Visualizing The Extreme Concentration Of Global Wealth

In recent decades, extreme world poverty has declined significantly and many millions of people have joined the swelling ranks of the middle class – particularly in China.

While these economic shifts are positive, Visual Capitalist’s Nick Routley notes that it’s the other end of the global wealth spectrum that attracts the most attention. A high degree of wealth creation is amassed by those at the top of the economic pyramid.

THE TOP-HEAVY WEALTH SPECTRUM

Today, slightly less than 1% of the world’s adult population occupies the $1M+ wealth range. Despite their small numbers, this elite group collectively controls 46% of the world’s wealth, valued at approximately $129 trillion.

Courtesy of: Visual Capitalist

On the flip side of the equation, 70% of world’s population fall into the sub-$10K wealth band. This majority of people around the world collectively control a mere 2.7% of the world’s wealth.

Even as “the rich get richer”, there is good news for the majority. The percentage of people in that lowest wealth band has been shrinking over the years.

MONEYED METROPOLISES

Not only is money concentrated among a small portion of the population, those people tend to gravitate towards global cities such as London, Hong Kong, and New York.

In fact, 70% of ultra high net worth individuals (UHNWIs) – persons with investable assets of $30 million or more – reside in just ten cities around the world.

According to Credit Suisse, emerging markets now account for 22% of growth in the UHNWIs category – up from just 6% growth in 2000 – with China alone adding over 16,000 UHNWIs to the mix. Many members of this elite class may generate their wealth in emerging economies around the world, but as we can see from the map above, the world’s richest people end up very concentrated, geographically speaking.

GLOBAL WEALTH, BY CONTINENT

As the visualization below demonstrates, wealth accumulates in Europe and North America. This trend is so pronounced that it only becomes evident once the scale is adjusted to see the detail in the upper percentiles.

One thing is for certain – the world is changing quickly, and just as this graph would have looked very different 20 years ago, global wealth will almost certainly look different in 20 years time.

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The Only Meddling “Russian Bots” Were Actually Democrat-Led “Experts”

Authored by Mac Slavo via SHTFplan.com,

Cybersecurity “experts” in the United States have long alleged that “Russian bots” were used to meddle in the 2016 elections.

But, as it turns out, the authors of a Senate report on “Russian election meddling” actually ran the false flag meddling operation themselves.

A week before Christmas, the Senate Intelligence Committee released a report accusing Russia of depressing Democrat voter turnout by targeting African-Americans on social media. Its authors, New Knowledge, quickly became a household name. Described by the New York Times as a group of “tech specialists who lean Democratic,” New Knowledge has ties to both the U.S. military and the intelligence agencies.

The CEO and co-founder of New Knowledge, Jonathon Morgan, had previously worked for DARPA (Defense Advanced Research Projects Agency), the U.S. military’s advanced research agency known for horrific ideas on how to control humanity. Morgan’s partner, Ryan Fox, is a 15-year veteran of the NSA (National Security Agency) who also worked as a computer analyst for the Joint Special Operations Command (JSOC). Their unique skill sets have managed to attract the eye of authoritarian investors, who pumped $11 million into the company in 2018 alone, according to a report by RT.

Morgan and Fox have both struck gold in the Russiagate scheme, which sprung into being after Hillary Clinton blamed Moscow for Donald Trump’s presidential victory in 2016. Morgan, for example, is one of the developers of the Hamilton 68 Dashboard, the online tool that purports to monitor and expose narratives being pushed by the Kremlin on Twitter. And also worth mentioning, that dashboard is bankrolled by the German Marshall Fund’s Alliance for Securing Democracy – a collection of Democrats and neoconservatives funded in part by NATO (North AtTreaty Tready Organization)and USAID (United States Agency for International Development).

It is worth noting that the 600 Russia-linked Twitter accounts monitored by the dashboard is not disclosed to the public either, making it impossible to verify these claims. This inconvenience has not stopped Hamilton 68 from becoming a go-to source for hysteria-hungry journalists, however. Yet on December 19, a New York Timesstory revealed that Morgan and his crew had created the fake army of Russian bots, as well as several fake Facebook groups, in order to discredit Republican candidate Roy Moore in Alabama’s 2017 special election for the U.S. Senate.

Working on behalf of the Democrats, Morgan and his crew created an estimated 1,000 fake Twitter accounts with Russian names, and had them follow Moore. They also operated several Facebook pages where they posed as Alabama conservatives who wanted like-minded voters to support a write-in candidate insteadIn an internal memo, New Knowledge boasted that it had orchestrated an elaborate ‘false flag’ operation that planted the idea that the Moore campaign was amplified on social media by a Russian botnet.”RT

This scandal is being perpetrated by the United States media and has so far deceived millions, if not more. The botnet claim made a splash on social media and was further amplified by Mother Jones, which based its story on “expert opinion” from Morgan’s dubious creation, Hamilton 68.

Things got even weirder when it turned out that Scott Shane, the author of the Times piece, had known about the meddling for months because he spoke at an event where the organizers boasted about it!

