Category Archives: Investing

Complain But Remain, by Jeff Thomas

Only a small percentage of people will do anything before the super-crisis headed our way finally hits. From Jeff Thomas at internationalman.com:

economic crisis

All countries have a “shelf-life” of sorts. Generally, they begin when an old, top-heavy government collapses from its own weight. The end of the old regime is characterized by civil unrest, revolution, secession, economic collapse or some combination of these conditions.

The new country generally has minimal government and little or nothing in the way of entitlements. It’s “sink or swim” for the people, and the recovery generally begins when a portion of the population rolls up its sleeves and creates an economy based upon production.

Over time, often a century or more, the population gets better at production and the country becomes wealthier. Along the way, whatever limited government existed has done all it could to expand itself. Governments, by their very nature, are parasites, living off the productive class, and eventually that parasite has the power to dominate those who produce, by promising largesse to those on the lower levels – who are in every society, the majority of voters.

This pattern has been followed for millennia. A nation establishes its freedom; it begins a productive economy; it develops wealth; it is taken over by a parasitical government; it goes into decline; it collapses, and the cycle begins anew.

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The Chinese Tortoise and the American Hare, by David P. Goldman

The Chinese are in it for the long haul, and they’re in it to win it. From David P. Goldman at pjmedia.com:

President Donald Trump and Chinese President Xi Jinping shake hands at Mar-a-Lago, Friday, April 7, 2017, in Palm Beach, Fla. (AP Photo/Alex Brandon)

Here are my remarks at the New York conference of the Committee on the Present Danger in New York City. I spoke on a panel with Steve Bannon, Roger Robinson, Kyle Bass and Gordon Chang, chaired by Frank Gaffney of the Center for Security Policy.

Historian Andrew Roberts reports that Winston Churchill said just after Pearl Harbor that “in the event of war, the Japanese would ‘fold up like the Italians,’ because they were ‘the wops of the Far East.’” The West chronically underestimates Asians, as the Russians found out at Port Arthur, the Americans at Pearl Harbor and the Yalu River, the British at Singapore, and so forth.

A case in point is the present tariff war. The U.S. assumed that tariffs on Chinese imports would force China to make fundamental concessions to American trade demands. On January 6, President Donald Trump said, “China’s not doing very well now. It puts us in a very strong position. We are doing very well.” Since then China’s CSI 300 stock index has gained 37% during 2019 to date, double the gain in U.S. stock markets. China’s economic growth has accelerated while America’s has slowed. The tariff war may have hurt the U.S. economy more than China’s. With an internal market of 1.4 billion people, China can replace lost foreign business by increasing internal demand. Ten years ago exports made up 36% of China’s gross domestic product versus only 18% today. World trade is shrinking, but the impact on China is manageable.

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The New American Nightmare, by Doug Casey

Americans have to come to terms with the fact that they are living in a country run by sociopaths. From Doug Casey at internationalman.com:

An International Man lives and does business wherever he finds conditions most advantageous, regardless of arbitrary borders. He’s diversified globally, with passports from multiple countries, assets in several jurisdictions, and his residence in yet another. He doesn’t depend absolutely on any country and regards all of them as competitors for his capital and expertise.

Living as an international man has always been an interesting possibility. But few Americans opted for it, since the U.S. used to reward those who settled in and put down roots. In fact, it rewarded them better than any other country in the world, so there was no pressing reason to become an international man.

Things change, however, and being rooted like a plant – at least if you have a choice – is a suboptimal strategy if you wish to not only survive, but prosper. Throughout history, almost every place has at some point become dangerous for those who were stuck there. It may be America’s turn.

For those who can take up the life of an international man, it’s no longer just an interesting lifestyle decision. It has become, at a minimum, an asset saver, and it could be a lifesaver. That said, I understand the hesitation you may feel about taking action; pulling up one’s roots (or at least grafting some of them to a new location) can be almost as traumatic to a man as to a vegetable.

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Trifecta: Pritzker Administration’s Pension Plan For Illinois Will Center On Three Strokes Of Folly, by Mark Glennon

A gang that can’t shoot straight takes Illinois from bad to worse. From Mark Glennon at wirepoints.org:

Deputy Governor Dan Hynes today released the first details of the Pritzker Administration’s plan for addressing Illinois’ pension crisis.

The administration will pursue three of the worst ideas available:

•  First, the state will borrow to pay off pension debt by offering a $2 billion pension obligation bond. We and many others have already written very extensively on why pension obligation bonds are irresponsible.  One credit card to another solves nothing and adds risk.

•  Second, the state will kick the can on its ramp for taxpayer pension contributions out seven years. The new goal for reaching 90% funding (which is still inadequate) will be 2052. Your grandchildren will fully understand why pensions are called “intergenerational theft.

