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Five Reported Killed In East Ukraine Following Ultra-nationalist Attack

Zerohedge - 3 hours 27 min ago

And to think it was just two days ago when all the USDJPY momentum ignition algos roared to life on flashing headline news of yet another diplomatic "de-escalation" of tensions in Ukraine. What was clearly ignored is that since John Kerry was involved, it was nothing but the latest sham. And the proof came moments ago when Reuters reported, citing Russian state television on Sunday, that five people were killed when Ukraine gunmen attacked a checkpoint manned by pro-Russian separatists near the eastern Ukrainian city of Slaviansk.

Reuters was not immediately able to verify the report. Ukraine's Interior Ministry in Kiev could not immediately be reached for comment and Interior Minister Arsen Avakov had no word of the reported incident on his Facebook page, where he usually posts updates on any clashes - perhaps because this one was allegedly started by Ukraine ultra-right nationlists of the Right Sector.

Russia's state-run Rossiya 24 news station, citing its correspondent in Slaviansk, said three of the dead were with the pro-Russian separatists who control Slaviansk, and the other two were from the group which attacked their checkpoint.

The self-declared mayor of Slaviansk, who supports the pro-Russian separatists in the city, said there had been a clash overnight and there were casualties, a Reuters Television team in Slaviansk said.

RT has more:

The fatalities came after a night attack on a protester checkpoint on the outskirts of the city, a Rossiya 24 news channel correspondent reported. Four cars drove by the checkpoint and opened fire at the local residents holding it, killing three people and seriously injuring another one.

 

A group of protesters, who had firearms unlike those holding the checkpoint, was called from their camp in the city. They opened fire at the attackers, killing two of them, the report said.

The protesters in the confrontation reportedly captured the attackers’ two cars. Firearms, explosives and aerial photos of Slavyansk were discovered there. RIA Novosti cites a doctor at the city’s main hospital as saying that four people with gunshots were brought in overnight.

 

“Apparently, something serious happened,” the doctor said.

 

The protesters believe that they were attacked by paramilitary from the Right Sector.

So if this is not merely another attempt at provocation and indeed the attackers' cars were captured and can be provided as evidence, and it can be verified that it was indeed Ukraine elements who were in breach of the now clearly null and void Geneva agreement, this may just be the escalation that Putin, who last week admitted for the first time the massing of Russian forces at the Ukraine border, will be free and clear to finally roll the tanks across the border purely with intentions to "protect" a "separatists" population which is clearly now targeted by its own government.








Categories: blogroll

Book Review: The Death of Money

TheAlephBlog - Sat, 04/19/2014 - 23:30

103729This is a hard book to review. I have respect for the author, and most of his opinions.  But extraordinary claims require extraordinary proof.  There is evidence here, but not extraordinary proof.  I agree that we are in a bad spot, and that there is reason to be cautious.  To claim that the current international monetary system will disappear by 2020 or so requires more than the book delivers.

Let me begin by saying the book is worth buying.  It will make you think.  Thinking is a valuable exercise in which few engage.  Most of us imitate, which is far easier to do than thinking, and usually saves time on common issues.

The author focuses on the weaknesses of US economic policy, but is less critical of bad economic policies being pursued around the world, with the poster children being Japan, China, and the EU.  The US has its problems, but also its unique strengths.  Though I am a critic of US economic policy, we are better off than most other large nations.

One criticism of the book is that it is not focused.  Make your case, and don’t go down many “rabbit trails.”  That said, the rabbit trails are interesting, and you will learn a lot from them, though they don’t support the central thesis of the book.  I think the book needed a better editor, because a tighter book would have made the case better.

Here’s the main difficulty: Okay, so the US Dollar is not a great store of value.  Imagine another nation who wants a better store of value, who lets their currency rise, and their politically powerful exporters scream.  Who will likely win?  The exporters.  At least, that has been the way it has worked for the last 30 years.

In order for a gold-backed currency to be introduced, there will be sacrifices, and under most conditions, it will produce some deflation.  It is not at all certain that the nation(s) that might do this will take the short-term punishment.  Our world is geared toward short-termism, and it harms us all.

Quibbles

The book is far too kind to the IMF, an incompetent institution, and far too kind to China, which faces a collapse in its financial system far more quickly then the US will see.

The book is also too kind to the EU, which continues the experiment of monetary union without political union, which has never worked  before on a large scale.

Who would benefit from this book: Anyone could benefit from this great book.  If you want to, you can buy it here:The Death of Money: The Coming Collapse of the International Monetary System.

Full disclosure: I asked the PR people for a copy of the  book, and they sent it.

If you enter Amazon through my site, and you buy anything, I get a small commission.  This is my main source of blog revenue.  I prefer this to a “tip jar” because I want you to get something you want, rather than merely giving me a tip.  Book reviews take time, particularly with the reading, which most book reviewers don’t do in full, and I typically do. (When I don’t, I mention that I scanned the book.  Also, I never use the data that the PR flacks send out.)

Most people buying at Amazon do not enter via a referring website.  Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites.  Whether you buy at Amazon directly or enter via my site, your prices don’t change.

Categories: blogroll

The Secret World Of Gold

Zerohedge - Sat, 04/19/2014 - 19:22

In light of the Chinese demand we discussed earlier, the ongoing manipulation of 'rigged' markets everywhere, and rising geopolitical tensions (as the de-escalation continues), we thought it worth dusting off this excellent  and wide-ranging look at the history and present of the barbarous relic, gathering many perspectives (pro and con) on gold.

The following documentary moves from historical shipwrecks to Nazi 'death gold' and England's war chest to recent years where widespread economic uncertainty has given the yellow metal a "new luster in the world of high finance." Valued for its permanence, beauty and scarcity, people will lie, cheat, steal and kill in the name of gold; and the clip provides color on many of the market manipulations of the last few years. As MacDonald says, whether it’s a few gold coins or gold bars stored in one of the many vaults around the world, many investors are taking a shine to gold. But there’s not a lot of it. It is said that, even melted down, there would not be enough to fill an Olympic swimming pool. Some claim that much of the gold held by the Bank of Canada, the Bank of England, the Federal Reserve and Fort Knox is gone - that for every 100 ounces of gold traded, there exists only one ounce of real, physical gold. So, where is the gold - and who really owns it?








Categories: blogroll

The 5 Faces Of Income Inequality

Zerohedge - Sat, 04/19/2014 - 18:36

Submitted by Lance Roberts of STA Wealth Management,

Since Easter is a time of family, compassion, forgiveness and resurrection, I thought this would be a good weekend to think about the income inequality/wealth gap which will be part of the mid-term election debate. There are many questions that must be answered from not only “how” to solve the issue, but also “should” it be?

There is no historical evidence that wealth redistribution leads to stronger economic outcomes as it discourages “hard work.” However, there is also little argument that the current state of crony capitalism and corporate greed has gotten more than just a bit out of hand.

To start our thought process in this week’s things to ponder here is a study on the wealth inequality gap in America by Politizane:

 

1) Thomas Piketty, Whither The Bottom 90% by Scott Winship via Forbes

"Piketty’s book lays his cards on the table from the start. He titles it to evoke Marx and begins with an epigraph quoting the Declaration of the Rights of Man and the Citizen to the effect that all inequality should be viewed as suspect. He poses the question in which he is interested as whether capitalism is fundamentally self-correcting in a way that prevents inequality from getting out of control or whether it will produce ever-rising inequality. While he allows that his answer is “imperfect and incomplete,” his modesty goes out the door before that paragraph ends. Piketty’s thesis, in his own words:

 

'When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.'"

2) The War On Poverty Is Grounded In Paternalism by Scott Beaulier via Real Clear Markets

“The plight of the poor is about a lot more than getting a better education or finding a job. It's about repairing the damage that has been done to their lives on a multitude of margins--broken families, stress and depression, fear of crime, drug use, etc. And, the plight varies from person to person and community to community. Like the broader effort to alleviate world poverty that I mentioned earlier, our War on Poverty has layered one bad idea on top of another in the hope something will stick. Yet, the problem persists, and there are few promising signs we are even headed in the right direction.”

3) Baseball And Income Inequality by Nick Colas via ZeroHedge

The United States already has the highest level of income inequality of any advanced country (according to the CIA’s World Factbook), but particular cities within the country display a considerably higher level than the national average.  And among cities with Major League Baseball teams, the inequality that exists regarding ticket prices directly correlates with the level of inequality in those urban areas.”

4) The Mismeasure Of Inequality by Kip Hagopian and Lee Ohanian via The Hoover Institution

“Perhaps the most important question left out of almost every discussion about income inequality is, “Why should we care about it?”

 

Many of those who worry about high income inequality argue that it is an indicator of social injustice that must be remedied through redistribution of income (or wealth). Unfortunately, those who make this claim have not provided any generally accepted criteria for determining when an economic system is unjust. Nor have they provided a convincing argument that such injustice is widespread in the U.S. (In considering this issue, it is worth noting that Greece, Spain, and Italy all have substantially lower income inequality than the U.S. The same is true for Afghanistan, Pakistan, and Bangladesh.)

 

Measuring inequality using the Gini coefficient. There are at least five methodologies used to measure income inequality. The most commonly used is the Gini coefficient (also called the Gini index) developed by Italian statistician Corrado Gini. The Gini coefficient is a method of measuring the statistical dispersion of (among other things) income, consumption, and wealth. The figure of merit for the Gini coefficient for income inequality ranges from zero to 1.0, where zero represents total equality (all persons have identical incomes) and 1.0 represents total inequality (one person has all of the income). By this measure, the U.S. has substantially higher income inequality than almost all other industrialized nations. In 2010, the Census Bureau reported that the U.S. Gini coefficient was .469, while the average Gini coefficient for the 27 European Union nations was .31.”

5) A Guide To Statistics On Historical Trends In Inequality via Center On Budget And Policy Priorities

“Data from a variety of sources contribute to this broad picture of strong growth and shared prosperity for the early postwar period, followed by slower growth and growing inequality since the 1970s.  Within these broad trends, however, different data tell slightly different parts of the story (and no single source of data is better for all purposes than the others). 

 

This guide consists of four sections. The first describes the commonly used sources and statistics on income and discusses their relative strengths and limitations in understanding trends in income and inequality. The second provides an overview of the trends revealed in those key data sources. The third and fourth sections supply additional information on wealth, which complements the income data as a measure of how the most well-off Americans are doing, and poverty, which measures how the least well-off Americans are doing.”

Whatever your position is on income inequality or the “great wealth divide,” there is little argument that it currently exists.  As I stated at the beginning, the question is whether something should be done about it.  Raising taxes on “the rich,” forced redistribution, increases in social welfare, etc. all have potentially negative economic consequences which affects everyone.

There is clearly no easy solution. However, for the upcoming mid-term elections this debate will waged to swing votes in favor of those who want to remain in political office on both sides of the aisle.  This is ironic considering that the majority of those individuals are currently in the top wealth brackets in the U.S. Maybe we should just start there?








