Stocks Vs. Bonds & What To Own Over The Next Decade

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

Imagine a world with two investment options, apples and oranges. Investors are best served to reduce their holdings of apples and to replace them with oranges when demand for apples drives the price too high. The simple logic in this example is applicable across the full spectrum of economics, and it holds every bit as true in today’s complex world of investing. The question every investor should have is, “When does the price of “apples” make “oranges” the preferred holding”? Most of the time, answering that question is not easy. Occasionally however, the evidence becomes too obvious to ignore.

Replace apples and oranges with stocks and bonds and you have defined the majority of investors’ asset allocation schematic. Unlike our fruit example, the allocation decision between stocks and bonds, is based on many factors other than the price of those two assets relative to each other. Among them, recent performance and momentum tend to be a big influence in both raging bull markets and gut-wrenching bear markets. In both extremes, valuations tend to take a back seat despite historical data providing ample evidence that equity valuations alone should drive allocation decision.

Current equity valuations and nearly 150 years of data leave no doubt that investors are best served to ignore yesterday’s stock market momentum and gains and should be shifting to bonds, as we will demonstrate.

Valuations

How often do you hear someone touting a stock because its share price is low, or advising you to sell because the price is too high? This nonsense does not come from just Uber drivers and novice investors; it is the primary programming line-up of the main-stream business media.  The share price on its own is meaningless. However, the stock price times the number of shares outstanding provides the market capitalization (market cap) or the dollar value of the company. Inexplicably, market cap is a number you rarely hear from those giving stock tips.

Market cap allows investors to take the aforementioned corporate worth and compare it to earnings, cash flow, revenues and a host of other fundamental data to provide a logical valuation platform for comparison to other investment options.

While we use a slew of different valuation techniques, we tend to prefer the Cyclically-Adjusted Price-to-Earnings (CAPE) Ratio as devised by Nobel Prize winning economist and Yale professor Robert Shiller. The ratio adjusts for inflation and as importantly, uses ten years of earnings data to derive a price to earnings ratio that encompasses business cycles. Shiller’s approach eliminates short-term noise that tends to make the more popular one-year trailing price-to-earnings ratio erratic and potentially misleading.

Currently, the CAPE on the S&P 500 is 33.41. Looking back as far as 1871, today’s valuation has only been exceeded by a brief period in the late 1990’s. To help link return expectations and CAPE valuations we plot below every historical monthly instance of CAPE to the respective forward ten-year returns. Each of the 1,525 dots represents the intersection of CAPE and the ten year total return that followed since 1871.

Data Courtesy: Robert Shiller

Apples or Oranges

While the analysis is telling, investors should compare the returns versus those from a ten-year U.S. Treasury note to determine whether the returns on stocks adequately compensated investors for the additional risk.

The graph below shows the returns above minus the prevailing ten-year U.S. Treasury note.  Essentially, the graph shows the excess or shortfall of the returns provided by stocks versus those of ten-year Treasury Notes in the ten years following each monthly CAPE instance. Negative returns indicate the 10-year Treasury yield exceeded the 10-year total return on stocks.

Data Courtesy: Robert Shiller

To better highlight the data and put a finer point on current prospects, consider the bar chart below.

Data Courtesy: Robert Shiller

The chart above aggregates the data from the prior chart into ranges of CAPE as shown on the x-axis. It also displays the mean, maximum and minimum of the excess ten year returns of stocks at the various CAPE ranges. This information can be used to create expectations for future performance given a stated CAPE.

With the current CAPE at 33.41 as circled, investors should expect an annualized excess return for ten years of -2.04%. Based on historical data which includes 32 full business cycles dating back to 1871, the best excess return experienced for all instances of CAPE over 30 is 0.39%. Over this 147 year period, there have been 57 monthly instances in which the CAPE was above 30. Only four of these instances provided an excess return over Treasuries and the average was a paltry twenty basis points or 0.20%.

Call us cynical, but the prospect of equity market excess returns  for the next ten years measuring in the fractions of a percent is not nearly enough compensation for the distinct possibility of underperforming a risk-free asset for ten years.

Summary

History, analytical rigor and logic all argue in favor of shifting one’s allocations away from stocks. Investors have no doubt become accustomed to the easy gains provided by equity markets over the past ten years, and old habits are hard to break but we know valuations to be mean-reverting. Given current extremes, this comparison offers compelling evidence that compounding wealth most effectively depends on breaking that habit.

via Zero Hedge http://ift.tt/2GQkfdd Tyler Durden

Is Keto the Cure for Type II Diabetes?

Type II diabetes is one of America’s most ubiquitous—and expensive—chronic diseases. Patients often require a suite of pharmaceutical products to manage high blood glucose levels, and the complications that arise over the long term, ranging from loss of vision and limbs to kidney failure and coronary artery disease, strain the resources of patients, their families, and the health care system.

The financial strain on insurance companies, employers, and Medicaid and Medicare is even more enormous. A 2013 study in the American Journal of Preventive Medicine put the lifetime direct medical costs for type II diabetes treatment at $124,000 for patients diagnosed in middle age. With nearly 30 million Americans affected by the disease, the American Diabetes Association estimates the national cost of direct diabetes care to be roughly $176 billion per year.

