Alan Greenspan: “We’re Running To A State Of Disaster”

Back in March, the former Fed chairman said that we're in trouble because "productivity is dead in the water, and real capital investment is way below average because business people are very uncertain about the future." Greenspan went on to add that entitlement programs are crowding out capital investment, and thus crowding out productivity."

Alan Greenspan is back delivering more warnings about the state of the global economy, hammering home the same key points made back in March.

"We have a global problem of a shortage in productivity growth and it's not only the United States but it's pretty much around the world, and it's being caused by the fact that populations everywhere in the Western world are aging, and we're not committing enough of our resources to fund that. We should be running federal surpluses right now not deficits. This is something we could have anticipated twenty five years ago and in fact we did, but nobody's done anything about it. This is the crisis which has come upon us."

Of course nobody has done anything about it Alan, your prior employer makes it so that precisely zero fiscal accountability needs to take place.

Entitlements are still a hot button issue with Greenspan (as they should be for everyone), saying that if we don't fix this issue we're headed for a disaster. Greenspan wants entitlements (and the America's inability to fund them in any way shape or form) to be the central issue of the presidential debate.

"Entitlements are crowding out savings, and hence capital investment. Capital investment is the critical issue in productivity growth, and productivity growth in turn is the crucial issue in economic growth. We're running to a state of disaster unless we turn this around."


"This should be the central issue of the presidential debate. Unless and until we can rein in entitlements, which have been rising at a nine percent annual rate in the United States and comparable levels throughout the world, we are going to find that productivity is going to maintain a very low rate of increase"

Greenspan also doesn't really view recession as the biggest problem right now, he is concerned (rightfully so) about the longer term problem of low economic growth and soaring entitlement growth.

"I don't think that's our problem. Our problem is not recession which is a short-term economic problem, I think youhave a very profound long-term problem of economic growth at the time when in the Western world there is a very large migration from being a worker to being a recipient of social benefits"

* * *

As we said last time Greenspan spoke some truthiness for once, if only he hadn't gotten us into this mess in the first place.


via Tyler Durden

Canadians Get Interested in Gary Johnson

It’s not just Americans who are disgusted by the choice of Donald Trump and Hillary Clinton in this year’s presidential election. This morning, I appeared on Canada AM, the morning show of the broadcast network CTV, to talk about Gary Johnson, the former Republican governor of New Mexico and the newly-minted presidential nominee of the Libertarian party, the largest of America’s third parties and the only one on pace to have its nominee appear on the ballot of all 50 states and the District of Columbia.

As I explained on CTV, in 2012 Gary Johnson received more than a million votes, or about one percent of the total, the best showing for a Libertarian presidential candidate since 1980. This year, the former two-term Republican governor of a Democratic state is joined on the ticket by William Weld, another former two-term Republican governor of a Democratic state. Between their credentials and the historically high unfavorability ratings of the presumptive Democratic and Republican nominees, Hillary Clinton and Donald Trump, Libertarians have a major opportunity to do far better this election cycle than ever before.

In polls where Johnson has appeared as a choice, he’s hit about 10 percent. If Johnson can hit 15 percent in five polls, he will be invited to the presidential debates run by the Commission on Presidential Debates. If he hits five percent in the November election, the Libertarian party will qualify for federal matching funds in the 2020 cycle.

As I mentioned in the CTV interview, Libertarians also have a unique opportunity to actually become a major party, especially if the Republican collapse continues long past the Trump nomination. The Libertarian party has already seen its membership double and its revenue quadruple in the Age of Trump. The Libertarian National Committee’s chair, Nicholas Sarwark, believes the LP could become a major party. “The ideal is that we use [the 2016 election] as a springboard to mass defections and the destruction of at least one of the old parties,” he explained. “It’s time for the Republican Party to fall apart and go away,” he added. “Or the Democratic party. I don’t really care which.” Watch Reason TV’s interview of Sarwark here and CTV’s interview of me below:

from Hit & Run

How the Weld Was Won

Judge James P. Gray, the Libertarian Party’s vice presidential candidate in 2012 (teamed with former New Mexico Gov. Gary Johnson) was on his way to give a nominating speech at the Libertarian Party’s national convention, held over the weekend in Orlando, for his successor: former Massachusetts Gov. William Weld.

“They are the two strongest, most qualified candidates in the race for president,” Gray (who made a name for himself in the libertarian world for being a sitting state judge openly against the war on drugs) tells me, and that includes the major parties. There is around the two former governors “not a hint of scandal” and they are “not bullies.”

This praise comes out full throated and sincere, although Gray, who expected until a couple of weeks ago to once again sally forth on the field of electoral battle with Johnson, admits he was “devastated” to be jilted for Weld. That said, he always told Johnson “if you find a better, more experienced choice” willing to run with him, Gray would nobly step aside. “But I didn’t expect he would.”