Categories: blogroll

Anti-HFT Trading Platform Comes To "Rigged" FX Markets

Zerohedge - Sat, 04/19/2014 - 17:29

The surge in volume on the anti-HFT equity trading platform IEX - of Flash Boys and TV-fight-night fame - makes it very easy to see how the buy-side (which the US retail investor is one small part of) clearly prefers an un-rigged place to find willing sellers (or buyers). Relatively light regulation and high volumes make the $5.3 trillion-a-day foreign-exchange market a prime target for high-frequency traders. More than 35% of spot currency volume in October was by speed traders, up from 9% five years earlier, but just as in equity markets, there are speculators and there are natural buyers and sellers in FX markets (looking to hedge payments and receipts from real business for example). As Bloomberg reports, a currency-dealing platform known as ParFX, established in 2011, offers a transparent marketplace and subjects orders to random pauses of about 20 to 80 milliseconds, and "is the industry’s effort to heal itself."

IEX volumes hit record highs...

 

And now the FX markets - also dominated by High-Frequency-Trading - have an anti-HFT platform upon which to transact...

The FX market is just as plagued by the HFT "parasite" as equity markets...

Relatively light regulation and high volumes make the $5.3 trillion-a-day foreign-exchange market a prime target for high-frequency traders. More than 35 percent of spot currency volume in October was by speed traders, up from 9 percent five years earlier, according to Boston-based consultancy Aite Group LLC.

 

...

 

There’s been a lot of dissatisfaction, particularly on the buy-side and asset-management community, about high-frequency trading,” said Richard Bentley, the vice president for financial services at Software AG, which aggregates trading platforms including ParFX. “There’s the perception that they’re parasites. What ParFX have done is essentially play to that and said, come and trade in our pool, because we’re not going to allow the HFT people to come and spoil the fun.”

And ParFX was set up specifically to rmeove HFT's ability to front-run orders (just like IEX did in equity markets)...

A currency-dealing platform known as ParFX, established in 2011 by firms from Deutsche Bank AG to Citigroup Inc...

 

The system started trading in July, and now executes deals for 15 firms including Deutsche Bank, Citigroup, Barclays Plc and UBS AG, the four biggest currency dealers. It expects to have 25 percent more clients by the end of April.

 

ParFX offers a transparent marketplace and subjects orders to random pauses of about 20 to 80 milliseconds, and “is the industry’s effort to heal itself,” according to Marcus.

The bottom line is a search for "trust" is on the rise...

“These banks do need to trade foreign exchange because it’s their business and they’re hedging their currency exposure across the world,” London-based Marcus said in an April 15 interview. “They would rather trade in an environment that they can trust.”








Categories: blogroll

It's Time To Retire Gross Domestic Product As A Measure of Prosperity

Zerohedge - Sat, 04/19/2014 - 16:34

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

What if we used wellness (Gross Domestic Happiness) as a metric for prosperity rather than GDP?

Distilling an economy's success in delivering "prosperity" to a single number has outlived its purpose. Zachary Karabell describes the birth of GDP in far less complex times in (Mis)leading Indicators: Why Our Economic Numbers Distort Reality (Foreign Affairs):

A GDP that is growing in sync with expectations can enhance a country’s reputation and thus its strength and power. A GDP that is contracting or failing to meet expectations, on the other hand, can lead to disaster. Yet a hundred years ago, the concept of GDP did not exist; history unfolded without it. The United States, for example, managed to win its independence, fight a civil war, and conquer a continent without any measure of national income.

GDP’s origins lie in the 1930s, when economists and policymakers in the United States and the United Kingdom struggled to understand and respond to the Great Depression.

 

It is not terribly surprising that economists and policymakers came to favor a statistical technique that helped the United States survive a depression and win a war. But not even the economists who invented this metric imagined that GDP would become so central to every state in the world within a few short decades.

The problem is this radical reductionism at the heart of any single measure is irrevocably flawed:

 

Leading indicators were invented to measure the economies of the industrial nation-states of the mid-twentieth century. In their time, they did so brilliantly. The twenty-first century, however, is proving more challenging to measure. Industrial nation-states have given way to developed economies rich in services and to emerging industrial economies exporting goods made by multinational companies. The statistics of the 20th century were not designed for such a reality, and despite the assiduous efforts of statisticians, they cannot keep up.

These shifts have created a temptation to find new formulas, better indicators, and new statistics. But the belief that a few simple numbers or basic averages can capture today’s multifaceted national and global economic systems is a myth that should be abandoned. Rather than seeking new simple numbers to replace old simple numbers, economists need to tap into the power of the information age to figure out which questions need to be answered and to embrace new ways of answering them.

The limitations of GDP are so severe that the number is at best misleading. Karabell identifies three intrinsic flaws in any single-number scheme to measure GDP:

1. GDP does not include vast swaths of economic output and value

2. GDP is useless in measuring real-world trade

3. GDP counts digging a hole and filling it but not conservation of energy or resources.

If a steel mill produces pollution that then requires a cleanup, both the initial output (the steel) and the cost of addressing its byproduct (the cleanup) add to GDP. So, too, would the cost of health care for any workers or residents injured or sickened by the pollution. Conversely, if a company replaces its conventional light bulbs with long-lasting LED bulbs and, as a result, spends less on lighting and electricity, the efficiency gains would detract from GDP. Yet few would argue that the pollution example represents a positive development or that the lighting example constitutes a negative one.

The simplistic assignment of "import" and "export" completely misses the reality of modern manufacture and trade, where parts come from multiple nations. As Karabell explains:

 

If trade numbers more accurately accounted for how products are made, it is possible that the United States would not have any trade deficit at all with China. The problem, in short, is that trade figures are currently calculated based on the assumption that each product has a single country of origin and that the declared value of that product goes to that country. Thus, every time an iPhone or an iPad rolls off the factory floors of Foxconn (Apple’s main contractor in China) and travels to the port of Long Beach, California, it is counted as an import from China.

A more reasonable standard, of course, would recognize that iPhones and iPads do not have a single country of origin. More than a dozen companies from at least five countries supply parts for them. Infineon Technologies, in Germany, makes the wireless chip; Toshiba, in Japan, manufactures the touchscreen; and Broadcom, in the United States, makes the Bluetooth chips that let the devices connect to wireless headsets or keyboards.

 

Taking these facts into account would leave China, the supposed country of origin, with a paltry piece of the pie. Analysts estimate that as little as $10 of the value of every iPhone or iPad actually ends up in the Chinese economy, in the form of income paid directly to Foxconn or other contractors.

I have addressed this issue for years, for example: Trade War with China: Who Benefits? (April 11, 2007)

Trade and "Trade War" with China: Who Benefits? (October 5, 2010)

No single number, regardless of the inputs, can possibly reflect the real economy. Karabell concludes:

How entrepreneurs run effective businesses; how individuals buy homes, pay for college, or retire -- none of those decisions should be based on the leading indicators of the last century. Old attachments to those indicators, and to the myth that there is something called “the economy” that affects all people equally, poses a major obstacle to progress.

Karabell also discusses what I call the propaganda value of GDP:

 

These measurements were not invented to serve as absolute markers of national success or failure or to indicate whether some governments were visionary and others destructive. But the transformation of these numbers from statistics into markers of national success happened so quickly over the course of a few decades that no one quite noticed what was happening.

I tend to think political authorities knew exactly what was happening: they realized that their own credibility could be boosted by a rigged GDP number. Thus we have the central government of China issuing blatantly bogus claims of 7+% annual GDP, as anything less will severely erode their claim of managerial brilliance.

In our own propaganda-dependent state, GDP is almost always positive, much like corporate earnings always beat expectations by a penny.

But we should be paying attention to an even deeper critique of GDP: that prosperity no longer depends of the "growth" of consumption, financialization, etc. but on the Degrowth of narcissistic consumerism and more efficient use of resources and capital.

What if we used Bhutan's guiding national policy of Gross Domestic Happiness, as a metric for prosperity?

A second-generation GNH concept, treating happiness as a socioeconomic development metric, was proposed in 2006 by Med Jones, the President of International Institute of Management. The metric measures socioeconomic development by tracking seven development areas including the nation's mental and emotional health.GNH value is proposed to be an index function of the total average per capita of the following measures:

1. Economic Wellness: Indicated via direct survey and statistical measurement of economic metrics such as consumer debt, average income to consumer price index ratio and income distribution

 

2. Environmental Wellness: Indicated via direct survey and statistical measurement of environmental metrics such as pollution, noise and traffic

3. Physical Wellness: Indicated via statistical measurement of physical health metrics such as severe illnesses

 

4. Mental Wellness: Indicated via direct survey and statistical measurement of mental health metrics such as usage of antidepressants and rise or decline of psychotherapy patients

 

5. Workplace Wellness: Indicated via direct survey and statistical measurement of labor metrics such as jobless claims, job change, workplace complaints and lawsuits

6. Social Wellness: Indicated via direct survey and statistical measurement of social metrics such as discrimination, safety, divorce rates, complaints of domestic conflicts and family lawsuits, public lawsuits, crime rates

 

7. Political Wellness: Indicated via direct survey and statistical measurement of political metrics such as the quality of local democracy, individual freedom, and foreign conflicts.

Here in the U.S., we give lip-service to all these values, but ask yourself: where do we spend most of our time? Serving our masters in the State/crony-cartel economy, creating GDP.

Yes, we all still need to earn a livelihood, but imagine a society constructed around generating Gross Domestic Happiness instead of GDP. The power structure would collapse because none of these activities generate enough profits or taxes to keep the Machine operational.

It is a sad statement that we often only awaken to real value and meaning when we've run out of time to change the way we "invest" our time.








Categories: blogroll

US, And Global, Military Spending Summed Up In One Chart

Zerohedge - Sat, 04/19/2014 - 15:36

While we previously noted the relative stability (but absolute surge) in US military spending over the past few decades, the scale of what the world's peace-keeping, red-line enforcing, hypocrisy-packed nation spends in context to the rest of the world...

 

Source: AFP

We previously put the US military budget in context over time...

 

 

And unless we get some serious military conflict to blame a reflation on, and if U.S. military spending were to revert to its 2000 level over the next five years, as President Obama had proposed, and the rest of the world were to continue spending the same portion of its GDP on the military, U.S. military spending as a share of the global total would decline sharply, to just under 30 percent.

U.S. Military Spending Share of Global Total








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Everything We Are Told About Deflation Is A Lie

Zerohedge - Sat, 04/19/2014 - 14:18

Submitted by Tim Price via The Cobden Center blog,

“The European Central Bank has given its strongest signal yet that it is prepared to embrace quantitative easing to prevent the euro zone from sliding into deflation or even a prolonged period of low inflation.”
- ‘Draghi strengthens QE signal’, Financial Times, April 4, 2014.

Yes, heaven protect Europe’s embattled citizens and savers from a prolonged period of low inflation. How could they possibly survive it ?

If history is any guide, probably quite well. As Chris Casey points out in his essay ‘Deflating the deflation myth’, the American economy during the 19th Century twice experienced deflationary periods of roughly 50 percent:

Source: McCusker, John J. “How Much Is That in Real Money?: A Historical Price Index for Use as a Deflator of Money Values in the Economy of the United States.” Proceedings of the American Antiquarian Society, Volume 101, Part 2, October 1991, pp. 297-373.