•  Third, the state will gift public assets to the pensions. The particular assets and their value remain to be identified, but speculation has centered on the Illinois Tollway, the Illinois Lottery and government office buildings. The concept goes by the name “asset transfer.” We explained why it’s a sham in an article just yesterday. A pension actuary writing in Forbes did the same.

The combined effect of the first two is odd. All $2 billion from the bond offering will go immediately to the pensions, but the regularly scheduled pension contribution for the upcoming fiscal year will drop by $800 million.

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The Fall Of Facebook Has Only Just Begun, by 13D Research

Facebook still faces a sea of woes that are probably not reflected in its stock price. From 13D Research, via zerohedge.com:

The fall of Facebook has only begun. The platform is broken and neither human nor machine can fix it.

Even after losing roughly a third of its market cap, it still may prove one of the great shorts of all time.

“There’s no mental health support. The suicide rate is extremely high,” one of the directors of the documentary, “The Cleaners” told CBS News last May. The film is an investigative look at the life of Facebook moderators in the Philippines. Throughout his 2018 apology tour, Mark Zuckerberg regularly referenced the staff of moderators the company had hired as one of two key solutions — along with AI — to the platform’s content evils. What he failed to disclose is that the majority of that army is subcontractors employed in the developing world.

For as long as ten hours a day, viewing as many as 25,000 images or videos per day, these low-paid workers are buried in the world’s horrors — hate speech, child pornography, rape, murder, torture, beheadings, and on and on. They are not experts in the subject matter or region they police. They rely on “guidelines” provided by Facebook — “dozens of unorganised PowerPoint presentations and Excel spreadsheets with bureaucratic titles like ‘Western Balkans Hate Orgs and Figures’ and ‘Credible Violence: Implementation standards’,” as The New York Times reported last fall. The rules are not even written in the languages the moderators speak, so many rely on Google Translate. As a recent op-ed by John Naughton in The Guardian declares bluntly in its headline, “Facebook’s burnt-out moderators are proof that it is broken.”

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The Generation that Will Save the World, by Jeff Thomas

The millenials probably won’t save the world, but the generation after them might. From Jeff Thomas at internationalman.com:

Eighty-four percent of millennials admit that they don’t know how to change a lightbulb. When asked what they do if one goes out, most either said that they call the landlord to fix it, or just accept having less light in future.

Readers of this publication will be savvy enough to know that a crisis of biblical proportions is on the way. It will begin as an economic crisis, but will quickly morph into a political and social crisis as well.

There can be no doubt that my generation (the baby boomers) have done more to create this crisis than any other. So, who will be the ones that will have to deal with the crisis, once it’s under way?

Well, that always falls to the young, strong, energetic segment of the population. The twenty-to-forty group would be the ones who would need to roll up their sleeves and bail out the sinking rowboat.

That means that, by the time we’re in crisis mode, the generation that will inherit the job of fixing the mammoth problem will be the millennials.

Uh-oh.

The “depression generation” were known for hard work and self-reliance. Their children – the boomers – were their spoiled children, who became the yuppies. They sought to live luxuriously, with a minimum of responsibility. The next generation – the millennials – have, so far, proven to be a generation that not only does not wish to take on responsibility, they are literally unable to do so.

With notable exceptions, it’s a generation of people who blindly expect that their parents, the government and perhaps the tooth fairy, have the full responsibility to take away all of their problems and inconveniences. This has reached the perverse degree that students at even the best universities have “safe spaces,” where no one may say anything that upsets them. Harvard now has rooms where students who are feeling stressed can play with Play-doh. Rules are established based not upon what is practical or workable, but on “How I feel at the moment.”

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Here’s Where the Next Crisis Starts, by James Rickards

Junk bonds are certainly a plausible candidate for where the next financial crisis begins. From James Rickards at dailyreckoning.com:

The case for a pending financial collapse is well grounded. Financial crises occur on a regular basis including 1987, 1994, 1998, 2000, 2007-08. That averages out to about once every five years for the past thirty years. There has not been a financial crisis for ten years so the world is overdue. It’s also the case that each crisis is bigger than the one before and requires more intervention by the central banks.

The reason has to do with the system scale. In complex dynamic systems such as capital markets, risk is an exponential function of system scale. Increasing market scale correlates with exponentially larger market collapses.

This means a market panic far larger than the Panic of 2008.

Today, systemic risk is more dangerous than ever because the entire system is larger than before. Due to central bank intervention, total global debt has increased by about $150 trillion over the past 15 years. Too-big-to-fail banks are bigger than ever, have a larger percentage of the total assets of the banking system and have much larger derivatives books.

Each credit and liquidity crisis starts out differently and ends up the same. Each crisis begins with distress in a particular overborrowed sector and then spreads from sector to sector until the whole world is screaming, “I want my money back!”

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