But unlike type I diabetes, which is an autoimmune disorder that destroys insulin-producing cells in the pancreas, type II diabetes is a lifestyle disease, and thus reversible. Over time, people with type-II diabetes can be made more receptive to their own insulin, which in turn allows their bodies to effectively clear glucose from the blood without insulin medication. The trick for the vast majority of type II patients is as simple as losing weight. (“The relationship between obesity and diabetes is of such interdependence that the term ‘diabesity’ has been coined,” two diabetes researchers wrote in 2005.)

But that “trick” is actually pretty hard. Permanent weight loss without bariatric surgery is practically impossible at the population level. A 2014 study by Kaiser Permanente that looked at incidents of non-surgical diabetes remission in 122,781 patients found that it basically doesn’t happen. The most commonly cited number among obesity researchers, meanwhile, is five percent—only five percent of people who lose weight without surgery will succeed in keeping it off over the long term.

Now Virta Health, a Silicon Valley startup, has developed a lifestyle modification system that can reverse the markers of type II diabetes. In a study published this month, Virta researchers found that over the course of a year, they were able to achieve remission of symptoms and a cessation of several pharmaceutical products in nearly two hundred patients using a “novel metabolic and continuous remote care model.”

Virta uses a combination of the ketogenic diet—which involves moderate fat and protein intake combined with very low carbohydrate intake—and frequent remote contact with a physician and a health coach to help patients change their lifestyle and lower their body weight, their blood glucose, and their HbA1c (a biomarker for diabetes). In its December study, 94 percent of patients in the control arm of the trial were able either to cease using insulin or to radically lower their insulin dose, and all of the patients in the control arm were able to stop using a class of antidiabetic drugs called sulfonylureas, which increase the amount of insulin released by the pancreas. The control group meanwhile, increased its insulin use over the course of that same year.

At $370 a month, Virta’s model isn’t cheap, but it’s cheaper over the course of a year than the suite of drug therapies many type II patients require. And if Virta’s model is scalable, the long-term savings on dialysis, hospital stays, and management of diabetic foot ulcers could be massive. Already, the company has partnered with Purdue University and Nielsen to offer the Virta system as a covered health benefit to employees with type II diabetes. The company’s stated goal is to reverse diabetes in 100 million people by 2025.

I recently spoke to James McCarter, Virta’s head of research, about the company’s treatment model and the broader landscape of type II diabetes care. McCarter received his A.B. in biology from Princeton, and he got his M.D. and a PhD in genetics from Washington University in St. Louis, where he’s an adjunct professor at the medical school. Our conversation has been edited for length and clarity.

Reason: Every doctor recommends lifestyle modification as the first course of treatment for patients with type-II diabetes and pre-diabetes. Yet most patients end up on metformin and eventually insulin and some other pharmaceutical products. Physicians seem jaded about lifestyle modification as a viable treatment. Do they have good reasons to be jaded?

James McCarter: I think endocrinologists and primary care doctors have reason to be jaded, in that they’ve seen lifestyle modification fail so many times. The conventional advice of “eat less and exercise more” has been shown to not work. People can do caloric restriction for a while, but you know what happens when you calorically restrict without any overall strategy other than just eating less? You get hungry. Exercise, and you get hungry. You can battle that hunger and craving for a while, but eventually it’s going to come back. What’s generally seen with most lifestyle interventions is that people will lose five pounds and gain it back over the course of a year.

Exercise is great for overall fitness and something that I believe in strongly in terms of maintenance of overall health. But it’s not a good strategy for weight loss.

Reason: So instead, type II diabetes patients and their doctors end up treating symptoms instead of trying to reverse the disease itself.

McCarter: I think that’s right, and I think to your point about physicians being jaded, they’ve seen that lifestyle modification only works in a minority of people. They’re not surprised when a patient comes back three months, six months, or a year later and the disease has progressed.

Reason: If one of the problems with lifestyle modification is that only a tiny fraction of patients can self-motivate or self-direct an effective change, what does the Virta model do differently? How do you help the patient who can’t pull off lifestyle modification?

McCarter: If you look at a large study that was done by Kaiser a number of years ago, they saw that their remission rate of type II diabetes was well under 1 percent. We’re seeing well over 50 percent. So what’s causing that 50-times improvement in our results? It really comes down to two things. Let’s talk first about the physiology and then we’ll talk about the behavior change.

First of all, using nutritional ketosis as an underlying part of the physiology approach has a tremendous impact on people’s ability to succeed in getting glycemic control, which is reduction in medications, improvement in metabolic health, and reduction in weight.

The reason for that is that unlike a willpower approach, where you’re just trying to force yourself to eat less, using nutritional ketosis allows you to tap into body fat for fuel. That means you have incoming energy from your body fat storage and from dietary fat. As a result, people will naturally tend to eat fewer calories because they are satiated.

We ask people everyday, “Tell us on a four-point scale how you feel about your hunger, cravings, mood, and energy. What we see is that as people achieve nutritional ketosis, energy and mood go up, hunger and cravings go down.

In effect, the physiology of ketosis is providing you with a tail wind. It’s making the whole process much easier.

Reason: Various kinds of diets can work for almost everyone for at least a little while. How do you make those new eating habits stick?

McCarter: The other part of our model is the coaching. The number of people who can just read a diet book and implement its recommendations without any monitoring or coaching is small. What we’re doing with Virta is we’re providing five things: We’re providing a physician with telemedicine for medication management; a health coach with an ongoing, one-on-one daily relationship who consults on nutrition and behavior change; education that’s provided online; biometric feedback; and an online community.