This during a period of “sustained and significant economic growth”. But just think of all those poor consumers, having to make the best of constantly falling everyday low prices.

In their research article ‘Deflation and Depression: Is There an Empirical Link?’ of January 2004, Federal Reserve economists Andrew Atkeson and Patrick Kehoe found that “..the only episode in which we find evidence of a link between deflation and depression is the Great Depression (1929-1934). We find virtually no evidence of such a link in any other period.. What is striking is that nearly 90% of the episodes with deflation did not have depression. In a broad historical context, beyond the Great Depression, the notion that deflation and depression are linked virtually disappears.”

In his 2008 essay ‘Deflation and Liberty’, Jörg Guido Hülsmann writes as follows:

“In the present crisis, the citizens of the United States [he could have added: and of the UK, and Europe] have to make an important choice. They can support a policy designed to perpetuate our current fiat money system and the sorry state of banking and of financial markets that it logically entails. Or they can support a policy designed to reintroduce a free market in money and finance. This latter policy requires the government to keep its hands off. It should not produce money, nor should it appoint a special agency to produce money. It should not force the citizens to use fiat money by imposing legal tender laws. It should not regulate banking and should not regulate the financial markets. It should not try to fix the interest rate, the prices of financial titles, or commodity prices.

 

“Clearly, these measures are radical by present-day standards, and they are not likely to find sufficient support. But they lack support out of ignorance and fear.

“We are told by virtually all the experts on money and finance – the central bankers and most university professors – that the crisis hit us despite the best efforts of the Fed [..and the Bank of England, and the ECB..]; that money, banking and financial markets are not meant to be free, because they end up in disarray despite the massive presence of the government as a financial agent, as a regulator, and as money producer; that our monetary system provides us with great benefits that we would be foolish not to preserve. Those same experts therefore urge us to give the government an even greater presence in the financial markets, to increase its regulatory powers, and to encourage even more money production to be used for bailouts.”

But as Hülsmann goes on to argue, all of these contentions are wrong, and have been proven to be wrong since the times of Adam Smith and David Ricardo. A paper money system is not beneficial “from an overall point of view”. (Nor has any unbacked paper money system ever lasted.) A paper money system does not create real resources on which our welfare depends. “It merely distributes the existing resources in a different manner; some people gain, others lose. It is a system that that makes banks and financial markets vulnerable, because it induces them to economize on the essential safety valves of business: cash and equity.”

The conventional view of deflation is that if it sets in, “the banking industry, the financial markets, and much of the rest of the economy will be wiped out in a bottomless deflationary spiral.” But as Hülsmann goes on to argue, such a spiral would not prove fatal to the lives and welfare of the general population. Rather, it would destroy “essentially those companies and industries that live a parasitical existence at the expense of the rest of the economy, and which owe their existence to our present money system.”

Let us be more explicit. Severe deflation threatens at an existential level bankrupt banks and the bankrupt governments that perpetuate their existence. Deflation is a mortal enemy to the heavily indebted state and its embedded parasites, but it is a friend to the saver and to anyone with a positive net worth. Because it is so dangerous to the debtor, (unelected) central bankers clearly feel they have no option but to incinerate savers at the altar of perpetuating an unsustainably indebted banking and political elite.

So it would seem that the euro zone, under Mario Draghi, is on the verge of outright quantitative easing, and that the ECB is also committed to using “unconventional instruments” in an increasingly desperate attempt to revive the corpse through explicit inflationism, not least by actually buying sovereign debt of dubious underlying value, rather than merely pledging to. The financial markets certainly appear to think so: the yields on Spanish 5-year government paper fell below those of their US equivalents last week. Spanish bonds yielded more than 7% above US paper as recently as 2012. And as Bloomberg pointed out, the yields on Spanish and Italian five year paper, and the yield on 10 year Irish government debt, all fell to record lows last Friday.

Whether in terms of goosed bond markets or inflated stock markets, inflated higher not necessarily by any improvement in corporate prospects but primarily by expectations of more ex nihilo money courtesy of the world’s major central banks, these are false markets. They cannot entirely be trusted – assuming that markets ever can. Fund manager Seth Klarman has written well on the artificiality of today’s markets:

“The Fed and the Treasury openly discuss the aims of their policies: to manipulate financial markets higher and to generate reported economic “growth” and a “wealth effect”. Inside the giant Plexiglas dome of modern capital markets, just about everyone is happy, the few doubters are mocked and jeered, bad news is increasingly ignored… The artificiality of today’s markets is pure Truman Show. According to the Wall Street Journal, the Federal Reserve purchased about 90% of all the eligible mortgage bonds issued in November.”

John Phelan of the Cobden Centre writes well that “the Federal Reserve has become an enabler of the financial havoc it was designed (a century ago) to prevent.”

Messrs Yellen, Draghi et al should be careful what they wish for. Inflation targeting is hardly a precise science. Achieving an entirely arbitrary 2% inflation level is bad enough for savers on fixed incomes when deposit rates are close enough to zero as to make no difference, but markets have a tendency to overshoot. Most government bond markets are clearly overbought – but in a QE world given fresh impetus by the looming arrival of the ECB, overbought markets can become even more overbought. When we don’t claim to understand the underlying dynamics (political) or the final destination (though we have our own fears), it’s much better simply not to play. From an asset allocation perspective, classic, benchmark-unconstrained Benjamin Graham-style ‘deep value’ equity is, we now believe, pretty much the only game in town – and that is where we now focus our attention, almost exclusively.

Meanwhile, we watch in disbelief as market distortions become even more untenable.








Categories: blogroll

How Americans Die

Zerohedge - Sat, 04/19/2014 - 13:35

America is growing older.

Nowhere is this more obvious than in the conversion of America's age pyramid into a rectangle from 1960 to 2050, as was shown in a recent post highlighting America's two 'slow-motion' social dramas. As the Pew Institute summarized "we'll have almost as many Americans over age 85 as under age 5. This is the result of longer life spans and lower birthrates. It’s uncharted territory, not just for us, but for all of humanity. And while it’s certainly good news over the long haul for the sustainability of the earth’s resources, it will create political and economic stress in the shorter term, as smaller cohorts of working age adults will be hard-pressed to finance the retirements of larger cohorts of older ones."

 

And as society comes to grips with the realization that the average age of America will hit new record highs with every passing day for the indefinite future, a new, and far less pleasant topic is sure to gain prominence. Namely: how Americans Die.

This should be intuitive: since older people die sooner than the young, even despite the generally declining mortality by age cohort, the sheer record number of aged Americans will soon drown out the incremental improvements in life expectancy.

But it is not only age that is a key issue: one surprising finding (in addition to a curious tangent of a brief spike in AIDS-related deaths in the late 80s and early 90s for the 25-44 year old cohort), is that over the past decade, motor vehicle accidents has lost its top spot as the primary cause of violent deaths across the population, handing over the title to both drug-induced deaths and suicides. 

Incidentally, in 2010, the number of suicide deaths was nearly four times greater than the number of Americas murdered by firearm. Perhaps it is time to ban suicides.

All these and many other curious observations surrounding this fascinating topic are revealed in the following interactive visual data compendium by Bloomberg's Matthew Klein.

So without further ado, here is a detailed look into How Americans Die.

First, it should be obvious that courtesy of numerous, life-extending advances over the past several decades, the morality rate has tumbled. Yet in recent years, it has been mostly males who have benefited. Overall progress stopped in the mid-1990s.

 

However the lack of improvement can be attributed to a simple factor: the aging of Americans, and specifially those aged 55 and over have risen as a total portion of the population from a little over a fifth of total in the year 2000 to a quarter currently.

 

Another obvious observation: old people die sooner than the young

 

Instead of breaking down the population into genders, looking at age cohorts over time shows a plunge in mortality across all age groups, with the biggest beneficiaries being Americans 25 and under.

 

However, something curious appears in the 25-44 age group sometime in the late 1980s...

 

That something was AIDS...

 

The AIDS epidemic was so bad for about a decade, the disease became the single largest killer of Americans in their prime, surpassing cancer, heart disease, and all other causes of death.

 

Of all races, however, the AIDS epidemic targeted mostly black men between 25 and 44.

 

Another curious observation: there has been no progress in mortality for the 45-54 year olds since the late 1990s.

 

This quandary is further compounded by the reduced mortality of cancer and heart disease - the biggest traditional killers of this age group - over the past several decades.

 

So what is the offset? Simple - a surge in deaths from two new killers - suicide and drug deaths.

 

As noted earlier, while until the mid-1990s, gun deaths outnumbered drug deaths, since then the number of gun murders has actually declined, while drug deaths have exploded. As have suicides. Actually perhaps it is time to ba suicides and drugs. Oh wait, somehow the pharma lobby wouldn't be too happy with that.

 

As for cars, no need to ban those: motor-related deathes have plunged to a record low, even with seemingy everyone texting and driving.

 

Safer roads, however, have been more than offset by an explosion in suicides, with representatives of the 25-44 age group most likely to take their lives.

 

Still, despite all of the noted curious patern shifts, the reality remains that most Americans are living longer and dying of natural causes.

 

If there is any bad news here, it is that as Americans get older they increasingly succumb to such debilitating, age-related diseases as dementia and Alzheimer's. Indeed, while there has been substantial progress in heart disease-related deaths, the total number of deaths in the 75 and older category has remained flat, precisely due to the increasing prevalence of such age-degenrative conditions.

 

Which means one thing is certain: the amount of spending on Alzheimer's and other age-related diseases is set to soar.

Source: Bloomberg








Categories: blogroll

"Timestamp Fraud": A Rigged Market Explained In One Simple Animation

Zerohedge - Sat, 04/19/2014 - 12:18

The topic of High-Frequency-Trading quickly dissolves into a smorgasbord of mnemonics and 'inside-baseball' technical terms - just complicated enough to lose everyone that matters or should care about its implications. Despite the fair-and-balanced defense from the mainstream media business channels (sponsored by the belief in the status quo fair markets that 'America the free' is known for), the fact is that HFT does front-run (perfectly legal under the umbrella protection of Reg NMS) order flow, but there may be one more wrinkle - one which would cement the Michael Lewis (accurate) allegation that the market is rigged.

Because if as Nanex shows below, there is in addition to everything else the element of timestamp fraud involved in the distribution of NMS "compliant" trading data for Direct Feed-to-SIP matching purposes, this means that not only is the market rigged, but its rigging goes from the very top all the way to the lowliest algo.

What's worse, the rigged system is so embedded there is nothing anyone can do about it, until it just collapses under its own weight: think May 2010 HFT-created flash crash, only without the mirror-image bounce. 

