Saturday, January 31, 2015

American Liar, The Rest Of The American Sniper Story..........

American Liar, The Rest Of The American Sniper Story

Why Jesse Ventura is likely to collect millions from Chris Kyle's American Sniper.

Chris Kyle, author of the runaway best-seller American Sniper, was a military hero who killed 160 people during his four tours of duty in Iraq and is now the subject of an Oscar-nominated blockbuster. He was also a fabulist. Before his tragic murder in 2013, Kyle told a number of extremely dubious stories. 

In one tale, Kyle claimed he killed two carjackers at a gas station southwest of Dallas, and that his driver's license directed local police officers who questioned him to contact the Department of Defense. Kyle also claimed he traveled to post-Katrina New Orleans with a sniper friend, set up his gun atop the Superdome, and picked off dozens of armed looters.

Those stories got Kyle into legal trouble. It was another, much less exciting story—one that wasn't just unverifiable, but verifiably false. That tale, conveyed in a mere three pages of American Sniper, has put Kyle's widow on the hook for $1.845 million in damages. And it may soon make Kyle's publishers wish they approached the veteran's claims with great deal of skepticism.

Kyle's legal difficulties emerged from a subchapter of American Sniper titled "Punching Out Scruff Face." In it, Kyle describes beating up a former Navy SEAL ("Scruff Face") after the SEAL claims American soldiers deserved to die in Iraq. 

Early drafts of the book identified the SEAL as Jesse Ventura, former governor of Minnesota and famed professional wrestler, but Kyle's publishers removed the name for fear of a lawsuit. Nonetheless, in a radio interview following the book's release, Kyle admitted that "Scruff Face" was Ventura, and he repeated the claim soon after on The O'Reilly Factor.
American Sniper shot to the top of Amazon's best-seller list, becoming a smash hit for its publisher, HarperCollins, selling more than 1.5 million copies by July of 2014.

There was, however, a problem: The Ventura story wasn't true, and Ventura meant to prove it. So he took Kyle to trial, suing him—and, after he died, his estate—for defamation and unjust enrichment. In the United States, defamation cases are extremely difficult to win, thanks to the First Amendment. When allegedly defamatory statements pertain to a public figure, the plaintiff mustn't just prove those statements were false. He has to prove the defendant made those statements with "actual malice"—that is, knowledge that they were false or with "reckless disregard" for their falsity. Very few defamation plaintiffs can make it over the high bar of actual malice.

Ventura made it over that high bar!

On July 29, 2014, a federal jury returned from six days of deliberations to award Ventura $1.845 million in damages—specifically, $500,000 for defamation and about $1.345 million for unjust enrichment. (In other words, Kyle unjustly profited from defaming Ventura, and so his estate must give Ventura some of that money.) Kyle's widow, Taya Kyle, promptly filed for "judgment as a matter of law," asking the trial judge to reverse's the jury's verdict because the jury clearly got it wrong. Failing that, she asked for an entirely new trial. The judge denied both requests, defending the jury's verdict as legally and factually justifiable. Kyle's widow is currently appealing the decision; her odds of winning appear quite low.

For the Kyle family, then, the legal tribulations surrounding American Sniper are probably wrapping up, and Taya Kyle will likely pay some damages but walk away from the affair with many millions of dollars left to her name. (HarperCollins' libel insurance, in fact, will cover her defamation damages.) But for Kyle's publisher, HarperCollins, the nightmare is just beginning. Several months after the verdict against the Kyle estate, Ventura brought another lawsuit for unjust enrichment, this time against HarperCollins. The lawsuit explains that while Kyle is the one who defamed Ventura, HarperCollins played up those defamatory statements in order to boost its sales—and with reckless disregard to the truth of Kyle's claims.

This suit is the second of Ventura's one-two punch, and from here, it looks like a knockout. During the first trial, Ventura's attorneys uncovered records of HarperCollins' negligence in fact-checking Kyle's book, as well as evidence that HarperCollins specifically touted the Ventura story to drum up publicity. Kyle's ghostwriters spoke with only one person who claimed to have witnessed the fight, a friend of Kyle's who told a different version of the story that lacked Ventura's offensive remarks. No one from HarperCollins contacted Ventura or his representatives to verify the story. And though Kyle claimed Ventura appeared at a SEAL graduation afterward with a black eye—where "everybody was laughing" and asking "Who beat the shit out of him?"—HarperCollins never asked a member of the graduating class whether they saw Ventura's injury. (A photograph from the event shows a clear image of Ventura—with no black eye.)

It gets worse for HarperCollins. Despite the tenuous source of the Ventura story, HarperCollins quickly saw it as a publicity gold mine. After Kyle identified "Scruff Face" as Ventura in a radio interview on The Opie & Anthony Show, HarperCollins editor Peter Hubbard wrote in an email that the publicity from the story was "priceless." HarperCollins publicist Sharon Rosenblum described the Ventura kerfuffle as "hot hot hot," immediately arranging for Kyle to retell the tale on The O'Reilly Factor. 

Sales of American Sniper—which, up to that point, were fairly modest—spiked dramatically, apparently in conjunction with interest in the Ventura story. After the O'Reilly appearance, Ventura publicly denied Kyle's accusations. Yet Rosenblum arranged for Kyle to tell the story again on The Opie & Anthony Show, and HarperCollins printed several new editions of the book that still featured the "Scruff Face" section. (It was finally removed after Ventura won his suit.)

All of this presents a very big problem for HarperCollins. Ventura's lawyers believe they can prove that American Sniper's massive success was spurred, at least initially, by interest in the Ventura story. Under normal circumstances, HarperCollins might fight back by arguing that the story is true. But therein lies the brilliance of Ventura's maneuvering: A jury has already determined that the Ventura tale is false and defamatory, meaning HarperCollins is legally barred from rearguing its veracity. As a result, HarperCollins must instead argue that it did not act with "reckless disregard" for the truth of Kyle's claims, and that no part of the company's profits arose from interest in the Ventura story. Those questions, of course, must be left for a jury to decide. But it does not look very good for HarperCollins.

Don't pity the publishers too much, though. In the midst of this legal drama, the movie adaption of American Sniper has shattered box office records and brought in well over $100 million. HarperCollins is sure to make a killing off royalties from the film, and off sales from the new movie tie-in edition of American Sniper. Even if Ventura wins millions in his second lawsuit, the publishing house may well walk away from this debacle with a healthy profit remaining, just as Kyle's widow will do. 

The moral of Kyle's story, then: It pays to lie. IT IS A VERY SAD MORAL AND IT IS TRUE IN AMERICAN POLITICS, ON WALL STREET, AND JUST ABOUT EVERYWHERE ELSE IN AMERICA AT THIS POINT.

Friday, January 30, 2015

WHY DID STOCKS GO UP YESTERDAY?........The Fed Saves The Day Again!

THE FED IS THE ONLY THING HOLDING THE MARKET UP AND AT THIS POINT ALL THEY HAVE ARE EMPTY PROMISES AND CAREFULLY CHOSEN WORDS.

At the end of the day, there is nothing behind the curtain at the Eccles Building except for the specious doctrine of wealth effects. Fractional changes in the money market rate are of relevance only to the day traders and robo machines which occupy the casino. Fed policy is designed to keep them dancing. It rests on the delusional hope that the drug of ZIRP or near-ZIRP can keep the stock market averages rising and a trickle down of extra spending by the wealthy flowing into the reported GDP and job numbers. 

History proves beyond a shadow of doubt that bubbles fueled by bad money ultimately splatter into a world of harm. The Fed is not only ignoring the coming storm, but is actually fueling its intensity.

WHY DID STOCKS GO UP YESTERDAY?


Yellen Saves The Day: Stocks Soar After Fed Chairwoman Tells Democrats 
 NO RATE INCREASE `IMMEDIATELY'!!!!!

The moment has arrived: the moment when the Chair of the "independent" Fed tells an audience of Democrats, away from the public, just what her plans for monetary policy are in private:

YELLEN TOLD DEMOCRATS NO RATE INCREASE `IMMEDIATELY': SCHUMER

We all knew some Fed member would speak today to boost stocks but had no idea it would be Yellen herself.

