Kentucky Teachers Blast Pension Reform Plan; Warn That 401(k) Plans Will “Dismantle Public Education”

Graves County Superintendent Kim Dublin in Kentucky is apparently concerned that forcing her teachers to accept the same retirement plans offered to almost every private sector employee in the country would literally “dismantle public education” as we know it.

Speaking to a local NBC affiliate in Kentucky, Dublin told reporters that she relies on the excessive generosity of Kentucky taxpayers to underwrite her state’s lavish defined benefit plans that she uses as a recruiting tool to attract the ‘best talent’.

A local school leader says she believes proposed changes to Kentucky’s pension system would dismantle public education.


Any day now, Kentucky Republican Gov. Matt Bevin could call for a special session for a vote on pension reform.


Some changes include putting new teachers — or teachers who have fewer than five years of experience — onto a 401k style system. Teachers with more than five years in the classroom will still be able to retire with a full pension after 27 years.


That would limit how long they could continue paying into a pension after reaching that number of years. The current proposal allows for three additional years.


Graves County Superintendent Kim Dublin is concerned by many aspects of the proposal.


She says the current pension system allows her to recruit and retain qualified teachers. “Our success is because of people, not programs,” she says.


Of course, a couple of things seem to be lost on Ms. Dublin.  First, she has no idea whether or not she’s managed to attract the best “talent” to her schools because her teacher union would never allow her track performance metrics and subsequently use those metrics to make hiring/firing decisions.  After all, treating public employees the same way their private sector counterparts are treated just can’t be allowed.

Second, Ms. Dublin seems to not understand that failure to enact pension reform in the state of Kentucky will almost certainly result in her pension ponzi going bust in the not so distant future, thus leaving her teachers with a fraction of the retirement benefits they expected.

As we’ve pointed out frequently of late, Kentucky’s public pensions face a daunting funding hole of $33-$84 billion, depending on your discount rate assumptions, according to a recent analysis conducted by PFM Group.



Meanwhile, the aggregate underfunded liability of pensions in states like Kentucky have become so incredibly large that massive increases in annual contributions, courtesy of taxpayers, can’t possibly offset liability growth and annual payouts…which means it’s trapped in an inevitable downward spiral that will only end when the ponzi runs out of cash.  All the while, the funding for these ever increasing annual contributions comes out of budgets for things like public schools even though the incremental funding has no shot of fixing a system that is hopelessly “too big to bail.”


Of course, maybe “dismantling public education” isn’t such a bad idea…there are hundreds of privately-funded schools sprinkled around the country that somehow manage to provide a far superior education at a fraction of the cost per pupil that public schools demand…

via Tyler Durden

Mike Krieger Warns “We Live In Revolutionary Times”

Authored by Mike Krieger via Liberty Blitzkrieg blog,

The most recent, and perhaps most important, network challenge to hierarchy comes with the advent of virtual currencies and payment systems like Bitcoin. Since ancient times, states have reaped considerable benefits from monopolizing or at least regulating the money created within their borders. It remains to be seen how big a challenge Bitcoin poses to the system of national fiat currencies that has evolved since the 1970s and, in particular, how big a challenge it poses to the “exorbitant privilege” enjoyed by the United States as the issuer of the world’s dominant reserve (and transaction) currency. But it would be unwise to assume, as some do, that it poses no challenge at all.


Clashes between hierarchies and networks are not new in history; on the contrary, there is a sense in which they are history. Indeed, the course of history can be thought of as the net result of human interactions along four axes.


