Category Archives: Debt

Close Up and Long Shot, by James Howard Kunstler

The world is whirling centrifugally apart and it can only end badly. What if they held a “climactic bloodbath” and nobody came? From James Howard Kunstler at kunstler.com:

Be careful about what you see in the foreground of the news vis-à-vis what’s in the background. Sunday, the cable networks were on fire over the 30-or-so white nationalists marching across Washington DC — with much larger hordes of masked, black-clad Antifa street-fighters following them around, and an army of DC cops in fluorescent green riot vests following the Antifas and the white nationalist knuckleheads.

The event was a billed as an attempt to commemorate the clash that happened between the same contestants in Charlottesville, Virginia, a year ago in the uproar over Confederate statues. That fiasco ended in the death of a bystander named Heather Heyer. Not a whole lot has changed since then, except perhaps the Left has become more strident in its calls to penalize white people for their crimes of “privilege,” no doubt further inflaming the Unite-the-Right crew. (And the anti-statue campaign has dropped down the memory hole.)

There was plenty of “hate” to go around on both sides Sunday. But those who were waiting for a climactic bloodbath in Lafayette Park must have been disappointed after a long day of tension when a big blob of rain hunkered over the District at suppertime and the theatrics concluded. Both the Antifas and the Unite-the-Right marchers had to go home and get out of their wet clothes. At least they could agree on that.

The cable TV anchors had issued the usual calls for “national unity,” exhorting President Trump to emerge from his Bedminster, New Jersey, golfing bunker and “bring the country together,” a sadly fatuous proposition. There is nothing to come together within. There’s nothing left of an American common culture besides a few Disney movies and that’s not nearly enough. That’s what happens when you opt for multiculturalism as your number one political principle. It automatically negates shared values, so why even expect any agreement between groups contending for dominance?

To continue reading: Close Up and Long Shot

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Elon’s First Fraud Suit, by Eric Peters

Tesla’s undoing may ultimately be that Elon Musk is not a car guy. From Eric Peters at theburningplatform.com:

Elon Musk is being accused of fraud – but not over his cars.

Not yet.

This fraud suit alleges financial flim-flam. That Elon’s very public musings about taking Tesla off the stock market as a publicly traded company were meant to temporarily inflate the value of Tesla stock as a way to generate more Desperation Money (but not by selling cars or making an honest profit) to stave off the inevitable collapse.

The lawsuit – a class-action lawsuit filed in Federal court –  alleges that Musk’s Aug. 7 statements had the effect of “completely decimating” short sellers, people who bet against a rise in the value of  Tesla’s stock.

The SEC is looking into things.

Other things being looked into include sketchy practices to meet Elon’s publicly promised production numbers for the Model 3, the “affordable” Tesla Elon has been touting but failing to deliver for years. Not yet being looked into officially – but arguably ought to be – are Musk’s promises to the thousands of people who put down deposits on the “affordable” Model 3 – the one with the promised $35,000 MSRP – which isn’t being produced.

The Model 3 which is being produced is the much-less-affordable $40,000 model – which has a larger, more powerful battery and more range than the $35k model. But the $5,000 difference makes all the difference to people who cannot afford a $40,000 car – electric or not.

Especially now that the federal tax incentives Elon relied upon to get people to buy his cars are on the verge of going away. This will mean that buying a $40,000 Tesla means paying the full $40,000 – not $40,000 minus whatever the federal government kicks back to the buyer.

But Elon’s biggest sin may not be fraud.

It is incompetence seasoned with a puckish, childish arrogance.

Musk is not a car guy and has no experience in the car business – outside Tesla. Yet he presumed he could teach the car industry a great lesson – with the help of Uncle.

He would show them.

But unlike car guys who do know the car business, Elon made a number of critical mistakes – which have nothing to do with his cars being electric. That just added salt to the wound.

The biggest mistake he made is focusing on sedans at precisely the moment when the market isn’t just moving away from them – it is virtually abandoning them in favor of crossover SUVs. These are now outselling cars and particularly sedans.

To continue reading: Elon’s First Fraud Suit

Talk Cold Turkey, by Raúl Ilargi Meijer

Will Turkey turn to Russia and China as a way out of its financial problems? From Raúl Ilargi Meijer at theautomaticearth.com:

Recep Tayyip Erdogan became Prime Minister of Turkey in 2003. His AKP party had won a major election victory in 2002, but Erdogan was banned from political office until his predecessor Gül annulled the ban. Which he had gotten in 1997 for reciting an old poem to which he had added the lines “The mosques are our barracks, the domes our helmets, the minarets our bayonets and the faithful our soldiers….”