Stocks started to squeeze after Europe closed and then Janet Yellen struck with her hints to Senate Democrats. that

Thank The Market Gods for Janet Yellen... Stocks were rescued back above their 100DMAs to prove everything is fine...



Yet again Crude made fresh cycle lows... before bouncing once again.....


The Next War In The Middle East Has Begun .........

The Next War In The Middle East Has Begun And Israel Vows "To Act Powerfully On All Fronts"

As the first month of 2015 wraps up, our world is becoming increasingly unstable.

In addition to the oil crash, the collapse of the euro, looming stock market troubles, civil war in Ukraine, tensions with Russia, an economic slowdown in China and imploding economies all over South America, now we have more war in the Middle East. If missiles start flying back and forth between Israel and Hezbollah, it could potentially spark the bloodiest war in that region that any of us have ever seen.

Make no mistake Israel and Hezbollah are at war again. We have a new war in the Middle East, and nobody is quite certain what is going to happen next.  Israel has been preparing for this moment for more than 8 years. So has Hezbollah.  According to some reports, Hezbollah has amassed an arsenal of 50,000 rockets since the end of the Hezbollah-Israel war in 2006. 

We could potentially see tens of thousands of missiles rain down into an area not too much larger than the state of New Jersey.  And of course the Israeli military is also much more sophisticated and much more powerful than it was back in 2006. If cooler heads do not prevail, we could be on the verge of witnessing a very bloody war.  

But right now nobody seems to be in the mood to back down.  Hezbollah is absolutely fuming over an airstrike earlier this month that killed six fighters and a prominent Iranian general.  And Israeli Prime Minister Benjamin Netanyahu says that Israel is "prepared to act powerfully on all fronts" in response to a Hezbollah ambush that killed two Israeli soldiers and wounded seven. Just such an incident is what sparked the war between the two sides back in 2006. 

This time, a conflict between Israel and Hezbollah could spark a full-blown regional war.

Earlier this month, Israel launched a surprise assault against a group of Hezbollah fighters that Israel believed was planning to conduct terror attacks inside their borders. But in addition to killing six Hezbollah fighters, a very important Iranian general was also killed.  Needless to say, Iran is furious… Iran has told the United States that Israel should expect consequences for an attack on the Syrian-controlled Golan Heights that killed an Iranian general, a senior official said on Tuesday.

Revolutionary Guards General Mohammad Ali Allahdadi died alongside six fighters from Lebanon's Hezbollah group in the January 18 attack on forces supporting President Bashar al-Assad in Syria's civil war. And we didn't have to wait too long for a response.  An IDF convoy was hit by anti-tank missiles near the Lebanon border. Two Israeli soldiers were killed and seven were wounded.  The following is how the Jerusalem Post described the attack.

The terrorists launched five or six anti-tank missiles from a distance of at least four kilometers from their targets, striking the vehicles as they drove two kilometers from the international border. In the heavy Hezbollah ambush, a military D-Max vehicle containing a company commander and his driver from the Givati Brigade was the first vehicle hit.

This prompted all of those inside an IDF jeep behind it to quickly evacuate their vehicle before it, too, was hit and destroyed with missiles. Just over an hour after that attack, mortar rounds struck an Israeli military position on Mt. Hermon.

In response to those strikes, the Israeli military hit back at Hezbollah positions on the other side of the Lebanese border… Israel struck back with combined aerial and ground strikes on Hezbollah operational positions along the border, the military said.

At least 50 artillery shells were fired at the villages of Majidiyeh, Abbasiyeh and Kfar Chouba, according to Lebanese officials. But Israel is probably not done.

Prime Minister Benjamin Netanyahu is promising a "disproportionate" response to the Hezbollah attacks, and he says that Hezbollah should consider what Israel recently did to Hamas before taking any more aggressive action…

"To all those trying to challenge us on the northern border, I suggest looking at what happened here, not far from the city of Sderot, in the Gaza strip.  Hamas absorbed the hardest blow since it was founded last summer, and the IDF is ready to act with force on any front."

If things continue to escalate, we might not just be talking about another Hezbollah-Israel war.

In the south, tensions between Israel and Hamas remain near all-time highs.  In the event of a full-blown war, Hamas probably could be easily convinced to join the fray.  And if Hamas jumps in, the rest of the Palestinians might not be far behind.

In addition, ISIS now has territory near the border with Israel…

Because of the strategic importance of the terrain, Iran and Hezbollah have been building infrastructure there for some time.  But their interest in the Golan skyrocketed in December.

The reason: ISIS gained a foothold there when the Yarmouk Martyrs Brigade of the Free Syrian Army "defected" from the de facto alliance with the U.S.-Arab coalition against Assad, and declared its allegiance to ISIS.  The Yarmouk Martyrs Brigade had been one of the most active rebel factions holding territory directly adjacent to the "area of separation" between Syria and Israel administered (in theory) by the UN.  In particular, it has held the southern line of confrontation with Syrian regime forces, in the transit corridor leading to the Quneitra border crossing.

Needless to say, ISIS would be extremely interested in any conflict with Israel. And of course there are all of the other surrounding Islamic nations that are not too fond of Israel either.

The truth is that the Middle East is a perpetual tinderbox.  One spark could set the entire region on fire.

Meanwhile, Barack Obama continues to do all that he can to undermine Israeli Prime Minister Benjamin Netanyahu. The animosity between the two is well known, and now an "Obama army" of political operatives has been sent to Israel to help defeat Netanyahu in the upcoming elections.


The Titanic Wreck Of Monetary Policy.........ICEBERG DEAD AHEAD!

The Titanic Wreck Of Monetary Policy

For 73 months running the Fed has lashed the money markets to the gross financial anomaly of ZIRP. Never before in the history of the world has any central bank or other monetary authority decreed that overnight money shall be indefinitely free to gamblers or that liquid savers should have their hard earned wealth chronically confiscated by negative returns after inflation and taxes. And, needless to say, never have savers and borrowers in a free market struck a bargain night after night after night at 0% for six years running, either.

Yet now comes another Fed meeting and announcement that our monetary overlords will be "patient" with zero cost money for several more meetings. Indeed, there are even hints that the era of ZIRP could extend beyond mid-summer—that is, for more than 80 months.

So an urgent question screams out...... 

Don't these obstinate zealots realize that zero cost overnight money has only one use, and that is to fund the carry trades of Wall Street gamblers?

Accordingly, are they not even more culpable than Longfellow's skipper, who perished along with the fair daughter he lashed to his ship's mast because he insouciantly belittled a ferocious storm made by nature?  By contrast, these benighted folks at the Fed are actually fueling their own hellish financial storm, thereby leaving in mortal danger the main street economy which they, too,  have foolishly nailed to the mast of ZIRP.

The reason that ZIRP is of exclusive benefit to financial gamblers is straight forward. No businessman in his right mind would fund equipment, inventories or even receivables with borrowings under a one-day or even one-week tenor. The risk of fatal business disruption resulting from the need to precipitously liquidate working assets if funding can not be rolled-over at or near the existing interest rates is self-evident.

Likewise, no sane householder would buy a home, automobile or even toaster on overnight borrowings, either. And, yes, financial institutions experiencing the daily ebb and flow of cash excesses and deficiencies do use the money market. But managing fluctuating cash balances does not require ZIRP—-especially when most banks alternate between being suppliers and users of funds on practically an odd/even day basis. Cash balances in the financial system can be cleared at 0.2%, 2% or 5% with equal aplomb.

So ZIRP is nothing more than free COGS (cost of good sold) for Wall Street gamblers. It is they who harvest the "arb". That is, the spread between the free funding dispensed by the Fed and any financial asset with a yield or prospect of short-term gain. And, yes, if push comes to shove, these same fast money gamblers can ordinarily liquidate their assets, repay their borrowings and start with a clean book the next morning—unlike business and household borrowers in the main street economy.

Stated differently, the Fed's ZIRP policy is a giant subsidy to speculators. Owing to the utter foolishness of its "transparent" communications policy, embodied in such gems as the fact the term "patient" is now the well understood code word for no rate increases for the next two meetings, traders don't even have to worry about one single dime of unexpected change in their carry cost, or the losses that can result from needing to suddenly dump less than fully liquid assets in order to repay their overnight borrowings (or liquidate options and other similar "structured finance" positions).