The first of these is time. The arrow of time can move in only one direction, even if we have become increasingly sophisticated in our conceptualization and measurement of its flight. The second is nature: Nature means in this context the material or environmental constraints over which we still have little control, notably the laws of physics, the geography and geology of the planet, its climate and weather, the incidence of disease, our own evolution as a species, our fertility, and the bell curves of our abilities as individuals in a series of normal distributions. The third is networks. Networks are the spontaneously self-organizing, horizontal structures we form, beginning with knowledge and the various “memes” and representations we use to communicate it. These include the patterns of migration and miscegenation that have distributed our species and its DNA across the world’s surface; the markets through which we exchange goods and services; the clubs we form, as well as the myriad cults, movements, and crazes we periodically produce with minimal premeditation and leadership. And the fourth is hierarchies, vertical organizations characterized by centralized and top-down command, control, and communication. These begin with family-based clans and tribes, out of which or against which more complex hierarchical institutions evolved. They include, too, tightly regulated urban polities reliant on commerce or bigger, mostly monarchical, states based on agriculture; the centrally run cults often referred to as churches; the armies and bureaucracies within states; the autonomous corporations that, from the early modern period, sought to exploit economies of scope and scale by internalizing certain market transactions; academic corporations like universities; political parties; and the supersized transnational states that used to be called empires…


Our own time is profoundly different from the mid-20th century. The near-autarkic, commanding and controlling states that emerged from the Depression, World War II, and the early Cold War exist only as pale shadows of their former selves. Today, the combination of technological innovation and international economic integration has created entirely new forms of organization—vast, privately owned networks—that were scarcely dreamt of by Keynes and Kennan. We must ask ourselves: Are these new networks really emancipating us from the tyranny of the hierarchical empire-states? Or will the hierarchies ultimately take over the networks as they did a century ago, in 1914, successfully subordinating them to the priorities of the national security state?

Two hundred and fifty years ago, it was 1767, and the seeds of the American revolution were being spread across the 13 colonies.

The Stamp Act became law two years prior, and many of King George’s subjects across the Atlantic had become enraged by this “taxation without representation.” A few years later came the Boston Massacre, followed by the Boston Tea Party. The rest is history.

Two hundred and fifty years prior to that, on October 31, 1517 (exactly 500 years ago today), Martin Luther sent his Ninety-Five Theses on the Power and Efficacy of Indulgences to the Archbishop of Mainz, thus kicking off the Protestant Reformation. The Catholic Church’s extraordinary influence over the religious and political life of Europe up to that point would never be the same again.

Both these eras were earth-shattering revolutionary time periods which massively transformed the Western world over the subsequent centuries. Taking on the Catholic Church in the early 16th century and Great Britain in the late 18th would’ve seemed like total suicide to people living at that time. Nevertheless, and against all odds, both Great Britain and the Catholic Church were successfully confronted and exposed as more vulnerable than anyone had imagined.

Although I don’t write on it much, I’m a big believer in cycles. In my opinion, it seems Western civilization finds itself in a similar state to where it was both 250 and 500 years ago. In other words, it appears we’re once again on the cusp of momentous paradigm level change regarding how the world functions.

Naturally, this stuff doesn’t emerge out of a vacuum. Whenever a system or way of organizing human affairs reaches a certain level of corruption and also refuses to reform (think crooked government responses to the financial crisis), you invariably get a reaction from the public. If this demand for change is not appropriately addressed and things continue to decay, some sort of revolution becomes inevitable. That’s where I think we stand today.

The revolution is already happening in many respects, but because we’re so busy living in the chaos of it all, it’s hard for many of us to recognize. Specifically, I think this time period will be remembered as an era during which a rapid decline in the forces of centralization and concentrated power occurred. Many of you will read this and think I’ve lost my mind. After all, aren’t multi-national corporations, oligarchs and political crooks in Washington D.C. and Brussels more in control than ever? In meaningful ways this is true, but I’d argue we are at or close to a historical peak in such centralized power. Looking back 25 years from now it should all make sense, it’s just tough to see the big picture while in the thick of it.

There are two things driving this revolution. First, there’s what’s going on under the surface at the grassroots level. To use the USA as an example, the vast majority of Americans can’t agree on much, but we agree that something is very, very wrong. While we can’t find consensus on solutions, we agree that there’s a big problem. Faith has been lost, deservedly, in the media, the financial system, political institutions, intelligence agencies, etc. These entrenched power interests have therefore resorted to unprecedented levels of propaganda, censorship and threats to hold on to their power. Thus far, they’ve maintained it, but it’s come at an enormous cost. Credibility is gone.