But Johnson did find his Weld, who he says over and over exceeded his wildest expectations for a running mate.

Gray isn’t the only Libertarian who had feelings of devastation attached to Weld’s candidacy.

Richard Lion, a candidate for U.S. Senate from Connecticut for the Party (L.P. delegates are very serious about their Party and its business; a surprisingly large number of delegates I interviewed at the convention, possibly a majority, had run for some local, state, or federal office with the Party) sums up the feelings of many about Johnson himself: “I don’t think Gary Johnson is a great libertarian in the sense of a Ron Paul or Harry Browne, but I do think he’s in the best position to move the Party forward.”

General love for Weld was even more muted, pretty much nonexistent. Neither I nor any of my Reason colleagues reporting from the convention found any delegate who wasn’t working for the Johnson campaign who had independent enthusiasm or love for Weld as their vice president.

Weld won his very bare majority, 50.5, on a second ballot entirely based on a desire to give Johnson what he wanted, what he almost begged for from them.

A lot of the delegates, including ones who ultimately voted for him, just don’t trust the guy. The two reasons I heard the most was his past support for some gun control laws, and his backing out of a promise to run for governor of New York on the L.P. ticket in 2006. Weld was a hard man to get face time with if you weren’t national TV this weekend, but in one of the chances I had to ask him a question directly, he said he was “as disappointed as anyone else” that it didn’t work out in New York in 2006 and that the Party had sufficient time to find another nominee.

Alicia Dearn, a lawyer from St. Louis, was presidential vote runner-up Austin Petersen’s choice for vice president. Petersen wanted even Johnson fans to get behind her as a unity candidate. Dearn herself, before the first balloting, drew Weld on stage to extract from him a promise to not “betray” the Party.

“I’m a Libertarian for life,” Weld said, and tried to push the delegates’ buttons by saying that the attention that would likely come with him getting the nomination would help not only “getting us elected to the White House” but downticket Libertarian candidates as well. After clarifying that what she meant by “betray” was simply, leave the Party?, Weld said: “Libertarian for life means not going back to any other party.”

“I did not expressly ask people to vote for him,” Dearn clarified in an IM interview today. “I asked for unity, to support Gov. Johnson, and for everyone to vote their hearts.”

After the first ballot, on which Dearn got 29 votes when an extra nine would have given Weld a first-ballot majority, “I did ask the few people who voted for me to vote for Gov. Weld,” Dearn said. “I wanted to avoid a fractious, multi-ballot vote because we were getting a lot of national attention.”

Dearn says she herself didn’t manage to cast a vote. She says she does fully support the Party’s ticket, and that Johnson’s people did not ask her to do any of this directly. Her belief that getting into the polls for the L.P. was more likely with Weld pushed her over to full support.

Right before the first ballot vote for vice president, Johnson addressed the convention assembled. “So many just don’t believe that victory can happen,” he said. “That was not me in 2012….but the way you deal with setbacks ultimately determines your success. And beyond my wildest dreams Bill Weld is the running mate I would love for you to choose. We have an opportunity to actually take and win the presidency,” Johnson said, but only with Weld.

“I don’t want to be debating my vice presidential candidate,” he said. “With Jim Gray in 2012 we tried desperately to get him in national media, but not one national media hit.” But with Weld, his merely announcing his intention to seek the job he’s gotten an unprecedented amount of respectful national media.

“If you want to grow the Party, to reach out to tens of millions of Americans right now, please give me Bill Weld and I’ll give you my best efforts. Please, please.”

Johnson’s “please, please”s to the convention assembled regarding Weld were so heartfelt and yearning one would have had to have a hard heart toward Gary indeed not to give him the vice president he wanted so badly. And yet, a majority of them did not, not on that first ballot.

Larry Sharpe, a management and business motivational consulting with Neo-Sage in New York, won over the crowd with a video laying out a fascinating life of struggle involving drug laws harming his adoptive mother and other personal, family, and business setbacks from which he bounced back, through pluck and free markets.

“Who better to call out the military-industrial complex than a Marine?” Sharpe asked the convention. “Who better to challenge the prison-industrial complex than someone whose family has been destroyed by it?” He felt his personal story of conquering “poverty and total financial destruction” would put a fresher and more compelling face on the Libertarian small-government, self- and communal-help message than would another old white Republican. 

Will Coley, the Muslim convert who ran as running mate with anarchist Darryl Perry, was hyped in a nominating speech from delegate Caryn Harlos as the real key to representing the full range of libertarianism on the ticket, someone whose libertarianism they could trust, and whose colorful story as a Muslim For Liberty in alliance with libertarian activists in the Muslim world would be as mediagenic a story as they could hope for.