The truth is, in an honest free market traders can not earn windfall returns arbing the yield curve. The vigorish gets competed away. And the independent movement of asset prices and funding costs compress returns toward the time value of money and the risk differentials embedded in each trader's specific book of assets and liabilities.

The ZIRP market is completely dishonest and therefore deeply subsidized. And every Econ 101 student knows that when you deeply subsidize something, you get more and more of it. In essence, by clinging obstinately and mindlessly to ZIRP the Fed is just systematically juicing the gamblers, and thereby inflating ever greater mispricing of financial assets and ever more dangerous and explosive financial bubbles.

In fact, after 73 months of ZIRP how can rational adults obsess over whether the first smidgeon of a rate increase should occur in June or September and whether the economy can tolerate a rise in the funds rate from 12 bps today to 25 bps sometime down the road?

The difference is utterly irrelevant noise to the main street economy; it can't possibly impact the economic calculus of a single household or business.

Having pinned the money market rate at the zero bound for so long and with such an unending stream of ever-changing and fatuous excuses, the occupants of the Eccles Building do not even know that they are engaging in a word splitting exercise that is no more meaningful than counting angels on the head of a pin. Indeed, if they weren't mesmerized by their own ritual incantation they would not presume for a moment that a fractional variance of the money market rate away from ZIRP would have any impact on main street borrowing, spending, investing and growth.

So why does the Fed persist in this farcical minuet around ZIRP? For two reasons that are not at all hard to discern.

In the first instance, the Fed is caught in a time warp and fails to comprehend that the game of bicycling interest rates to heat and cool the macro-economy is over and done. The credit channel of monetary transmission has fallen victim to "peak debt". The main street economy no longer gets a temporary pick-me-up from cheap interest rates because balance sheets have been tapped out.

The only actual increases in household debt since the financial crisis has been for student loans, which are guaranteed by Uncle Sam's balance sheet, and auto loans which are collateralized by over-valued vehicles. Stated differently, home equity was tapped out last time; wage and salary incomes have been fully leveraged for years and households have nothing else left to hock.

So households now only spend what they earn, meaning that the Fed's interest rate manipulations—-which had potency 40 years ago—-have no impact at all today. Keynesian monetary policy through the crude tool of money market rate pegging was always a one-time parlor trick.

Likewise, the Fed's interest rate machinations have not induced business to acquire incremental productive assets financed with borrowed capital. Instead, virtually the entire increase in business debt outstanding—- and it is considerable, having rising from $11 trillion on the eve of the financial crisis to nearly $14 trillion today—-has gone into financial engineering. But stock buybacks, LBOs and cash M&A deals do not cause output to expand or productivity to increase whatsoever. They just bid up the price of existing financial assets, thereby further rewarding the ZIRP-enabled gamblers who inhabit the casino.

Given the utter blockage of the credit channel of monetary transmission to households and businesses, then, why on earth do our monetary central planners cling so desperately to ZIRP? The apparent answer is that it even if the credit channel of transmission is badly diluted, cheap money might still do a smidgeon of good. Besides, it hasn't caused any consumer price inflation so, they contend, what's the harm?

Yes, and doing a rain dance neither causes harm nor rain, either. But there is a huge difference. Zero interest rates are not even remotely harmless. They amount to a colossal economic battering ram because they transform capital markets into gambling casinos.

So doing, they cause risk and long-term capital to be mispriced, meaning an accumulating level of malinvestment and excess production capacity; and this is a worldwide condition because all central banks are engaging in the same game of financial repression. THE DANGER IS SO ENORMOUS IT CANNOT BE QUANTIFIED! 

As is now evident in the case of oil, iron ore, copper, consumer electronics and much more, massive excess capacity ultimately results in the collapse of boom time prices. Soon there is in motion a withering cycle of deflationary adjustment, profit collapse and a plunge in new capital spending. THINK ABOUT THAT FOR A MINUTE AND ASK YOURSELF WHAT EVENTUALLY HAPPENS TO THE STOCK MARKET.

So our monetary central planners are trapped in a dangerous feedback loop. !!! Having fueled the boom with cheap money, they now justify the prolongation of ZIRP on the grounds that they must use the same tool to ward off the deflation they caused in the first place.

At the end of the day, there is nothing behind the curtain at the Eccles Building except for the specious doctrine of wealth effects. Fractional changes in the money market rate are of relevance only to the day traders and robo machines which occupy the casino. Their words are all about speculator confidence.

Fed policy is designed to keep them dancing. It rests on the delusional hope that the drug of ZIRP or near-ZIRP can keep the stock market averages rising and a trickle down of extra spending by the wealthy flowing into the reported GDP and job numbers.

History proves beyond a shadow of doubt that bubbles fueled by bad money ultimately splatter into a world of harm. 

So now comes the Wreck of our Monetary Titanic. And unlike Longfellow's foolish captain, the Fed is not only ignoring the coming storm, but is actually fueling its intensity with their ignorant policy prescriptions.

PUTTING A BILLION IN PERSPECTIVE..........

PUTTING A BILLION IN PERSPECTIVE
 
The next time you hear a politician use the word 'billion' in a casual manner, think about whether you want the 'politicians' spending YOUR tax money.
 
A billion is a difficult number to comprehend, but one advertising agency did a good job of putting that figure into some perspective in one of its releases.

A billion seconds ago it was 1959.

A billion minutes ago Jesus was alive.

A billion hours ago our ancestors were living in the Stone Age.

A billion days ago no-one walked on the earth on two feet.

A billion dollars ago was only 8 hours and 20 minutes, at the rate our government is spending it!

While this thought is still fresh in your brain... let's take a look at New Orleans...

It's amazing what you can learn with some simple division.
 
Louisiana Senator, Mary Landrieu (D) was asking Congress for 250 BILLION DOLLARS To rebuild New Orleans. 

Interesting number... What does it mean?

Well .. If you are one of the 484,674 residents of New 
Orleans, every man, woman and child, You each get $516,528.

Or... If you have one of the 188,251 homes in New Orleans , your home gets 
$1,329,787.

Or... If you are a family of four... Your family gets $2,066,012.

100 years ago...  our nation was the most prosperous in the world.
 
We had almost no national debt...

We had the largest middle class in the world...

And Mom stayed home to raise the kids.

 
What happened?

Politicians owned by corporations and Wall Street 
combined with excessive greed and an ignorant electorate happened!
 

Thursday, January 29, 2015

IMPORTANT HEADLINES....THE FED HAS FAILED!

Stocks finished sharply in the red on Wednesday after an ugly last hour of trade saw the averages go from roughly unchanged to lows of the day. 

The big event on Wednesday was the Fed's latest monetary policy statement, that saw the Fed largely keep its statement in tact from the December meeting. Markets were little changed after the Fed, but gave it up into the close as stocks had their second tough day in a row.

First, the scoreboard:

Dow: 17,191.4, -195.9, (-1.1%)
S&P 500: 2,002.2, -27.4, (-1.4%)
Nasdaq: 4,638, -43.5, (-0.9%)

And now the, top stories on Wednesday:

FED

The Fed will remain patient. In the Fed's latest monetary policy statement the Fed said that it would still be "patient" in looking to raise interest rates, adding that the economy still continues to expand at a "solid pace" as labor market conditions continue to improve. The Fed did acknowledge, however, that inflation expectations have fallen "substantially" and that "international" developments bear monitoring, giving the statement what could be seen as a dovish tilt, which was not accompanied by a press conference from Chair Yellen.

Officials at the Federal Reserve seem to now appreciate the hole that they have dug by allowing interest rates to go too low for too long.... While there is no better system than capitalism, it is incumbent upon it and its policymakers to promote a future condition which offers hope as opposed to despair. Capitalism depends on hope – rational hope that an investor gets his or her money back with an attractive return. Without it, capitalism morphs and breaks down at the margin. The global economy in January of 2015 is at just that point with its zero percent interest rates.

