International Holdings Co. “The central bank needs to take further action, either by injecting more liquidity, though not necessarily in the form of a reserve ratio cut, or taming the stocks rally, to realize its goal of lowering financing costs.”
China's Irrational Exuberance moment...
The People’s Daily, run by the ruling Communist Party, said on its micro-blog last week that some stock investors weren’t acting rationally, joining the official Xinhua News Agency in highlighting risks from the nation’s world-beating equity rally. That marked a turnaround from three months ago, when official media advocated equity investments.
* * *
Yet again - once again central-planners fall victim to unintended consequence
“[W]e want to use our reserves more constructively by investing in development projects around the world rather than just reflexively buying US Treasuries. In any case, we usually lose money on Treasuries, so we need to find ways to improve our return on investment.”
– Unnamed senior Chinese official, cited in an FT article, ‘Turning away from the dollar’, 10th December 2014.
“Mutually assured destruction” was a doctrine that rose to prominence during the Cold War, when the US and the USSR faced each other with nuclear arsenals so populous that they ensured that any nuclear exchange between the two great military powers would quickly lead to mutual overkill in the most literal sense.
Notwithstanding the newly dismal relations between the US and Russia, “mutually assured destruction” now best describes the uneasy stand-off between an increasingly indebted US government and an increasingly monetarily frustrated China, with several trillion dollars’ worth of foreign exchange reserves looking, it would now appear, for a more productive home than US Treasury bonds of questionable inherent value.
Until now, the Chinese have had little choice where to park their trillions, because only markets like the US Treasury market (and to a certain extent, gold) have been deep and liquid enough to accommodate their reserves.
The above FT article points to three related policy developments on the part of the Chinese authorities:
- China’s appetite for US Treasury bonds is on the wane;
- China is ramping up its overseas development programme for both financial and geopolitical reasons;
- The promotion of the renminbi as a global currency “is gradually liberating Beijing from the dollar zone”.
The US has long enjoyed what Giscard d’Estaing called the “exorbitant privilege” of issuing a currency that happens to be the global reserve currency.
The FT article would seem to suggest that the days of exorbitant privilege may be coming to an end – to be replaced, in time, with a bi-polar reserve currency world incorporating both the US dollar and the renminbi.
(The euro might be involved, if that demonstrably dysfunctional currency bloc lasts long enough.)
Here’s a quiz we often wheel out for prospective clients:
- Which country is the world’s largest sovereign miner of gold?
- Which country doesn’t allow an ounce of that gold to be exported?
- Which country has advised its citizenry to purchase gold?
Three questions. One answer. In each case: China.
Is it plausible that, at some point yet to be determined, a (largely gold-backed) renminbi will either dethrone the US dollar or co-exist alongside it in a new global currency regime?
We think the answer is yes, on both counts.
Meanwhile the US appears to be doing everything in its power to hasten the relative decline of its own currency.
There is a new ‘big figure’ to account for the size of the US national debt, which now stands at $18 trillion.
That only accounts for the on-balance sheet stuff. Factor in the off-balance sheet liabilities of the US administration and pretty soon you get to a figure (un)comfortably north of $100 trillion.
It will never be paid back, of course. It never can be. The only question is which poison extinguishes it: formal repudiation, or informal inflation.
So the direction of travel of two colossal ‘macro’ themes is clear (the insolvency of the US administration, and its replacement on the geopolitical / currency stage by that of the Chinese).
The one question neither we, nor anybody else, can answer precisely is: when?
There are other statements that beg the response: “when?”
Government bond yields have already entered a ‘twilight zone’ of practical irrelevance to rational and unconstrained investors.
But when do they go into reverse? When will the world’s most frustrating trade (‘the widow-maker’, i.e. shorting the Japanese government bond market) start finally to work?
When will investors be able to enter or re-enter stock markets without having to worry about the malign impact of central bank price support mechanisms?
Here’s another statement that begs the response: “when?”
The US stock market is already heavily overvalued by any objective historical measure.
When is Jack Bogle, the founder of the world’s largest index-tracking business, Vanguard, going to acknowledge that advocating 100% market exposure to one of the world’s most expensive markets, at its all-time high, might amount to something akin to “overly concentrated investment risk”?
Lots of questions, and not many definitive answers. Some suggestions, though:
- At the asset class level, diversification—by geography, and underlying asset type—makes more sense than ever. Unless you strongly believe you can anticipate the actions and intentions of central banking bureaucrats throughout the world.