With the veil of credibility shattered, a power structure must resort more aggressively to coercion and even violence to maintain control. This can work in the short-term, but it’s ultimately a losing strategy. Here’s where the second driver of the revolution comes into play: technology. Specifically, technology has provided the public with tools to rebel against the status quo in a peaceful and effective manner.

For instance, media narratives used to be highly centralized within a few well-funded and powerful organizations, but thanks to the internet and social media we now have the citizen journalist who can influence tens of millions with a short video clip and a click of a button. Likewise, money has long been the domain of highly centralized nation-states and their shady central bankers, but we now live in a world with Bitcoin and various other crypto-assets. Just as a handful of media barons no longer control the human narrative, clusters of central bankers no longer have a monopoly on money. This is an incredible development and not one I believe can be reversed. The cat of decentralization is way too far out of the bag.

The one area that’s been lagging significantly when it comes to this decentralizing trend relates to politics and governance. Most of us continue to live in high-population, dangerously centralized nation-states that are extremely corrupt and refuse to reform. Burgeoning frustration with centralized, unaccountable, bureaucratic forces has manifested most clearly within Europe, first with Brexit and now within Catalonia. Politicians in Madrid and EU mandarins think they can just stuff this thing back in the bag and carry on, but they don’t see the bigger picture. This is much larger than the U.K. or Catalonia. Both these movements are just early manifestations of the overall spirit of our times. They’re mere symptoms of the revolutionary era we’re living in.

Going forward, I think people are going to want more autonomy for the regions in which they reside. As an example, people who live in Houston, Texas will, generally speaking, exist within a culture/worldview that feels quite distinct from the one experienced by those who live in let’s say Seattle, Washington. This isn’t to pass judgement, but to acknowledge reality. You can go ahead and apply this logic to any other nation-state with a large, diverse population. As national politics continues to degenerate and decay across the world, people will begin question whether it makes sense to centralize so much power in national capitals in the first place. Demands that power should be more distributed are likely to become far more widespread over the next decade or so.

In that regard, I recently read a fascinating article written by Paul Mason and published at The Guardian titled, Catalonia, Lombardy, Scotland … Why the Fight for Self-Determination Now? The paragraphs below specifically connected with me:

As calls for autonomy and independence proliferate, mainstream left parties are failing to understand the basic principle: in some circumstances, the national question is not a distraction from the fight for social justice – it is the frontline of it. And it is not going away.


Above the problems of economic failure and racial polarisation, the positive factor driving progressive nationalisms, from Scotland to Catalonia, is technological change. Information-rich societies reward the development of human capital; so the ability to study in your first language, to participate in a rich national culture, to create unique local selling points for incoming foreign investment is more important than ever. If the regions, peoples and nations currently demanding more freedom seem to be driven by “cultural nationalism”, that in turn is driven by technological change plus global competition.


The second impact of these forces is the emergence of successful big cities and devastated small towns. In large cities with dense networks of information and culture, you can survive globalisation. In small towns it is harder. So the logical economic strategy is to create a “region” or small nation focused on one big city, and develop the suburban and rural economy in synergy with that city, not the bigger unitary state. If Barcelona were not a massive global success story, the impetus behind Catalan nationalism would be smaller.

If you were to ask me what I think our current massive nation-states are likely to morph into over the coming decades, I think that last paragraph summarizes the situation quite well. A proliferation of numerous smaller, largely autonomous regions with one or perhaps two urban hubs seems quite plausible several decades from now. Just as we’ve seen an explosion in local food scenes focused on farm-to-table, I expect there will be an increased emphasis on local governance and decision-making going forward. One size fits all solutions crafted in far away national capitals will become regarded as not just inappropriate and ineffective, but as a downright insane way to organize human affairs.

I also think political decision-making will move increasingly in the direction of public referendums and direct democracy, as opposed to technocratic bureaucracy and representative democracy (voting for someone to vote for us). In this regard, I found a recent pledge by someone running for city council in my adopted home of Boulder, Colorado kind of fascinating. Here’s what he pledged to do according to Motherboard:

If Camilo Casas is elected to city council in Boulder, Colorado, this November, he doesn’t plan to make any decisions himself. If he wins, Casas will instead give up his vote to Parti.Vote, a “liquid democracy” app he built to change how government functions.