Via Nanex,

Direct vs SIP Data Feed

The animation below shows how a trade or quote sent on an exchange makes its way to the SIP (Securities Information Processor) and a Direct Feed used by High Frequency Traders (HFT). Reg NMS requires that an exchange (A) send data to the SIP (C) as fast or faster than it sends that data to direct feed subscribers (B). Here's the relavent text from Regulation NMS:

Rule 603(a)(2) requires that any SRO, broker, or dealer that distributes market information must do so on terms that are not unreasonably discriminatory. These requirements prohibit, for example, a market from making its "core data" (i.e., data that it is required to provide to a Network processor) available to vendors on a more timely basis than it makes available the core data to a Network processor.

This is the same rule that NYSE broke and was fined $5M by the SEC in September 2012. We have a nice write up summarizing this fine as it applies to the SIP. Unfortunately, this practice continues at other exchanges. In the animation below, note that the information sent to the SIP has to travel significantly farther distances (40 miles vs 1000 feet), on a slower network (1 GBps vs 40 GBps) with a protocol that adds more latency (TCP vs UDP) than the same information sent to the direct feed. Sometimes this latency on the input side of the SIP shows up in SIP data as fantaseconds (a term we coined to describe trades printing before quotes). See this well documented example.

Timestamp Fraud

The animation also shows something that many aren't aware of: the original timestamp gets stripped, and replaced with a fresh timestamp when the SIP transmits it to a subscriber! Watch the timestamp in the box get stripped when it enters, and replaced when it leaves, the circle labeled "SIP Tape A". Keeping original timestamps is crucial for constructing audit trails, or for detecting system delays, which is why it's integral to this solution which allows HFT and non-HFT to coexist.

Understanding the Animation

Reg NMS requires that exchanges provide core data (trades and quotes) to the SIP as fast or faster than direct feeds. In the animation above, that means a trade or quote originating at an exchange (labeled A) must arrive at the SIP (C) no later than it arrives on a direct feed (B).

The animation starts with a trade (or quote) in the symbol "F", timestamped by the exchange at exactly 9:45. One network sends it to direct feed recipients (B) which are all 1000 feet away, and the other network sends it to the SIP (C) which is about 40 miles away. When the trade arrives at the SIP, the timestamp is removed and aggregated with trades from other exchanges (not shown). Finally, at the point where the SIP transmits the trade to a SIP subscriber (blue circle) it gets a new timestamp based on the SIP clock (which could be ahead or behind the original exchange's clock).

This new timestamp, in effect, will hide any delays between the exchange (A) and the blue circle from SIP users. During the flash crash, delays of over 30 seconds occurred in many stocks and were impossible to detect, because of the altered timestamps. Had the original timestamps from the exchange remained, everyone, not just High Frequency Traders, would have been aware they were trading on stale data.

Sending data faster to HFT is against regulations. Period. Changing timestamps is just plain wrong, and one could argue that SIP subscribers are being denied the true timestamp that HFT enjoy. Keep in mind that nearly all brokerage reports on trade execution quality use the SIP and therefore, an altered timestamp.

Nearly 40% of trades are priced based on the SIP - this include practically all retail trades and most dark pools. Even Goldman Sach's Dark Pool is executes based on SIP prices. When SIP prices lock or cross (due to slow input from one of 13 exchanges or even FINRA), it causes internalizers (retail trades) to stop trading until the condition is resolved: a phenomenon made clear during the flash crash.

Furthermore, speed differences between the direct feed and the SIP can lead to other undesirable market behaviors, such as momentum ignition, which have become quite common (we detailed one market-wide momentum ignition event here). Simply put, when prices suddenly move, those who can act earlier (HFT using direct feeds), will profit at the expense of those who cannot, such as internalizers and Dark Pool that are based on the SIP. With nearly 40% of trading based on the SIP, the profitability of this manipulative strategy can be great enough that the cost of inducing price shifts (momentum ignition) is worth the economic and regulatory risk.

Additional Reading






Categories: blogroll

David Stockman On 'The QE Follies': Bernanke's Swell Gift To The Big Four Banks

Zerohedge - Sat, 04/19/2014 - 11:04

Submitted by David Stockman via Contra Corner blog,

I recently pointed out that the Fed’s 5-year campaign to drive the 30-year mortgage rate from 6.5% to 3.3% had accomplished nothing except to touch off another of those pointless “refi” booms which enable homeowners to swap an existing mortgage for a new one carrying a significantly lower interest rate and monthly service cost. Such debt churning exercises have been sponsored repeatedly by the Fed since the S&L debacle of the late 1980s.

I further noted that this time the Fed had really outdone itself:

During some periods upwards of 80% of new originations were not money purchase mortgages to finance a new home, the declared purpose of interest rate repression, but just refis of existing debt. By resorting to this maneuver to leave more money in the pocket of borrowers each month, our monetary central planners undoubtedly hoped that America’s flagging consumers would buy another flat screen TV, dinner at Red Lobster or new pair of shoes.

The choice of a flat screen TV or mortgage payment ought to be up to the  American people, not the monetary politburo in the Eccles Building. But even within its own terms, the Fed’s massive refi party made no sense. That’s because unless the Fed intended to peg the mortgage rate at artificial, sub-economic levels for all time to come, its refi maneuver could only shift consumer choices and their mix of spending between quarterly GDP reports; it could not generate permanent gains in national output and real wealth.

In fact, the Fed’s interest rate pegging policies amount to an arbitrary transfer of wealth from mortgage investors to mortgage borrowers—and even that is ultimately temporary. Capital markets do eventually, and often violently, reject central bank imposed financial repression—- as they did during the Great Inflation of the 1970s when bond prices plummeted.

So it was evident all along that even the mighty Fed would have to eventually take its thumb off the scales in the treasury market, thereby permitting benchmark interest rates to “normalize”. In that event, mortgage rates would rise and new homebuyers would find themselves spending more on their mortgage and less at the Red Lobster. And on the margin, a higher so-called “cap rate” for residential real estate would mean that housing prices would tend to weaken, not rise. The whole exercise was ultimately a circular delusion.

Even though this cash flow shuffle is perfectly silly, it has been stubbornly pursued by our paint-by-the-numbers Keynesian central bankers because they refuse to acknowledge the reality of “peak debt”—especially in the household sector. Yet only a permanent gain in leverage can cause consumer spending to remain elevated in response to monetary stimulus.

The overwhelming evidence, however, is that America’s shop-till-they-drop consumers have finally dropped. After a forty-year cycle of soaring household leverage ratios, “peak debt” ratios were finally encountered in 2007-2008— and now retrenchment has set in. Accordingly, consumer spending will now have to come solely out of income, not income plus incremental credit drawdowns which fueled the spending party for decades.

Household Leverage Ratio - Click to enlarge

Household Leverage Ratio – Click to enlarge

But while peak debt means that the Fed’s entire 5-year money printing spree was destined to fail, it nevertheless has produced massive impacts—–all of them bad or stupid. One of the most crucial is that it generated an artificial refi windfall to the Big Banks which now dominate the home mortgage business. And the profit windfall was a doozy.

Now that financial results for Q1 2014 have been posted, the impact on Big Four financial results can actually be quantified. The four charts below on mortgage originations per quarter during the course of the Fed’s balance sheet expansion binge are the smoking gun.

They show that during the most recent quarter the four banks only originated about $67 billion in new mortgages on a combined basis. That figure is a reasonable proxy for the steady-state condition that would have existed had the Fed not been engaged in a monetary cattle drive to get mortgage rates to the bottom of the valley. That is, had mortgage rates remained at their not unreasonable 2008 levels or oscillated randomly owing to the interaction of supply and demand for mortgage funds on the free market, there would have been no thundering stampede by American homeowners to refi their housing debts.

Accordingly, activity rates in the mortgage operations of the Big Four would have reflected mainly purchase money borrowing by households who were buying a new or existing home. So the difference between the peak mortgage origination rates shown in the graphs and Q1 results roughly measures Bernanke’s gift to the big banks.

On a combined basis, the Big Four originated mortgages at a peak rate of nearly $300 billion per quarter—or $1.2 trillion annually during the period between 2010 and early 2013. So the refi maneuver resulted in up to a 5X gain in the rate of mortgage originations—a process that gave rise to a triple dip of profits, as previously described:

As summarized in the Fortune article below, the mortgage originators were booking up to $3,300 of up front profit per refi.

And that was just the fee on the transaction—before booking the embedded “gain-on-sale” (often thousands more) when most of this booming mortgage volume was subsequently shuffled off to Freddie and Fannie to be packaged and resold as an MBS. Yes, and at that point, such newly minted “mortgage bonds” did flow back to Wall Street where they were doubtless churned many times over by the dealer side of the banking houses in their endless and remunerative chore of supplying “liquidity” to the homeowners of America….So the banking side of the Fed’s refi churn did well too—–enjoying a triple profit dip along the way.

As can be seen in the graphs, the windfall in some quarters was even more stupendous. The peak rate for Bank of America was 10X its Q1 2014 rate and for Citi it was 9X.

Yet the real story is in the Wells Fargo (WFC) data. During the third quarter of 2012 it originated $100 billion more in mortgages than it did in Q1 this year after the Fed’s refi cattle drive had ended. Stated differently, the geniuses who run Warren Buffet’s favorite bank were handed a  giant book of totally artificial businesses by the Fed— and the consequent opportunity to triple dip from mortgage volumes that amounted to nearly one-half trillion at an annualized rate. WFC had indeed learned at the knee of the nation’s master crony capitalist.

 

 

 

 

 

It should not take more than a moments reflection to grasp the hidden function of the massive mortgage churning shown in the left side of these graphs compared to the meager (and more market neutral) levels shown for Q1.Triple-dipping through their massive mortgage churn, the Big Four banks were able to book net income of $20-25 billion per quarter from originations, gain-on-sale and mortgage trading during much of this period.

That means that thanks to Bubbles Ben’s largesse they could pretend that their balance sheets were being repaired. Accordingly, raiding their equity accounts in order to fund dividends and stock buybacks was now fully copasetic.

So Uncle Warren along with his fast money trend followers got their reward in a munificent flow of cash out of bank vaults that had been wards of the state only a few months earlier—as did long suffering executives who’s stock options rose 5X in value owing to all the dividends and buybacks.

Indeed, during fiscal years 2009-2013 Wells Fargo disgorged $59 billion in cash to fund dividends and share repurchases and JPMorgan paid out $65 billion during the same 5-year period. Needless to say, $110 billion of cash flowing toward the bank stocks post at the Wall Street casino had the hedge fund speculators who continuously cycle in and out of these names delirious with excitement.

Likewise, their echo boxes in the financial press were quick to pronounce the all clear. The economy is fixed, the banks are back, and their stocks are soaring—surely proof that all is well. Compared to post-crisis lows, WFC’s stock price was recently at 6X (i.e. $60 per share vs. $10), JPM and BAC were at 3X and even the zombie known as Citi was at 2X.

Yes, some of the banks also raised new capital—especially in the early years after the crisis. But that was mainly a smokescreen to give false credibility to the phony “stress tests” concocted by Turbo Tim and Bubbles Ben. But even giving credit to new equity issued—the net cash distribution by WFC and JPM over the five-year period was just short of $80 billion. Adding in BAC, the Big Three distribution of cash for share repurchases and dividends amounted to nearly $35 billion during 2013 alone.