Over the last 100 years the Fed has had many mandates and policy changes in its pursuit of becoming the chief central economic planner for the US. Not only has it pursued this utopian dream of planning the US economy and financing every boondoggle conceivable in the welfare/warfare state, it has become the manipulator of the premier world reserve currency. All this effort by thousands of planners in the Federal Reserve, Congress, and the bureaucracy to achieve a stable financial system and healthy economic growth has failed. It must be the case that it has all been misdirected. And just maybe a free market and a limited government philosophy are the answers for sorting it all out without the economic planners setting interest and CPI rate increases. A simpler solution to achieving a healthy economy would be to concentrate on providing a "SOUND DOLLAR" as the Founders of the country suggested.

The Fed and its friends in the financial industry are frantically hoping their next mandate or strategy for managing the system will continue to bail them out of each new crisis. At this point, Fed policy is a hodgepodge of monetary mismanagement and economic interference in the marketplace. Sadly, little effort is being made to seriously consider real monetary reform, which is what we need. That will only come after a major currency crisis.

OIL

Crude oil got slammed again, falling more than 4% to as low as $44.20 a barrel as oil still cannot find a bottom. Data from the EIA on Wednesday showed that oil inventories are at their highest level in "at least 80 years." This followed new from the API on Tuesday that showed crude inventories rose by 13 million barrels last week.

GREECE / EURO

S&P put Greece's credit rating on review with negative implications as the financial situation in Greece remains uncertain following the election of Syriza over the weekend.

Lessons To Be Learned From The Fed's Failed Policies...........

Lessons To Be Learned From The Fed's Failed Policies

1. Increasing money and credit by the Fed is not the same as increasing wealth. It in fact does the opposite.

2. More government spending is not equivalent to increasing wealth.

3. Liquidation of debt and correction in wages, salaries, and consumer prices is not the monster that many fear.

4. Corrections, allowed to run their course, are beneficial and should not be prolonged by bailouts with massive monetary inflation.

5. The people spending their own money is far superior to the government spending it for them.

6. Propping up stock and bond prices, the current Fed goal, is not a road to economic recovery.

7. Bailouts only help the insiders and the elite, they hinder the economic recovery.

8. Production and savings are the only source of capital needed for economic growth.

9. Monetary expansion can never substitute for savings but guarantees mal–investment.

10. Market rates of interest are required to provide for the economic calculation necessary for growth and reversing an economic downturn.

11. Wars provide no solution to a recession/depression. Wars only make a country poorer while war profiteers benefit.

12. Bits of paper with ink on them or computer entries are not money – gold is.

13. Higher consumer prices per se have nothing to do with a healthy economy.

14. Lower consumer prices should be expected in a healthy economy as we experienced with computers, TVs, and cell phones.

Bank of England Governor Warns Of Liquidity Storm As Global Currency System Turns Upside Down....A MUST READ!

Bank of England Governor Warns Of Liquidity Storm As Global Currency System Turns Upside Down

The Governor of the Bank of England has warned markets to brace for possible trouble in 2015 as the US Federal Reserve tightens monetary policy and liquidity evaporates, fearing that the new financial order has yet to face its first real test.

Mark Carney said diverging monetary policies in the US, Britain, Europe, and Japan may set off further currency turbulence and "test capital flows across the global economy, including to emerging markets."

It is the latest sign that officials at Threadneedle Street are worried about the global fall-out from the rising dollar, which poses a mounting threat to companies in the developing world that have borrowed up to $9 trillion in US dollars.

Mr Carney said regulators have cleaned up the banks and tried to prepare for the tectonic shift taking place in the international currency structure but major risks remain.

"This will test the resilience of that new financial system. It has a potential feedback and we have to be aware of that," he told an elite group of central bankers at the World Economic Forum.

"We are particularly concerned about an illusion of liquidity that has existed in a number of financial markets. I would say that illusion of liquidity is gradually being disabused," he said, adding that the so-called 'flash crash' in the US Treasury market last October was a wake-up call even if the "bouts of losses" have been small so far.

Mr Carney said the global authorities have clamped down on excess leverage and the sort of behaviour by banks that caused the financial crisis seven years ago, but new worries have emerged.

"The big question for us now is about liquidity cycles that come from fund managers that don't have leverage. It's $35 trillion of mutual funds that invest in relatively illiquid securities," he said.

Global watchdogs say the scale is so large -- and subject to "clustering" and crowd psychology - that these funds may all rush for the exits at the same time in a crisis and amplify the effects.

The concerns were echoed by Benoît Cœuré, a board member of the European Central Bank.

"The system is untested. We had a wave of new financial regulation, which has mostly focussed on banks, so we're pretty sure that banks are much safer," he said.

Mr Cœuré said the ECB was forced to throw caution to the winds and launch a €60bn blitz of bond purchases on Thursday, given that inflation expectations in the eurozone have collapsed, with outright deflation in December.

"It was pretty clear we had to do something. The only discussion was how to do it," he said.

"Being patient is a risk that we just don't want to take. We need growth in Europe. With entrenched unemployment, people are being forced out of the labour market, and we are seeing the whole foundation of the European project being weakened. This cannot last for too long," he said.   AS I HAVE SAID ALL ALONG,NOTHING IS FIXED!

Mr Cœuré warned that no central bank can work magic and that the real burden lies with fiscal policy and structural reform. "There is nothing we can do at the ECB to lift growth in a lasting way. We did our part, governments have to do their part," he said.

Mr Carney defended quantitative easing against those who argue that it leads to asset bubbles and leads to rising inequality without doing much to boost the real economy. "All monetary policy has distributional consequences. We lower interest rates and it benefits debtors at the expense of people who've saved money, and I can assure you I hear from savers and I understand that," he said.

Yet the moral imperative of battling high unemployment is greater. "When people are unemployed for too long, they lose their skills, so called hysteresis. There has been a race against hysteresis. In the UK, we created over 600,000 jobs in the last year. Wages are starting to pick up, and we're winning that race," he said.   WISHFUL THINKING!

The Governor vowed to bring inflation back to its 2pc target after it dropped to 0.5pc in December, and may soon go negative by some estimates. "We have a very low inflation environment right now, largely caused by commodity prices," he said.

Mr Carney said the Bank will "look through" the latest dip but do whatever it takes meet its mandate over the next two years. "We have the means, and the will, and the responsibility to do it, and we will do it. People can rely on that," he said.  COMPLETE BULLSHIT!

The Home Builder Hope Trade..............

The Home Builder Hope Trade

Lumber and Homebuilders are diverging in a dreadfully deja-vu-ic manner,just as they did in 2005, marking the top.

This relationship seldom diverges for long...


Currency Wars, Year-To-Date Summary...........

Currency Wars, Year-To-Date Summary: 13 Rate Cuts, 5 Rate Hikes

For those keeping track of currency wars around the globe, 2015 - a year in which two central banks, those of Switzerland and Singapore have already admitted defeat, is shaping up as nothing short of historic. 31 countries have, in less than a month, eased in the form of 13 mostly "surprise" rate cuts, while just 5 have tightened monetary policy.

Here is the full list: Singapore, Europe, Switzerland, Denmark, Canada, India, Turkey, Egypt, Romania, Peru, Albania, Uzbekistan and Pakistan. Given that the ECB covers 19 countries you could actually say its 31 countries. On the other hand 5 countries have tightened monetary policy including Brazil, Armenia, Krygyzstan, Mongolia and Belarus. Overnight the RBNZ kept rates on hold although attention in the Asia-Pacific region will move to the RBA decision next week.

Who is next is the big question, and can the Fed continue to try to prime the market for rate hikes when the rest of the world is easing? 

Judging by yesterday's market reaction to the Fed, the answer for now is probably not!


Something We Should All Know / Remember........

Something We Should All Know / Remember

The powers of the market are much bigger than the powers of politicians, Central Bankers And Wall Street!

It is something we will all certainly learn going forward.

Wednesday, January 28, 2015

When This Ends, Everybody Gets Hurt And The End is Uncomfortably Close.............

When This Ends, Everybody Gets Hurt And The End is Uncomfortably Close

Central banks around the globe have taken us all into uncharted territory, where the possible paths boil down to a binary outcome: either it all works out or it doesn't.

Unfortunately, the 'it all works out' outcome has a very low probability of actually happening; so the binary outcome isn't equally weighted like a coin toss.  