Essentially, we’re providing a whole support environment that allows people to understand what they’re doing and why.

Reason: Is there a calorie deficit? It seems like there would have to be for weight loss, but I’m also guessing that it would be a small one because you seem to be very skeptical of crash diets or excessive calorie restriction. Or does keto somehow defy the claim that calories out need to exceed calories in?

McCarter: Rather than measuring calories, what we’re doing is having people monitor their approximate macronutrients. Roughly how many carbohydrates am I having on a daily basis? How much protein am I having on a daily basis? It’s a low-carbohydrate, moderate-protein diet.

What we have people do instead of an elaborate food diary is measure daily blood beta hydroxybutyrate. That’s one of the ketone bodies, and by seeing an elevation in beta hydroxybutyrate, we’re able to say, “Oh, you’re actually in nutritional ketosis which means you’re burning fat for fuel which is what we want to achieve.”

It doesn’t mean you have a caloric deficit necessarily, but at least you’re getting your diet and other aspects of your lifestyle correct in a way that supports nutritional ketosis. And we’re looking at glucose as well. That way we can say on a daily basis, are you on track or off track?

Now, calories still do matter. What generally happens, even though we are not asking people to count calories, is that because they are feeling satiety in their meals at an earlier point, they’re creating a deficit. Rather than having a second or third helping, they’re saying after one helping, “Gosh, I feel you know, adequately full.” They are generally eating less, especially in the first six months.

Reason: So instead of having the goal be “I will eat 500 fewer calories today than my body needs,” patients are focused on getting the macro ratio roughly right and checking their efforts against the ketone blood test?

McCarter: Right, and it’s going to be a different journey for everyone. Some people just get it right out of the gate. Other people will take quite a few weeks or even months before they really figure out exactly how to do this. One of the key things we’ve found is a need for individualization. We want this to work not just for the quantified self-optimizer, but for somebody who has had diabetes for 10 or 20 years, who is on insulin or other potent diabetes drugs they want to stop taking. It has to work for somebody who is a stay-at-home parent, for a business traveler, for somebody working the night shift. It has to work for different ethnic cuisines; it has to work for different dietary restrictions.

That’s what both our software and our health coaches aim to do. Make changes that work for specific individuals.

Reason: Where do you think the rest of the medical community is on the utility of a low carbohydrate diet for weight loss? In the realm of nutrition science, the debate over dietary fat still seems pretty contentious.

McCarter: Conventional wisdom has shifted somewhat. Many physicians would describe it as effective for weight loss, but most would say that it is a short-term measure that is not sustainable. Many do worry about dietary fat. There is a growing movement that counters the status-quo. While the number of physicians that recommend a sustained low carb approach for weight loss and metabolic health is still limited (low single digit percentage?), it is growing rapidly. For instance, the international petition we started for Dr. Tim Noakes last week has garnered nearly 35,000 signatures, including many physicians and medical professionals. [Editor: Tim Noakes is a South African physician who pioneered early research into the low-carb, high-fat diet as a treatment for type II diabetes. The Health Professions Council of South Africa is attempting to revoke Noakes’ medical license because he recommended to a woman that she transition her baby to such a diet when the child finished breastfeeding.]

We find that when we start taking care of a patient, their primary care doctor, who often begins as a skeptic, quickly converts to a supporter based on the results we obtain and the supporting scientific literature we provide.

Reason: It seems like the ability to do a lot of this coaching and guidance remotely is what’s going to make this model scalable for Virta and anybody else that wants to help large numbers of people make lifestyle modifications. Because if everybody needed to check in with someone who lived where they lived, this seems like a thing that could maybe only go so far.

Jim: You’re exactly right. It doesn’t work without technology and it doesn’t work without the ability to provide what we call continuous remote care. We actually tested that in our clinical trial. Of the 262 people with type II diabetes that were in the intervention arm, half received everything remotely—the physician, the health coach, the education, all of it.

The other half received all the remote stuff but also came to an in-person classroom setting with 10 to 20 other people and a health coach at our clinic. Initially, it was once a week, and then less frequently over time. The outcomes between the in-person group and the remote-only group were statistically indistinguishable.

Reason: Most of my own weight loss was self-directed, but I recently signed up for a remote coaching service with daily lessons as a way to get better about my eating habits, and I noticed that the combination of check-ins with a real person and daily lessons on a website is strangely compelling for reasons that aren’t entirely related to the content. I feel watched, but not in a bad way.

Jim: That’s part of the reason we structured Virta the way we did, with an actual one-on-one relationship with a coach. There are prior clinical studies that have shown that when you have this coaching relationship, as opposed to entirely automated or entirely self-directed program, people will do better.

Reason: What do you make of the fact that some patients in your trial couldn’t come off of metformin? Does that mean some aspects of type II diabetes are not actually reversible? That it could take longer to reverse the symptom that metformin treats?

Jim: Let me talk you through the medications a little bit and address Metformin as part of that. The first thing I should say is that medication reduction is symptomatic of an overall improvement in metabolic health.

Of all the medications for type II diabetes, there are things that can be done right away and there are things that take more time. First off, we want to avoid hypoglycemic events, which is low blood sugar. If you’re on potent hypoglycemic medications, which are medications like sulfonylureas and insulin that lower your blood sugar, and then you go on a carbohydrate-restricted diet, that’s going to drive you toward low blood sugar levels. So what we try to do early on is very aggressively remove sulfonylurea. Fully everyone in our trial were off that within the first three months.