It goes without saying that this all amounted to a lot of “shareholder friendly” action—even if it did constitute horrid public policy. And Washington’s policy of allowing the same big banks—who allegedly brought the financial system to the brink of Armageddon just 66 months ago— out of supervisory lock-up is indeed horrible.

Every dime of big bank profits—honest earnings and windfall gains like these from the refi contraption alike—should have been sequestered on their balance sheets for years and years to come. Or at least until one of two conditions pertained.

One option would have been for some of them to grow up and become real free enterprises. But that would require  giving up the Fed’s discount window privilege, deposit insurance and undertaking an irrevocable renunciation of any future bailout claims on any agency of the state.

In the alternative, their balance sheets could have stayed in sequester during the entire five years since the crisis. This would have permitted retained earnings and capital to pile-up so deep that even the weak-kneed pettifoggers of the beltway would not be panicked into throwing the banks a life line next time they blow themselves up.

Neither option was chosen, obviously. Instead, while the Fed’s entire mortgage refi gambit did nothing for Main Street–except to confer cash flow windfalls on the less than 15% of  households that  actually did the refi— it did accomplish wonders on the Wall Street side.

Not only did it confer massive capital gains on speculators like Warren Buffet and the bank management teams who brought us the financial crisis, but it also amounted to a regulatory get out of jail free card.

Yet what was the all-fired hurry in Washington to open the flood gates to bank dividends and stock buybacks. Supposedly, that was to pepper the market for bank stock—so that they would raise new capital on their own.

Really? In our financialized economy and crony capitalist policy regime there is apparently no need for more bank capital. As was well demonstrated in 2008-2009, when push comes to shove the state treasury will be raided.

In the interim, its all about the secondary market. That is, goosing the price of existing stock certificates held by gamblers who scooped them up at the bottom and management teams who got themselves issued more options after Bubbles Ben pronounced the all clear.








Categories: blogroll

The One Thing Most Desired By Chinese Consumers Is...

Zerohedge - Sat, 04/19/2014 - 09:20

Hint: it's not designer clothes, shoes, bags or watches.

 

And some additional explanation from the World Gold Council:

The Chinese traditionally regard gold as a form of money. Indeed, the character for gold in Mandarin (jin) is also a synonym for money. This is an important fact when it comes to the motivations behind the purchase of jewellery. Asian buyers of plain, 22 or 24 carat jewellery have no doubt in their mind that they are buying gold as well as an object of beauty that can be worn. The perception of value is very important in markets such as India and China where plain, very high carat or ‘pure gold’ articles bought on low-mark-ups comprise the majority of gold jewellery consumption. As such, the level and direction of local gold prices usually have an important bearing on jewellery consumption. This was very clear in 2013 when in April of that year the sudden slump in prices triggered an extraordinary wave of buying in China. Consumers perceived this as a unique opportunity to exchange renminbi for gold at a very favourable rate. It was also of course a chance to bring forward planned purchases for gifts or weddings, especially as the consensus was that prices were bound, eventually, to move a good deal higher.

 

World Gold Council consumer research indicates that consumers remain very positively disposed towards ‘pure gold’ jewellery. It might be thought that the disappointing price trend in the second half of 2013 had undermined this optimism as well as the public’s desire to purchase ‘pure gold’ jewellery. This does not seem to be the case. An extensive consumer survey conducted towards the end of 2013 on behalf of the World Gold Council illustrates how China’s population continues to view ‘pure gold’ jewellery as a form of money, with little indication that this traditional attitude will change any time soon. Asked whether they agreed with the statement that 24 carat gold jewellery "...is as much an investment as it is a fashion item” no less than 80% of the sample agreed, while only 4% disagreed (16% held no view either way). Agreement levels were strong across all respondents. Moreover, support for future demand is strong: in a separate survey of over 10,000 Chinese consumers, 76% of those aged between 18 and 27 also affirmed ‘pure gold’ jewellery’s investment status. And the majority of respondents planned to maintain or increase their spending on 24 carat gold jewellery over the next 12 months (44% and 35% respectively.

h/t @RudyHavenstein








Categories: blogroll

The Next Shoe Just Dropped: Court Denies Attorney-Client Privelege

Zerohedge - Sat, 04/19/2014 - 08:14

Submitted by Simon Black via Sovereign Man blog,

In the Land of the Free, people grow up hearing a lot of things about their freedom.

You're told that you live in the freest country on the planet. You're told that other nations 'hate you' for your freedom.

And you're told that you have the most open and fair justice system in the world.

This justice system is supposedly founded on bedrock principles-- things like a defendant being presumed innocent until proven guilty. The right to due process and an impartial hearing. The right to counsel and attorney-client privilege.

Yet each of these core pillars has been systematically dismantled over the years:

1. So that it can operate with impunity outside of the law, the federal government has set up its own secret FISA courts to rubber stamp NSA surveillance.

According to data obtained by the Electronic Privacy Information Center, of the nearly 34,000 surveillance requests made to FISA courts in the last 35-years, only ELEVEN have been rejected.

Unsurprising given that FISA courts only hear the case from the government's perspective. It is literally a one-sided argument in FISA courts. Hardly an impartial hearing, no?

2. The concept of 'innocent until proven guilty' may officially exist in courts, but administratively it was thrown out long ago.

These days there are hundreds of local, state, and federal agencies that can confiscate your assets, levy your bank account, and freeze you out of your life's savings. None of this requires a court order.

By the time a case goes to court, you have been deprived of the resources you need to defend yourself. You might technically be presumed innocent, but you have been treated and punished like a criminal from day one.

3. Attorney-Client privilege is a long-standing legal concept which ensures that communication between an attorney and his/her client is completely private.

In Upjohn vs. the United States, the Supreme Court itself upheld attorney-client privilege as necessary "to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law. . ."

It doesn't matter what you're accused of-- theft. treason. triple homicide. With very limited exceptions, an attorney cannot be compelled to testify against a client, nor can their communications be subpoenaed for evidence.

Yet in a United States Tax Court decision announced on Wednesday, the court dismissed attorney client privilege, stating that:

"When a person puts into issue his subjective intent in deciding how to comply with the law, he may forfeit the privilege afforded attorney-client communications."

In other words, if a person works with legal counsel within the confines of the tax code to legitimately minimize the amount of taxes owed, that communication is no longer protected by attorney-client privilege.

Furthermore, the ruling states that if the individuals do not submit attorney-client documentation as required, then the court would prohibit them from introducing any evidence to demonstrate their innocence.

Unbelievable.

While it's true that attorney-client privilege has long been assailed in numerous court cases (especially with regards to tax matters), this decision sets the most dangerous precedent yet.

With this ruling, government now has carte blanche to set aside long-standing legal protections and even deny a human being even the chance to defend himself.

Naturally, you won't hear a word about this in the mainstream media.

But it certainly begs the question, what's the point of even having a trial? Or a constitution?

When every right and protection you have can be disregarded in their sole discretion, one really has to wonder how anyone can call it a 'free country' any more.








Categories: blogroll

Massive "Meteor-Like" Explosion Lights Up North Russian Night Sky

Zerohedge - Sat, 04/19/2014 - 07:22

A little over a year ago, in February 2013, a meteor traveling at 19 miles per second above Chelyabinsk in the Russian Urals exploded in the morning sky, recorded by countless dashcams, with the resulting shock wave shattering windows hundreds of miles away. Fast forward to this night, when residents of Russia's northern Murmansk region witnessed the fall of a celestial body similar to the famous Chelyabinsk meteorite on Saturday night. It flashed at 02:10 am local time and was clearly seen in the sky. However, no sound of explosions was heard.

Officials say that the nature of the celestial body is unknown, however since there were no warnings of any ICBM tests overnight, the meteor theory is the most valid one. Then again, the major Russian base of Severomorsk, and the administrative center of the Russia northern fleet, is located precisely in this area, so one can see why some of the already percolating theories suggest this may have been nothing but a military test.








Categories: blogroll

SlideShare: Portfolio Optimization Under Uncertainty

Advisor Analyst - Sat, 04/19/2014 - 06:10

by Adam Butler, http://gestaltu.com

Had the distinct pleasure of presenting to the extremely bright Queen’s Master of Finance class of 2014 a few weeks ago on Portfolio Optimization Under Uncertainty, and thought I’d share the slides. Enjoy! 

 

The post SlideShare: Portfolio Optimization Under Uncertainty appeared first on GestaltU.

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Categories: blogroll

Bankers are Behind the Wars

Zerohedge - Sat, 04/19/2014 - 06:00
http://freedom-articles.toolsforfreedom.com/wp-content/uploads/2013/06/bankers-wars.jpg

Former managing director of Goldman Sachs – and head of the international analytics group at Bear Stearns in London (Nomi Prins) -  notes:

Throughout the century that I examined, which began with the Panic of 1907 … what I found by accessing the archives of each president is that through many events and periods, particular bankers were in constant communication [with the White House] — not just about financial and economic policy, and by extension trade policy, but also about aspects of World War I, or World War II, or the Cold War, in terms of the expansion that America was undergoing as a superpower in the world, politically, buoyed by the financial expansion of the banking community.

 

***

 

In the beginning of World War I, Woodrow Wilson had adopted initially a policy of neutrality. But the Morgan Bank, which was the most powerful bank at the time, and which wound up funding over 75 percent of the financing for the allied forces during World War I … pushed Wilson out of neutrality sooner than he might have done, because of their desire to be involved on one side of the war.

 

Now, on the other side of that war, for example, was the National City Bank, which, though they worked with Morgan in financing the French and the British, they also didn’t have a problem working with financing some things on the German side, as did Chase

 

When Eisenhower became president … the U.S. was undergoing this expansion by providing, under his doctrine, military aid and support to countries [under] the so-called threat of being taken over by communism … What bankers did was they opened up hubs, in areas such as Cuba, in areas such as Beirut and Lebanon, where the U.S. also wanted to gain a stronghold in their Cold War fight against the Soviet Union. And so the juxtaposition of finance and foreign policy were very much aligned.

 

So in the ‘70s, it became less aligned, because though America was pursuing foreign policy initiatives in terms of expansion, the bankers found oil, and they made an extreme effort to activate relationships in the Middle East, that then the U.S. government followed. For example, in Saudi Arabia and so forth, they get access to oil money, and then recycle it into Latin American debt and other forms of lending throughout the globe. So that situation led the U.S. government.

Indeed, JP Morgan also purchased control over America’s leading 25 newspapers in order to propagandize US public opinion in favor of US entry into World War 1.

And many big banks did, in fact, fund the Nazis.

The BBC reported in 1998:

Barclays Bank has agreed to pay $3.6m to Jews whose assets were seized from French branches of the British-based bank during World War II.

 

***

 

Chase Manhattan Bank, which has acknowledged seizing about 100 accounts held by Jews in its Paris branch during World War II ….”Recently unclassified reports from the US Treasury about the activities of Chase in Paris in the 1940s indicate that the local branch worked “in close collaboration with the German authorities” in freezing Jewish assets.