By 'working out', here's what the central banks are all striving (praying) for:

Inflation of 2% to 3% per year

Economic growth of at least 6% per year (nominal) and a real (inflation adjusted) rate of 3% per year.


The reason that the central banks want all of this growth and inflation isn't because it's good for you, me, or anybody we know. Instead, the bankers need it because that's what our exponential money system requires. HIGH LEVELS OF DEBT REQUIRE EVER HIGHER LEVELS OF CREDIT / DEBT TO KEEP THE GAME AFLOAT.

Slaves To The System

It bears repeating, inflation is not rising prices — those are symptoms of inflation – but instead is the expansion of the existing stock of money and credit.  If we observe the symptom of 'rising prices', then that means the underlying mechanism of expansion of credit (mainly) and money (less important because the money supply is a only fraction of the volume of credit) is functioning.

Think of it this way: it's like the central banks want a slightly feverish patient and so they track the patient's temperature. They tell everyone that 100 degrees, perhaps 101, is the perfect termpurature…slightly elevated, but not too much.  But the patient's temperature is merely a symptom.  The underlying reason for having an elevated temperature is having too many foreign bodies living within the patient, like having too much money and credit in an economic arena.

With ever increasing levels of credit in our monetary system, the system functions reasonably well and enough new loans are being made to service both the principal balances of prior loans plus their interest payments.  But with stagnant or falling levels of credit, the exact opposite is true and the entire financial system slips into collapse mode.



We are now in service to our system of money, not the other way around!

That is, we have a money system to which we are now slaves. It's either expanding or collapsing, but has no stable state; no easy equilibrium that it can inhabit.

The tragedy in all this is that we could easily have a different system of money that does not make such unreasonable demands of us. But virtually nobody in power is discussing this idea. 

The Folly Of Endless Growth

Getting back to the central bank wish list, nominal GDP of at least 6% with real growth of 3% allows governments to expand their debt loads by 3% per year without them ever getting larger in proportion to the underlying economy. That way, they never have to be paid back. They only grow larger, and this means more borrowing/credit in the system which is part of requirement #1, above.

So the entire central bank playbook, in slavish devoted service to an obviously dysfunctional system of money, boils down to endless credit growth coupled to endless economic growth.

Endless growth. When you hear of how central bankers are 'battling deflation' or 'seeking price stability of at least 2% inflation', just think to yourself What they really want is endless growth.

The next thought you should have is Hey, is that even possible? Or even, advisable?

The answers, clearly, are No and NO!

Every day, we have further confirmation of the idea that the world has limits and that economic growth requires more resources. Water, soil, fisheries, forests, ore bodies, and energy sources are all being overtaxed and rapidly depleted at even today's level of economic activity.

If resources are finite but economic growth has to be endless (again, to support our chosen system of money, and for no other reason), then there's a gigantic conflict brewing. 

And that's the subtext to the entire confusing array of political and monetary actions and reactions over the past decade or two. 

A Simple Example

The idea that endless growth isn't realistic needs to be explored as often as possible simply to counteract the huge volume of spoken and written words that profess it's exactly what we both want and need.

For most people indoctrinated with the endless growth narrative, we have to engage in a bit of deprogramming before we can have a proper conversation.

So let's start with a simple example that lays this all bare.

China has been on a very impressive program of economic expansion. Of late, that's slowed down a tiny bit and it's causing quite a bit of worry among the Chinese leadership, which believes that fast economic expansion supports social stability:

Chinese economy posts lowest growth rate since 1990

Jan 20, 2015

BEIJING — China's economy last year slumped to its lowest rate of growth in 24 years, the government announced Tuesday.

China's gross domestic product grew 7.3% in the last quarter of 2014, and 7.4% over the whole year, the slowest rate since 1990 and below the official target of 7.5%.

Now, let's examine that 7.4% rate of growth using the handy 'rule of 72', which will answer the question: How long will it take, in years, for something expanding annually at 7.4% to double?

The answer is simply 72/7.4 which equals 9.7 years.  That is, if China continues to expand at 7.4%, its economy will be fully twice are large as it currently is in just under ten years.

Twice As Large!

That means (roughly speaking) twice as much energy consumed, twice as many cars on the road, twice as many factories churning out twice as much stuff. Twice as much economic activity in less than a single decade from now. That's what a GDP growth rate of 7.4% means.

Of course, you won't encounter any such dot-connecting in any of the articles you will read about China's growth — desired or actual — because the implications of being 'twice as large' are not yet part of the global dialog about economic growth. 

So let's explore just one of those implications by looking at China's coal consumption. Energy and economic activity are very tightly linked. If you want to have more economic activity, you're going to use more energy. Coal is heavily used in China to generate electricity, which is a critical form of energy for economic expansion.

In fact, when we look at China's energy consumption over these past few decades, we note one period between 2002 and 2009 where its energy use fully doubled, with coal being, by far, the largest component of that doubling:



In just 7 years, energy use doubled!  Again returning to our handy 'rule of 72,' but in an opposite direction, we can divide 72 by 7 years and calculate that China's energy use was growing by 10.3% per year during this period.

How does this compare to China's reported GDP growth during the same period?  Well, according to The World Bank, between the years 2002 and 2009 China sported an average rate of GDP growth of 11%.

As expected, the growth rates for energy consumption (10.3%) and economic expansion (11%) were very tightly coupled.

Now let's take note that, in 2012, China consumed 49% of all the coal consumed in the world. How much of the world's coal will China consume if it doubles in the next 10 years?

Well, a doubling is a doubling: China's current 7.4% GDP growth rate implies that in just 10 years, give or take a little, China will consume as much coal by itself as the entire world does today.

But then what? What about the next 10 years after that?  Eventually, we all have to come to the same conclusion: it's just not possible for China to double its coal consumption forever. Sooner or later, real physical and environmental limits apply.

It's Already 'Later'

We're living through the period of time when that dawning recognition of limits will finally burst over the horizon, shining a very bright spotlight on a frightening number of our global society's unsustainable practices.

The most urgent of them all, as far as everyone reading this is concerned, is the very uncomfortable fact that it is our system of money that is most likely to break first and hardest because its very design demands endless growth, without which collapse ensues.

As the China example illustrates, the prospect of endless economic growth is simply not a workable plan because resources are not infinite. 

Our global obsession with growth is the very definition of unsustainable. Someday reality is going to intrude and ruin the party and very few are actually prepared for that future. !!!!!!

A very big problem we all share is that the world's central banks have been vigorously defending the status quo (of endless growth) and that means we all face a very bad period of adjustment when their efforts finally fail.

That moment of failure is coming closer and closer. Recent actions by central banks have exposed their increasingly desperate mindset and have even called into question the one thing that absolutely cannot ever be questioned: the ability of the central banks to deliver on the promise of endless growth.

Central bank credibility (as fictitious as that may be) is essential to maintaining the current narrative, BUT central banks are rapidly losing their credibility (which should have happened simply via deductive reasoning a long time ago) and the strains are showing. Their actions are increasingly wild and extreme (SNB, anyone?), and 2015- 2016 will mark the end of this long run of overly-ambitious central bankers and over-complacent markets.

When credibility in central bank omnipotence snaps, buckle up. Risk will get re-priced, markets will fall apart, losses will mount, and politicians will seek someone, anyone, to blame. WE ARE RAPIDLY HEADED TOWARDS THE FINAL CHAPTERS 
OF THIS STORY! THE INCREASE IN VOLATILITY IS A KEY SIGN OF CRACKS IN THE FED'S WALL OF OMNIPOTENCE.

Understanding Risk: Risk is Integral Part of Invention, Growth and Wealth........

Understanding Risk: Risk is Integral Part of Invention, Growth and Wealth

"The person who risks nothing, does nothing, has nothing, is nothing, and becomes nothing. He may avoid suffering and sorrow, but he simply cannot learn, feel and change..."

Ask any of your friends, colleagues or contacts who've enjoyed success, ask them about risk. They'll tell you that regretting risks NOT taken is higher on their list than regretting risks taken.

This is the polar opposite to what we hear from the mainstream. It seems humans hate pain so much that we've allowed the bureaucrats to develop encyclopedic volumes of laws "protecting" us from it. Entire industries have been built around providing said protection.