This is how it will work: If more than 50 percent of people in his community vote “yes” on an issue through the app, Casas will vote the same way they do. Only in the event of a tie would he be forced to make a decision based on his own beliefs.


Parti.Vote could be used to help create a “liquid” or direct democracy, where technology is leveraged to place power among citizens rather than representatives. Before the advent of the internet, it was too cumbersome for every citizen to vote on every single government issue.


Now, advocates of liquid democracies argue tech can be used to make democratic systems actually represent the will of the people. The idea has gained traction in EuropeSouth America, and elsewhere.


Casas nevertheless says Parti.Vote is designed to make the US’s representative government system more equitable. The idea is that if politicians commit to voting the same way the people do, they’ll be less susceptible to the desires of big business, interest groups, or deep-pocketed donors.


“I personally am convinced that when you have to lobby a constituency rather than an elected office you will on average get more democratic and consensual outcomes,” Casas told me on a phone call.


For Casas, creating a liquid democracy using his app is more important than the race in Colorado. In fact, he doesn’t even expect to win. “It’s rather unlikely,” he told me.


The real goal is to hopefully convince other politicians to adopt Parti.Vote, which is open-source and free. Later down the line, Casas wants to create a political party that will support any candidate, as long as they commit to making decisions based on what their citizens want.


Parti.Vote will come with several novel features that allow citizens to participate even if they don’t have time to learn about every issue. For example, there will be an auto-vote mode, which aligns your vote with a particular council member’s every time. You can also assign your vote to another member who serves as a delegate. They then have the ability to put it toward an issue for you.

I don’t highlight the above to imply that we’re going to move toward such a governance system tomorrow or the next year, but to provide an example of the general direction I see things heading in. People around the world feel justifiably unempowered, and at the mercy of corrupt forces making decisions thousands of miles away from where they live. Human beings will increasingly look for ways to escape this suffocating trap and empower themselves as well as their local communities.

This desire will serve to reinforce an already occurring and powerful trend toward decentralization which has been thus far primarily driven by technology and mainly affected information flow (the internet, social media), and more recently money (Bitcoin and crypto assets in general). The next big wave of decentralization I foresee relates to politics/government, with Brexit and Catalonia representing mere tremors ahead of the big event.

When people hear the word “revolution” negative feelings often come to mind. Images of pitchforks and torches; of violence and chaos. Although I’m not going to tell you the next ten years will be a cakewalk, I want people to understand that the revolution is already in progress and it isn’t the stuff of nightmares. This revolution is not about simply tearing down what already exists, but about creating something better in its place.

We can all agree that both big business and big government are out of control, corrupt and dangerous. That much is obvious. What we need are both the will to say no, and the consciousness and creativity to build and embrace something better. Don’t stand on the sidelines, don’t embrace the lesser of two evils, and don’t imitate the unethical practices and tactics of your enemies. Stand tall, choose awareness and do your part to help humanity move forward. The future will be shaped by what we do in the coming years.

*  *  *

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via Tyler Durden

Russia Tried To Undermine Trump After The Election

Following today's Senate Judiciary panel hearings with social media executives, the establishment's 'Russians colluded with Trump' narrative is hanging but all but the thinnest of threads.

Having shown that so-called 'Russian actors' "were trying to create discord between Americans," during the election – which politicians attempted to position as "directed against Clinton," top lawyers from Facebook and Twitter said Tuesday that Russian-linked posts and advertisements placed on the social networks after Election Day sought to sow doubt about President Donald Trump's victory.

As we showed earlier, sixteen thousand Facebook users said that they planned to attend a Trump protest on Nov. 12, 2016 organized by the Facebook page for BlackMattersUS – a Russian-linked group.

The event was shared with 61,000 users.

“Join us in the streets! Stop Trump and his bigoted agenda!” reads the Facebook event page for the rally.


“Divided is the reason we just fell. We must unite despite our differences to stop HATE from ruling the land.”

And that appears to have the 'Russians' m.o. after the election, as Politico reports, Facebook general counsel Colin Stretch told a Senate Judiciary panel that content generated by a Russian troll farm known as the Internet Research Agency after Nov. 8 centered on “fomenting discord about the validity of his [Trump’s] election.”

