Category Archives: Investing

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.

Continue reading

Advertisements

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.

Continue reading

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.”

Continue reading

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.”

Continue reading

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!”

Continue reading

An Open Letter on the Next Great Crisis wrought by the Fed, by Stephanie Pomboy

Stock markets have staged a vigorous rally and the economy has expanded since the financial crisis of 2008-2009. Paradoxically, pension funds have become more underfunded. From Stephanie Pompoy of Macro Mavens at nebula.wsimg.com:

Actions have consequences. Even for the Fed.

That’s not a reference to the market’s grumpy reaction to the central bank’s continued rate hikes and quantitative tightening. No. The impact of both on financial assets were as obvious as they were inexorable. To be sure, Wall Street’s resident soothsayers had a good run spinning tales that ‘this time’ was different. A tightening Fed, we were assured, was a good thing—a ringing endorsement of the economy’s indefatigable strength. But, in the end, there was simply no way around the basic fact: Just as rate cuts and QE were designed to expand the pool of credit and incent the embrace of risk, so would rate hikes and QT necessarily beget the reverse. And so they have.

But while the impact of receding liquidity and the reduced reward for reckless speculation and risk-taking have finally begun to play out on Bloomberg screens everywhere, the real devastation has yet to be revealed. In the ensuing weeks and months the full and lugubrious legacy of the Fed’s great monetary experiment of the last decade will finally come into view. Beyond inflating and bursting a bubble in corporate debt (with leveraged loans acting as posterchild), the Fed’s decade-long financial repression has had a far larger and more sinister impact. It has silently bankrupted the US pension system.

Sound overly-dramatic??

Continue reading

Explosive WSJ Report Exposes China’s Role In 1MDB Scandal, by Tyler Durden

The Malaysian investment fund scandal gets stinkier and stinkier. From Tyler Durden at zerohedge.com:

In the waning months of his administration, Malaysian Prime Minister Najib Razak was desperate to stave off the bankruptcy of1MDB, the sovereign wealth fund that Razak and members of his inner circle looted (allegedly with the help of Goldman Sachs). So, he turned to an unlikely source of funding to bail out the fund – signing away rights to some of his country’s most valuable resources in the process.

The source? China. Employing financier Jho Low as an intermediary, Razak worked out an arrangement with the Chinese government whereby Razak’s government would grant state-owned Chinese enterprises lucrative stakes in Malaysian railway and pipelines projects in exchange for $34 billion – more than enough to clear the shortfall in 1MDB, and then some.

By 2016, Mr. Najib was in a bind because the fund had borrowed $13 billion it couldn’t repay. He turned to Jho Low—a Malaysian financier the U.S. Justice Department has alleged was the mastermind of a multibillion-dollar theft of 1MDB funds—to negotiate with China to resolve the crisis, according to current and former Malaysian officials.

According to a report in the Wall Street Journal, Razak offered the Chinese an invaluable cherry on top of the sweetheart deal. Permission to dock Chinese Navy ships in two Malaysian ports – a “significant concession” that would push Malaysia undeniably into the orbit of Beijing.

Mr. Najib also embarked on secret talks with China’s leadership to let Chinese navy ships dock at two Malaysian ports, say two people familiar with the discussions. Such permission would have been a significant concession to Beijing, which seeks greater influence across contested waters of the South China Sea, but it didn’t come to pass.

To continue reading→