Everywhere you look we're being told to "watch out," to "be careful," to be fearful. Risk is everywhere!

Terrorists with dark beards and funny accents lurk on street corners. Pedophiles, while stroking their mustaches, snickering to one another, peer through dark sunglasses at our kids in shopping malls, just waiting for Billy to stray. Billboards on freeways tell us to slow down or die in a bloody pool of mutilated meat. Children are warned by teachers against climbing trees, parents won't let their kids out in the sun between the hours of 10 AM and 2 PM (really?), and news channels terrorize us about Ebola.

We've become a society of wimps. !!!!!!

Humans love stability, but that stability is largely a myth. Stability is the opposite of risk. Risk involves the unknown while stability involves the known.

Fortunately for us there are groups of people who are driving forward with innovation, purpose, creating, building, living and breathing... they are called entrepreneurs. Try to scare them with real and imaginary risks? You may as well be trying to teach a lamp post how to code HTML... and thank the heavens for that.

Risk taking is required. That's a fact. 

We need risk like we need air, food and water. Without it we'd all still be enjoying each others company sitting huddled in caves somewhere. Some of the world's most amazing, life-enhancing inventions would simply not exist: air travel, plumbing, the internal combustion engine, electricity, the microchip, quantum physics, vaccines, the string bikini... None of it.

Any individual, family, or country cannot ignore the reality that invention, growth and wealth all have a twin sister, and that twin sister is RISK.

Let's for a moment consider this from a macro level. The hermit kingdom of North Korea is a great example. Not a lot happens there unless young Kim says so.

It's not that North Korea is afraid of risk on an individual level but certainly the moron running the place sees risk in allowing citizens to develop their own businesses, trade and interact with the world. A country can ignore this reality, but it cannot ignore the consequences of doing so.

So, if the anti-risk brigade aren't successful with dumbing down everyone, what exactly is it that drives risk taking behaviour?

The reason we will always have humans taking risk and moving us forward is due in no small part to dopamine. This is the stuff that sends a rush of euphoria through your body. Dopamine is why it feels awesome to drive fast, snowboard, water ski, bungy jump, sky dive... and even why it's so exciting to "create" things.

At the root of our animal brain sits the limbic system. This controls our emotions, our behaviour, our motivation and importantly our adrenaline flow. When we do something that our brain perceives as dangerous it dumps a load of dopamine into our body. 

When Isaac Newton formulated his laws of motion he would have experienced injections of dopamine. When Jim Chanos was vindicated by revealing the frauds at WorldCom and Enron he no doubt would have experienced a dopamine rush.

In fact, identifying such an opportunity before wide spread vindication would likely have been a euphoric experience. Whoa, look at this baby! These guys are complete fraudsters. We have to short this one!

Here is the kicker. Those endorphins make you stronger, they make you more alert, they heighten your senses. This is why when something goes bump in the night your body stiffens. Your body senses danger and sends blood to your muscles. Sure your face goes white, but you're getting ready to fight for your life.

Taking risk as an entrepreneur, as a trader or as an investor is critical. That risk has to be calculated and thought through. I'm not talking about gambling in Las Vegas - that's not taking risk, that's just plain stupid. 

All the best investors and traders I know are laser-focused on risk, and how to mitigate it.


IMPORTANT HEADLINES................

IMPORTANT HEADLINES

Stocks got slammed on Tuesday after some worse-than-expected economic data and corporate-earnings reports weighed on the indexes as markets prepared for Wednesday's big Federal Reserve meeting and the release of Q4 GDP data on Friday morning.


Dow: 17,387.2, -291.5, (-1.6%)
S&P 500: 2,029.6, -27.5, (-1.3%)
Nasdaq: 4,681.5, -90.3, (-1.9%)

And now, the top stories on Tuesday:

Tuesday got off to a rough start. The latest report on durable-goods orders showed that orders unexpectedly contracted 3.4% in December, missing expectations for orders to increase 0.3%. Excluding transportation and defense orders, orders fell 0.6%. November's orders were also revised lower, and following this report, which was out at 8:30 a.m. ET, futures got slammed and the market never really recovered from this early blow.

Caterpillar also had a terrible earnings report before the market opened, reporting adjusted profit that beat expectations but saying that in 2015, revenue would come in about 10% below where Wall Street had been expecting. The company's comments on 2015 were also generally downbeat, with Caterpillar saying, "We expect world economic growth to only improve modestly in 2015. The relatively slow growth in the world economy and continued weakness in commodity prices — particularly oil, copper, coal and iron ore — are expected to be negative for our sales." Shares of Caterpillar lost about 7% on Tuesday.

After Monday's close, Dow member Microsoft also had a worse-than-expected outlook on the year ahead, with the tech giant saying that it expects to have a generally tough road ahead of it. Following this outlook, Nomura's Rick Sherlund downgraded the stock to Neutral from Buy, and Microsoft shares fell more than 9% on Tuesday.

And because the 30-member Dow is a price-weighted average, the losses from Caterpillar, Microsoft, United Technologies, and Proctor & Gamble alone took about 100 points off the blue-chip index.

The US dollar is having a terrible day.

And now, the dollar, which has been a major outperformer over the last several months, is getting crushed. 

Market Wrap: All Eyes On Yellen Who Better Not Disappoint

While all the algos are programmed and set to scan today's FOMC statement for whether both "patient" and "considerable time" are still there (as it did last time when it supposedly sent a pseudo-hawkish message while telling Virtu and Getco to buy, buy, buy), the market is torn between the trends observed in recent days: on one hand finally succumbing to the adverse impact of USD strength, which overnight also saw the Singapore Dollar admit defeat in the ongoing currency wars, is crushing both revenues and EPS, as well as outlooks, for the bulk of US companies, even as millennials - long since given up on buying a house - allocate their meager savings to the annual incarnation of Apple's flagship product as seen in yesterday's record, blowout numbers by AAPL which is up 8% in the premarket and sending Nasdaq futures soaring compared to the stagnant DJIA or S&P. And then there is Europe where the mood is decidedly sour this morning, with Greece imploding on fears Tsipras really means business and concerns the Greek "virus" may spread to other peripheral nations whose bonds have also seen a lack of a bond bid this morning.

Greek Stocks Crash, Bonds Plummet, Banks Have Worst Day Ever

In the two days after Syriza's dramatic victory in the local Greek election, global investors assumed this loud cry against European policies would mean... more of the same, and as a result not much changed in the risk assessment of Greek assets. Then, overnight, following the previous report that not only does Syriza mean business but it is actively pivoting away from Europe (and toward Russia?), and everyone started paying attention, with a waterfall of selling engulfing not only the Greek stock market but also its bonds, which are crashing in the process sending the 3 Year yield to 16.4%, the highest since the restructuring, and the 10 Year either below or above 10%, depending on which data source is used (Bloomberg has them slightly below, others reporting 10-year bond yields up 50 basis points at 10.30%).





Spot The Difference: Money Printing, Then And Now.........

Spot The Difference: Money Printing, Then And Now

Every single central bank is printing money in order to export deflation to its peers, with more and more printing necessary each year just to stay in one place.  AN UNSUSTAINABLE SITUATION BY ANY DEFINITION.

As central banks are poised to monetize a record amount of debt this year, 7 years into the so called "recovery", and as the amount of eligible collateral dwindles to a point where the functioning of the entire market is becoming impaired, the moment of "hyperinflationary containment" is coming to an end.

But don't worry....it's different this time!


Tuesday, January 27, 2015

Dow Down Almost 500 Points From Friday's Highs.......AMAZING!

ANY ONE THAT THINKS MARKETS AREN'T BEING MANIPULATED IN WAYS NEVER SEEN BEFORE IS BLIND....

Dow Down Almost 500 Points From Friday's Highs

NYSE Invokes Rule 48 To Pre-Empt Selling Panic

The status quo must be maintained...!!!

*NYSE SAYS RULE 48 INVOKED FOR MARKET OPEN
*NYSE SAYS MANDATORY OPENING INDICATIONS ARE NOT REQUIRED

And what better excuse to stall the opening plunge implied by futures than the "blizzard" which never was... 