Sharpe’s appeal was the most resonant, and he came in second on the first ballot behind Weld, with 264 votes, 30.3 percent.

Then came an hour or so of turmoil. Fourth place Derrick Grayson, a motivational speaker for the black community, dropped out. Grayson won 48 votes, 5.5 percent, on the first ballot after being endorsed by antivirus software developer John McAfee, who came in third on the presidential ballot.

McAfee turned his energies after his loss to upbraiding the Party for its lack of race and gender balance, and said before the nomination began that of course he would have to put his support behind “the black guy.” Grayson threw his support behind Sharpe, the other black guy, for the second ballot and warned the convention about selling their souls to anyone such as Weld who he thought had and would betray the Constitution.

Tiffany Madison, McAfee’s campaign manager, right after the first ballot count was announced, was calling McAfee to get him back to the floor to whip the delegates into doing anything other than nominating Weld, who she considers “toxic. I will vote for anyone to keep that guy” away from her beloved Party.

Andy Craig, with the Johnson campaign and running for Congress with the L.P. from Wisconsin, told me they were not too worried as the whipping between votes commenced. Weld actually did better first round than they expected, and he considered the existing first ballot Dearn support likely “soft.”

Ron Nielson, Johnson’s campaign manager, told me of some of the problems with whipping delegates between ballots: a lot of them literally just “walk outside and have lunch and don’t come back” so you can literally lose support that way. They had a system of mass texting their people that hopefully prevented too much loss that way. 

While to most sober outside observers the choice between Weld and his non-professional competitors might have seemed obvious, Nielson says they always had to remember the political truth that “you must respect the voters and their right to make a decision. Your job is to change that decisions, and you can’t do that unless you understand the reasons they think what they do.”

Another source, not Nielson, told me Weld made a special reach-out to the Ohio delegation, mad at him over his support for John Kasich in the GOP race, as Kasich is considered a special villain by them for his efforts against their ballot access.

Michael Cloud, a longtime Party activist, worker, and speaker, said between ballots that a commitment he believed in from Weld to help finance ballot access in six figures for the Party made him happy to vote for him. The Weld family are “very well-heeled” and he has some faith in Weld’s ability to make his personal relationships pay off for the Party, and he believes his media power has already proven itself even before the convention.

Cloud trusts that the two ex-Republicans will try their best for the Libertarians because they “want to be impact players, they want to sack the quarterback.” On at least two occasions at the convention I heard Weld refer to his strong desire to escape or overcome the elements of the GOP he had grown quite contemptuous of, the social conservative end. He does, whether or not he’s a hardcore Libertarian, seem to be motivated to rub the Republicans’ face in the dirt electorally, which can only help.

On the second ballot, Weld had picked up 15 new votes and was the winner, with a bare 50.5 percent. Sharpe had 46.9.

The hall didn’t exactly explode with unalloyed joy at the announcement, as those numbers should indicate. A motion to let Weld speak to them after he won had a lot of loud “no”s. Someone tried to raise the issue that Grayson’s nine second ballot votes shouldn’t count as he’d dropped out already. But many votes had already been cast before he did. There was no tricky way around Weld’s victory.

Johnson was wobbly with relief. Did he have any doubts, I asked? “I was actually worried, yes, genuinely!” he said. But a little bit later, ever the athlete, Johnson noted that no one thinks about the tiny, tiny sliver of difference that might exist between a gold and silver winner. A win is a win. He had his Weld.

Weld got his minutes to address the convention, victorious. He promised he and Johnson would “do our best to represent the best ideas and ideals of the Libertarian Party. We can offer something meaningful and realistic for the entire country, a third way. Our platform of economic and fiscal responsibility and and social and personal freedom,” well, that’s something that “does not match the current” stances of either major party. “We will have a lot to talk about in the Fall!”

Is this a matter of the proof that the Big Boys ultimately control and manipulate poor delegates in Party politics? No, it was just proof that the delegates who did select Johnson were dedicated enough to him, or at least to the idea of what he could do in terms of credibility, money, and attention, that they were willing, at least slightly over half of them, to swallow someone who almost none of them seemed to think of as particularly libertarian in their sense.

Luckily for the Johnson/Weld campaign, at this point they probably don’t have to worry too much about what the over 900 delegates at the Libertarian National Convention in Orlando thought of them. In a press conference with both Libertarian candidates right after Weld won, Johnson said that “outside of this building tens of millions of Americans want to understand what libertarianism is and means. In my opinion this is the best message team going forward to accomplish that.”