“During the election, they were trying to create discord between Americans, most of it directed against Clinton.


After the election you saw Russian-tied groups and organizations trying to undermine President Trump’s legitimacy. Is that what you saw on Facebook?” Sen. Lindsey Graham (R-S.C.) asked at the hearing.

Stretch and his Twitter counterpart, Sean Edgett, called that an "accurate" statement.

Not really the one-sided, reason-for-my-loss, Russians-colluded narrative that the left (and right establishment) would like to be spun.

The social media giants' counsels parried most grandstanding blows from the various politicians; however, there were five key moments that Politico identified during the hearings…

1) First look at the fake Russian ads

Tuesday's hearing offered the public its first look at political ads that Facebook and Twitter have identified as being purchased by the Russia-sponsored Internet Research Agency. The companies provided copies of the ads to congressional investigators earlier this month and revealed yesterday that they were seen by millions of users in the U.S. Sen. Richard Blumenthal (D-Conn.) showed an advertisement depicting an altered image of comedian Aziz Ansari holding a sign deceptively claiming voters could cast ballots via text from home. Meanwhile, Coons decried a sponsored image of a kneeling solider with the text "Hillary Clinton has a 69 percent disapproval rate among all veterans" overlaid on top. Facebook has said publicly that lawmakers should decide whether to make all 3,000 Russia-backed ads it has found available for public review.


2) Facebook not sure whether Russian ads swayed election

Facebook wasn’t able to offer much in the form of a definitive answer when Sen. Mazie Hirono (D-Hawaii) asked the company if it felt like content on its platform had an effect on the election. “In an election where a total of about 115,000 votes would have changed the outcome, can you say that the false and misleading propaganda people saw on your Facebook didn’t have an impact on the election?” Hirono asked. Stretch dodged in response. “We’re not well-positioned to judge why any one person or an entire electorate voted as it did,” he said.


3) Facebook won’t say no to accepting election-related foreign money

Franken, in an especially fiery exchange, asked Twitter, Google and Facebook if they would commit to not accepting foreign money payments on election-related advertisements, saying he wanted a simple “yes” or “no” answer from the platforms — and wanted to know why Facebook didn’t catch Russian agents purchasing ads sooner. Stretch said he hesitated on the foreign currency question because “it’s relatively easy for bad actors to switch currencies. So it’s a signal but not enough.” Edgett gave a quick “yes” to Franken, and Google Law Enforcement and Information Security Director Richard Salgado said Google would need to have a good enough “signal” that the transaction was illegal to keep it from going through. “Foreigners can’t use money in our campaign, you know that?” Franken said.


4) Democrats — allies of tech — attack their friends

For Democrats, who have for years had a largely warm and productive relationship with liberal-leaning Silicon Valley, the hearing represented a sharp break. Several members seized upon the chance to unleash on the company reps their simmering frustrations that the tech industry’s tools — so often pitched as the means for making the world a better place — had harmed their nominee, perhaps even fatally. Blumenthal highlighted widely shared posts on Twitter that incorrectly claimed that voters could cast ballots for Clinton simply by tweeting. “Do you know how many thought they voted but in fact were fooled?,” Blumenthal asked Edgett, who said he did not know.


5) No support for Honest Ads Act

Not a single one of the three tech giants would commit to supporting Sen. Amy Klobuchar (D-Minn.), Mark Warner (D-Va.) and John McCain (R-Ariz.)’s Honest Ads Act, which would require disclosures about political advertising on their platforms. All three have rolled out and touted work to independently address the issue of ads, following the introduction of the bill. “We certainly support the goals of the legislation and would like to work through the nuances to make it work for all of us,” Salgado said. Their answers prompted Klobuchar to draw attention to the lack of external oversight on these actions. “Just to clarify, while you are taking responsibility for a lot of what happened here, and trying to make some changes, there wouldn’t be an outside enforcer for any of these policies, right?”

Finally, James Lewis, an international cyber policy expert at the Center for Strategic and International Studies, said the revelation about Russian anti-Trump activity on social media post-election fits with typical Kremlin information warfare efforts.