After that, we’re aggressively titrating the insulin downwards, so that about half of the insulin was gone by three months and another nearly half of patients had it reduced. Ninety-four percent of people in the intervention group were able to either reduce or eliminate their insulin use.

But the one that we generally will leave alone and not aggressively reduce is metformin. The reasons for that are that it is generally well-tolerated, it’s generally inexpensive, and there’s a growing body of evidence that it’s effective in prediabetes. The American Diabetes Association now recommends metformin for people with prediabetes to prevent progression to diabetes, and there is also emerging evidence that it may have some other benefits, including longevity benefits.

That’s the rationale to leave metformin in place if it’s well-tolerated. Our definition for having reversed diabetes is that patients have glycemic control, which means they’ve lowered their hemoglobin A1C lower than 6.5, which is the diabetes threshold, without medications like insulin and sulfonylureas.

Reason: Chronic diseases require decades of expensive treatment, which means effective lifestyle modification could save payers—be they insurance companies, patients, or employers—thousands of dollars a year per person. Can you talk a little about Virta’s disruption potential and what kind of blowback that might attract?

McCarter: There’s plenty of work to be done, so I’m not worried about what’s going to happen to many of the incumbent players. For instance, there are not enough endocrinologists to take care of all the people with type II diabetes in the United States. If Virta is successful over time, maybe this allows endocrinologists, who are incredibly well-trained, to concentrate on more challenging diseases, like type I diabetes and other extremely challenging endocrine disorders.

As for the pharmaceutical industry, there’s plenty of disease out there to be handled. There are also people for whom the types of behavior change we’re advocating are not a fit for them. It’s not as if we’re going to get 100 percent adoption. The industry is going to be disrupted over time, but it will adjust.

Reason: So it’s overly dramatic to say that one thing will work for everyone, or that an effective new treatment option will crater incumbents overnight?

McCarter: To get a sense of how industries adapt, it helps to look back at the late 1970s, which is when the dietary recommendations for low-fat foods came out. You can see that within about five years, the food industry rolled out something like 100,000 products where they just removed fat and put in sugar and starch. That probably didn’t do consumers any favors, but it showed the speed with which industry can respond.

Reason: The food industry seems to be changing again right now. I’ve noticed with delight that a ton of products now advertise their protein content on the package, the same way they used to advertise their low-fat content.

McCarter: Yeah, people are focusing on protein. In the coming five years, I think you’re going to see a return to the idea that fats can be beneficial. As opposed to saying something is low-fat, I think you’re going to see things that advertise as being high-fat.

Reason: That still feels far away to me, but maybe not that far. The number of products and recipes that incorporate chia and coconut and almonds has increased quite a bit. Those are all very fatty, delicious, and thus satiating things. It seems like the next logical step for manufacturers is being more explicit about why they think these products are good for us.

McCarter: There was actually a report from Credit Suisse a couple of years ago, maybe two years ago now, where they basically predicted all of this. It was kind of an industry direction report suggesting that fat was a marketing tool.

Reason: A health care tool potentially being scalable and scaling a health care tool are two different issues. How does Virta scale?

McCarter: On the commercial side of things, our goal is to make this available and affordable to everyone over time. To begin to break through, we’ve been concentrating on employers. Self-insured employers are on the hook for the costs. What we can do is we can go to that employer and say, “Hey, work with us to have your folks with type II diabetes join the Virta Clinic and turn that around.” We put a fair amount of the fee structure at risk. It’s outcomes-based, so if we don’t succeed in reversing type II diabetes, we don’t get paid.

Reason: Does Virta currently have a way to follow study participants past the 12-month mark? The Kaiser study you mentioned covers a pretty long time horizon, and I know obesity researchers like to point out that weight regain gets likelier with each passing year.

McCarter: Absolutely. The Virta-IUH trial (see clinicaltrials.gov listing) was originally designed for two years and has recently been extended to five years. You can read the description on our blog. We will be publishing two-year and five-year outcomes. We are also following our commercial patients long-term, with more to come on that in a few months. The longterm view is super important.

from Hit & Run http://ift.tt/2t3i6sH
via IFTTT

Mueller Reportedly Asking “Pointed Questions” About Trump’s Knowledge Of DNC Hack

Just days after President Trump exclaim-tweeted that “there is no collusion” and this is a “witch hunt, NBC News reports that Special Counsel Robert Mueller’s team is asking witnesses pointed questions about whether Trump was aware that Democratic emails had been stolen before that was publicly known.

Mueller’s investigators have asked witnesses whether Trump was aware of plans for WikiLeaks to publish the emails. They have also asked about the relationship between GOP operative Roger Stone and WikiLeaks founder Julian Assange, and why Trump took policy positions favorable to Russia.

And furthermore, a breathless Katy Tur reports, questions have been asked as to whether he was involved in their strategic release, according to multiple people familiar with the probe.

The line of questioning suggests the special counsel, who is tasked with examining whether there was collusion between the Trump campaign and Russia during the 2016 election, is looking into possible coordination between WikiLeaks and Trump associates in disseminating the emails, which U.S. intelligence officials say were stolen by Russia.

Trump has repeatedly denied any collusion.

NBC News goes on to note that in one line of questioning, investigators have focused on Trump’s public comments in July 2016 asking Russia to find emails that were deleted by his then-opponent Hillary Clinton from a private server she maintained while secretary of state.