Warren Buffett once said that wide diversification was only required when investors do not understand what they are doing.
We would revise that statement to take into account the unusual risks at play in the global macro-economic arena today: wide diversification is precisely required when central bankers do not understand what they are doing.
- Expanding on the diversification theme, explicit value (“cheapness”) today only exists meaningfully in the analytically less charted territories of the world. Stock markets in Russia and China, for example, are trading at book value or less, while North American markets 3x more.
- Some form of renminbi exposure makes total sense as part of a diversified currency portfolio.
- US equities should be selected, if at all, with extreme care; ditto the shares of global mega-cap consumer brands, where valuations point strongly to the triumph of the herd.
- And whatever their direction of travel in the short to medium term, US Treasuries at current levels make no sense whatsoever to the discerning investor. The same holds for Gilts, Bunds, JGBs, OATs.
- Arguments about Treasury yields reverting to a much lower longer term mean completely ignore a) the overwhelming current and future oversupply, and b) the utter lack of endorsement from one of their largest foreign holders.
Foreign holders of US Treasuries, you have been warned. The irony is that many of you are completely price-insensitive so you will not care.
There are other reasons to be fearful of stock market valuations, notably in pricey Western markets, over and above concerns over the debt burden.
As Russell Napier points out in his latest ‘The Solid Ground’ piece,
“In 1919-1921, 1929-1932, 2000-2003, 2007-2009 it was not a resurgence in wages, Fed-controlled interest rates or corporate taxes which produced a collapse in corporate profits and a bear market in equities.
“On those four occasions equity investors suffered losses of 32%, 85%, 41% and 51% respectively despite the continued dormancy of labour, creditors and the state. It was deflation, or the fear of deflation, which cost equity investors so much. There is a simple reason why deflation has always been so damaging to corporate profits and equity valuations: it brings a credit crisis.
“Investors forget at their peril what can happen to the credit system in a highly leveraged world when cash-flows, whether of the corporate, the household or the state variety, decline. In a deflationary world credit is much more difficult to access, economic activity slows and often one very large institution or country fails and creates a systemic risk to the whole system.
“The collapse in commodity prices and Emerging Market currencies in conjunction with the general rise of the US$ suggests another credit crisis cannot be far away. With nominal interest rates already so low, monetary remedies to a credit seizure today would be much less effective. Such a shock, after five and a half years of QE, might suggest that the patient does not respond to this type of medicine.”
And since Christmas fast approaches, we can’t speak to the merits of frankincense and myrrh, but gold, that famous “6,000 year old bubble”, has always been popular, but rarely more relevant to the investor seeking a true safe haven from forced currency depreciation and an ever vaster mountain of unrepayable debt.
Perhaps the collapse in oil prices does have something to do with demand after all? HSBC's China's Manufacturing PMI tumbled to 49.5 (missing expectations of 49.8), its lowest since May (and first contraction). This is the 3rd contractionary print in the last 2 years as HSBC notes "domestic demand slowed considerably," with only new export orders (to whom we wonder) improving. Employment slipped yet again as did output leaving HSBC no choice but to demand "further monetary easing," due to "rising disinflationary pressures, which fundamentally reflect weak demand."
Triple-dip contraction in soft-survey data...
as across the board the PMI components were weak... apart from new export orders?? To who?
Of course - you know what HSBC thinks this should mean:
Commenting on the Flash China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & CoHead of Asian Economic Research at HSBC said: “The HSBC China Manufacturing PMI dropped to a seven-month low of 49.5 in the flash reading for December, down from 50.0 in November. Domestic demand slowed considerably and fell below 50 for the first time since April 2014. Price indices also fell sharply. The manufacturing slowdown continues in December and points to a weak ending for 2014. The rising disinflationary pressures, which fundamentally reflect weak demand, warrant further monetary easing in the coming months.”
* * *
Where are you going, America?
I don’t like to discuss politics too much. There are not enough smart, kind and honest people in politics wherever I look in the world for me to want to have anything to do with that game. I’d just spend all my time wondering what kind of mindset it takes to want to tell other people what to do, and be in control of the millions, billions and trillions of dollars that are taken from these people on a daily, yearly, basis.
Not that all politicians are bad, but those who have genuinely good intentions get drowned out, within seconds, by the ones for whom the need to have power over others is more important than anything else. And as I said, on the whole they’re not very smart. It’s for instance a very bad idea to let your countries’ economic policies be decided by the very people who make the decisions today.