“Their goal is to create confusion and dissent. The target is the U.S. and NATO, not any particular candidate. They just want chaos…"

via Tyler Durden

When Will The Tesla Stock-Promote Finally Fail???


The history of industry leading consumer tech products has not been kind to investors who overstay their welcome. You need look no further than all the hundreds of notable recent failures, to realize that these companies almost always flame out. The list below (in no particular order) is a nice trip down memory lane of former favorites, that are now either bankrupt or shells of their former selves—often consumed by some other entity that fortunately put them out of their misery. Of course, the list below, is just from the past decade or two;

Palm, Gateway, Research In Motion, GoPro, FitBit, Heelys, Handspring, Compaq, BlueRay, Garmin, Delorean, Casio, Sega, Tamaguchi, TiVo, Betamax, AOL, Walkman (Sony), Set Top Boxes (Scientific American), Kodak, Atari, Napster, Netscape, Polaroid, etc.

Let’s just say, it’s hard at the top. You must guess each change in technology, each generation of improvement and design it for fickle consumers, while constantly outlaying capital for research and development that may never go anywhere. All the time, others are constantly trying to overtake you.

If you look at the lifecycles of these companies, they often follow a similar trajectory from ingenious creation with huge margins, to a few generations of new products with smaller margins, to massive competition as deep pocketed competitors and venture capitalists try and emulate your product, to missing a product cycle, to becoming obsolete. These consumer product companies rarely last more than a decade; often just a few years. In the end, consumer focused tech is vicious and Darwinian, with very few long-term competitive advantages.

Of course, Tesla (TSLA – USA) is something of an anomaly here. While the companies in the above list, all produced prodigious cash while they were industry leaders, Tesla seems to incinerate cash while in the lead—using repeated equity and now debt offerings to plug the hole. While other companies had a huge stash of cash to fall back on when others overtook them, Tesla’s cash balance leaves it only a few quarters from insolvency. Add in a host of questionable related party transactions, convoluted financial statements (what the hell is pro-forma revenue?), the inability to ever hit company guidance, deceptive disclosures and a business that seems to lose more money with each vehicle it produces, is it any wonder that Tesla is one of the most shorted large-cap stocks today? If I had to choose the most obvious pending bankruptcy of a large-cap stock, it is clearly Tesla.

At the same time, I have to give Elon Musk credit. He has created a company that is a rather successful cult, even if it is still a failing auto company. Every time that skeptics ask real questions, he deflects them with futuristic sci-fi pronouncements. What other automobile CEO is obsessed with Mars while his assembly line fumbles along? What other CEO talks of hyperloops, while his main product on auto-pilot will kill you if used as currently designed. This “visionary “status has deferred timelines and made all logical financial metrics meaningless to investors—which may be the point of all his hubristic talk in the first place. Extend, pretend, blatantly mislead investors, raise more capital. It’s the junior mining model—applied to auto production—on a scale that would make anyone in Vancouver blush.

Automobile production is a decidedly unsexy industry, with massive capital outlays, high fixed costs, huge cyclicality and low returns on invested capital throughout the cycle—the technical definition of an awful business. The leading players produce millions of vehicles a year, yet trade at mid-single digit cash flow multiples, due to how awful the industry is. Why is Tesla valued like a high-tech growth stock, where investors ignore accelerating operating losses; if the best-case outcome is that it becomes a cyclical auto manufacturer with depressing returns on capital? A new technology like electronic vehicles (EV) sounds cutting edge, but so was automatic transmission, air conditioning, power steering, fuel injection, etc. All the other auto makers copied these technologies and caught up within a few years—much like what is now happening in EV. So, how has Tesla become such an epic bubble, if it is competing (poorly) in an industry that is notorious for destroying capital? It is clearly the promotional genius of Elon Musk. Naturally, he won’t be the first or last “visionary” to have a comeuppance.

So, going back to my question, which is the genesis of this article; when will the Tesla stock promote finally implode?