Or, as Charles Peralo, who sought but did not win the position of chair of the Libertarian National Committee this year said, and many Libertarians who are less than in love with Weld would agree: With Johnson and Weld moving forward, “America finally has a serious ticket in this race for president.”

from Hit & Run

Forget Big Brother, Facebook Is Watching (And Listening) To Everything You Do

It’s irresistible, enticing and addicting.  And, as reports, it’s available 24-hours a day all over the world to billions of people. Facebook beckons to users seemingly with a two-prong approach – both the pressure and pleasure to post. We share stories, photos, triumphs and tragedies. It is ingrained into our daily lives so deeply that studies show people check Facebook, on average, 14 times a day.  With all those eyes all over the globe dialed in and the purchasing power available, the online giant has tapped into a controversial delivery of data into its intelligence gathering.  It all starts with something that you may not even realize is enabled on your phone.

A little-known feature deeply embedded in Facebook's privacy settings is causing users to think twice aboutnot just what they write but what they say. As's Clarice Palmer explains…

The debate over Internet privacy and the responsibility social media companies should carry in protecting user privacy never ceases to spark controversy — among both users and tech insiders. But while Facebook, one of the most popular social media networks, struggles with accusations of news suppression and even fraud, a new report on the network’s microphone settings is reigniting past fears of surveillance that were never fully addressed.


According to University of South Florida Professor Kelli Burns, Facebook is a huge part of the lives of smartphone users. Due to this widespread addiction, Burns explains, “Anytime you’re using your phone, any kind of information that you’re putting into your phone, looking at on your phone, Facebook can access that.” But details regarding what you’re doing or what you’re browsing while on Facebook are not the only type of data the Silicon Valley giant can access. The social media’s microphone feature, which can be enabled by the user via Facebook’s settings, is also listening.


A few months back, a Facebook user took their concerns over the microphone settings to Reddit. The post quickly went viral, prompting Facebook to issue a statement on the matter. According to the social media network, the company does not “record your conversations.” Instead, the statement claimed, if the user chooses to turn the microphone feature on, Facebook will “use your microphone to identify the things you’re listening to or watching based on the music and TV matches we’re able to identify. If this feature is turned on, it’s only active when you’re writing a status update.”


But According to ABC’s WFLA, Burns might have been able to prove Facebook isn’t telling the whole story behind this technology.


From the publication:


We tested the theory with Kelli, and even we were surprised by what we found and saw.


“Kelli enabled the microphone feature and talked about her desire to go on safari, right down to her mode of transportation. ‘I’m really interested in going on an African safari. I think it’d be wonderful to ride in one of those jeeps,’ she said aloud, phone in hand.


“Less than 60 seconds later, the first post on her Facebook feed was a safari story that seemed to pop up out of nowhere. Turns out, it was a story that had been posted three hours earlier. And, after mentioning a jeep, a car ad also appeared on her page.”


This test, the news organization contended, demonstrates how Facebook picks up “buzz words” in order to show that particular user ads and posts matching their interests. The fact the professor made those comments after turning the feature on may serve as an example of how easily Facebook can trick users into giving the company access to their private conversations.


Though Facebook claims it does not store or share user information, the very existence of the technology may give hackers, including government-backed security experts, a reason to explore private data further, putting the privacy — and even safety — of Facebook users in danger. What’s more concerning about this issue is the company’s previous association with the U.S. National Security Agency’s PRISM program, which gave federal agents access to users’ private data, including, emails, photos, and instant messages, among other things. While Facebook’s more recent claims concerning user privacy regarding the microphone feature might be legitimate, the company’s former cooperation with NSA officials could indicate the feds may seek to explore the microphone feature — whether Facebook agrees with them or not.


Smart TV manufacturers like Samsung have recently been forced to publicly address privacy concerns after news broke the technology was listening to users’ conversations. As the same users learn Android Smart TVs may also present vulnerabilities that give hackers the ability to record what they do, other members of the tech industry, like Facebook, might also face growing obstacles and skepticism from users.


In contrast, though Apple has aligned with the federal government in at least one case, the company was widely praised for standing for privacy rights in a legal standoff involving the FBI over the San Bernardino shooter’s iPhone. But unlike Apple, whose hesitation regarding lobbying practices has earned negative attention from Congress in the past, Facebook has a relatively cozy relationship with Washington. Whether this relationship is mutually beneficial to both parties — and whether Facebook will respond like Apple has — remains to be seen.

But Market-Ticker's Karl Denninger rages further – demanding an answer to "how is this legal?"

…the article Facebook appears to confirm that it does indeed use your microphone — which means it listens to and uploads the contents of speech and other sound around you when you are using the app.


Explain to me, if you would, why you'd ever allow such a device in your pocket?  Further, please explain to me exactly why you believe Facebook would only use this for "ad targeting"….. when there is literally nothing to prevent them from doing otherwise.