The comments came at a news conference on July 27, 2016, just days after WikiLeaks began publishing the Democratic National Committee emails. “Russia, if you’re listening, I hope you’re able to find the 30,000 emails that are missing,” Trump said.

Witnesses have been asked whether Trump himself knew then that Clinton’s campaign chairman John Podesta, whose emails were released several months later, had already been targeted. They were also asked if Trump was advised to make the statement about Clinton’s emails from someone outside his campaign, and if the witnesses had reason to believe Trump tried to coordinate the release of the DNC emails to do the most damage to Clinton, the people familiar with the matter said.

So to summarize NBC News’ post – Some Trump-related people have been asked lots of Russia-related questions… with no reported results.

Does this seem like just another ‘old news’ dredged up as new ‘fake news’ story to anyone else?

Of course, with Gates and Manafort on the block, this would seem like a well-timed leak from Mueller’s tightly-run ship to send a message to President Trump designed to perhaps spook him?

via Zero Hedge http://ift.tt/2owBz09 Tyler Durden

School Forbids Students from Touching Snow

SnowballGiving new meaning to the “snowflake” generation, a headmaster in Britain has forbidden all 1,500 of his students from even touching snow.

Ges Smith is the headmaster of the Jo Richardson Community School in Dagenham, East London, and where others see fluffy white flakes of winter wonder, he sees the wide and icy path to hell.

“It only takes one student, one piece of grit, one stone in a snowball in an eye, with an injury and we change our view,” he said.

His concern seemed to be that snowflakes are the gateway drug to snowballs. “The rules are don’t touch the snow. If you don’t touch the snow you’re not going to throw it.”

You’re also not going to taste it, make a snowman or fort, or have any fun at all.

On the talk show Good Morning Britain, host Susanna Reid pushed back, saying, “It’s only a bit of fun, let us throw a snowball,” according to The Telegraph.

“If it was that simple, I’d let them throw snowballs all day long,” the headmaster cryptically replied.

But it is that simple. In fact, it’s simpler: You can let the kids touch the snow and not throw snowballs.

Note that snowballs weren’t the only problem dancing in the headmaster’s head. He also doesn’t want kids to get wet, as that would make them unprepared for school. As to whether they will be unprepared for life, well… hopefully the kids will have an opportunity to touch the substance at some point in their childhood.

from Hit & Run http://ift.tt/2t4v4q8
via IFTTT

New Nuclear Cruise Missiles Could Go On Navy’s Stealth Destroyer

The United States Navy has a new vision for what its high-tech stealth destroyer could do: launching nuclear cruise missiles at extended ranges. 

According to the Military Times, the Nuclear Posture Review (NPR) includes a long-term strategy that could equip the new USS Zumwalt (DDG-1000) stealth destroyer with nuclear cruise missiles. Released earlier this month, the NPR calls for the development of smaller warheads that the Pentagon believes would be seen more “usable” against China, Iran, North Korea, and or even Russia.

“In support of a strong and credible nuclear deterrent, the United States must…maintain a nuclear force with a diverse, flexible range of nuclear yield and delivery modes that are ready, capable, and credible,” stated the report, which serves as the first updated document the Pentagon has released about its perceived nuclear threats since 2010.

Air Force Gen. John Hyten, StratCom, said the Pentagon’s program to develop a new, low-yield nuclear Sea-Launched Cruise Missile (SLCM) “would not be limited to using ballistic submarines as the sole launch platform, as many assumed when the NPR was endorsed by Defense Secretary Jim Mattis earlier this month.”

“It’s important to know that the NPR, when it talks about the Sea-Launched Cruise Missile, does not say ‘Submarine-Launched Cruise Missile,’ ” Hyten said earlier this month at the National Defense University’s Center for the Study of Weapons of Mass Destruction.

During the speech, Hyten replied to a question, “we want to look at a number of options — everything from surface DDG 1000s into submarines, different types of submarines” for the nuclear cruise missiles.

“That’s what the president’s budget has requested of us — to go look at those platforms, and we’re going to walk down that path,” Hyten said.

Moar war…

The Military Times sheds some color on the unreliability of the USS Zumwalt, along with some of its failures during sea trials. Further, the Military Times outlines the growing nuclear threats from Russia and China, which may explain why the Pentagon is rushing to strap nuclear cruise missiles on the USS Zumwalt.

The USS Zumwalt, the first of three new stealthy destroyers billed by the Navy as the world’s largest and most technologically advanced surface combatants, experienced numerous cost overruns in construction and problems in sea trials. It also broke down while transiting the Panama Canal in 2016.

The second ship in the Zumwalt class, the Michael Monsoor, had to cut short sea trials in December because of equipment failures.

The NPR called for the development of two new, low-yield nuclear weapons — the SCLM and a new submarine-launched ballistic missile.

Hyten said the U.S. will be modifying “a small number of existing submarine-launched ballistic missile warheads to provide a prompt, low-yield capability, as well as pursuing a modern nuclear-armed sea-launched cruise issile in the longer term.”

He added, with some regret, that both are necessary to enhance U.S. deterrence against growing tactical and strategic nuclear threats from Russia and China.

“I don’t have the luxury of dealing with the world the way I wish it was,” he said. “We, as a nation, have long desired a world with no or at least fewer nuclear weapons. That is my desire as well. The world, however, has not followed that path.”