They have no clue what they’re talking about. So they get advisors who they feel do know, and these advisors all come from the same small niche of society that steer everybody’s hard-earned cash towards that same small niche of society. 99% of economists are religious nuts who do even the Roman Catholic church one better because they chart graphs to ‘prove’ their beliefs are true -or even provable.
They adapt the world to their theories, not the other way around, as physicists do. They pretend their field is a science, but, other than the graphs, it has none of the characteristics of a science. Falsifiability is not a term one can let loose on economics; within minutes, there’d be nothing left.
The other advisors politicians have when it comes to economic policies are bankers, who are convinced banks are the most important institutions and edifices in the world, just like priests and vicars would have described their churches and cathedrals not long ago. That is why last week we saw a spending bill being shoved through US Congress and Senate that includes parts openly written by Citigroup lobbyists, and which puts the risk of over $300 trillion in derivatives on American taxpayers’ shoulders.
America is a democracy in name only. And I often ask myself why Americans take that lying down. Why they think they don’t have to fight for their rights and their freedoms the way the founders did. Do they think they’re special, are they so full of themselves, and full of ‘it’, that they think it’s okay to let their rights being taken away from them, and their children, the same rights so many Americans died for in earlier days?
When you try and see things that way, what else do present day US citizens deserve than what’s coming to them? You can’t have freedom, and you can’t have rights, if you’re not willing to fight for them. And that doesn’t mean sending a bunch of your low-down poorest young people to some faraway desert, it means keeping in touch with what’s happening in your own town and county and state and country. And raising your voice if you don’t like what you see.
There’s a Senate report – many years too late – that confirms the CIA and other parties tortured often innocent people in the name of the United States, and that means you, in incredibly cruel ways reminiscent perhaps most of Medieval times or even before that, before man allegedly became civilized, but for which, by the looks of it, nobody will to be prosecuted in the US.
Letting people die of torture, and then afterwards finding out it was just another case of mistaken identity, has become acceptable in America. Congratulations. We’ve come a long way.
There’s the incredible story of the Ukraine, in which the Senate just days ago called for more economic sanctions vs Russia, and full-blown lethal military aid for Ukraine, where US patsies have taken over even more government positions by being handed hundreds of millions of dollars and fresh Kiev passports, and where now Russia will be forced to counteract, against its will.
Why do Americans allow for that to happen in their name? Don’t they care what other people in the world, in which they’re hugely outnumbered, since less than 1 in 20 is American, think about them? Don’t they care about the effect of harassing others incessantly for the purpose of enriching US companies?
Or do Americans think their superior weaponry allows them to do whatever they want to whoever they want to do it to? Somehow, that, too, is reminiscent of the Middle Ages. America hasn’t won an actual war since 1945, because bigger armies don’t win wars anymore. Having the biggest guns doesn’t either. Nuclear weapons are too destructive for that.
Ron Paul seems to be the only US politician who has any idea of what the US should stand for, who understands that empire building is a really bad idea with all the nukes around, and that coalition building and friendship with other peoples and nations is a much better way to keep Americans safe and -relatively – prosperous. And Ron Paul is getting on; who’ll stand up in his place?
But the biggest issues for Americans are not abroad, they’re right at home. As evidenced by Ferguson, by Eric Garner, and by the mass demonstrations in the past days. The problem is, since the 1960s people have turned their focus so much towards money and so far away from their personal rights and freedoms, and those of others, that one or two or ten demonstrations won’t make a difference anymore.
I was watching something on the 1964 Klan killing of three civil rights workers in the town of Philadelphia, Mississippi the other day, of Dr. King’s role, of how the entire town knew who was guilty but shut up. And I wondered what exactly America has achieved since then, what has changed and what is better 50 years on.
And sure enough I found my answer, in a graph of all places. It this doesn’t hurt your sense of justice, and your sense of pride to be an American, I don’t know what would. Nor do I understand, if you choose to keep silent, where you think this will lead in the future. What can you possibly say when you let these numbers sink in?
With The Fed due to make some highly amibiguous, always dovish promises this week, we thought a quick look at the world of stocks and bonds through the eyes of the Fed would be useful...
There's no decoupling economically...
And stocks are catching down to the Fed's Taper...
But what is really important is how close we are to un-taper... as it's the flow that matters...