And finally, please explain why this is legal and Facebook and its officers are not under criminal indictmentparticularly when you consider that people other than you may well speak within the listening range of your microphone, and while you may have given consent they did not and further, they had no idea they were being recorded!


So you want to have a conversation with me, eh?  Well I don't consent to being recorded, and in many states (including Florida) unless said recorder is either openly and notoriously present and thus obvious (giving me the clear option to refuse to talk to you in its presence) or you have my consent it's a felony to make that recording in any situation where I reasonably believe I'm not being taped or overheard.


Oh by the way, the use to which you put the recording is immaterial; it is not legal in this state to do so for "purely" advertising purposes; any such use is unlawful and in fact it is a felony in this state.


Heh Zuckerpig — your ass ought to be indicted for this crap, and Florida is not alone in criminalizing this activity.

*  *  *

And finally, here is a media design professor exposing how his Facebook provacy settings were opted back in without notice or consent…

via Tyler Durden

North Korean Propaganda Outlet Hails Trump as ‘Wise,’ Jerry Brown Endorses Clinton, Bias at U. of Oregon: P.M. Links

  • Kim Jong-UnThe North Korean government might have a soft spot for Donald Trump. A state-run news agency published an editorial calling Trump “wise.” The presumptive GOP presidential nominee has criticized U.S. policy toward North Korea and says he would be willing to meet with Kim Jong-Un. Make Korea Great Again, I guess.
  • TV host Jeff Corwin said bad parenting contributed to the death of Cincinatti Zoo gorilla Harambe, who was shot after a toddler wandered into the gorllia’s territory. “The zoo is not your babysitter,” said Corwin.
  • The University of Oregon says the details of its bias response reports are “not in the public interest.”
  • California Gov. Jerry Brown endorses Hillary Clinton.
  • Here’s Amber Heard’s side of the dispute between the actress and the husband she is divorcing, Johnny Depp.
  • A terrifyingly large alligator menaced a golf course in Florida.

from Hit & Run

Brexit Bounce, Crude Crumble, & Dismal Data Slam Stocks, Bid Bonds & Bullion

Spending rose (thanks to higher costs for energy) and everything else was dismal… and then Brexit moved into the lead – Inconceivable…


Following the flash crash in China overnight…


From Friday's close, things went a little turbo with crude crumbling and gold and bonds bid…


Which left "Sell In May" working for Trannies.. but the late-day panic bid (sparked by USDJPY) saved the month for The Dow…


PMs were May's laggard (Silver was worse than gold), Crude oil the big winner…

*  *  *

On The Month:

  • USD Index Up 3% – best month since Nov 15
  • AUD Down 4.9% – Worst month sine Jul 15
  • WTI Up 4.8% – 3rd monthly gain in a row
  • Gold Down 5.9% – Worst month since Nov 15
  • Silver Down 10.4% – Worst month since Sept 14

30Y Treasuries were the only part of the complex lower in yield on the month as 2Y yield soared 15bps (before plunging today)…


The USD Index rose over 3% on the month led by AUD weakness offset by Cable strength…


Silver notably underperformed gold on the month but crude was the biggest winner…

*  *  *

Since Friday, Treasury yields tumbled as a slew of weak data this morning suggested the rebound is not there…


And stocks began to leak yesterday (futures) then accelerated lower today…before melting up to VWAP


As 17,773.64 was all that mattered today – Getting The Dow green for May… (note 17,740 is the 50-day moving average)


Since Friday, it was chaos as the rebalance meltup managed to get the S&P green for a second before the last minute dump…


Cable was the big loser today as Brexit polls showed a pickup in "leave" support…but the USD remains marginally higher on the week…


Gold drifted higher all day as silver dropped. Crude and Copper tumbled as Europe closed…


Crude algos seemed to run out of stops to churn above $50 and puked it all back…


Charts: Bloomberg

via Tyler Durden

Here’s Proof That The US Dollar Is Insanely Overvalued

Submitted by Simon Black via,

Shocking. Astonishing. Jaw dropping.

There’s just no other way to describe how cheap South Africa is right now.

Between the worldwide decline in commodities prices, and a major crisis of confidence in the national government here, the local currency (South African rand) remains at the lowest level it’s been… ever.

And that’s made nearly EVERYTHING here dirt cheap if you’re spending foreign currency… especially US dollars.

Just doing something simple like eating out at a restaurant or going to the grocery store can be startling.

Once you do the math and convert the prices back to US dollars, it almost seems like you’re missing a zero.

This also carries over into many asset prices, including certain areas in the property market.

Here in Johannesburg, I saw an amazing home for sale in one of the nicest, upscale neighborhoods with an asking price of about $515,000 US dollars.