The New York Daily News noted the same year:

The relationship between Chase and the Nazis apparently was so cozy that Carlos Niedermann, the Chase branch chief in Paris, wrote his supervisor in Manhattan that the bank enjoyed “very special esteem” with top German officials and “a rapid expansion of deposits,” according to Newsweek.

 

Niedermann’s letter was written in May 1942 five months after the Japanese bombed Pearl Harbor and the U.S. also went to war with Germany.

The BBC reported in 1999:

A French government commission, investigating the seizure of Jewish bank accounts during the Second World War, says five American banks Chase Manhattan, J.P Morgan, Guaranty Trust Co. of New York, Bank of the City of New York and American Express had taken part.

 

It says their Paris branches handed over to the Nazi occupiers about one-hundred such accounts.

One of Britain’s main newspapers – the Guardian – reported in 2004:

George Bush’s grandfather [and George H.W. Bush's father], the late US senator Prescott Bush, was a director and shareholder of companies that profited from their involvement with the financial backers of Nazi Germany.

 

The Guardian has obtained confirmation from newly discovered files in the US National Archives that a firm of which Prescott Bush was a director was involved with the financial architects of Nazism.

 

His business dealings … continued until his company’s assets were seized in 1942 under the Trading with the Enemy Act

 

***

 

The documents reveal that the firm he worked for, Brown Brothers Harriman (BBH), acted as a US base for the German industrialist, Fritz Thyssen, who helped finance Hitler in the 1930s before falling out with him at the end of the decade. The Guardian has seen evidence that shows Bush was the director of the New York-based Union Banking Corporation (UBC) that represented Thyssen’s US interests and he continued to work for the bank after America entered the war.

 

***

 

Bush was a founding member of the bank [UBC] … The bank was set up by Harriman and Bush’s father-in-law to provide a US bank for the Thyssens, Germany’s most powerful industrial family.

 

***

 

By the late 1930s, Brown Brothers Harriman, which claimed to be the world’s largest private investment bank, and UBC had bought and shipped millions of dollars of gold, fuel, steel, coal and US treasury bonds to Germany, both feeding and financing Hitler’s build-up to war.

 

Between 1931 and 1933 UBC bought more than $8m worth of gold, of which $3m was shipped abroad. According to documents seen by the Guardian, after UBC was set up it transferred $2m to BBH accounts and between 1924 and 1940 the assets of UBC hovered around $3m, dropping to $1m only on a few occasions.

 

***

 

UBC was caught red-handed operating a American shell company for the Thyssen family eight months after America had entered the war and that this was the bank that had partly financed Hitler’s rise to power.

Indeed, banks often finance both sides of wars:

 

(The San Francisco Chronicle also documents that leading financiers Rockefeller, Carnegie and Harriman also funded Nazi eugenics programs … but that’s a story for another day.)

The Federal Reserve and other central banks also help to start wars by financing them .

And America apparently considers economic rivalry to be a basis for war, and is using the military to contain China’s growing economic influence.

Multi-billionaire investor Hugo Salinas Price says:

What happened to [Libya's] Mr. Gaddafi, many speculate the real reason he was ousted was that he was planning an all-African currency for conducting trade. The same thing happened to him that happened to Saddam because the US doesn’t want any solid competing currency out there vs the dollar. You know Gaddafi was talking about a gold dinar.

Senior CNBC editor John Carney noted:

Is this the first time a revolutionary group has created a central bank while it is still in the midst of fighting the entrenched political power? It certainly seems to indicate how extraordinarily powerful central bankers have become in our era.

 

Robert Wenzel of Economic Policy Journal thinks the central banking initiative reveals that foreign powers may have a strong influence over the rebels.

 

This suggests we have a bit more than a ragtag bunch of rebels running around and that there are some pretty sophisticated influences. “I have never before heard of a central bank being created in just a matter of weeks out of a popular uprising,” Wenzel writes.

Indeed, many claim that recent wars have really been about bringing all countries into the fold of Western central banking, and that the wars against Middle Eastern countries are really about forcing them into the dollar and private central banking.

The most decorated American military man in history said that war is a racket, and noted:

Let us not forget the bankers who financed the great war. If anyone had the cream of the profits it was the bankers.

The big banks have also been laundering money for terrorists. The big bank employee who blew the whistle on the banks’ money laundering for terrorists and drug cartels says that the giant bank is still aiding terrorists, saying:

The public needs to know that money is still being funneled through HSBC to directly buy guns and bullets to kill our soldiers …. Banks financing … terrorists affects every single American.

He also said:

It is disgusting that our banks are STILL financing terror on 9/11 2013.

And see this.

According to the BBC and other sources, Prescott Bush, JP Morgan and other leading financiers also funded a coup against President Franklin Roosevelt in an attempt – basically – to implement fascism in the U.S. See this, this, this and this.

Kevin Zeese writes:

Americans are recognizing the link between the military-industrial complex and the Wall Street oligarchs—a connection that goes back to the beginning of the modern U.S. empire. Banks have always profited from war because the debt created by banks results in ongoing war profit for big finance; and because wars have been used to open countries to U.S. corporate and banking interests. Secretary of State, William Jennings Bryan wrote: “the large banking interests were deeply interested in the world war because of the wide opportunities for large profits.”

 

Many historians now recognize that a hidden history for U.S. entry into World War I was to protect U.S. investors. U.S. commercial interests had invested heavily in European allies before the war: “By 1915, American neutrality was being criticized as bankers and merchants began to loan money and offer credits to the warring parties, although the Central Powers received far less. Between 1915 and April 1917, the Allies received 85 times the amount loaned to Germany.” The total dollars loaned to all Allied borrowers during this period was $2,581,300,000. The bankers saw that if Germany won, their loans to European allies would not be repaid. The leading U.S. banker of the era, J.P. Morgan and his associates did everything they could to push the United States into the war on the side of England and France. Morgan said: “We agreed that we should do all that was lawfully in our power to help the Allies win the war as soon as possible.” President Woodrow Wilson, who campaigned saying he would keep the United States out of war, seems to have entered the war to protect U.S. banks’ investments in Europe.

 

The most decorated Marine in history, Smedley Butler, described fighting for U.S. banks in many of the wars he fought in. He said: “I spent 33 years and four months in active military service and during that period I spent most of my time as a high-class muscle man for Big Business, for Wall Street and the bankers. In short, I was a racketeer, a gangster for capitalism. I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. I helped purify Nicaragua for the International Banking House of Brown Brothers in 1902-1912. I brought light to the Dominican Republic for the American sugar interests in 1916. I helped make Honduras right for the American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went on its way unmolested. Looking back on it, I might have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents.”

 

In Confessions of an Economic Hit Man, John Perkins describes how World Bank and IMF loans are used to generate profits for U.S. business and saddle countries with huge debts that allow the United States to control them. It is not surprising that former civilian military leaders like Robert McNamara and Paul Wolfowitz went on to head the World Bank. These nations’ debt to international banks ensures they are controlled by the United States, which pressures them into joining the “coalition of the willing” that helped invade Iraq or allowing U.S. military bases on their land. If countries refuse to “honor” their debts, the CIA or Department of Defense enforces U.S. political will through coups or military action.

 

***

 

More and more people are indeed seeing the connection between corporate banksterism and militarism ….

Indeed, all wars are bankers’ wars.








Categories: blogroll

FX: Ranges Persist, though Sterling is Exceptional

Zerohedge - Sat, 04/19/2014 - 05:59

The US dollar rose against all the major currencies last week, except the British pound, which was lifted by a strong employment report and a tick up in wage growth. The greenback's gains are consistent with our caution last week against playing for a breakout as key support for the dollar had been approached.  

 

The issue remains the same for the week ahead. Assuming no exogenous shocks, such data or comments that require a significant reassessment of the macro-view, that is to say, the continued status quo favors continued range trading.  

 

In a world in which we may not have seen the peak in central bank balance sheets, and the first Fed hike is still move than a year away, incentives favor riskier assets and the chase of yield. Once one minimizes the redenomination risk (i.e., the break-up of EMU) and recognizes the reform efforts, the European periphery may still attract flows even if spreads are at multi-year lows (in the same way some credit quality spreads in the US have returned to pre-crisis levels).    

 

Many investors are cautious; however, fearing that the ECB may introduce a negative deposit rate and/or a QE program.   While understanding the logic, why QE, or and/or a negative deposit rate should weaken the euro, we wonder if it would work that way.  Not only are investors buying stocks and sovereign bonds, but other investors are buying bad loan portfolios.  These flows, coupled with a large current account surplus appear key drivers and rather than being disrupted by unorthodox policies, they may reinforce them.   

 

Many investors have been burned by the yen.  The consensus view coming into the year was the BOJ's QQE would continue to weigh on the yen and, along with new savings vehicles, would help lift Japanese equities.  Instead, the yen is one of the strongest of the major currencies, appreciating 2.8% against the dollar this year, eclipsed only by the New Zealand dollar and Australian dollars.  The Reserve Bank of New Zealand is raising rates and sentiment has swung away from another rate cut by the Reserve Bank of Australia.   For its part the Nikkei is the worst performing major bourse, off almost 11% this year.  

 

Euro:  Last week, the euro established a base just above $1.3780, which corresponds to a 20-day moving average.    The upper end of the narrow trade range is near $1.3865.  The month's high was set at $1.3900. The wider range is around a cent larger in both directions--$1.3680-$1.40. Continued range trading is consistent with lower implied volatility, which around 6% is back to pre-crisis levels.  Low volatility also encourages greater risk taking.  

 

Yen:  The dollar also appears range-bound against the yen.  The lower end of the range (JPY101.20-30) has been tested around eight times in the past two months.  The upper end of the range (JPY104) has only been tested twice.  The dollar is near the middle of that range now.  There is scope for it to trade toward JPY103, but probably not much more unless they're is a further backing up bond yields and/or a strong rally in equities. We note that the US-Japanese 10-year yield spread is also range-bound between about 200 bp and 217 bp.  It too is near the middle of the range.  

 

Sterling:  A strong employment report pushed UK rates higher and lifted sterling.  The implied yield of the June 2015 short-sterling futures contract rose 14 bp from last weeks lows to finish at 119 bp.  Sterling bucked the broader trend of US dollar gains and traded at its best level in 4 1/2 years just above $1.6840. The technical indicators we look at do not suggest a significant top is in place  We are more inclined to buy pullbacks that chase the market.  The magnitude of the pullback we have in mind is $1.6660-80.  On the upside, $1.70 beckons and then, perhaps $1.72.

 

Canadian dollar:  The Canadian dollar was the second best performing major currency against the US dollar last week:  it lost about 0.4% and finished on its lows.  The US dollar has been trending higher against its northern neighbor since testing the CAD1.0850 area on April 9. We suggested two targets last week, CAD1.1020 and CAD1.1070.  The first target has been met.  Technically,  we expect the US dollar to continue to trend high.   We note that trend following models may turn more negative the Canadian dollar as the greenback's five-day moving average is likely to cross about the 20-day early in the new week.  Above CAD1.1070, we look for CAD1.1120 and then, the old CAD1.12 nemesis.  