Long-time readers of this site know that I no longer short companies. This was a hard-learned lesson from when I was short Research in Motion, about two years too soon and watched as it went up 3-fold on me—before ultimately collapsing as I had predicted. Unfortunately, I was not short much by the time of the collapse as a small position had mushroomed into something pretty large and I was forced to keep covering at accelerating losses—lest I be forced to sell good longs to fund the repeated margin requirements of the short. While my thesis had been right, my timing was wrong. As long as investors believed in Blackberry, it didn’t matter that Apple and Samsung were building competing products that were likely to be better. It didn’t matter that Chinese players were producing low-end models that were likely to be almost as good, but at a fraction of the cost. It didn’t matter that competition from cash rich competitors grabbing for market share would crush margins. No one on Wall Street cared—until the iPhone finally showed up and people realized it was better. Then the Research in Motion collapse began.

For the past year, Tesla was a bet on pending mass production of affordable EV cars. Earlier this summer, we saw the first of the Tesla Model 3s to be produced. Even the normally ebullient journalists struggled to hide their disappointment with the product. This is understandable, dozens of competing EV models are coming, starting as soon as 2018. Will they be better than the Model 3? Based on what we know thus far, they’re unlikely to be worse. As they continue to advance EV technology, auto companies with far greater resources than Tesla, will eventually surpass it—much like with Blackberry. Then again, Research in Motion was coining money while at the top of its game—Tesla consumes money, while racking up debt. This won’t be a game of margins and profits—all the incumbents need to do is show that they can break even producing a comparable vehicle. At that point, the funding for Tesla will subside and its debt will bury it.

I was too early with RIMM and I don’t want to be too early with TSLA. So, I’ve been patient. I’ve been waiting for the competitors to show up. They’re now coming. The Tesla Model 3 is a dud—competing products will begin showing up in 2018 and they look much better. However, I’m not going to short TSLA. I’m going to use long-dated puts—much like I’ve played all subsequent dead-man-walking companies with an uncertain mortality date.

The problem with puts, is that long-dated puts are expensive. Fortunately, there’s a way to offset this cost, the bear put spread. This is the purchase of a put and the sale of a put at a lower price. By doing this, your gains are capped by the price of the put you’ve sold, but since your cost is much lower, you get to play with many more of them. Besides, you don’t need Tesla at zero to win with these, you just need Tesla’s share price to drop materially from here. If my timing is wrong, my losses are small and I can reload when they expire. Besides, I don’t expect TSLA to be a zero immediately. It is much more likely to limp towards zero, as opposed to imploding towards zero—making the bear put spread even more attractive than straight puts. Let’s just say that for the past few months, I’ve been adding to this position. The net cost of the spread is cheap and the timing now seems increasingly pregnant.

When will Tesla’s stock promote finally implode? When people realize that it’s a cash incinerating vanity project for Elon Musk, at a time when new, better products are coming to the market. That point is coming soon. Very soon.

via Tyler Durden

NYC Terror Suspect Was “Very Friendly” Uber Driver, Friend Claims

It's been less than two hours since police identified the suspect in today's Halloween terror attack in NYC as 29-year-old Uzbek national Sayfullo Habibullaevic Saipov, and already the New York Post has published an interview with a friend of the suspected terrorist who reportedly expressed complete shock when told his friend had killed 8 people and injured more than a dozen others in what some sources described as the deadliest terror attack in NYC since 9/11.

Kobiljon Matkarov, 37, and a fellow Uzbek native, described Saipov as a "very friendly" man who worked for Uber. Matkarov met Saipov in Florida about five years ago shortly after he came over from Uzbekistan. The two connected over their mutual heritage, with Matkarov adding that Saipov had no terrorist connections.

“He is very good guy, he is very friendly… he is like little brother… he look at me like big brother,” Matkarov said by phone Tuesday from his home in Miamisburg, Ohio.

Saipov was identified as a resident of Tampa, Florida, by police but according to Matkarov had been living in New Jersey where he drove for Uber as recently as this summer. Matkarov said he last saw Saipov in June when he asked him to a ride to JFK, where the family was catching a flight to Uzbekistan.

“He dropped me to the airport with my family… I called him and said I needed a ride."

Matkarov said Saipov got along well with Matkarov's five kids, who enjoyed playing with Saipov.