The question is... will lower for longer make up for no moar QE? We suspect not given the charts above.
Charts: Bloomberg and @Not_Jim_Cramer
As hard as it is to believe - given the strength of the "Russia-is-doomed" meme - Crude oil prices for Russia (in Rubles) are unchanged since February... This is important as all costs are Ruble denominated while revenues are USD denominated, leaving Russian oil companies’ margins insulated despite the dollar decline in price. In addition, the Russian government is easing the export taxes which further improve the profitability of Russian oil. So as US Shale Oil sector is destroyed by its USD costs, it appears Putin's core energy industry is somewhat insulated... and America's late-80s "defeat The Sovet Union" playbook is failing.
Reserves are tumbling with the Ruble...
Did Russia peg the Ruble to Crude? Not quite the crash everyone thinks of...
As Giannis Kolmer explains,
The subject under discussion is whether or not the “clearing” taking place in the oil markets “rhymes” with the events of 1986 that led to fall of the Soviet Union; and the effects of the devaluation of the Ruble, which I strongly believe will be more favorable for Russia, combined with recent trade agreements.
The last time around the US used oil as a tool to combat Russia (at the time the Soviet Union), on a nominal basis Brent underwent a correction from over $30 toward the range of $11-13.5 where it remained until the defeat of the Soviet Union and the withdrawal of the Red Army from Afghanistan in February 1989 after the signing of Geneva Accords in 1988.
While successful this time around the Russian’s via Putin are more than able to cope with an oil rout for the near future. Already the devaluation of the Russian Rubble means that oil revenues will in fact be more in Rubles than last year since the devaluation is currently wider than the correction of the oil price itself.
In many ways, the Ruble is the thing to watch in terms of timing the bottom. Since intervention is ahead of the correction. From 33 to 63 rubles per dollar, that’s almost a 50% devaluation while the correction of oil prices is just nearing the 50% correction level at 52.5 assuming a peak of $105 per barrel. So where does intervention stop? $45 on Brent Crude means 40 to 42 for WTI while in the relationship of USD with respect to the RUB that means 70 to 75 or another few billion worth of foreign reserves while revenues from oil in rubles double at the minimum. Also it is important to remember that Russia has very low debt compared with the 80’s and 90’s.
Meanwhile such weakness in oil markets leads to strength in the Natural Gas sector as the aged, inverse correlation between the two (as oil rises NG prices fall and vice versa) combined with winter conditions boost a price, which in itself is stable-NG prices are not in the process of price discovery but rather in the stage of consolidation, after a violent upswing last winter. While since October NG prices have sold off from 4.5 to 3.7 currently, the 20% drop is nothing compared to the drop in WTI.
In the meantime, if 1986 is any indication, the process of price discovery “clears out” when the correction enters the 60% territory or in number terms from 105 to 42 dollar per barrel
So really what all this suggest is that a bounce is to be expected as we head into the winter, however the long term lows suggest that the mid 40’s is where all this end, which coincides with the correction of 86 and a Ruble above 70 per USD.
Anything below 50 is scary for the energy sector, which accounts for a third of capex in a world dominated by buybacks and dividends fueled by cheap financing. But credit markets are already actively taking that option away.
“Widening”, is definitely the word of the week. However, like in Afghanistan in the late 80’s, in the words of Charlie Wilson, the US "are fucking up the endgame."
After spending a few billion along with the Saudi’s fighting a covert war, the Senate committee in charge of the budget did not see fit for the US to spend a few more million to build schools and infrastructure, indirectly enforcing the belief that God helped the Afghan people, (who for the most part were under the age of 20 at a rate of 1 out of three) fight off the Red Army, not the US taxpayer.
This time, after spending billions to make the USA energy independent, at great risk, they are falsely using a vulnerable geopolitical tool as a weapon against a highly formidable opponent. In the game of career politician versus former spy, like in the game of follow the leader, the bets are in favor of the side with less layers of political red tape and influence.
As George R.R. Martin’s King Robert Baratheon stated “which is the bigger number 5 or 1?... One, one army, united behind one leader with one purpose.
This is not a result of problematic markets. It’s a problem of political stupidity. The question is do you bet on the one leader or on the combination of the Senate, the President, NATO, the Pentagon and all related offensive defensive components in its arsenal.
* * *
Pretend, for a minute, that you’re a money manager in today’s manipulated world. You understand that most of what’s happening is the result of governments and central banks forcing down interest rates and pumping up asset prices. You don’t trust this process but since “the markets are recovering” you’ve felt compelled to play along, putting your clients into a standard mix of stocks, bonds and cash.
