“Safety Stocks” Have Never Been More Risky

In the new normal, where bad news is good news, stagnation is growth, and depression is a buying opportunity, it should be no surprise that the so-called "safety stocks" of the Consumer Staples sector have never been more risky. At a P/E valuation of 22x, food, beverage, and tobacco companies have never been more expensive.


But, "safety stocks" are not the most expensive stocks in the US equity market…

more than doubled in the last month!!

Yes – you read that correctly – The S&P 500 Energy Sector currently trades at 101.5x analysts' expectations of next 12 months earnings.

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Let’s Stop Pretending Nuclear Power Is Commercially Viable

Submitted by Leonard Hyman and William Tilles via OilPrice.com,

First its new president, Jean-Bernard Levy, said French state utility EDF would delay a decision on its joint French-Chinese nuclear project in the UK, Hinkley Point. That was over a year ago. Then the CFO of EDF, Thomas Piquemal, quit reportedly because he opposed the project on financial grounds. That was a short time ago. Then after a slew of leaked memos, the French government just announced that EDF would be raising more money and the Hinkley decision would now come in September.

David Cameron’s government in the UK backs this exceedingly expensive project and the French government controls both EDF and Areva, the nuclear manufacturer that developed the nuclear system to be used at Hinkley Point. (Two other plants in Finland and China using this technology are still under construction, behind schedule and over budget.) As part of a plan to rescue Areva (which has lost money in each of the past four years and has negative equity, meaning the share-holder investment has been wiped out), EDF agreed, earlier in the year to buy Areva’s nuclear engineering division. Clearly, France views its nuclear ambitions as a matter of national prestige and intends to support Hinkley Point.

Now for the finances. These British nuclear units will cost roughly £18 billion ($27 billion). EDF has already sold a 35 percent share to the Chinese state nuclear company. However EDF still has to find more outside investors and get its ownership of the plant below 50 percent or it will have to consolidate Hinkley Point on its books and show all of the project’s debt on its own balance sheet.

At the end of 2015, long- and short-term debt made up 79 percent of EDF’s capital, an already high number, and two of the three major bond rating agencies have assigned EDF's debt a “negative outlook." EDF also needs more capital to take over Areva, finish the French nukes still under construction and refurbish its own domestic fleet of aging nuclear power stations. All this will take place during what amounts to a financial crisis within the European electricity markets.

So the French government just announced a $4.5 billion capital raising for EDF (the government will buy the lion’s share of the newly issued stock). But from the look of the numbers that share offering constitutes a modest fraction of what is required by a firm that will have to compete more and more in a competitive electricity market.

Last year EDF reported a return on shareholder investment of less than 5 percent (an adequate return for bondholders not stockholders). To reduce the total debt burden to a more manageable 70 percent would require the sale of another $16 billion of stock, a painful process, especially for existing shareholders when returns and share prices are so depressed. More than likely EDF will explore asset sales and other ingenious means to rearrange assets in order to shore up its overly indebted balance sheet.

If we were gamblers we would not wager that EDF will take the obvious first step towards restoring its financial health and cancels the Hinkley project. Of course, if David Cameron loses the Brexit vote (a referendum to take the UK out of the European Union) and is ejected from Number Ten Downing Street, a new Prime Minister might take a more skeptical view of Hinkley Point.

The real point of this story is that nuclear power is not commercially viable but has become a state-sponsored technology. There is nothing wrong with state supported technology. But we could save a lot of time and money by not pretending that it is something else.

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Trump Responds To California Protesters: “Felt Like I Was Crossing The Border, But I Got Here”

Protesters forced Donald Trump to abandon his motorcade and find an unconventional route to his speaking engagement at the Hyatt in Burlingame, California yesterday.


Despite their best efforts…


… the Donald made it to the venue, and perhaps predictably seized on the opportunity to liken his journey to crossing the border.

"That was not the easiest entrance I've ever made. We went under a fence, and through a fence. Oh boy, it felt like I was crossing the border actually. I was crossing the border, but I got here."

Looks like Trump is right: if you want to really stop someone, best to just build a wall.


Jim Quinn notes that the real question – that no one in the mainstream media appears willing to ask is – How come Trump supporters never get violent at Hillary rallies? Who are the real problem in this country? The right or the left? 

And then there was this summary…


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The Cult Of Central Banking Is Dead In The Water

Submitted by David Stockman via Contra Corner blog,

The Fed has been sitting on the funds rate like some monetary mother hen since December 2008. Once it punts again at the June meeting owing to Brexit worries it will have effectively pegged money market rates at the zero bound for 90 straight months.

There has never been a time in financial history when anything close to this happened, including the 1930s. Nor was interest-free money for eight years running ever even imagined in the entire history of monetary thought.

So where’s the fire? What monumental emergency justifies this resort to radical monetary intrusion and repression?

Alas, there is none. And that’s as in nichts, nada, nope, nothing!

There is a structural growth problem, of course. But it has absolutely nothing to do with monetary policy; and it can’t be fixed with cheap money and more debt, anyway.

By contrast, there is no inflation deficiency—–even by the Fed’s preferred measure. Indeed, the very idea of a central bank pumping furiously to generate more inflation comes straight from the archives of crank economics.

The following two graphs dramatize the cargo cult essence of today’s Keynesian central banking regime. Since the year 2000 when monetary repression began in earnest, the balance sheet of the Fed has risen by 800%, while the amount of labor hours used in the US economy has increased by 2%.

At a ratio of 400:1 you can’t even try to argue the counterfactual. That is, there is no amount of money printing that could have ameliorated the “no growth” economy symbolized by flat-lining labor hours.


Owing to the recency bias that dominates mainstream news and commentary, the massive expansion of the Fed’s balance sheet depicted above goes unnoted and unremarked, as if it were always part of the financial landscape. In fact, however, it is something radically new under the sun; it’s the footprint of a monetary fraud breathtaking in its magnitude.

In essence, during the last 15 years the Fed has gifted the US economy with a $4 trillion free lunch. Uncle Sam bought $4 trillion worth of weapons, highways, government salaries and contractual services but did not pay for them by extracting an equal amount of financing from taxes or tapping the private savings pool, and thereby “crowding out” other investments.