“My kids like him too, he is always playing with them. He is playing all the time,” Matkarov remembered.

But when Matkarov’s son asked for a picture with Saipov, he refused.

“He no like that. He said no,” Matkarov said.

New York Gov. Andrew Cuomo said Saipov acted alone when he carried out today's attack and that there were no signs of an international plot. However, the New York Times has reported that allegiance notes to ISIS written in Arabic were found at the scene.

via Tyler Durden

The Delays Begin: Release Of Republican Tax Bill Postponed Until Thursday

In our comprehensive review of the GOP tax bill which was scheduled to be unveiled tomorrow, we noted the following key caveat  “There are a lot of unknowns in this process, the biggest of which – of course – is whether the bill will be delayed from its scheduled Wednesday appearance.” In retrospect, and in light of the conflicting reports about what may be contained in the final draft of the bill, this has proved prophetic because moments ago, Axios reported that week’s 2nd biggest events – after Trump’s announcement of Jay Powell as the next Fed chair – the release of the Republican tax bill is being postponed by at least one day, from Wednesday to Thursday.

The delay of the scheduled release, by the House Ways and Means Committee, reveals the difficulties the team has had in resolving how to raise enough money to pay for the massive corporate tax cuts. Political hot button issues — like the treatment of 401k savings — are still in flux. The delay shouldn’t affect the timing for the mark-up, which is expected to happen Monday.

Separately, the Hill adds that the GOP now says the bill will be released on Thursday as lawmakers scramble to reach a consensus on how to restructure the nation’s tax laws.

Fights over possible changes to the tax status of 401(k) retirement plans and the state and local taxes deduction are at the center of the delay. Lobbyists chattered throughout the day over whether Wednesday’s big unveiling of the GOP tax package would have to be delayed as it became clear that lawmakers were differing over various reductions.


Hours before the decision was made to punt the release for a day, Ways and Means Committee Chairman Kevin Brady (R-Texas) told reporters that he intended to release text of a bill Wednesday — but that it would not be a chairman’s mark. This would allow Brady to make changes to the text through the weekend ahead of a planned markup on Monday in the Ways and Means Committee.


President Trump had sought to quash any changes to 401(k) plans last week, but it has become clear that Republicans have not stopped talking about shifting the tax status of the plans as they seek to ensure their bill does not add to the deficit after its first 10 years. Republicans have discussed lowering the amount people can put into their retirement plans before taxes, which could increase the amount of revenue initially hit by taxes. 


Brady appears to be moving toward a compromise that would allow a deduction for local property taxes — a concession that could win at least some support from the blue-state Republicans. “I think we’re moving in the right direction,” Rep. Leonard Lance (R-N.J.) said on CNN Tuesday.


The bill’s unveiling would launch the GOP’s blitzkrieg effort to try to pass legislation by Thanksgiving and trigger a lobbying bonanza from both supporters and opponents. Any delay in the bill’s introduction is not helpful giving the time pressures, though the delay of one day would not affect the planned Monday markup.

The delay itself is not surprising as the final bill is expected to somehow reconcile numerous other, often conflicting items among which:

  • Are middle-class cuts from the budget framework (like doubling the standard deduction and expanded child tax credits) included?
  • Is the SALT deduction included (or capped in some way)?
  • What level is the corporate tax rate (over/under Trump’s 20% target)
  • Is there a fourth tax bracket (rumblings suggest incomes above 1mm USD would be affected)
  • Is the tax cut retroactive to Jan. 1, 2017?
  • Is there a repatriation deal for money kept overseas?
  • Does it add to the deficit?  If so, how much?
  • Will extraneous issues be slipped into the draft to entice specific voters?
    • Minimum wage hike
    • Border wall funding
    • Debt ceiling compromise
    • Planned parenthood funding

And much more. In light of this, the biggest surprise would be if the GOP actually manages to have a just one day delay.

This means that for markets Thursday is now shaping up as an especially painful day, with announcements due on not only the next Fed chair, but also the layout of the tax bill. The good news is that no matter what the “news” actually is, the market will hit new all time highs.

via Tyler Durden