New developments with the Xian H6K strategic bomber, a version of the Russian Tupolev Tu-16 twin-engine bomber, has given China a nuclear triad of bombers, land-based missiles and submarines “for the first time,” Hyten said.

He also cited repeated statements from Russian President Vladimir Putin about modernizing his own nuclear force and developing a new generation of low-yield weapons. “Russia has been clear about their intent all along,” he said.

In the question-and-answer period at National Defense University, an official from the Russian Embassy in Washington challenged the general’s assessment of the threat posed by his country.

Hyten responded, “We listen very closely to what your president says, and then watch closely” through a variety of means to see Putin’s thoughts put into action. “We have to consider those a threat.”

Pentagon policy chief David Trachtenberg said the newly amended NPR report developed by the Trump administration is not a divergence from the 2010 NPR established by the Obama administration.

“Contrary to some commentary, the Nuclear Posture Review does not go beyond the 2010 NPR in expanding the traditional role of nuclear weapons,” said Trachtenberg.

“The goal of our recommendations is to deter war, not to fight one,” he said.

“If nuclear weapons are employed in conflict, it is because deterrence failed, and the goal of the 2018 NPR is to make sure that deterrence will not fail,” he added.

However, “it is clear that our attempts to lead by example in reducing the numbers and salience of nuclear weapons in the world have not been reciprocated,” Trachtenberg said.

Paul Craig Roberts describes the US nuclear posture as a reckless, irresponsible, and destabilizing departure from the previous attitude toward nuclear weapons.

The Trump administration and the Pentagon are eagerly arming America’s high-tech war machines with atomic weapons. Why? Perhaps, the insane escalation in such a rapid timeframe is to challenge an emerging multipolar world order led by China, Russia, and other rising global powers. The reshaping of the global order is well underway, and the Pentagon feels threatened. War is coming…

via Zero Hedge http://ift.tt/2HRO92l Tyler Durden

Consumers In Surprising Places Are Borrowing Like Crazy

Authored by John Rubino via DollarCollapse.com,

The Money Bubble is inflating at different speeds in different places. But apparently no culture is immune:

Household Debt Sees Quiet Boom Across the Globe

(Wall Street Journal) – A decade after the global financial crisis, household debts are considered by many to be a problem of the past after having come down in the U.S., U.K. and many parts of the euro area. But in some corners of the globe—including Switzerland, Australia, Norway and Canada—large and rising household debt is percolating as an economic problem. Each of those four nations has more household debt—including mortgages, credit cards and car loans—today than the U.S. did at the height of last decade’s housing bubble.

At the top of the heap is Switzerland, where household debt has climbed to 127.5% of gross domestic product, according to data from Oxford Economics and the Bank for International Settlements. The International Monetary Fund has identified a 65% household debt-to-GDP ratio as a warning sign.

In all, 10 economies have debts above that threshold and rising fast, with the others including New Zealand, South Korea, Sweden, Thailand, Hong Kong and Finland.

In Switzerland, Australia, New Zealand and Canada, the household debt-to-GDP ratio has risen between five and 10 percentage points over the past three years, paces comparable to the U.S. in the run-up to the housing bubble. In Norway and South Korea they’re rising even faster.

The IMF says a five percentage-point increase in household debt over a three-year period is associated with a hit to GDP growth of 1.25 percentage points three years down the road. The historical record suggests that large debts lead to a short-term economic boost but long-term struggles, as a greater share of the economy’s resources go to servicing the spending binge associated with high debts. The IMF also finds rising household debts are associated with greater risks of banking crashes and financial crisis.

“When household credit goes up too fast, the fact is, it doesn’t end well,” said Guillermo Tolosa, an economist at Oxford Economics.

The disparate economies on this debt list, though far apart geographically, actually have much in common. They are mostly wealthy with well-developed financial systems and avoided the worst of last decade’s global financial crisis. Their housing markets didn’t collapse dramatically. They weren’t the focus of fiscal debt crises. When nearly the entire world was in recession in 2009, Australia, New Zealand and South Korea managed to keep growing.

Compared with the euro area, the U.S., or Japan they looked like little outposts of stability.

But as economist Hyman Minsky once said, stability can be destabilizing. They attracted capital and their interest rates followed the rest of the world’s rates lower, sparking housing booms that are now a source of risk.

During the U.S. housing bubble, home prices nearly doubled from 2000 to their peak in 2006, according to the Case-Shiller home price index. In Canada, Australia, New Zealand and Sweden home prices have more than tripled by some measures.

Collectively, those 10 economies have $7.4 trillion in total economic output and a household debt stock about the same size. Taken as a whole, that’s more than the output of Germany or Japan. Moreover, many of them have a large stock of adjustable-rate mortgages that could suddenly become more costly to service should global interest rates rise.

Note that this article’s first sentence — “A decade after the global financial crisis, household debts are considered by many to be a problem of the past after having come down in the U.S., U.K. and many parts of the euro area.” — was outdated before it was written. As the chart below illustrates, US consumers are back to borrowing like it’s 2006. November was a credit card orgy and December was about twice the year ago level.