Instead, Uncle Sam “bridge financed” these expenditures on real goods and services by issuing US treasury bonds on a interim basis to clear his checking account. But these expenses were then permanently funded by fiat credits conjured from thin air by the Fed when it did the “takeout” financing. Central bank purchase of government bonds in this manner is otherwise and cosmetically known as “quantitative easing” (QE), but it’s fraud all the same.

In essence, Uncle Sam has gotten $4 trillion of “something for nothing” during the last 16 years, while the Washington politicians and policy apparatchiks were happy to pretend that the “independent” Fed was doing god’s work of catalyzing, coaxing and stimulating more jobs and growth out of the US economy.

No it wasn’t!

What it was actually doing was not stimulating the main street economy, but falsifying and inflating the price of financial assets. That happened directly in the Treasury and GSE (i.e. Fannie Mae and Freddie Mac) markets where the Fed made its massive debt purchases, but that Big Fat Bid obviously cascaded through the pricing mechanism of the entire financial system via the linkage of credit spreads, cap rates and carry trades, including the PE on equities.

By contrast, the mainstream Keynesian delusion that the Fed has been stimulating GDP growth rather than speculator windfalls is rooted in the hoary concept of “aggregate demand” deficiency. That is, the proposition that the macroeconomy has a natural growth rate based on potential output at full employment, and that when actual growth falls short of that benchmark, it is the job of the state—–and in recent times, especially its central banking branch——to stimulate sufficient aggregate demand to close the gap.

This is claimed to be the essence of the welfare enhancing function of the state. To wit, pushing a continuously lapsing and faltering private capitalism toward its inherent full employment potential, thereby generating jobs, income and wealth that would otherwise not happen.

Alas, that’s complete self-serving clap-trap. At the end of the day, the full employment myth has conferred opportunities for employment and power on economists who would otherwise not have much more social function than astrologists; and it has provided an all-purpose blanket of rationalization for politicians bent on using the tools of state intervention and subvention to do good, do favors and do re-election.

The truth is, there can never by an honest shortage of “aggregate demand” because the latter is nothing more than spending for consumer and capital goods that is financed from the flow of income and production. As “Say’s Law” famously and correctly insists, “supply creates its own demand”.

And even more to the point, it is “supply” that is the hard part of the economic equation. It stems from work, exertion, sweat, discipline, enterprise, innovation, invention, sacrifice and savings.

Spending from what has already been produced is the easier part. And given human nature,  there is virtually no prospect of a shortage of aggregate demand——and most certainly not one which is chronic and continuous, as is implicit in the 24/7 stimulus policies of modern central banking.

Indeed, the idea that the state can create “aggregate demand” ex nihilo stems from a one-time parlor trick that was operative in the second half of the 20th century. Central banks discovered that they could stimulate credit expansion by supplying plentiful reserves to the fractional reserve banking system, thereby causing credit growth that was not funded from current savings.

That did permit a temporary breach of Say’s Law because spending derived from freshly minted banking system credit was additive to spending for consumer and capital goods financed out of current income and production. But there was a catch. Namely, continuous credit expansion resulted in the steady leveraging-up of household and business balance sheets.

Eventually, balance sheets became saturated and a condition of Peak Debt was achieved. In the case of the household sector, leverage ratios against wage and salary income rose from a stable historic level of about 75% prior to 1980 to a peak of 220% in 2007.  Then the parlor trick was over and done because in the aggregate there was no credit-worthy headroom left on balance sheets.

In fact, as shown in the chart below, the household sector has been slowly deleveraging its wage and salary income since the Great Financial Crisis. What that means is that with respect to the largest slice of the income pie by far—–the wage and salary earnings of households——Say’s Law has been re-instated. Household consumption is now constrained to the growth of production and income.

There is no more central bank “stimulus” through the household credit channel of monetary transmission.

Household Leverage Ratio - Click to enlarge

Household Leverage Ratio – Click to enlarge

Likewise, total US business borrowings have increased from $11 trillion to $13 trillion since the fall of 2007, but it has not lead to additional investment spending. Instead, the Fed fueled inflation of financial assets has induced businesses to cycle virtually 100% of their incremental borrowings into financial engineering. That is, stock repurchases and M&A deals.

But financial engineering does not add to GDP or increase primary spending; it results in the re-pricing of existing financial assets. That is, it gooses stock prices higher, makes executive stock options more valuable and confers endless windfalls on the fast money speculators who work the financial casinos.

Indeed, as we demonstrated in a post earlier this week—–precisely 100% of the entire increase in corporate borrowing since the turn of the century has been pumped back into the casino in the form of stock repurchases. Accordingly, the business investment channel of monetary transmission is over and done, as well.

The world is drowning in excess production capacity owing to the massive worldwide credit inflation and repression of capital costs during the last two decades. That was the effect of total global credit growth from $40 trillion in the mid-1990s to upwards of $225 trillion today—-an $185 trillion expansion that exceeded the growth of global GDP by nearly 4X during the same period.

Under this condition the diversion of corporate borrowing to financial engineering and stock buybacks is a no-brainer. Prospective returns on real productive assets are jeopardized by the immense overhang of excess capacity and the unfolding contraction of profit margins and CapEx, whereas stock buybacks and M&A deals bring immediate excitement and financial rewards to the C-suite.

So we go back to the beginning. The Fed and central banks in general are pushing on a fiat credit string because Peak Debt has arrived. All of today’s massive central bank intrusion is ending up in the secondary markets where it is causing the falsification of financial asset prices and massive, unearned and ultimately destructive windfall gains to speculators.

Here’s the essence of the Keynesian full employment/potential GDP myth. The learned economic doctors have simply pulled a fancy version of the old story about the professor of economics who fell into a 30-foot hole with a colleague. At length, the latter inquired about the professor’s plan to get out. “Assume we have a ladder”, said he.

There is absolutely nothing more to potential GDP and the so-called output gap than an assumed ladder. In the context of an $80 trillion global GDP enabled by today’s massive trade, capital and financial flows and current information technology, “potential output” is impossible to measure and is constantly changing.

There is no way to know whether an auto plant is at 95% utilization or 65%; it all depends on ever-changing costs of labor, the number of scheduled shifts, the complexity of the vehicles being assembled at any moment in time and the line speed, which. in turn, is a function of equipment, automation and technology variations over time.