Now, half a million bucks might not sound terribly cheap– until you find out what you’re getting for the money.

The house is an enormous seven-bedroom compound of nearly 13,000 square feet.

Pool. Courtyard. Fountains. Private chef’s kitchen. Parking for eight. Separate home for live-in staff. Wonderful neighborhood with top schools, shops, and restaurants.

Something like this would go for at least 20 times that price in Los Angeles, and 40 times the price in London.

Much of this price mismatch is due to the currency anomaly– that the South African rand is so undervalued, AND that the US dollar is so overvalued.

Perhaps this is most obvious when looking at the travel package I just bought.

Longtime readers know that I’m a big fan of special “round the world” fares that major airline alliances offer.

I’ve written about this before— all three of the major global airline alliances offer special fares for passengers when you travel completely around the world.

A typical journey might be, for example, Los Angeles to London to Singapore to Sydney and back to Los Angeles again.

That itinerary takes you all the way around the world, and you’ll pay one simple fare that’s usually quite attractive.

Typically the round-the-world fare is calculated based on the country where you depart.

So if your journey starts and stops from London, your fare will be quoted and priced in British pounds.

But if your journey starts and stops in Los Angeles, your fare will be quoted and priced in US dollars.

The strange thing is that when you convert the currencies, the amounts won’t match even though the journey is essentially the same.

In other words, LA-London-Singapore-Sydney-LA costs $11,400, while Sydney-LA-London-Singapore-Sydney costs AUD 13,600, or about $9,875 USD.

That’s more than a $1500 difference.

This doesn’t make any sense since both itineraries are comprised of the exact same flights, i.e. Sydney to LA, LA to London, London to Singapore, Singapore to Sydney.

The flights are simply in a different order. That’s all. The price should be more or less the same.

And yet, due to these major anomalies in the currency markets, there are major differences in the fares.

Here in South Africa, I’ve just booked a business class ticket that goes from Johannesburg to Asia, then the US, Chile, Madrid, London, and back to Johannesburg.

The price I paid was 70,000 South African rand.

But due to the rand being near it’s all-time low, that’s the equivalent of just $4,500.

To put this in perspective, the same itinerary starting and stopping in the US costs about $12,500 in business, and over $6,600 in economy class.

Crazy. I paid 30% less to fly in business class for the exact same flights that someone would pay in US dollars to fly in economy class.

Clearly this makes no sense (but I’m happy to take the deal).

The reason is obvious: the rand is undervalued relative to the US dollar.

Ten years ago it was the opposite: the US dollar was deeply undervalued relative to other currencies.

Oil was expensive, and major commodities exporters from Brazil to Australia, and even here in South Africa, had overvalued currencies.

Now the pendulum has swung in the other direction.

Commodities prices have plunged, and those same exporters are experiencing major economic slowdowns. Their currencies have all been punished.

Undoubtedly the right equilibrium is somewhere in the middle.

But markets rarely find the equilibrium. They almost always overcorrect.

So now the rand has plummeted and become absurdly weak, while it’s the US dollar that has become extremely expensive.

Sure, it’s possible that the dollar becomes even stronger (and the rand weaker).

But these things routinely go in cycles, and there will be a correction. There always is.

So anyone who owns US dollars has an opportunity right now to trade overvalued pieces of paper for undervalued real assets… as long as you look abroad.

Part of being a Sovereign Man is having a global view– expanding one’s thinking to the entire world.

I’ve written before about how our company is acquiring or has already purchased productive farmland in central Chile, deeply undervalued, profitable businesses in Australia, and real estate in Colombia.

These are all REAL assets. And as long as central bankers continue to print paper money without restraint or regard for the consequences, it’s critical to own something real.

Gold and silver are also real assets, and both are historically inexpensive relative to the US dollar.

Bottom line: take advantage of this opportunity to trade your paper for something of value. It won’t last.

via Tyler Durden

Liberals Need to Stop Giving Students Reasons to Buy Trump’s Anti-PC Rhetoric

Milo YiannopoulosPolitical correctness is a vague and ill-defined concept, but hatred of it is one of the most consistent animating philosophies of Donald Trump’s supporters. It’s discouraging, then, that self-proclaimed progressives at a number of universities are playing right into Trump’s hands by giving legitimacy to complaints about PC-based censorship on campus. 

The college left’s treatment of Breitbart tech editor (and pro-Trump provocateur) Milo Yiannopoulos, whose visit to DePaul University last week was interrupted by Black Lives Matter protesters, is a perfect example. Yiannopoulos is currently touring colleges—at the invitation of conservative and libertarian students—telling everyone how evil, censorious, and militantly illiberal the left has become.  His over-the-top shtick–“feminism is cancer” is one of his favorite mantras—relies upon the idea that the left is intolerant of offensive ideas. 