The Turkish courts of the time saw this as “an incitement to violence and religious or racial hatred..” and sentenced him to ten months in prison (of which he served four in 1999). The courts saw Erdogan as a threat to the secular Turkish state as defined by Kemal Ataturk, the founder of modern Turkey in the 1920’s. Erdogan is trying to both turn the nation towards Islam and at the same time not appearing to insult Ataturk.

The reality is that many Turks today lean towards a religion-based society, and no longer understand why Ataturk insisted on a secular(ist) state. Which he did after many years of wars and conflicts as a result of religious -and other- struggles. Seeing how Turkey lies in the middle between Christian Europe and the Muslim world, it is not difficult to fathom why the ‘father’ of the country saw secularism as the best if not only option. But that was 90 years ago.

And it doesn’t serve Erdogan’s purposes. If he can appeal to the ‘silent’ religious crowd and gather their support, he has the power. To wit. In 2003, one of his first acts as prime minister was to have Turkey enter George W.’s coalition of the willing to invade Saddam Hussein’s Iraq. As a reward for that, negotiations for Turkey to join the EU started. These are officially still happening, but unofficially they’re dead.

In 2014 Erdogan finally got his dream job: president. Ironically, in order to get the job, Erdogan depended heavily on the movement of scholar and imam Fethullah Gülen, who, despite moving to Pennsylvania in 1999, still had (has?) considerable influence in Turkish society. Two years after becoming president, Erdogan accused Gülen of being the mastermind behind a ‘failed coup’ in 2016, after which tens of thousands of alleged Gülenists were arrested, fired, etc.

To continue reading: Talk Cold Turkey

Money—How to Get It and Keep It, by Doug Casey

Doug Casey on a topic most everybody’s interested in: money. From Casey at internationalman.com:

Even if you are already wealthy, some thought on this topic is worthwhile. What would you do if some act of God or of government, a catastrophic lawsuit, or a really serious misjudgment took you back to square one? One thing about a real depression is that everybody loses. As Richard Russell has quipped, the winners are those who lose the least. As far as I’m concerned, the Greater Depression is looming, not just another cyclical downturn. You may find that although you’re far ahead of your neighbors (you own precious metals, you’ve diversified internationally, and you don’t believe much of what you hear from official sources), you’re still not as prepared as you’d like.
I think a good plan would be to approach the problem in four steps: Liquidate, Consolidate, Create, and Speculate.

Step 1: Liquidate

Chances are high that you have too much “stuff.” Your garage, basement, and attic are so full of possessions that you may be renting a storage unit for the overflow. That stuff is costing you money in storage fees, in depreciation, and in the weight of psychological baggage. It’s limiting your options… It’s weighing you down. Get rid of it.

Right now, it has a market value. Perhaps to a friend you can call. Or to a neighbor who might buy it if you have a yard sale. Or to some of the millions of people on eBay. A year from now, when we’re out of the eye of the financial hurricane and back into the storm, it will likely have much less value. But right now, there’s a market. Even if most people are no longer wearing those “He who dies with the most toys, wins” T-shirts that were popular at the height of the boom, there are still buyers. But the general standard of living is dropping, and mass psychology is changing. In a year or two, you may find there aren’t any bids and the psychology of the country has changed radically. People will be desperate for cash, and they’ll all be cleaning out their storage units (partly because they can’t afford the rent on them).

To continue reading: Money—How to Get It and Keep It

Saudi Arabia’s PIF and SoftBank Not Interested in Tesla Buyout, by Wolf Richter

Did Elon Musk lie, and therefore open him to civil and perhaps criminal liability, when he said Tesla had secured funding for a buyout that would take Tesla private? From Wolf Richter at wolfstreet.com:

Two often-cited suspects are axed. So where’s the “secured” funding supposed to come from?

The whole scheme kicked off when Tesla CEO Elon Musk tweeted during trading hours that he was “considering” taking Tesla private, “Funding secured,” which caused the already ludicrously overvalued shares to spike. Later he added, “Investor support is confirmed.” But no details, no names, no tidbits, not even a tease. Two days earlier, he’d tweeted that “even Hitler was shorting Tesla stock.”

We can brush off the Hitler tweet as just one more Musk idiocy gone awry, but “Funding secured” and “Investor support is confirmed” are big-ass phrases for a public-company CEO discussing a buyout that would be valued at $72 billion.

Now some folks, including those at the SEC’s San Francisco office, are wanting to know where exactly this money is going to come from – and if funding was even remotely “secured.”