The last time this was invoked was June 2012 (amid a dramatic drop in pre-open futures) and Sept 2011 amid the chaotic 400-point swings in The Dow. Funny they do not use this "Rule" when futures indicate massive upside opens?

As WSJ explains, basically it means the designated market makers "will not have to disseminate price indications before the bell, making it easier and faster to open stocks.

The rule was approved by the Securities and Exchange Commission on Dec. 6, 2007 and has been used rarely since then.

Extreme market volatility conditions... as NYSE explained it.

Dow down almost 500 points from Friday's exuberant highs...



As we open, massive volume hits Dow Futures - far above normal







Ludicrous' Exchanges Will Be Open During Storm..........

Ludicrous' Exchanges Will Be Open During Storm

The New York Stock Exchange Will Be Open. BECAUSE GREED COMES BEFORE SAFETY AND COMMON SENSE!

A travel ban remains in effect in New York City. Public transportation is shut down, and all you'll see on Manhattan's streets are emergency vehicles and snow plows. NYC Mayor DiBlasio is expected to provide updates at 8:00 a.m. ET. Meanwhile, the NYSE will be open, and traders aren't happy about it.

The Northeast is bracing for a snowstorm of "potential historic" proportions, with New York and New Jersey declaring a state of emergency, but the stock exchanges in New York plan to be open Tuesday.

However, one trader called that plan "ludicrous."

"If the governor and mayor of New York City declare a state of emergency, that should cover everybody," Peter Costa, president of Empire Executions, said in an interview Monday with "Closing Bell."

"That being said, we are going to be open and we are going to be …as staffed as well as we can be under the circumstances." He expects volumes to be down. While the exchanges planned to stay open, many businesses were not.

The last time the markets were closed due to bad weather was when Superstorm Sandy hit the East Coast.

The Federal Reserve Has Declared The Winner In The Generational Financial War..........

The Federal Reserve Has Declared The Winner In The Generational Financial War

The policy of safeguarding Boomer benefits with asset bubbles will lead to the destruction of the unprepared, the unwary and those who foolishly trusted our "leadership" and central bank to tell them the truth.

Though it is politically incorrect to mention it publicly, a financial war between the generations is being fought in the U.S. and every other developed nation that has promised social welfare benefits to its burgeoning class of retirees.

The war is being fought on multiple fronts: political promises, interest rates, housing, central bank policies and official rates of inflation, to name a few of the top battlefields.

Though no one in power will state this publicly, the Federal Reserve has already declared the winner of the generational war: the Baby Boomers won and Gen-X and Gen-Y lost. Fed policies insure the Boomers will benefit from financial bubbles inflated by the Fed, and the following generations will lose--not just this year or next year, but for decades to come.

Any nation that offers its retirees social welfare benefits (pensions and healthcare) faces a no-win demographic crunch: the number of retiring people entering the class of beneficiaries far exceeds the number of additional full-time jobs being created. In other words, it's not just a matter of having enough young people to support the rapidly expanding cohort of retirees--there must be enough good-paying full-time jobs for the young people so they can pay high taxes to fund the retirees' benefits and support their own consumption/saving.

Let's cover the fundamentals of the mismatch between what was promised to retiring Baby Boomers and the generations that must support their retirement.

The fact is that the number of full-time jobs paying more than minimum wage has stagnated while the number of retirees qualifying for pensions and healthcare benefits has soared. In the good old days of expansion, there were roughly 10 full-time workers for each retiree drawing social benefits (Social Security and Medicare).

The ratio fell to 5-to-1, then to 3-to-1, and is now 2-to-1: that is not a ratio that is sustainable without crushing tax burdens on the young.


Estimates are even worse in other developed nations. In Europe, the ratio of retirees over 65 to those between 20 and 64 will soon reach 50%--and that's of the population, not of people with full-time jobs paying taxes to fund social welfare programs. (source: Foreign Affairs, July/August 2014, page 130)

All government social welfare programs are pay-as-you-go. The Trust Funds touted in propaganda are illusions, backed by nothing but the promise to sell more Treasury debt.

While the costs of defined-benefit programs such as Social Security can be extrapolated relatively accurately, the program's revenues cannot be predicted because they come from wages. If recession slashes millions of jobs, or earned income declines as wage increases slip below the rate of inflation (which is precisely what's been happening for the past 6 years), revenues won't meet wildly optimistic forecasts that presume high, sustained wage and employment growth forever.

No official forecast of tax revenues supporting Social Security and Medicare ever factor in a recession, much less a decade or two of declining wages. If the forecasts were more realistic, the programs would be revealed as insolvent.

That is of course a political impossibility, so delusional forecasts are issued and accepted as "real" lest the unpalatable reality be recognized.

Defined-benefit programs such as Social Security have costs that can be estimated with some accuracy, but programs such as Medicare are open-ended: their costs cannot be predicted.Every attempt to control the ballooning costs of healthcare benefits for the retired lowers the rate of growth for a year or two, and then the costs soar once again as the number of beneficiaries and costs of delivering ever-expanding services both explode higher.

As a result of these fundamentals, the Powers That Be face a dilemma: they cannot reveal the insolvency of these huge social welfare programs, even though the insolvency is guaranteed by demographic and global-economic dynamics.

There are a very limited number of financial solutions to this dilemma.

1. Taxes can be raised. This is problematic for several reasons. One is that taxes on the self-employed and upper-middle class are already 40%-50%, as I have outlined many times. Two, the number of "wealthy" people (households earning $250,000 or more) is tiny compared to the 100+ million army of social welfare program beneficiaries.

Higher taxes and junk fees are already suppressing consumption. Every dollar of additional tax paid is a dollar that won't be spent by the household that earned the dollar.

Tax the rich is politically popular but in practical terms, it doesn't generate the revenues that are expected, for the simple reasons that A) the number of wealthy is relatively tiny and B) the super-wealthy either move their capital elsewhere or they buy political favor-tax breaks.

2. Slash benefits and limit the total Medicare costs per beneficiary. Since young people tend not to vote and older people tend to vote, this is a political non-starter, at least until 90+% of young people start voting.

3. Raise interest rates to 10+% to encourage saving and to generate a healthy return on pension funds and retirement accounts. The net result of 10% yields is the immediate collapse of the Fed-fueled asset bubbles in housing, bonds and stocks. All these currently bubblicious assets would implode.

This is also a non-starter, because the financial/political Aristocracy and owners of these assets would be devastated by the implosion of the bubbles.

4. Inflate bubbles in housing, stocks and bonds to boost the value of pension funds, retirement accounts, and government tax revenues from capital gains by pushing interest rates to zero and extending credit to speculators, financiers and marginally qualified borrowers.

The Federal Reserve has clearly chosen #4 as the only politically palatable solution. While asset bubbles create the politically positive illusion that pension funds can pay the benefits promised, retirement accounts are swelling in value and tax revenues are rising thanks to higher property taxes and capital gains taxes, this legerdemain comes with a heavy price:

Younger generations are either priced out of assets such as housing or they are forced to buy assets at inflated prices-- prices that will inevitably implode as these stupendous speculative bubbles pop. When the bubbles pop, the young people who bought into the illusion that asset bubbles can expand forever will be underwater, and not for a year or two but for a generation.

The system rewards silence and complicity. Everyone bellying up to the social welfare trough is implicitly encouraged to support the Status Quo, lest their share of the swag be diminished. That the trough will collapse is not important to each beneficiary; what's important is that their share of the swag is not diminished, even if cuts are the only sustainable way to save the programs from collapse.

I am a Baby Boomer, and soon I will be entitled to belly up to the trough and extract hundreds of thousands of dollars in open-ended benefits (at least for Medicare). I have long proposed that the Boomers collectively fall on our swords and accept the draconian cuts necessary to align our benefits with the cold reality of declining wages and employment.

The equally cold reality is that the current "solution" impoverishes the younger generations and generates a tsunami of risk that will wash away the Status Quo--including the benefits of the Boomers.

Right now, we as a nation are greedily collecting the financial fish flopping around as the coming tsunami pulls the water out of the bay and briefly exposes the sea floor. The Federal Reserve and our self-serving political "leadership" is reassuring us the water has left for good and we are free to collect the free fish forever.