In response to his antics, the left continues to provide ample fodder for the validity of his hypothesis. At DePaul, protesters stormed the stage and appeared to threaten Yiannopoulos with a light blow to the face. Indeed, censorship and outright violence has derailed a number of campus speakers who were deemed controversial for one reason or another, from the arch conservative #NeverTrumper Ben Shapiro (now an antagonist—or rather, protagonist—in the Yiannopoulos saga) to Metallica drummer Lars Ulrich

I disagree with Trump supporters on almost everything, including their belief that political-correctness-run-amok is some great national concern. But the American university is certainly one place where this concern has relevance: it is true that students and faculty members are routinely investigated for merely saying the wrong thing.  

As I argue in a recent column for The Daily Beast, progressives will never defeat Yiannopoulos and his ilk if their reaction to his free speech experiment is to prove him correct about their censorious intentions: 

After his DePaul appearance, Yiannopoulos headed to the University of California at Santa Barbara, where students literally carried him to the stage on a throne. 

Campus censorship is a moral wrong on its own. But look, progressives: if you want to stop the Trumps and Yiannopouloses (Yiannopouli?) of the world, you might want to ask yourselves if continuously proving them right in the eyes of their fans is the best strategy. 

Students who disagree with Yiannopoulos are welcome to call him out: ask him tough questions, hold civil demonstrations before and after his events, invite speakers that counter his narrative. But censoring him doesn’t stop him: it does the opposite. It makes him a hero. He benefits from it. 

And so does Trump.

from Hit & Run

Intern at Reason This Fall!

Reason is now accepting applications for our FALL 2016 journalism internship.

The Burton C. Gray Memorial Internship program runs year-round in the Washington, D.C. office. Interns work for 12 weeks and receive a $5,000 stipend.

The job includes reporting and writing for Reason and, helping with research, proofreading, and other tasks. Previous interns have gone on to work at such places as The Wall Street JournalForbes, ABC News, and Reason itself.

To apply, send your résumé, up to five writing samples (preferably published clips), and a cover letter by the deadline below to:

Gray Internship
1747 Connecticut Avenue, NW
Washington, DC 20009

Electronic applications can be sent to, please include “Gray Internship Application” and the season for which you are applying in the subject line.

Summer Internships begin in June, application deadline March 1

Fall Internships begin in September, application deadline July 1

Spring Internships begin in January, application deadline November 1

Internship dates are flexible.  

Looking for a full-time job at Reason? Go here.

from Hit & Run

These Are The Two Most Important Questions Facing The Market

With the S&P500, seemingly unable to break decisively above 2090, investors are wondering what are the main catalysts that can push the market higher, and are asking questions. To help with the confusion, Deutsche Bank has laid out the top five recurring questions asked by investors who are trying to figure out what will push stocks higher. Among these are whether European (and global) equities will rally as Brexit fears are being priced out; is there scope for earnings upgrades and will value stocks finally start outperforming.

However, the two most important questions by far, those whose answer will determine not only the near term return of the S&P, but also global equity markets as well as that all-important commodity, oil, are the following:

  • Can the oil price hold up even as the dollar rises?


  • Can the CNY depreciate without hurting asset prices?

Let’s take a look at these in sequence; first: will the recent disconnect between rising oil and a rising dollar persist? This is Deutsche Bank’s answer:

Can the oil price hold up even as the dollar rises? The oil price has risen above $50/bbl this week, despite a number of negative catalysts: a) the broad dollar TWI is up 3% since the start of May on increased market expectations for a Fed rate hike – consistent with oil below $40/bbl, according to historical correlations; b) iron ore has already dropped by 30% from its late April peak as the China rebound has faded (historically the correlation with the oil price has been very strong at around 60%); and c) the oil price has rallied far ahead of what sluggish global economic momentum would have suggested. Oil remains crucial, given that it has been the key driver of US high-yield credit spreads in this cycle, with the risk premium for European equities in turn moving in line with credit spreads.

  • The benign scenario: the positive price impact of the tightening in the oil market continues to outweigh the negative catalysts – pushing the oil price higher or keeping it at least stable. This allows US high-yield credit spreads to remain at current tight levels, thus preventing a renewed outbreak of credit stress.
  • The risk scenario: the oil price drops again as the USD rises further and the slowdown in China becomes more pronounced, putting renewed upward pressure on credit spreads and hurting equity performance.

Adding some literal color to the answer, DB then goes on to layout some of the key considerations, including the 74% probability of a rate hike by December, the rise in WTI above $50 despite the 3% rise in the USD TWI in the past month and the resulting 25% overvaluation of oil relative to its regression to the US Dollar, all of this in light of the strong correlation between the USD and crude.