Likewise, when on the margin labor is deployed by the gig in the DM economies and when the rice paddies have not yet been fully drained in the EM economies, there is no reasonable, accurate or meaningful way to measure labor utilization, either.

So there is no grand Keynesian economic bathtub whose full employment dimensions can be measured; and there is no way for the Fed or other central banks to fill it right to the brim with extra demand stimulus, anyway. Peak Debt has blocked the monetary policy transmission channels.

In fact, tepid growth of labor hours, productivity and output is a supply side problem. In that respect, replacing the current burdensome 16% payroll tax on America’s high cost labor with a consumption tax on the nation’s heavily imported goods would do more for supply side growth than central bankers could ever accomplish in a month of Sundays.

Likewise, there is no want of inflation, and the 2% target is simply a central banker’s con job. By selecting the most flawed and under-stated measure possible—-the PCE deflator less food and energy—–our monetary central planners rationalize their massive usurpation of power.

But there isn’t an iota of proof that 2.0% goods and service inflation is any more conduce to real growth of output and wealth than is 1.4% or even (0.2%). In any event, there is plenty of evidence that we are and always have been at 2.0% CPI inflation or better.

When an array of the inherently flawed inflation indices are considered as shown below, there is no meaningful shortfall from 2.0% since 2010 or during the entire period when the Fed has claimed to be struggling against lowflation. And that’s especially so when the BLS’ preposterous owners’ equivalent rent (OER) is replaced with empirical gauges of housing rent inflation.

CPI, PCE and Reality  - Click to enlarge

So what is to be done, as Lenin once queried?

In a word it is this. Fire the Fed. Attend to supply side policy. Let market capitalism do the rest.

The cult of central banking is dead in the water.

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Bernie Sanders’ Wife: “It Would be Nice If The FBI Moved Along Hillary’s Email Probe”

For the past year, republicans had been pushing both the US Department of Justice and the FBI to move faster in their ongoing Hillary Clinton email probe, although as has been revealed recently, said probe is mostly being throttled by the DOJ for political reason while the FBI, having scented blood, is eager to unveil its evidence against the frontrunning Democratic presidential candidate. Just last week, confirming there is indeed much bad blood between the two government agencies, senator Chuck Grassley who chairs the Senate Judiciary Committee implied that one way the FBI may avoid the DOJ’s stonewalling, is to “leak”, hypothetically-speaking of course, reports of its investigation into Hillary Clinton’s use of a private email server.

As we reported last week, in practically laying out the next steps in Hillarygate, Grassley said “an anonymous and unauthorized release of FBI investigative materials could result if officials at the agency believed prosecution of Clinton was stymied for political reasons” according to the Des Moines register.

But while republicans have – for obvious reasons – been pushing to expose and discredit Hillary ahead of the presidential elections, democrats had been largely silent on the issue. At least that was the case until late this week when none other than Bernie Sanders’ wife, Jane, said on Thursday that “it would be niceif the FBI speeds up its investigation of Hillary Clinton’s private email server.

We said right from the beginning, right after the debate where he said, ‘enough of your damn emails,’ he also said, ‘there’s a process…it’s going forward,'” Jane Sanders said Thursday on Fox Business Network’s “Cavuto Coast to Coast.”

“It’s an FBI investigation…we want to let it go through without politicizing it and then we’ll find out what the situation is and that’s how we still feel. I mean, it would be nice if the FBI moved it along,” she said with a laugh.

Which is odd, because Democrats (and the DOJ) would be delighted it he investigation is stalled indefinitely as has been the case under what many have speculated is political pressure.

Clinton told CBS’ “Face the Nation” in March that the email scandal was “moving toward a resolution” and predicted that the investigation was “getting closer and closer” to being complete. Close… just 8 more months, ideally with the election in the rearview mirror.

Meanwhile, in her interview, Jane Sanders also said that her husband and Clinton have “very different visions for America”, repeating the same complaint popularized by Trump, namely that the delegate selection process isn’t fair. 
“It doesn’t seem fair that superdelegates can play such an outsized role,” she said. “We don’t like the concept of the superdelegates. It’s pretty much an insurance policy for the establishment.”

Her surprising statement comes after Sanders only won one out of five primaries on Tuesday. He won Rhode Island while Clinton won Connecticut, Delaware, Maryland and Pennsylvania, expanding her delegate lead. One can see why suddenly Bernie Sanders’ better half is agreeing with the republicans that it is time for Hillary’s dirty email laundry to be made public.

Sadly for Jane, as of this moment, online betting markets see about a one in five chance that Hillary will be charged.

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Why We’re So Unhealthy

Submitted by Charles Hugh-Smith via PeakProsperity.com,

That America is in the throes of a systemic health crisis can no longer be denied. According to the U.S. Department of Health And Human Services, more than two-thirds (68.8 percent) of adults are overweight or obese.  (Overweight is typically defined as a body-mass index (BMI) of 25 or higher. A BMI of 24.9 is not exactly featherweight; I would have to add 30 pounds to reach a BMI of 24.9. )

The health risks of being overweight or obese include:

  • type 2 diabetes
  • heart disease
  • high blood pressure
  • nonalcoholic fatty liver disease (excess fat and inflammation in the liver of people who drink little or no alcohol)
  • osteoarthritis (a health problem causing pain, swelling, and stiffness in one or more joints)
  • some types of cancer: breast, colon, endometrial (related to the uterine lining), and kidney
  • stroke

Since the early 1960s, the prevalence of obesity among adults more than doubled, increasing from 13.4 to 35.7 percent in U.S. adults age 20 and older.  (Source)

The Journal of the American Medical Association (JAMA) reported in 2015 that roughly half of all adult Americans are diabetic or prediabetic (also called metabolic syndrome).

If we add up everyone in America who is either suffering from or at risk of lifestyle-related diseases such as heart disease, diabetes and lifestyle-related types of cancer, it’s clear this is an unprecedented national health crisis that has no easy or cheap medical fix.

Why have we become so unhealthy? The answers come thick and fast: we are more sedentary as most work is now white-collar; the foods low-income people can afford are unhealthy; children now spend time playing digital games rather than playing outside; serving sizes of sodas and other high-calorie/low nutrition beverages have ballooned; people buy more convenience and fast foods and prepare fewer meals at home, and so on.