And has there ever been a case of a country’s house prices tripling in a decade without causing a crisis? That kind of data doesn’t seem to be available but it’s a safe bet that the answer is either “rarely” or “never.”

via Zero Hedge http://ift.tt/2HTMMQH Tyler Durden

What’s Going Down in China is Very Dangerous – Part 1

I’m sure all of you are aware of the dramatic power play pulled off over the weekend by China’s Communist Party to eliminate term limits for both the president and vice president. Prior to the move, Chinese leaders have stuck to two five-year terms since the presidency of Jiang Zemin (1993-2003), but that’s about to change as wannabe emperor Xi Jinping positions himself as indefinite ruler of the increasingly totalitarian superstate.

While the weekend announcement was illuminating enough, I found the panicked reactions by Chinese authorities in the immediate aftermath far more telling. The country’s propagandists took censorship to such an embarrassing level in attempts to portray the decision as widely popular amongst the masses, it merely served to betray that opposite might be true.

China Digital Times compiled a fascinating list of words and terms banned from being posted or searched on Weibo. Here’s just a sample of some I found particularly interesting.

continue reading

from Liberty Blitzkrieg http://ift.tt/2t1yWIt
via IFTTT

AG Sessions Responds To Trump’s Twitter Taunt

It looks like all those Saturday Night Live sketches portraying Jeff Sessions as an obsequious diminutive imp have gotten to the attorney general.

In a stiffly-worded response to President Trump – who earlier today castigated the AG for ordering the Justice Department’s inspector general, an Obama-era holdover, to investigate FISA abuses – Sessions defended his handling of the FISA investigation by saying he followed the “appropriate process” by ordering the IG to investigate and that, as long as he remains attorney general, he will “continue to discharge my duties with integrity and honor.”

 

 

 

Of course, as one twitter user reminds us, Senate Republicans have said they will not confirm another AG nominee if Sessions is forced out.

 

 

The statement elicited a wave of incredulous responses from twitter users, who were surprised by Sessions’ strongly worded response.

 

His response begs the question: Will their spat end here? Or will we soon hear from a (no doubt infuriated) Trump?

via Zero Hedge http://ift.tt/2oE8VK0 Tyler Durden

BofA Fires Two Amid Growing Sexual Harassment Scandal Involving Jon Corzine Advisor

Two months ago, when the world was feverishly following every twist of the growing Harvey Weinstein sexual abuse scandal, we predicted that it was only a matter of time before the it hit Wall Street front and center, where some of the stories heard in recent years would make even Harvey blush.

Today, that scandal hit home for two Bank of America staffers who were fired by the bank for not sufficiently disclosing information related to allegations against a prime brokerage executive who left last month following a complaint of inappropriate sexual conduct.

According to Bloomberg, Joe Voboril and Valerie Ludorf worked under Omeed Malik at the bank’s prime brokerage unit. Malik left the firm in January, a month after a woman in her 20s claimed that he had made unwanted advances.

Omid Malik, center

Omid Malik,38, left the bank after a roughly three-week inquiry, which included interviews with other staff, turned up additional concerns, a person with knowledge of the situation said last month.

On Wall Street, Malik was known as a charismatic figure with close ties to the hedge fund world.

His renown grew in part because of his attendance at prominent hedge fund conferences. He also threw splashy parties, including a birthday party for himself that featured a number of celebrities — photos of which were posted online by several well-known celebrity photographers.

This is how the NYT reported his departure one month ago:

A senior executive at Bank of America in New York departed last week after an internal investigation into a young female banker’s accusation of inappropriate sexual conduct, according to people at the bank who were briefed on the investigation.

The executive, Omeed Malik, 38, was a powerful figure in the hedge fund world. He was a managing director and helped run the prime brokerage business that raises money for hedge funds.

Among his roles, Malik was an adviser to Jon S. Corzine, the former New Jersey governor and United States senator, as Mr. Corzine started a hedge fund, and he was a speaker at a high-profile hedge fund conference organized by Anthony Scaramucci.

Malik, a former lawyer at Weil Gotshal & Manges, a prominent New York firm, also was a member of the Council on Foreign Relations.

Malik’s close ties to Corzine were forged while Malik worked at MF Global, the big commodities trading firm that collapsed in bankruptcy under Corzine’s leadership. Last year, Corzine sought to return to Wall Street with a hedge fund that Malik helped promote.

The young woman, who is employed by Bank of America as an analyst, complained about Malik in January, the NYT reported. The bank then opened an investigation. Officials from human resources interviewed as many as a dozen people who have worked with Mr. Malik. He left roughly two weeks before annual bonuses were to be handed out.

“Joe fully cooperated with the investigation and did all that was asked of him. He was fully forthright and the firm never told him that he failed to disclose information or cover anything up,” said Kim Michael, a partner at Wechsler & Cohen LLP and counsel for Voboril. “We believe the real reason he was terminated was part of Bank of America’s attempt to discredit anyone whose truthful answers didn’t fit into the bank’s narrative about Omeed.”

Allegations of sexual harassment and discrimination have cropped up at Bank of America in the past. Two years ago, it reached a settlement with a female managing director in its fixed income group who had filed a lawsuit claiming the bank fostered a “bros’ club” culture, mistreated female employees and paid them less than men in comparable jobs. The terms of that settlement were not disclosed.

via Zero Hedge http://ift.tt/2FbCGfn Tyler Durden

House Passes ‘Anti Sex-Trafficking’ Bill Opposed by Both DOJ and Trafficking Survivors

With bipartisan enthusiasm, the U.S. House of Representatives has just passed a bill that would endanger sex workers, make life even worse for human trafficking survivors, put both free speech and social media in serious jeopardy, and drastically expand federal prosecutorial power.