 

Australian dollar:  The Aussie is the strongest of the major currencies thus far this year, gaining 4.6% against the US dollar.  However, after reaching a peak near $0.9460 (the measuring objective of the large head and shoulders bottom is $0.9500), on April 10, the Australian dollar trended lower. Key support is seen in the $0.9290-$0.9300, a break of this area could see many late longs capitulate and send the currency down to $0.9200.  

 

The golden cross (or death cross) refers to the 50-day and 200-day moving averages.  As the Aussie recovered off the January low ($0.8660), there has been a convergence of these two moving averages.  The gap was a little more than a cent and a half apart at the end of March and is now a little more than 30 bp. The 50-day average could cross above the 200-day average next week, and some may emphasize this bullish technical development.  In the current context, with a deterioration in the near-term technical tone, we advise caution especially if the moving averages cross and the Aussie has sustained a break of that support mentioned above. 

 

Mexican peso:   Narrow trading ranges prevailed in recent sessions.  The attempt to push the dollar below MXN13.00 earlier this month could not be sustained, but the greenback's recovery has been modest.  The dollar's five-day average is likely to cross above the 20-day average in the coming days.  Late peso longs could get frustrated.  Technically, we think there is scope toward MXN13.1750-MXN13.20.

 

Observations from the speculative positioning in the CME currency futures:

 

1.  There were only two notable position adjustments.   The gross long euro position rose 13.6k contracts to 106.3k.  The net long position did not change as might as one may suppose, as the gross shorts rose by 9.2k contracts to 78.6k.  The gross short yen positions were reduced by 17.7k contracts to 83.1k.  This is the smallest gross short yen position since last October.  It is the second consecutive reporting period of short-covering.   Of the other 12 gross positions we track, ten were changed by less than 5k contacts.

 

2.  Speculators are only net short yen and Canadian dollar futures.  The net short yen position has been more than halved this year to -68.7k.  It finished last year near 144k.  The net short Canadian dollar position has barely changed over the past four weeks.  Since its net short positions was halved a month ago, it has remained stuck around 35k contracts.

 

3.  It is the second consecutive week that the net Australian dollar position has been long.  However, given the price action since the end of the reporting period, it would not be surprising if, in next week's report, the net position swung back to the short side.

 

4.  The gross long euro position of 106.3k contracts is the largest long position.  But the gross euro shorts are also substantial at 78.6k contacts.  It is second only to the yen's 83.1k gross short contracts.  Indeed the gap between the two has been dramatically reduced an is the smallest since the middle of last year.  It is possible, that like what happened last May, the gross euro shorts could surpass the gross yen shorts.








Categories: blogroll

Sorted Weekly Tweets

TheAlephBlog - Fri, 04/18/2014 - 21:28

Stocks & Industries

  • Invest In Stubs, Spin-Offs And Liquidations For Alternative Returns http://t.co/ccezep0K9Y Cites a Gabelli article http://t.co/xTrqEfmQeq $$ Apr 19, 2014
  • Real Estate Management Better Than Owning Real Estate? http://t.co/IFaDLiwTRa Sometimes yes, sometimes no. Definitely adds more leverage $$ Apr 19, 2014
  • Wells Fargo Securities Lending Lawsuit Ends in Settlement http://t.co/w3lSY4Cw8D Low margin business that can go badly wrong in a crisis $$ Apr 19, 2014
  • Makani, a $GOOG subsidiary makes an airborne wind turbine that dramaticlly increases power generation efficiency http://t.co/0Fug49o7gC $$ Apr 18, 2014
  • Google to Buy Titan Aerospace as Web Giants Battle for Air Superiority http://t.co/HjJ8wKtnjM Makes me think $GOOG has 2much $$ 2spend Apr 18, 2014
  • Profit Tastes Like Chicken in Hunt for Cheaper US Meat http://t.co/drgQbwEiKR With recent rise in beef & pork prices people substitute $$ Apr 18, 2014
  • Roads Versus Rail:The Big Battle Over Public Transportation http://t.co/ydBxEglexC Makes case that American will own fewer cars in future $$ Apr 18, 2014
  • Barclays Ups $LNC To Buy, Says $MET , $PRU Are Undervalued – Stocks To Watch http://t.co/c7yNaVZqdp Stock Market sensitive insurance cos $$ Apr 18, 2014
  • Bidding War Looming for Aspen? Analysts Say Don’t Count On It http://t.co/iMotqyAgHv Offer 4 $AHL looks pretty full 2me, dont look4more $$ Apr 18, 2014
  • Biggest LBO Demise Poised to Put Oncor in Play http://t.co/d30djwOa5M Buffett is unlikely 2 enter into bidding in a competitive sale $$ Apr 18, 2014
  • Target of Naked Short Sellers Is Angry, Confused http://t.co/I3ZZDn5JNp @matt_lavine takes on imaginary naked shorting in $LPHI $$ Apr 18, 2014
  • Radioactive Waste Is North Dakota’s New Shale Problem http://t.co/BiMkO0ZdgK Significant amounts of low level radiation from radium $$ Apr 18, 2014
  • The death of mortgage lending http://t.co/u8uQBvZCuS Loan yields must rise in order to compensate for higher required capital at banks $$ Apr 19, 2014
  • Kochs’ Flood Insurance Opposition Becomes Campaign Issue http://t.co/b1iuvoVhZK 1 of the few businesses the Kochs’ aren’t in is insurance $$ Apr 18, 2014
  • Office Markets Strengthen Where Tech, Energy Jobs Are http://t.co/sESuHUeAVr Helps explain the spottiness of commercial RE prices $$ $CMBS Apr 18, 2014
  • Labor Shortage Threatens to Bust the Shale Boom http://t.co/R1TctaTelD Can’t find a job? Consider learning to weld; monotonous but pays $$ Apr 18, 2014
  • Koch Brothers Net Worth Tops $100B as TV Warfare Escalates http://t.co/XgH0M6CNIR Almost as wealthy as extended Walton family $$ $WMT $SPY Apr 18, 2014
  • Big Banks Ramp Up Business Lending http://t.co/83dMAPIQia Signs of life spotted in big corporations, but r they just buying back stock? $$ Apr 18, 2014
  • How Can Yahoo Be Worth Less Than Zero? http://t.co/sr3owwkyNE @matt_levine argues a breakup of $YHOO makes sense even if core biz loses $$ Apr 18, 2014
  • Wal-Mart Undercuts Rivals With New U.S. Money Transfer Service http://t.co/a4vq0HYALi Useful if u need 2 transfer $$ inside the US $WMT $SPY Apr 18, 2014
  • How Chick-fil-A Spent $50M to Change Its Grilled Chicken http://t.co/Q9kpXoSIbF The marinade matters, but the grill design was the key $$ Apr 15, 2014
  • Small US Colleges Battle Death Spiral as Enrollment Drops http://t.co/nHRhO4Gc1R Too much capacity & affordability is a problem $$ $APOL Apr 14, 2014

Outside the US

  • China GDP Gauge Seen Showing Deeper Slowdown http://t.co/ntIxxdXcpO If China increases consumption GDP growth will fall faster still $$ $FXI Apr 18, 2014
  • Housing Trouble Grows in China http://t.co/Z4tKUuqLFd Overbuilding by Real-Estate Developers Leaves Smaller Cities W/Glut of Apartments $$ Apr 18, 2014
  • Suddenly, Europe Is Taking a Harder Line on Russia Sanctions http://t.co/MnzxvMP3pe Nations can solidify when they face a common threat $$ Apr 18, 2014
  • Las Bambas Copper Mine Purchase Shows China’s Still in the Hunt for Commodities http://t.co/h1cqGERGCu China may not b changing much $$ Apr 18, 2014
  • Forgetting How to Speak Russian http://t.co/D0UwT6unki Among former Soviet republics knowing Russian is less important for business $$ Apr 18, 2014
  • The Middle East War on Christians http://t.co/BW1NwCAXuH Israeli Ambassador 2 UN argues Israel is tolerant of Christians, not like some $$ Apr 18, 2014
  • Britons Struggle to Save for Home Down Payments as Prices Surge http://t.co/M6vH0vDlDs Space is constrained in London & foreigners buy $$ Apr 18, 2014
  • US Said to Warn Money Managers of More Russia Sanctions http://t.co/rB8AUQTsnc Putin knows Iran survived worse sanctions; Russia tougher $$ Apr 18, 2014
  • China Sentences Four Activists on Disturbing Public Order Charge http://t.co/Tx95rrhWsb Mostly, US has rule of law, China has rule by law $$ Apr 18, 2014
  • US govt isn’t perfect, but in principle the govt is subject to the Constitution & laws, & not merely able 2 use law 2 enforce its will $$ Apr 18, 2014
  • Frontier Fund Buyers Find It Pays To Look Under The Hood http://t.co/JQ6khwYllJ 2much $$ is being thrown @ frontier mkts; crowded trade $FM Apr 18, 2014
  • Why iShares’ ‘FM’ Is About To Get Better http://t.co/4FiqlfW0YS Diversifies out of Middle East, but frontier market vals r stretched $$ $FM Apr 18, 2014
  • Putin’s 21-Year Quest to Be Russian Guardian Began in Estonia http://t.co/5oelLBHCmN Father was betrayed by Estonians in WWI, almost died $$ Apr 15, 2014

Market Dynamics & Fundamentals

  • Bridgewater Founder Says 85 Percent Of Pensions will Go Bankrupt http://t.co/YknEmyGgfJ 9% pension returns required, 4% is most likely $$ Apr 19, 2014
  • The Fitch Fundamentals Index Dashboard http://t.co/OzI6KWUFfs Interesting little utility 4 understanding where we are in the credit cycle $$ Apr 19, 2014
  • Rich Start-Ups Go Back for Another Helping http://t.co/ZbFbpLVgmM When capital is plentiful, bad decisions get made. expected returns low $$ Apr 18, 2014
  • Stumbling S&P 500 Reaches Worst Stretch of Election Cycle http://t.co/zgJTynu2od Interesting timing, wonder whether past is prologue? $$ Apr 18, 2014
  • How a 56-Year-Old Engineer’s $45K Loss Spurred SEC Probe http://t.co/3HfdH2aqxK Always read the risk factors in the prospectus or 10K $$ Apr 18, 2014
  • High-Speed Traders Said to Be Subpoenaed in NY Probe http://t.co/2qxmrxeVd7 What level of technology is legitimate 2 gain an advantage? $$ Apr 18, 2014
  • Nuggets of Corporate Governance Wisdom From Charlie Munger http://t.co/gMFIE9jlRM Also c this paper: http://t.co/033v0bgdYr $$ $BRK.B $SPY Apr 18, 2014
  • Global stock rally: World market cap reached record high in March, &is $2.4T above pre-recession, pre-crisis level http://t.co/iMq0IoBhch $$ Apr 18, 2014
  • Speed—the only HFT advantage? Not so fast—Flash Boyshttp://www.cnbc.com/id/101586488 Algorithms may also be an advantage w/price patterns $$ Apr 18, 2014
  • Investor Alert – Exchange-Traded Notes—Avoid Unpleasant Surprises http://t.co/NqhUr2whsJ A helpful reminder 2b wary of exotic ETNs $$ $SPY Apr 18, 2014
  • Americans Sold on Real Estate as Best Long-Term Investment http://t.co/La4UROU0ie Helps explain y retail investors lose on average $$ $GLD Apr 18, 2014
  • Destroying Smart Beta 2: Ground Rules http://t.co/uecYqZLCEe Smart beta is a trendy but vapid concept, factors should be part of alpha $$ Apr 18, 2014
  • Gross Loses to Goldman in Hot Bond Strategy as Pimco Lags http://t.co/VWv7UC72bS Series of bad bets makes Pimco a laggard as AUM flees $$ Apr 15, 2014
  • Trillion-Dollar Firms Dominating Bonds Prompting Probes http://t.co/RXZNkNwtFs Concentrated markets can lead to bond pricing distortions $$ Apr 15, 2014