Two things are clear: there is no one solution to the epidemic of lifestyle-related diseases. Limiting sodas in schools and demanding better labeling of food are examples of reforms that are well-intended, but have so far had little effect on the expanding waistlines of Americans or their ill-health.

The second is expressed by the Chinese proverb: “Diseases enter through the mouth,” i.e. disease is a result of what we eat and drink. Since what we eat has an enormous impact on our health, if we want to tackle our health crisis in a manner that get results, we must start with what we eat and how our food is grown, processed and prepared.

Once we start examining our diet, we have to examine where our food comes from, how it is grown/raised and how it is processed for consumers.

A second Chinese proverb explains why we must start with diet: “When you’re thirsty, it’s too late to dig a well.”  If we want to avoid lifestyle illnesses, we must start pursuing a new way of growing and preparing food now, not after we’re already ill.

The long lists of contributory factors to our growing ill-health distract us from the real source of our national health crisis: our food/illness/healthcare system is sick, and so it’s no wonder we’re sick, too.  The only possible result of our unhealthy food/illness/healthcare care system is ill-health.  

Understanding the Food / Illness / Healthcare System

To understand why this is so, we must start with the fact that we live in a highly centralized government/private-sector system that limits our choices to maximize the profits of corporate cartels: Big Agriculture, Big Oil/Ag Chemicals, Big GMO seeds (Monsanto et al.), Big Processed Foods, Big Supermarkets, Big Fast Food, Big Healthcare (what I have called sickcare for many years, because profits flow not from keeping us healthy via prevention but from keeping us alive when we’re suffering from chronic lifestyle illnesses) and last but not least Big Pharma, which is happy to provide medications that costs tens of thousands of dollars per patient per year to address the symptoms of lifestyle diseases rather than the causes, which trace back to what we eat and how we live.

Once you hear an alternative account of how we could be raising food and delivering it to consumers to prepare at home, you grasp the sickening stranglehold Corporate America and government agencies have on our food, diet and the resulting epidemic of ill-health.

I was fortunate to attend a permaculture conference, 'Better Soil, Better Food…A Better World' at Tara Firma Farms in Petaluma, California this past weekend that Adam Taggart (co-founder of Peak Prosperity) was responsible for producing. Joel Salatin (author of nine books, including Everything I Want To Do Is Illegal: War Stories from the Local Food Front and head farmer at Polyface Farms, Virginia), Paul Kaiser (Singing Frogs Farm, Sonoma, California), Toby Hemenway (author of Gaia's Garden: A Guide to Home-Scale Permaculture, 2nd Edition), and Robb Wolf (author of The Paleo Solution: The Original Human Diet) were on hand to explain the connections between the way our food is grown, processed and distributed and our ill-health.

Though these connections are common sense—we all know about garbage in, garbage out—the linkage between our extractive, monoculture agriculture and all the other subsystems of food and health remains opaque to most Americans.

Centralized Systems Are Hijacked By Those Who Profit Most From Them

Centralized systems are inevitably hijacked by vested interests in a way that is simply not possible in highly decentralized systems.  Powerful vested interests rig centralized systems to protect and extend their privileges and profits.  This dynamic is a positive (self-reinforcing) feedback loop: the greater the centralization, the greater the influence of vested interests, who increase the centralization that benefits them.

Though it is poorly understood by conventional economists and political scientists, centralization makes it inevitable that the interests that benefit most from centralization (corporations) will serve their self-interests by gaining control of centralized power via lobbying and political contributions.

Once entrenched interests have purchased influence over politicians and regulatory agencies, they use the power of centralized government to limit competition by erecting regulatory barriers.  The regulatory system is soon approving whatever reaps the most profit for the big corporations and restricting alternatives to corporate products.

Before centralized federal and state government agencies and big corporations became dominant, decentralized family-owned farms and grocery stores were the norm. Anyone seeking to control the entire sector faced an essentially impossible task.

Now, a handful of corporations control key sectors of the food/healthcare complex: seeds, chemical fertilizers, processing of food into consumer products, distribution to consumers via grocery chains and the fast-food industry, and the healthcare/pharmaceutical sectors.

This concentration of power over our food and health is presented as the lowest-cost and most efficient system possible: concentrated ownership and control, we’re told, enables vast economies of scale that lower the cost to consumers. While this might be true of grains, it is not true of healthcare.  And since food and health are causally connected, we have to consider the total system costs: not just the cost at the grocery store or fast-food outlet, but the eventual costs of low-quality food and an unhealthy diet.  

Once we consider total system costs, we have to include healthcare: the American healthcare system is the most expensive per capita on the planet, over-delivering costly (and often questionable or needless) tests, procedures and medications, and under-delivering affordable preventative care and well-being.

While it’s impossible to break out the eventual system costs of poor diet, the preponderance of lifestyle-related diseases that end up being treated suggest the percentage of healthcare related to diet and lifestyle (fitness, sufficient sleep, etc.) is substantial:

Though the mainstream media paints skyrocketing healthcare costs as the result of costly new technologies and drugs, the unspoken reality is that higher costs also reflect cartels being able to raise prices without fear of competition and the declining health of Americans.

The food/illness/healthcare system is not a conspiracy; it is a self-organizing system driven by the goal of maximizing profit and eliminating competition. The two are related, of course; the most effective way to maintain high prices and reap big profits is to eliminate competitors and consumer choice.

Big Pharma doesn’t ask the fast-food cartel to make its food unhealthy so its customers will need pricey medications to control the resulting lifestyle illnesses down the road; the fast-food cartel chooses the lowest-priced (and thus lowest quality) ingredients and processes to maximize its own profits.

The full consequences of the food/illness/healthcare system take decades to manifest. Humans respond to price (buy what’s cheapest) and what triggers the reward centers of the brain (consume sugar, fat, salt).  It’s remarkably easy to exploit these short-term factors to sell unhealthy food and meals whose lifetime costs are still years or decades in the future.

The same can be said of our extractive system of monoculture agriculture.  Though touted as the most efficient system for growing food in the world, monoculture depends heavily on cheap fuel, cheap chemical fertilizers and pesticides/herbicides, cheap transportation and ignoring the eventual cost of losses in soil and soil quality.