This is a blatant lie! 

The demographic and economic tsunami is gathering force over the horizon, and the policy of safeguarding Boomer benefits with asset bubbles will lead to the destruction of the unprepared, the unwary and those who foolishly trusted our "leadership" and central bank to tell them the truth.

Doomsday Clock Scientists Say We Are At Closest Point To Disaster In Decades............

Doomsday Clock Scientists Say We Are At Closest Point To Disaster In Decades
In an announcement today the Bulletin of the Atomic Scientists (BAS) has moved the minute hand of the symbolic Doomsday Clock forward by two minutes. It is now at three minutes to midnight, the closest it has been since 1984. The BAS moved the clock due to the threat of nuclear war and climate change
Symbolic clock was established by Manhattan Project scientists in 1947. It's designed to show how close civilisation is to facing global catastrophe.

In an announcement the Bulletin of the Atomic Scientists (BAS) moved the minute hand forward by two minutes. It is now at three minutes to midnight, the closest it has been since 1984. The BAS moved the clock due to threat of nuclear war and climate change.
 
Last time the Doomsday Clock minute hand moved was in January 2012, when it was pushed from six to five minutes before midnight. The Doomsday Clock's minute hand has been moved two minutes closer to midnight as experts warn we are closer than ever to a global catastrophe.

In a live international news conference, the Bulletin of the Atomic Scientists (BAS) said that the threat of climate change and nuclear war posed a very serious threat to modern society. Their symbolic clock is now set at three minutes to midnight, but while they say it is not too late to avert disaster 'the window for action is closing rapidly'.

The danger is great but our message is not one of hopelessness,  There is still time to act, but real steps need to be taken soon in order to 'avert catastrophe.' We find conditions to be so threatening that we are moving the hand two minutes closer. 

The BAS was founded in 1945 by University of Chicago scientists who had helped develop the first atomic weapons in the Manhattan Project. The physicists set up the Doomsday Clock in 1947 after their atomic bombs hit Hiroshima and Nagasaki at the end of World War II. Their Clock was created to convey threats to humanity and the planet. Midnight represents Doomsday, or when these threats will peak and cause a global catastrophe.

The decision to move the minute hand of the Doomsday Clock is made by the Bulletin's Board of Directors in consultation with its Board of Sponsors, which includes 18 Nobel Laureates.

The Clock has become a universally recognised indicator of the world's vulnerability to catastrophe from nuclear weapons, climate change, and emerging technologies in life sciences.

Since it was set up, the hand on the clock has moved 18 times, and each move represents how the scientists view the world's chances of survival in the face of these threats. 

This graphic details key changes and movements of the minute hand on the Doomsday Clock since 1947

TIMELINE OF HUMANITY'S DANCE WITH DISASTER

2012: FIVE MINUTES TO MIDNIGHT

Difficulty in ridding the world of nuclear weapons and harnessing nuclear power
Potential for nuclear weapons use in regional conflicts in the Middle East, Northeast Asia, and South Asia described as alarming
Difficulty dealing with climate disruption from global warming

2010:SIX MINUTES TO MIDNIGHT

Belief that civilisation is moving closer to being free of nuclear weapons
Talks between Washington and Moscow for a follow-on agreement to the Strategic Arms Reduction Treaty are nearly complete, and more negotiations for further reductions in the US and Russian nuclear arsenal are already planned
Dangers posed by climate change are growing, but 'there are pockets of progress'. Most notably, at Copenhagen, the developing and industrialized countries agree to take responsibility for carbon emissions

2007: FIVE MINUTES TO MIDNIGHT

World described to be at the 'brink of a second nuclear age'
The United States and Russia remain ready to stage a nuclear attack within minutes, North Korea conducts a nuclear test, and many in the international community worry that Iran plans to acquire the Bomb
Climate change also presents a dire challenge to humanity
Damage to ecosystems is already taking place; flooding, destructive storms, increased drought, and polar ice melt are causing loss of life and property

2002: SEVEN MINUTES TO MIDNIGHT 

Concerns regarding a nuclear terrorist attack underscore enormous amount of unsecured -and sometimes unaccounted for - weapon-grade nuclear materials
US expresses a desire to design new nuclear weapons

1998: NINE MINUTES TO MIDNIGHT 

India and Pakistan stage nuclear weapons tests only three weeks apart
Russia and the United States 'continue to serve as poor examples to the rest of the world'
Together, they still maintain 7,000 warheads ready to fire at each other within 15 minutes

1995: 14 MINUTES TO MIDNIGHT

Hopes for a large post-Cold War peace and a renouncing of nuclear weapons fade 
More than 40,000 nuclear weapons remain worldwide
Concern that terrorists could exploit poorly secured nuclear facilities in the former Soviet Union

1991: 17 MINUTES TO MIDNIGHT 

Cold War is officially over and the US and Russia begin making cuts to their nuclear arsenals

1990:  10 MINUTES TO MIDNIGHT 

One Eastern European country after another frees itself from Soviet control
In late 1989, the Berlin Wall falls, symbolically ending the Cold War

1988: SIX MINUTES TO MIDNIGHT 

The US and Soviet Union sign the historic Intermediate-Range Nuclear Forces Treaty, the first agreement to actually ban a whole category of nuclear weapons

1984: THREE MINUTES TO MIDNIGHT 

US-Soviet relations reach their iciest point in decades and dialogue between the two superpowers virtually stops 
The US seems to flout the few arms control agreements in place by seeking an expansive, space-based anti-ballistic missile capability, raising worries that a new arms race will begin

1981: FOUR MINUTES TO MIDNIGHT 

The Soviet invasion of Afghanistan hardens the U.S. nuclear posture
President Jimmy Carter pulls the US from the Olympic Games in Moscow and considers ways in which the US could win a nuclear war 
President Reagan scraps talk of arms control and proposes that the best way to end the Cold War is for the US to win it

1980: SEVEN MINUTES TO MIDNIGHT 

The bulletin describes the Soviet Union and US as 'nucleoholics' - drunks who insist that a drink being consumed is 'the last one,' but who can always find a good excuse for one more

1974: NINE MINUTES TO MIDNIGHT 

South Asia gets the Bomb, as India tests its first nuclear device 
The US and Soviet Union appear to be modernising their nuclear forces, not reducing them 

1972: 12 MINUTES TO MIDNIGHT 

The US and Soviet Union attempt to curb the race for nuclear superiority by signing treaty

1969: 10 MINUTES TO MIDNIGHT

Nearly all of the world's nations come together to sign the Nuclear Non-Proliferation Treaty
The deal is simple--the nuclear weapon states vow to help the treaty's non-nuclear weapon signatories develop nuclear power if they promise to forego producing nuclear weapons

1968: SEVEN MINUTES TO MIDNIGHT 

Regional wars are raging
US involvement in Vietnam intensifies, India and Pakistan battle in 1965, and Israel and its Arab neighbors renew hostilities in 1967
France and China develop nuclear weapons to assert themselves as global players

1963: 12 MINUTES TO MIDNIGHT 

After a decade of almost non-stop nuclear tests, the US and Soviet Union sign the Partial Test Ban Treaty, which ends all atmospheric nuclear testing
Signals awareness among the Soviets and United States that they need to work together to prevent nuclear annihilation

1960: SEVEN MINUTES TO MIDNIGHT 

For the first time, the US and Soviet Union appear eager to avoid direct confrontation 

1953: TWO MINUTES TO MIDNIGHT 

After much debate, the US decides to pursue the hydrogen bomb, a weapon far more powerful than any atomic bomb

1949: THREE MINUTES TO MIDNIGHT 

Soviet Union denies it, but President Truman tells the American public that the Soviets tested their first nuclear device - officially starting the arms race

1947: SEVEN MINUTES TO MIDNIGHT 

As the Bulletin evolves from a newsletter into a magazine, the Clock appears on the cover for the first time


In an announcement today the Bulletin of the Atomic Scientists (BAS) has moved the minute hand of the symbolic Doomsday Clock forward by two minutes. It is now at three minutes to midnight, the closest it has been since 1984. The BAS moved the clock due to the threat of nuclear war and climate change