The Tesla true believers instantly figured that a deal had already been worked out, either with SoftBank or with Saudi Arabia’s Public Investment Fund (PIF), or with both, or whatever.

Turns out, it’s not going to be SoftBank, and it’s not going to be the Saudis, either. They’re not interested in creating the magic to pull this off.

Reuters reported today that a source “familiar with PIF’s strategy,” said that the fund was not, as Reuters put it, “currently getting involved in any funding process for Tesla’s take-private deal.”

PIF had made headlines recently when it came out that it had acquired a stake in Tesla of just below 5% by buying its shares (TSLA) in the market. None of this money went to Tesla. It went to Tesla shareholders that wanted to get out.

PIF has also heavily invested in other tech companies in the US, including a $45-billion investment in the Vision Fund, a venture capital fund that SoftBank, a Japanese holding conglomerate, has put together by pouring $100 billion into it.

To continue reading: Saudi Arabia’s PIF and SoftBank Not Interested in Tesla Buyout

Another Way Of Looking At The Pension Crisis, As “A Stealth Mortgage on Your House”, by John Rubino

Public pensions are an average of $75,000 for each household. From John Rubino at dollarcollapse.com:

Money manager Rob Arnott and finance professor Lisa Meulbroek have run the numbers on underfunded pension plans and come up with an interesting – and highly concerning – new angle: That they impose a “stealth mortgage” on homeowners. Here’s how the Wall Street Journal reported it today:

The Stealth Pension Mortgage on Your House

Most cities, counties and states have committed taxpayers to significant future unfunded spending. This mostly takes the form of pension and postretirement health-care obligations for public employees, a burden that averages $75,000 per household but exceeds $100,000 per household in some states. Many states protect public pensions in their constitutions, meaning they cannot be renegotiated. Future pension obligations simply must be paid, either through higher taxes or cuts to public services.

Is there a way out for taxpayers in states that are deep in the red? Milton Friedman famously observed that the only thing more mobile than the wealthy is their capital. Some residents may hope that they can avoid the pension crash by decamping to a more fiscally sound state.

But this escape may be illusory. State taxes are collected on four economic activities: consumption (sales tax), labor and investment (income tax) and real-estate ownership (property tax). The affluent can escape sales and income taxes by moving to a new state—but real estate stays behind. Property values must ultimately support the obligations that politicians have promised, even if those obligations aren’t properly funded, because real estate is the only source of state and local revenue that can’t pick up and move elsewhere. Whether or not unfunded obligations are paid with property taxes, it’s the property that backs the obligations in the end.

To continue reading: Another Way Of Looking At The Pension Crisis, As “A Stealth Mortgage on Your House”

Lira Collapse To Jump the Mediterranean, by Tom Luongo

A number of European banks, some of which are not in such great shape, hold significant Turkish debt, which means they would be hurt if Turkey runs into funding and debt repayment problems. Their pain could spread. From Tom Luongo at tomluongo.me.com:

The Turkish Lira crisis is fundamentally different than the Russian Ruble crisis of 2014/15.  This one has contagion risk.

Back then no one was worried about the fall of the ruble having spillover effect.  If Sberbank failed, it wouldn’t jump to Europe.  Then again, there was little worry about that since the Russians had more than enough in reserves to cover the debts.

With Turkey, however, there is a real worry about this jumping into Europe. From Zerohedge:

Friday’s fall came after the Financial Times reported that supervisors at the European Central Bank are concerned about exposure of some of Europe’s biggest lenders to Turkey, including chiefly BBVA, UniCredit and BNP Paribas. The FT reported that along with the currency’s decline, the ECB’s Single Supervisory Mechanism has begun to look more closely at European lenders’ links with Turkey. The moves also came after the US showed no signs of lifting crippling sanctions despite the visit of a Turkish delegation to the US capital.

According to the FT, the ECB is concerned about the risk that Turkish borrowers might not be hedged against the lira’s weakness and begin to default on foreign currency loans, which make up about 40% of the Turkish banking sector’s assets.

And while it does not yet view the situation as critical, it sees Spain’s BBVA, Italy’s UniCredit and France’s BNP Paribas, which all have significant operations in Turkey, as particularly exposed, according to two people familiar with the matter.

Note the banks here.  Italian zombie-bank UniCredit.  Spain’s BBVa and France’s major zombie-bank BNP Paribas.   You can almost smell the desperation in the Financial Times’ reporting on this.

To continue reading: Lira Collapse To Jump the Mediterranean