I’ll share one small example that illustrates the hidden costs of our corporate-dominated system.

Last summer we drove to a Central Valley (Calif.) farm county for the annual county fair, a staple of rural life we enjoy.  To reach the town, we took a two-lane county lane. On a sharp curve in the road, hundreds of ripe tomatoes lay on the pavement and shoulder. It didn’t take much to see what had happened; as heavily loaded harvest trucks made the turn, tomatoes had spilled onto the roadway.

We stopped and picked up some of the fallen tomatoes. They were red Roma tomatoes, and they were still firm, undamaged by the impact of cascading ten feet from the trucks.  The fields nearby were already plowed under, bare dirt as far as the eye could see.

Though the naked eye could not possibly discern the consequences of this monoculture mode of growing tomatoes, studies have found that each acre of tilled bare soil loses tons of topsoil to erosion of wind and rain every year.

As for the nutritional content of the tomatoes: as an experiment, we took some of the fallen tomatoes home to see if they ever ripened enough to become soft. They never did; they remained hard and tasteless, even in a bowl of fruit that naturally emitted ripening ethylene.

What was the nutritional content of this tasteless product of monoculture? Only a lab test could tell, but it was a good bet the nutritional content was as poor as the taste.

These indestructible tasteless tomatoes were undoubtedly bred to become tomato sauce in some distant processing plant, bound for wholesalers and retailers who end up taking most of the consumers’ dollar:


It Doesn’t Have To Be This Way

It doesn’t have to be this way. Regenerative agricultural practices actually build soils rather than strip-mining them. Consumer-supported agriculture (CSA) cuts out the corporate middlemen and delivers high-quality food directly to consumers.

If we consider that Americans throw away 40% of all food they purchase, it’s not hard to see another option: waste nothing and spend the savings on higher quality food.

High-quality vegetables can be grown in cities, lowering cost and raising access (see: A guerilla gardener in South Central L.A.)

My time this past weekend with Joel Salatin, Toby Hemenway and the folks from Singing Frogs Farm was filled with compelling yet practical steps each of us can and should take in our lives to take more control over our health — in ways that are easy, enjoyable and result in big improvements to our quality of life

In Part 2: Take Control: If You Don't, Who Will? I share the most important of these takeaways and detail ways to opt out of our matrix of ill health and extractive systems. There's a lot of room for optimism here to make great improvements in our lives with steps that feel life-enhancing rather than sacrifices. The real question is not Why did we let the system get this bad?, it's rather Why shouldn't we start embracing these very accessible solutions immediately?

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)


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EXCLUSIVE: Another ZERO HEDGE Insider Leak

There is a palpable taste of frustration and envy in the air.  To some the idea of unfettered and anonymous (to them, most of you know who some of us are) market commentary is a cancer that must be struck down.  Those on the outside, the people who think that reporting on Wall Street is all just some fun and games that happen between 9 and 5, are sorely mistaken.  Sadly, they are the ones pretending to tell you what you missed.

At no point has Zero Hedge ever told anyone what to trade or posted anything on the main feed openly suggesting a trade.

It is laughable that people view Zero Hedge as an outlet designed to offer trading ideas.  

We do not have Dennis Gartman on daily with trade ideas:

We do not say “I like Alibaba at $115, it’s a mature business.  It’s going to $150” right before the stock collapses:

We also do not run multiple commercials ever hour asking you to pay us $29.99 for a book we tell you is free and will help you crush it on returns:


The community appreciates Bloomberg exposing their fear that an outlet they think has only 3 people is a competitor to them. Sorry we are such a threat to fantastic financial media content such as:


When a brand is able to identify with a disenfranchised group and provoke a fervor like Zero Hedge does, it is somewhat understandable when establishment outlets freak out and seek to discredit the brand through slanted stories.

Unlike every other outlet claiming to be market sources of information, Zero Hedge has never censored people the way those outlets do or ever said anything about what we write. We all work hard. We are all gifted in certain areas. People who want to be like us and can not play with the big boys like to entertain the idea that they are under some sort of pressure from us. Colin’s betrayal burns, yes. What is worse is that he lied to himself about being able to keep up. Michael Jordan never blamed his high school for cutting him. He never concocted some unrealistic mental view that the school was trying to control him. Jordan also never went to other schools and selectively aired grievances in public in an effort to “expose” his high school. He simply got real with his mental state, got his shit together, and became the epic athlete we know of today.

This is not a game for 9-5ers five-days a week. If you are unable to hack it, admit it. Don’t hate the players.

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PRECIOUS METALS INVESTOR: Must See Important Charts & Data

SRSrocco Report Ico

By the SRSrocco Report

The U.S. and world economies are in serious trouble.  Unfortunately, the majority of analysts continue to put out increasingly worthless forecasts as they fail to understand the true nature of the problem… or rather, the predicament we are facing.

We must remember, problems have solutions while a predicament may be too difficult to solve.  According to the Cambridge definition of Predicament:

Predicament: noun[c] /pr??d?k·?·m?nt/: an unpleasant or confusing situation that is difficult to get out of or solve.

With no money and no job, he found himself in a real predicament.

Mankind enjoys slapping itself on the back when it comes up with new technologies to solve problems.  However, solving problems with technology in the short run creates even larger problems in the longer run.  For example, how does the U.S. Federal Government maintain the massive infrastructure that technology help to create if there aren’t available funds to do so???

You see this is very similar to the example given above in the predicament definition.  With no money and no job, he found himself in a real predicament.  Some individuals would just scoff at the unemployed person and tell him to get a job at McDonalds or some other high-class establishment.  But, what if there were no jobs to be found as was true during the Great Depression?

Furthermore, the employment situation in the United States is much worse than the official estimates put out by the Bureau Of Labor Statistics.  If we go by the unemployment measures we used a few decades ago, true U.S. unemployment is closer to 25%.  It is just impossible to get all of the 25% of unemployed Americans a job today.  So, this is a serious chronic unemployment predicament with no real solution.

Why?  Because it all has to do with ENERGY.  The following charts and data will provide the precious metals investor the critical reason to own gold and silver.

NOTE:  If you haven’t checked out our new PRECIOUS METALS INVESTING PAGE, please do.