But you’re not feeling the love. With stocks outperforming bonds and cash, your blended portfolios have failed to match the S&P 500 and your clients are asking snarky questions like “What exactly am I paying you for when I could do better by just buying an ETF?”
So finally, as equity prices march ever higher and governments around the world reiterate their promises of unlimited cheap money from here to eternity, you throw up your hands and give the clients what they want, loading up on growth stocks, especially from the hottest emerging markets.
Then, out of the blue, the dollar spikes, oil tanks and the world tips into chaos. US stocks have their worst week in three years, emerging markets collapse, and clients who last month demanded double-digit gains now start begging for reassurance that their savings won’t just melt away.
You, of course, have no idea what to tell them. Your training was all about markets and cash flows and how to analyze them. But today there are no markets. Instead of millions of more-or-less rational, self-interested producers and consumers, all you see when you look out the window is a handful of large, politically-motivated entities playing games with make-believe currency to get through the next election cycle or bonus period. Fundamentals like P/E ratios and dividend yields offer no insight into what might happen, and traditional asset allocation formulas, based as they are on the assumption of free capital flows and rational actors, give results that are random at best and exactly the opposite of what was intended at worst.
And this is just the first month in what might — if oil keeps falling and energy-company junk bonds blow up and the eurozone falls back into recession and Greece, Italy, Spain, and France elect anti-euro leaders and emerging market governments start defaulting and some other less obvious black swans all land at once — turn out to be 2008 all over again. You barely made it to 2010 with your career and sanity intact, and now here you are again, staring into the abyss and hoping the abyss doesn’t stare back.
OR, some central bank talking head might appear on TV with a promise of free money for every imprudent bank and insane oil driller, and the markets might resume their march into fantasy land. So here you sit on a Sunday morning wondering whether to sell everything and move your clients to 100% cash — as you wish you had done when the housing bubble started to burst in 2007 — or load up on high-beta growth stocks, trusting the Fed, ECB, and BoJ to pay off on the Greenspan put one more time.
The killer is that whatever you do, it’s strictly a guess. Financial fundamentals don’t matter, geopolitics doesn’t matter, and those cook-book financial planning guidelines are irrelevant. You’re flying blind with the fate of dozens of people in your hands, people who trust you and have no idea how little you know.
Sometime in the next 24 hours you’ll simply roll the dice with their futures. There must, you think, be an easier, more honest way to make a living.
Run away... just 6 weeks ago when we first highlighted the FBI was probing multi-billion-dollar REIT American Realty Capital, the company's stock crashed, wiping out billions leading the CEO to note, "we don't have bad people, we had some bad judgment there." Now, as The WSJ reports, it appears the CEO David Kay, COO Lisa Beacon, and founder & Executive Chairman Nicholas Schorsch have all decided to "stabilize the company and... strengthen future leadership and strategy," by jumping ship. We are sure their jets will be fueled up and ready for the nearest extradition-free nation...
Embattled real-estate investment trust American Realty Capital Properties Inc. announced a dramatic management shake-up early Monday morning as Nicholas Schorsch, the company’s founder and executive chairman, resigned.
The move comes just over six weeks after an accounting scandal shook the company and erased more than $3 billion from the REIT’s market value.
Mr. Schorsch also resigned from the boards of several notraded REITs managed by Cole Capital Advisors Inc., an affiliate of American Realty Capital Properties.
In a surprise move, David Kay, the company’s chief executive since the end of September, and Lisa Beeson, a longtime deputy to Mr. Schorsch, also stepped down Monday morning. Mr. Kay had been handling the damage control after the accounting irregularities had been announced, meeting with investors and analysts in an effort to contain the scandal.
The company said that board member William Stanley had been appointed lead independent director and would sever as interim chief executive officer and chairman until replacements could be found.
“The actions taken today will stabilize the company and are necessary to strengthen future leadership and strategy, improve governance, and complete a separation from Nick Schorsch and his affiliates,” Mr. Stanley said in a statement. “These actions build on ARCP’s significant real estate assets and asset management capabilities, and will further restore investor confidence in ARCP.”
The company said its financial results going back as far as 2013 could no longer be relied upon, and hired outside counsel and auditors to investigate the financial results.
* * *
When the tide rolls back, they will all be exposed...