The bill, H.R. 1865, is euphemistically named the “Allow States and Victims to Fight Online Sex Trafficking Act” (FOSTA), despite the fact that there’s nothing stopping state authorities from punishing sex traffickers and their allies at present and despite the fact that trafficking victims can already sue abusers in civil court. FOSTA’s actual targets are adults consensually engaging in prostitution as well as web platforms that allow user-generated content.

One of many similarly misleading bills that have gained traction in recent years, FOSTA amends Section 230 of the federal Communications Decency Act to hold online publishers, apps, and services legally liable for the actions of people who post there or connect through them. What this means in practice is that social media sites such as Snapchat and Facebook, classified ad sites such as Craigslist and Backpage, chat apps, search engines, and many other communication tools could be both criminally charged and sued in civil court—by individuals or by states—anytime anyone uses them to meet someone with whom they would eventually engage in commercial sex.

As Rep. Sheila Jackson Lee (D-Texas) explained on the House floor yesterday,

H.R. 1865 creates the new offense of intentional promotion or facilitation of prostitution while using or operating a facility or means of interstate or foreign commerce, such as the internet. A general violation of this offense will be punishable by a sentence of upwards of 10 years.

The bill, sponsored by Rep. Ann Wagner (R-Missouri), has had bipartisan support in the House from the get-go, despite objections from a wide range of stakeholders, from victims’ advocacy organizations to the U.S. Department of Justice, which has already declared the bill “unconstitutional.”

On Tuesday, it passed the House with 388 votes in its favor.

Ivanka Trump and a host of liberal Hollywood celebs, government-funded nonprofits, and former #Pizzagate conspiracy theorists cheered.

But the response from sex workers, sex-trafficking survivors, free speech advocates, human rights activists, tech companies, due process proponents, and many others was much less positive.

The bill “marks an unprecedented push towards Internet censorship, and does nothing to fight sex traffickers,” the Electronic Frontier Foundation (EFF) declared yesterday. “Facing huge new liabilities, the law will undoubtedly lead to platforms policing more user speech,” going out of business, or failing to launch in the first place.

“The tragedy is that FOSTA isn’t needed to prosecute or sue sex traffickers,” the EFF continued. “As we’ve said before, Section 230 simply isn’t broken. Right now, there is nothing preventing federal prosecution of an Internet company that knowingly aids in sex trafficking. That includes anyone hosting advertisements for sex trafficking, which is explicitly a federal crime” already thanks to the 2015 “SAVE Act.

Voting against FOSTA were just 14 Republicans and 11 Democrats. Among them were staunch criminal justice reform advocate Rep. Bobby Scott (D-Virginia), pro-Trump Republican Rep. Matt Gaetz (Florida), longtime women’s rights and anti-violence advocate Rep. Barbara Lee (D-California), and most of the House Liberty Caucus, including Reps. Justin Amash (R-Michigan), Thomas Massie (R-Kentucky), and Mark Sanford (R-South Carolina).

In a statement, Rep. Scott explained that he voted against the bill because it “establishes an overly-broad federal crime that is not limited to the advertisement of sex trafficking victims, which is already illegal, and punishes conduct which is much less serious than what is ordinarily viewed as ‘sex trafficking.'”

“By targeting prostitution broadly, [FOSTA] may also force markets for consensual commercial sexual activities offline, which would increase risks of violent crime against vulnerable populations,” said Scott.

The House Liberty Caucus warned that the bill would subject sites like Facebook, Twitter, and Yelp “to substantial liability unless they’re able to continuously remove all illegal content—which is effectively impossible to do.” FOSTA, in its initial or amended form, “will significantly burden the rights of hosts and users” while increasing “risks of violent crime against vulnerable populations.”

It’s also all sorts of unconstitutional, the Liberty Caucus notes.

FOSTA “violates the Tenth Amendment by establishing a broad new federal crime for using or operating a website with the intent to promote or facilitate the prostitution of someone else,” which is “not limited to the advertisement of sex trafficking victims” (already illegal). Rather, the bill “covers prostitution broadly, which the Constitution does not permit the federal government to regulate through criminal laws.”

The caucus adds that on amendment to FOSTA “violates the Constitution by allowing states to use the bill’s changes retroactively to prosecute conduct that states could not prosecute at the time it occurred.” This goes against Article 1 and the Rule of Law, which forbid “ex post facto laws that retroactively apply criminal liability to actions that occurred before the law is passed.”

Rep. Bob Goodlatte, chair of the House Judiciary Committee, spoke against this retroactive facet of the bill on the House floor yesterday. “Though I applaud my colleague’s dedication to this issue and fully appreciate the suffering of victims, I have concerns about this amendment which states that the provisions of the bill apply regardless of whether the conduct alleged occurred or is alleged to have occurred before, on, or after such date of enactment,” said Goodlatte. “I hope we have an opportunity to fix this problem as we move forward with the bill.”

During a private call last week, a source in the House said Goodlatte’s office was upset about the situation with FOSTA but wouldn’t seriously try to fight it. Another source said on background that Goodlatte’s decision not to fight followed an “expletive-laden exchange” between the Judiciary Committee and House leadership in which Republican Reps. Paul Ryan of Wisconsin and Kevin McCarthy of California made it clear that they were going ahead with the bill as written despite Judiciary’s concerns.

from Hit & Run http://ift.tt/2EZSTF9
via IFTTT