The United States Is In Serious Trouble… And Most Americans Don’t Realize It

EROI iconIf you look at the SRSrocco Report Icon on the top left corner of the site, you will see this EROI Red Square with a silhouette of the United States in it.  There is a very good reason I designed that graphic to be included in my icon.  According to my analysis of the top minds who study the EROI – Energy Returned On Invested, this is the most important factor that controls life as we know it.

The collapse of the Ancient Roman Empire was attributed to many factors, but the overriding reason was due to the Falling EROI.  The Roman Empire grew by acquiring lands and their resources.  Some of these resources were stolen wealth from the rich families in the lands the Romans had conquered.  However, as the years went by, the Romans conquered less lands, but spent an increasing amount of wealth (energy) to defend what they had.

The collapse of the Roman Empire came as the wealth (energy) needed to keep foreign invaders out as well as the masses happy, exceeded the wealth (energy) the empire could acquire.  Thus, the Falling EROI of the Roman Empire (as well as most empires in the past) was the number one cause of its demise.

This will also be true for the U.S. Empire.  I am not proud to say that, but this is no secret if you read those who research and study the EROI.   The following chart was taken from the 8020vision.com website based on a white paper, A New Long Term Assessment of Energy Return on Investment (EROI) for U.S. Oil and Gas Discovery and Production, from scientists Megan Guilford, Charles Hall, Pete O’ Conner, and Cutler Cleveland:

EROI Oil Discoveries

This chart shows the falling EROI – Energy Returned On Invested of U.S. oil and gas discoveries.  In 1910, the U.S oil industry was finding more than 1,200 barrels of oil for each barrel of oil (energy equivalent) consumed in the process.  The small EROI insert chart shows the huge decline since the 1950’s.  At last count in 2007, the U.S. oil and gas industry was discovering five barrels of oil for the cost of one barrel (5/1 EROI) versus the 60+/1 EROI during the 1950’s.

This next chart shows the Falling EROI of U.S. oil and gas production.  It peaked in 1950 at an EROI of 23/1 and trended downward to the 5/1 EROI for Shale Oil production today:

EROI Production

The data for the chart ended in 2007.  I added the dashed line showing the EROI of U.S. shale oil production.  The reason the EROI declined so much in the 1980’s was due to huge increase in drilling activity as the price of oil surged during the 1970’s.  Regardless, the EROI of U.S. oil and gas production has experienced a downward trend since the peak in 1950.

Simply put, as the EROI falls, there are less profitable barrels to run the U.S. economy.  Charles Hall recently stated that a modern society needed at least a 12/1 EROI of energy to sustain itself.  The Shale Oil Industry has provided a much needed liquid energy supply, but the 5/1 EROI of shale oil does not meet the minimum requirements of a modern society.

If we look at these two charts, we can see that EROI of U.S. oil discovery and production fell significantly since the 1950’s.  This had a profound impact on the U.S. economy and outstanding debt.  Ever since the 1970’s, top paying U.S. manufacturing jobs have been exported overseas.  It’s no coincidence that this occurred right at the same time as the U.S. oil discovery and production EROI rapidly declined.  Again, please check the small EROI insert chart in the U.S. oil and gas discoveries graph.  You can see the collapse of the EROI more readily.

How did the Falling EROI impact the outstanding debt of the United States?  Please look at the following chart:

U.S. Debt

You will notice that the total U.S. debt started to increase in the 1970’s and picked up considerably in the following decades.  I labeled the FRED chart as “ENERGY DEBT” because this is exactly what all financial debt should be called.  Energy has to be burned to create economic activity to pay back debt.  So, all financial debt is actually “ENERGY DEBT.”

Why did U.S. ENERGY DEBT increase so much since the 1970’s??  This was due to the falling EROI of U.S. oil discoveries and production.  Basically, the United States economy and system could no longer sustain itself as a commercially viable enterprise with the Falling EROI and declining domestic oil production, so it increased the amount of outstanding debt.  Thus, the increased debt is an inverse relationship to the Falling EROI and production of U.S. energy.

It’s that simple folks.  However, most analysts don’t understand this as they create all sorts of complicated models and charts showing how the U.S. will continue to grow well into the 22nd Century (2100).

Precious Metals Investors Are Mislead By Faulty Superficial Analysis

One of my readers forwarded the link to a recent article, Getting It Wrong On Silver by Keith Weiner.  Mr. Weiner is famous for his gold-silver basis charts which describes the inherent tightness or abundance of metal in the market.  While this is a valuable tool for traders who have a half a dozen monitors in front of them looking to scalp profits on short-term movements in the precious metals, it will be worthless for Americans who will be trying to survive as the U.S. oil supply contracts by 70-75% over the next decade.

Here is a chart of the largest shale oil field in the United States, the Eagle Ford by Tad Patzek.  You can read more about it in my previous article, THE REAL REASON TO INVEST IN PRECIOUS METALS… It’s The Fundamentals.

Eagle Ford Field Tad Patzek

As you can see, Mr. Patzek forecasts Eagle Ford oil production to collapse back to very little by 2020.  This is only four years away.  Again, if you check out the link above you can read his vast experience and background in Petroleum Geology.

Unfortunately, Mr. Weiner’s gold-silver basis charting analysis wont put food on the table when the complex supply chain system disintegrates due to the collapse of U.S. energy production.  However, owning physical gold and silver at this time could help considerably.

Mr. Weiner brings up several NO-NO’s written about silver in a Bloomberg article that is no longer available at the link he provided.   One of the items Mr. Weiner tries to debunk in his article is the subject of “STOCK to FLOWS.”  Here is his commentary:

Mankind has been accumulating silver for many thousands of years. Unlike gold, some of it is consumed. Unlike any ordinary commodity, most of it is not. Economists call this the ratio of stocks to flows — inventories divided by annual production.

In gold and silver, stocks to flows is measured in decades. In ordinary commodities, it’s months. In wheat, crude oil, or lithium if inventories build up too much, that is called a glut. The price crashes until the glut is worked off.

There is no such thing as a glut in gold or silver, nor a shortage. This is part of what makes them money.

Mr. Weiner is making the point that there is no real shortage of silver or gold.  He states that the analysis showing a decline in global silver production is meaningless because there is so much above-ground available silver.  As he states, “Mankind has been accumulating silver for many thousands of years.”