DB then points out the recent weakness in China-supported commodities and asks if oil can maintain its levitation even as the latest Chinese bubble has burst, while at the same time not only has oil overshot recovery expectations but spec positioning is at two-year highs, suggesting there is a risk for a sharp selloff should the momentum reverse:


DB does point out that US crude oil production appears to have peaked for now, and that according to the IEA the market should be in balance in H2, but it also notes that historically this particular fundamental relationship has been irrelevant for the price of oil.


And then, if oil does correct, what will it impact: most likely HY bond spreads.


That covers DB’s thought on oil; what about that other critical factor, the Chinese Yuan, namely “Can the CNY depreciate without hurting equities?” DB’s response:

Can the CNY depreciate without hurting equities? The Chinese currency has depreciated by 1.6% against the dollar since mid-April, against the backdrop of a broad dollar rebound. CNY weakness is a function of Fed tightening expectations, and is therefore likely to intensify as Fed hikes become more likely. Chinese authorities face difficulty in supporting their currency through higher rates given high private sector debt and weakening growth momentum. DB forecasts a weakening of over 6% in CNY by the end of the year (to USD/CNY 7.0). This points to downside to European equities, which have tracked USD/CNY closely since the middle of last year.

  • The benign scenario: the fact that the PBoC’s CNY basket is already below the target level of 100 and that authorities have managed to stop capital outflows suggests both, that depreciation risk is lower than it was in mid-2015 and early-2016 (when the CNY basket was clearly above 100) and that a depreciation against the dollar could be less problematic for global risk assets this time round (if it does not translate into renewed capital outflows). Furthermore, the upcoming G20 Summit in September hosted by China means they are unlikely to rock the boat in the near-term.
  • The risk scenario: the PBoC’s basket is merely a reference rate rather than a hard peg, as our China economist argues, and CNY weakness driven by Fed tightening triggers more capital flight since leakage through trade channels in particular have not been fixed. This sparks concerns of a) renewed capital outflows and FX reserve draw-downs, leading to tighter global financial conditions; b) weaker commodity prices, as a lower CNY depresses Chinese commodity imports; c) the renewed risk of a sharp one-off devaluation in China to stem reserve losses

As we have documented here before, the biggest reason why the market is focused on the Chinese currency is because CNY weakness is a function of Fed tightening expectations, and therefore likely to continue as Fed hikes become more likely; needless to say, the natural response to a stronger currency (due to its USD peg) would be to raise rates, however as a result of an unprecedented debt load, China can not afford to do this.


Here, DB anticipates further Yuan weakness, and forecasts that the year-end value of the USDCNY will be 7.00; It also points out that so far equities have not reacted to the CNY weakness over the past month – unlike during the depreciation episodes in August and January.

Why is this the case? One possible explanation is that capital outflows have been stopped and that the PBoC’s RMB basket is already below its target level – this would explain the lack of selling of various US-denominated assets. However, DB adds, “capital still has the potential to escape through trade and our China economist argues that the index is used as a reference rather than a hard peg”


* * *

What are DB’s conclusions? In one word: skeptical.

First, on the question of whether oil can continue rising alongside the dollar, DB says that its commodity analysts expect Brent crude to finish the year close to current levels, at $50/bbl, but chief strategist Sebastian Raedler notes that he is worried about downside risks relative to this scenario, given that the USD, a potentially negative catalyst, has been a more reliable determinant of the oil price over the past ten years (R2 of 80%) than the balance in the oil market, the potentially positive catalyst (R2 of 40%). He adds that “any weakness in the oil price would likely have a negative impact on credit and equity markets.”

As for whether the recent devaluation in the onshore Yuan to levels not seen since February 2011 will impact equities, DB is “not convinced by the argument that Chinese FX vulnerability has been reduced significantly. 6% downside to our FX strategists USD/CNY target of 7.0 by year-end would weigh significantly on the European equity market.” Also, on the US and global stock markets.

For now, it remains to be seen if these pessimistic forecasts play out: oil continues to trade around $50 with the USD rising, which in turn is pressuring the Yuan lower, however so far risk assets have not felt the brunt of it.

Ultimately, the answer is in the hands of none other than Janet Yellen: perhaps a main reason why the stocks and crude have not reacted forcefully to the recent rise in the dollar is because there is little conviction that Yellen will actually follow through with her warning of a June or July rate hike. However, the closer we get to these important dates, should the Fed not relent as it did in March, it is very possible that those who are betting Yellen will chicken out will do so themselves, and the reaction that was observed in August and again in December will recur.

Which is why for anyone seeking answers to these two most important for the market questions, should just ask Yellen. We can only hope that she knows the answers.

via Tyler Durden