US Politics & Policy

  • What’s the Matter With Illinois? http://t.co/wmDiyWDN1e They r the exemplary state for shortsightedness & corruption $$ Apr 19, 2014
  • Heartbleed Hackers Steal Encryption Keys in Threat Test http://t.co/dYfezfXe8A >6 people were able to extract private key of a website $$ Apr 19, 2014
  • Elijah Cummings, W/IRS, Targeted Tea Party Group True The Vote http://t.co/TE5A1zTM0y I live in his gerrymandered district; kick him out $$ Apr 18, 2014
  • Yellen Lays Groundwork for Rules on Short-Term Credit Markets http://t.co/z03MWlpsqI Fed doesn’t regulate the banks well, y try 4 more? $$ Apr 18, 2014
  • Schooling on a ‘Debit Card’ http://t.co/wwixbB0pqy Arizona created a program so that special needs kids can get specialized schooling $$ Apr 18, 2014
  • IRS Among Agencies Using License Plate-Tracking Vendor http://t.co/HTs5aEMNtK Howard County Police use it & catch people 4 old crimes $$ Apr 18, 2014
  • Wealth Effect Failing to Move Wealthy to Spend http://t.co/R3vfD5i94J Wealth effect, if it exists, is small, FOMC is pursuing illusions $$ Apr 18, 2014
  • NSA Said 2 Exploit Heartbleed Bug for Intelligence for Years http://t.co/9XvcLX9ZTE NSA quietly knows security vulnerabilities; uses them $$ Apr 15, 2014
  • The Wall Street second-chances rule: scandal makes the rich grow stronger http://t.co/8HhscWJjMN What does not kill us makes us stronger? $$ Apr 14, 2014

Practical

  • How well do you know your insurance policy? http://t.co/szp3G8H4kN Know what is covered & what isn’t, how much is covered & options $$ Apr 19, 2014
  • Attention Shoppers: Fruit and Vegetable Prices Are Rising http://t.co/MMdPOLry9A As are meat prices & most food prices $$ #agflation Apr 18, 2014
  • How to start investing http://t.co/yGyziE8Tac Good advice from a credible source $$ Apr 18, 2014

Other

  • El Nino Signs Detected, Presaging Global Weather Change http://t.co/D1uDLS9aJ0 El Nino exists 2 give us something 2 blame when frustrated $$ Apr 18, 2014
  • More People Pick Elimination Diets to Discover Food Sensitivities http://t.co/ftQkzs3PxP Fad and Science of Not Eating Entire Food Groups $$ Apr 18, 2014
  • SAT Adopts Real-World Questions and Jettisons Obscure Words http://t.co/Mspw9EG3OV In 2016, changes from intelligence to achievement test $$ Apr 18, 2014
  • Scientists Make First Embryo Clones From Adults http://t.co/e5qlwyiWwj Cloned cells 2create early-stage embryos, matching DNA tissue $$ Apr 18, 2014

Comments, Replies & Retweets

  • RT @howardlindzon: Funds still paying up (I say silly overpay) for private over public, this is spooking IPO ‘s for sure http://t.co/mclSd9… Apr 15, 2014
Categories: blogroll

What Happened To The Middle Class? The Infographic

Zerohedge - Fri, 04/18/2014 - 19:16

Restaurants like Olive Garden and Red Lobster are struggling, while high end dining is flourishing. At GE, demand for high-end dishwashers is racing ahead of sales growth for mass-market models. The increased wealth of highly skilled workers, the insane wealth of those with capital, and the outsourcing of lower skilled jobs have left us all asking, “what happened to the middle class?

 

Middle Class

Source: BestMSWPrograms.com








Categories: blogroll

Are The Swiss Going Crazy? $25 Minimum Wage Referendum In May

Zerohedge - Fri, 04/18/2014 - 18:33

Submitted by Pater Tenebrarum of Acting-Man blog,

Most of our readers probably know what we think of minimum wages, but let us briefly recapitulate: there is neither a sensible economic, nor a sensible ethical argument supporting the idea.

Let us look at the economic side of things first: for one thing, the law of supply and demand is not magically suspended when it comes to the price of labor. Price it too high, and not the entire supply will be taken up. Rising unemployment inevitably results.

However, there is also a different way of formulating the argument: the price of labor must not exceed what the market can bear. In order to understand what this actually means, imagine just for the sake of argument a world without money. Such a world is not realistic of course, as without money prices the modern economy could not exist. However, what we want to get at is this: workers can ultimately only be paid with what is actually produced.

As Mises has pointed out, most so-called pro-labor legislation was only introduced after enough capital per worker was invested to make the payment of higher wages possible – usually, the market had already adjusted wages accordingly.

However, unskilled labor increasingly gets priced out of the market anyway, which is where the ethical argument comes in. If a worker cannot produce more than X amount of  goods or services, it is not possible to pay him X+Y for his work. Under minimum wage legislation he is condemned to remain unemployed, even if he is willing to work for less.

In Switzerland, the unions have recently managed to get the demand for minimum wage legislation on one of the quarterly referendums in the country. An interesting point has been brought up by one of the opponents in the course of the debate, but first a little background information:

“Jasmin Eicher has already axed her sole full-time employee to keep afloat her shop selling cards, candles and paper in a Zurich suburb. If Switzerland approves what would be the world’s highest minimum wage, she says the only option would be to close her door.

 

The Swiss will vote in a national referendum May 18 on whether to create a minimum wage of 22 francs ($25) per hour, or 4,000 francs a month. While about 90 percent of workers in Switzerland already earn more than that, employers say setting Switzerland’s first national wage floor would push up salaries throughout the economy. When adjusted for currency and purchasing power, it would be the highest minimum in the world.

 

“We couldn’t pay it,” said Eicher, standing behind the counter in her shop in Schlieren. The employee she let go earned 3,500 francs a month. Now she’s by herself, working 10 hours a day, six days a week, and her hopes of hiring a cheaper helper would be dashed if the proposal passed.

 

“Of course I understand about people not earning enough, but not everyone is worth 4,000 francs. Here in Switzerland we’re already so well-off,” she said.

 

The chief backers of the proposal are Switzerland’s biggest trade unions, which argue that pay levels need to reflect the country’s prices – among the world’s highest.”

 

[…]

 

George Sheldon, professor of economics at the University of Basel, said the Swiss proposal would be counterproductive.

 

“Unemployment among the unskilled is increasing,” he said in a phone interview. “The solution to their problem can’t be to make them more expensive.”

(emphasis added)

So, 90% of all employees are already paid more than the proposed minimum wage. It turns out that virtually all the biggest companies pay salaries above what would be the world's highest minimum wage – but that is not the main problem.

 

Who Would Lose Out?

The point we actually wanted to get at is touched upon in the following excerpts:

“Despite being home to multinational corporations such as KitKat-candy-maker Nestle SA and drugmaker Novartis AG, Switzerland gets two-thirds of its employment from small and medium-sized enterprises.

 

The Association of Swiss Cleaning Companies, Allpura, opposes the minimum wage, saying it would lead to job cuts and worse working conditions. It says employees in the sector earn between 18.50 francs and 26.50 francs per hour.

 

Big companies including Nestle, Novartis and Swatch Group AG are against the measure too, saying it will hurt the economy.

 

“State intervention in the liberal economic system also goes against the market economy principles of our society that have been so successful to date,” Novartis spokesman Dermot Doherty said via e-mail.

 

At Nestle, the wages of all Swiss employees are above the proposed minimum, spokesman Philippe Aeschlimann said. “A higher cost of labor would however affect companies in our supply chain and our Swiss customers,” he said via e-mail.

 

[…]

 

“A minimum wage won’t stop poverty,” Economy Minister Johann Schneider-Ammann said at a press conference in Bern in February. “This new system could be counterproductive.”

 

According to Boris Zuercher, head of the Employment Directorate at the State Secretariat for Economic Affairs, the uniform wage would get passed on to consumers in the form of higher prices and will ultimately result in job losses among low-wage earners. Workers earning between 4,000 and 6,000 francs a month — 40 percent of the full-time workforce — will seek higher pay too, he said.

 

“The main criticism is that it’s an enormously high minimum wage — it would be the highest internationally,” Zuercher said, speaking by phone from Bern. “It’s not a question of Novartis or UBS not being able to afford to pay 4,000 francs, but some little company in a remote valley.”

 

By contrast, the Swiss Federation of Labor Unions says a minimum wage wouldn’t lead to higher unemployment because it would mostly affect domestically-oriented sectors where outsourcing isn’t possible.”

(emphasis added)

The first salient point is the fact that once this new minimum wage law is introduced, upward pressure on all wages would likely ensue. Note in this context that Switzerland is awash in newly created deposit money due to the ministrations of the SNB, which is manipulating the Swiss franc's exchange rate (a few charts on Swiss monetary inflation over recent years can be seen in our article 'How Safe is the Swiss Franc?'. The article is slightly dated, but it still serves to illustrate the point). So there is no brake on prices and wages due to  a lack of money supply inflation – rather the opposite. Naturally, wages would not be the only thing rising under these circumstances – prices would be adjusted accordingly, and in the end the purchasing power of the higher wages would not be greater than before.

The second important point is the one about which enterprises would suffer the most on account of such legislation. When the union official cynically comments that 'only businesses that cannot be outsourced will be hit' (i.e., those who cannot vote with their feet and simply flee), he forgets to mention that small and medium-sized companies as a rule cannot 'outsource' their operations either, almost regardless of what they are producing. We felt reminded of something a friend of ours mentioned to us recently: “The problem of today's form of capitalism is that there are not enough capitalists:”

Indeed, an individual entrepreneur running a small business has a very difficult life already, as every new imposition is much harder to overcome for a small business than it is for a large corporation. This is also why we often find that big corporations don't resist new regulations: they reckon they are likely to keep competition from upstarts at bay. It is laudable that several big Swiss corporations are evidently not following this trend.

If Swiss voters agree to introducing a new minimum wage law, they would end up doing incalculable damage to Switzerland's entrepreneurial culture. At the moment, Switzerland is still one of the freest economies in the world. It has been extremely successful so far and its achievements would clearly be put at risk. Hopefully Switzerland's voters won't be swayed by union's arguments.








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