While Mr. Weiner is correct that Mankind has been accumulating a lot of silver for thousands of years, it has also been accumulating a massive amount of debt over the past 40 years.  When the Roman Empire collapsed, it may have debased its currency to continue business as usual as best it could, but it didn’t have much debt.

This is much different scenario for the U.S. and world today.  Here is a chart of total World debt:

Total world debt

Unfortunately, Keith Weiner doesn’t factor in this debt when he produces his gold-silver basis charts.  I imagine Mr. Weiner believes this debt will continue to head exponentially until it reaches Mars or Pluto.

Think about this for a minute.  Gold and silver are real stores of wealth, while paper assets and debt’s are ENERGY IOU’s.  Moreover, most assets are really debts to be paid in the future.  Think about all the Pension Plans we are now hearing about that are underfunded.  How about the viability of Social Security in 5-10-20 years??  Or how about all the 401K’s that Americans believe are going to be fully funded when they retire in say five or ten years??

How on earth do Americans think they will receive their monthly payment from a 401k, Pension plan, IRA or etc if U.S. energy production declines by 70- 75% in the next decade.  And don’t forget about the falling EROI.

Okay, let’s get back to silver.  Here is a chart I just made to show how much silver came on the market each year due to scrap supply and net Govt sales:

Global Silver Scap & Official Sales

You will notice a few interesting trends in the chart above.  First, total supply from these two sources peaked in 2003 at 285 million oz (Moz) and has been trending lower.  The majority of Government Silver sales came from China, Russia and India since 2000 (ironic aye, the very same countries acquring the most gold today).  However, Official Govt silver sales were ZIP in 2014 and 2015.

Secondly, even though the high silver price in 2011 and 2012 brought about a larger scrap supply, the total for those years didn’t surpass 273 Moz.  In regards to total global above ground silver stocks, I have seen the following estimates by the CPM Group:

3 billion oz Silver bullion & coins

24 billion oz Jewelry, Decorative & Religious

27 billion oz Total

So, if we assume the 27 billion oz figure is correct of all the public and private held silver in the world, then in 2011 only 273 Moz of silver came into the market when the price nearly touched $50.  Thus, only 1% of total world STOCKS came into the market when the price of silver reached $50.  That is not an impressive figure at all if we are discussing silver stock to flows.

Of course there are likely other silver stocks we don’t know about that have been supplementing the one billion oz cumulative global supply deficit since 2004.

Global Annual Silver Deficits

However, those stocks are likely declining as Central Banks are no longer dumping silver on the market.  This is also true for gold as well.

Truth be told, the STOCKS to FLOWS factor will become totally meaningless when investors start moving out of increasing worthless paper assets and into physical gold and silver to protect wealth due to the decline of U.S. and world energy production.

As I explained above, the Falling EROI has been creating havoc on the U.S. economy since the 1970’s.  Americans have enjoyed a 40 year reprieve due to the U.S. Petro-Dollar arrangement and the exporting of high-paying manufacturing jobs overseas.  Unfortunately, this is not a sustainable business model.  Either is the $19+ trillion in debt.

Precious metals investors need to understand the difference between short-term superficial analysis that provides traders with scalping profits versus the mid to longer term fundamentals that suggest owning physical precious metals in the troubling times ahead.

As more investors wake up to the upcoming economic and financial collapse, the need to analyze the gold-silver basis will no longer be necessary or relevant.  Shortages of the precious metals will occur in the future (even though Mr. Weiner may disagree) as investors move into physical gold and silver to protect wealth.

Lastly, the days of earning interest, dividends or scalping profits are growing short.  Keep an eye on the Falling EROI and world energy production for the key going forward.

Please check back for new articles and updates at the SRSrocco Report.  You can also follow us at Twitter, Facebook and Youtube below:


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“Don’t Fly Near Our Borders” – U.S. Spy Plane Again Intercepted By Russian Jet

According to CNN, yet another close encounter took place between the U.S. and Russia yesterday, as a Russian SU-27 allegedly conducted a barrel roll over top of a U.S. Air Force RC-135 reconnaissance plane flying over the Baltic sea. The incident was in international airspace according to the Defense Department.

This is the second time a Russian jet has allegedly barrel rolled over a U.S. plane flying over the Baltic, and the incident marks the fourth close encounter between the two countries just this month, as tensions continue to rapidly escalate between the two countries.

The Russian SU-27 approached alongside within 25 feet of the U.S. aircraft, and then flew inverted over the top of the plane to the other side, according to Lt. Col. Michelle L. Baldanza, a U.S. Army spokesperson.

"The SU-27 intercepted the U.S. aircraft flying a routine route at high rate of speed from the side then proceeded to perform an aggressive maneuver that posed a threat to the safety of the U.S. aircrew in the RC-135," Baldanza said.

Pentagon spokesman Commander Bill Urban said in a statement

"This unsafe and unprofessional air intercept has the potential to cause serious harm and injury to all aircrews involved. More importantly, the unsafe and unprofessional actions of a single pilot have the potential to unnecessarily escalate tensions between countries."

There appears to be more to the story however, as Russia's defense ministry claims that the U.S. plane had turned off its transponder, which is needed for identification..

"The US Air Force has two solutions: either not to fly near our borders or to turn the transponder on for identification."

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Bloomberg UNMASKED – The Truth about ZH from Forex perspective

We’ve been a Forex author for many years on Zero Hedge and many other sites.  Writing is a big part of our job as analysts, and educators.  Recently we published a book Splitting Pennies – Understanding Forex to explain this complicated market to investors.  We write by purpose – Forex is the largest market in the world and the least understood.  Because of this, it’s not widely covered in the main stream media (MSM) and when it is, it is often mis-characterized.  After 15 years in this business, we don’t believe there is any ‘conspiracy’ hiding the ‘truth’ about Forex- it’s simply a lack of understanding.  The guys who really understand Forex are mostly working for banks or hedge funds and making a fortune, and a few, professing at universities.  

Although we’d like to see some guest author compensation – the fact that guest authors are allowed to write freely without ANY editing is INVALUABLE in a market such as Forex which is vastly misunderstood.  For example a lot of Forex information is coupled with ‘conspiracy theories’ and ‘politics’ although it should not be.  For example, with events such as 911, often a move in the Forex market will preceed the actual event by several hours.  We know that generally speaking, terrorists don’t have access to huge amounts of capital or connections on Wall St. – so this is an odd phenomenon that’s never properly been explored or discussed.  By stating the facts, we aren’t making any conclusions, simply that ‘someone’ must have had foreknowledge, whether it be intelligence services, well connected investors, governments, or who knows.  Statistical analysis has shown that it’s not coincidence.  Anyway, this topic is an important one for Forex but not one that is ‘appropriate’ for Bloomberg news.  Bloomberg is a great example of the MSM because Bloomberg has always been ‘business news’ – with an international focus.  Others such as CNBC are more US focused.

Exhibit 1 – 28 pages

Recently the 28 redacted pages of the 911 report to be released, have potentially significant impacts on markets – not only directly, but how markets function.  It is also an important Forex event because potentially, we can see a shift of sentiment away from the US Dollar as a global reserve currency.  But more importantly, 911 exposes how ‘someone’ whoever that group may be, manipulate world events in direct connection to markets and profit.  The markets are manipulated – if you think investors have a fair shot in the markets, you are due for a wake up call.  Suggested treatment – disconnect your Television and social media and read Zero Hedge for 90 days.  

An article was composed by analysts at Fortress Capital which was not published by several MSM sources, so we posted it on Zero Hedge.  The article isn’t really inflammatory but discusses these topics in objective way, asking questions that some would rather not like to be asked.  It was a relief that it could be published in a timely manner before the markets opened.  

Exhibit 2 – Pro Russia

We have authored several seemingly pro-Russia articles for ZH and were never encouraged to do so.  




First, the mantra of analyst objective integrity is to be pro-fact, not pro- anything.  We would say we are pro-fact, not pro-Russia.  The only people in the world who are really pro-Russia are average Russians living in Russia.  If you talk to Russian intelligentsia, or Russians in America, they are critical of their country and just roll their eyes.  Practically though, Putin has done a great job leading Russia into a new market based system – which is not easy if you understand the culture and where they came from.  America was founded by commercial interests, it was a business from the beginning.  Russians have lived 80 some years under a controlled system, and those who tried to start a business were mostly killed.  The mentality is in their genes, it will take many generations for Russia to grow into a real superpower.  They need social reforms, business law reforms, regulations, human rights, immigration reform, and a number of other changes, before they can be a serious threat to other major economic powers.  But Russia has acheived a lot and they have made good use of their natural resources.  

It just so happens that because they are a ‘new’ economy Russia is an excellent Forex example.  Because the Ruble is still controlled by the central bank, although you can exchange in and out of Rubles freely, there are trading rules, and the rate is controlled by the central bank aggressively.  There are many interesting ironies about Russia and Forex, such as the largest retail platform in the world is a company from Russia (Meta Quotes). 

Exhibit 3 – Bloomberg 

During the period of 2007 – 2008 the most objective MSM coverage of the financial crisis was provided by Bloomberg.  Brian Sullivan was the best anchor who seemed to really present information as it should be, not as ‘marketing.’  He seemed sincere with his comments, he would say “I work for you – the viewer – so let me know how I’m doing, give me your feedback!”  So we did.  The first comment was to tone down his sporty attitude, he was calling the markets like a boxing match, which seemed out of taste at the time.  This was peak of the credit crisis.  Sure enough next day – he toned down his clown like attitude, dressed in professional suit and very serious!  This guy really did his job well, so it seemed.  Weeks go on and the Fed was under pressure to do something about market events, and he made a comment about “Shouldn’t the government, the Fed, do something about this situation?”  We fired away many comments about how the Federal Reserve is not part of the government.  It’s no more Federal than Federal Express.  The Fed was created by an act of Congress, but it is a private bank.  The President appoints the chairman, but that’s all.  There’s no other connection to the government.  The next time he discussed it on air, he said, “But shouldn’t the Fed, whoever owns it or if it’s private or whatever, do something?”  – several days later – he no longer worked for Bloomberg! 

It is unclear what time period Mr. Sullivan would handle for Fox Business, which relies on a dual-anchor format during the day. A Fox spokeswoman did not immediately respond to a request for comment.

A Bloomberg spokeswoman confirmed on Monday that Mr. Sullivan, who joined the network in 1997, had resigned. He most recently hosted the 3 to 5 p.m. show “Final Word.”

In an interview at Bloomberg’s offices last August, Mr. Sullivan, an avid race car driver on the weekends, said he did not spend much time thinking about Fox. “If I sit there worrying about my competitor, it’s called driving-in-your-mirrors racing,” he said.

Mr. Sullivan said that anchors like him have to work harder to stand out amid the increasingly commoditized landscape of business news. “If you just cover earnings, numbers, statistics, you can get all that on the Internet,” he said. “The way to differentiate yourself is to tell the smartest story and get the best guests.”

Coincidence, maybe.  But a strange one, especially during a time when people started to question the Fed.

But let’s take a step back and understand what is Bloomberg.  The Bloomberg Terminal is a trading appliance (well, it used to be a physical appliance and now it’s an application).  Bloomberg News is a ‘value add’ service provided to Bloomberg customers, so they don’t have to use a 3rd party for general market news.  Bloomberg more importantly streams economic data and other market news over the terminal, as does Dow Jones, Reuters, and other news services.  Bloomberg was always more objective than traditional news for this reason.  But like with anything, over the years, they became biased and poorly managed just like the media they replaced such as CNBC.  That’s their perspective – they sell terminals, market data.  The Bloomberg Terminal has almost no competition in many markets, especially OTC derivatives such as CDS, or if you want to trade Forex with a central bank, you need the Bloomberg Terminal.

Zero Hedge has been, for recent years, one of the only online platforms for objective Forex discussion.  This situation with the rogue author is sad, but it just elaborates what a sham Bloomberg is, and encourages ZH to work closer with Guest authors and other financial professionals who still have a need for a platform such as ZH.  It shows how Bloomberg has declined and lost complete control over its editorial staff.

This is all explained in our book Splitting Pennies – Understanding Forex.  Open a Forex account (if you are a non-US citizen) and get a free robotic strategy with every purchase of the book.  

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