Shane was one of the speakers at a meeting in September, organized by American Engagement Technologies, a group run by Mikey Dickerson, President Barack Obama’s former tech czar. Dickerson explained how AET spent $100,000 on New Knowledge’s campaign to suppress Republican votes, “enrage Democrats to boost turnout, and execute a false flag to hurt Moore. He dubbed it Project Birmingham.” -RT

There really was meddling in American democracy by Russian bots. Except those bots weren’t run from Moscow or St. Petersburg but from the offices of Democrat operatives chiefly responsible for creating and amplifying the Russiagate hysteria over the past two years in a textbook case of psychological projectionbrainwashing, and Nazi-style propaganda campaigns.

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Tires Slashed, Guns Pulled On Self-Driving Cars As Arizona Residents Revolt

More than 20 driverless vehicles in Arizona have reportedly been vandalized over the last two years, according to the New York Timesas enraged locals in the Waymo test market of Chandler have begun to revolt.

Tensions began to flare last year after an Arizona pedestrian was killed by a self-drivng Uber car, with residents slashing tires, throwing rocks at, pulling guns on, and trying to wreck the autonomous cars. 

Some people have pelted Waymo vans with rocks, according to police reports. Others have repeatedly tried to run the vehicles off the road. One woman screamed at one of the vans, telling it to get out of her suburban neighborhood. A man pulled up alongside a Waymo vehicle and threatened the employee riding inside with a piece of PVC pipe.

In one of the more harrowing episodes, a man waved a .22-caliber revolver at a Waymo vehicle and the emergency backup driver at the wheel. He told the police that he “despises” driverless cars, referring to the killing of a female pedestrian in March in nearby Tempe by a self-driving Uber car. –NYT

There are other places they can test,” said 37-year-old Erik O’Polka, who was issued a warning in november after multiple reports that his Jeep Wrangler had tried to run Waymo vans off the road. In one instance, O’Pokla reportedly drove head-on toward one of the self-driving vehicles, forcing it to abruptly stop. 

  

O’Polka’s wife Elizabeth, 35, admitted in an interfview that Erik “finds it entertaining to brake hard” in front of the driverless vehicles, and that she herself “may have forced them to pull over” for a good yelling-at. The couple says their hatred of self-driving cars began when their 10-year-old son was almost hit by a self-driving vehicle while playing in a nearby cul-de-sac.

“They said they need real-world examples, but I don’t want to be their real-world mistake,” said Polka. “They didn’t ask us if we wanted to be part of their beta test,” added his wife. 

Natural reaction

According to New York City University media theorist Douglas Rushkoff, “People are lashing out justifiably,” as he compared driverless cars to “robotic incarnations of scabs,” workers who cross picket lines to take the jobs of striking workers. 

“There’s a growing sense that the giant corporations honing driverless technologies do not have our best interests at heart,” said Rushkoff. “Just think about the humans inside these vehicles, who are essentially training the artificial intelligence that will replace them.”

Some of the attacks have been difficult for law enforcement to pursue, as Waymo emergency drivers told the Chandler police that the company prefers not to pursue the prosecution of the assailants. In several cases, the police say Waymo was unwilling to provide video of the attacks – and were told that they would need a warrant in at least one case. 

Officer William Johnson of the Chandler Police Department described in a June report how the driver of a Chrysler PT Cruiser wove between lanes of traffic while taunting a Waymo van.

A manager at Waymo showed video images of the incident to Officer Johnson but did not allow the police to keep them for a more thorough investigation. According to Officer Johnson’s report, the manager said that the company did not want to pursue the matter, emphasizing that Waymo was worried about disruptions of its testing in Chandler.

The report said Waymo was concerned about the effect the attacks were having on its emergency drivers, who are intended to remain in monitoring mode. “The behavior is causing the drivers to resume manual mode over the automated mode because of concerns about what the driver of the other vehicle may do,” Officer Johnson wrote. –NYT

Waymo said in a statment that the attacks only involved a tiny fraction of the more than 25,000 miles the company’s vans travel every day in Arizona. 

“Safety is the core of everything we do, which means that keeping our drivers, our riders, and the public safe is our top priority,” said Waymo spokeswoman Alexis Georgeson. “Over the past two years, we’ve found Arizonans to be welcoming and excited by the potential of this technology to make our roads safer.”

She added that the company disputes claims that they are trying to avoid bad publicity by avoiding criminal prosecution of vandals. 

“We report incidents we deem to pose a danger and we have provided photos and videos to local law enforcement when reporting these acts of vandalism or assault,” said Georgeson. “We support our drivers and engage in cases where an act of vandalism has been perpetrated against us.”

According to Rob Antoniak, COO of Phoenix transit operator Vallet Metro, Arizona is still welcoming driverless cars with “open arms” despite the attacks on Waymo vehicles, tweeting in December: “Don’t let individual criminals throwing rocks or slashing tires derail efforts to drive the future of transportation.” 

 The naysayers remain unconvinced. 

One of them, Charles Pinkham, 37, was standing in the street in front of a Waymo vehicle in Chandler one evening in August when he was approached by the police.

“Pinkham was heavily intoxicated, and his demeanor varied from calm to belligerent and agitated during my contact with him,” Officer Richard Rimbach wrote in his report. “He stated he was sick and tired of the Waymo vehicles driving in his neighborhood, and apparently thought the best idea to resolve this was to stand in front of these vehicles.” –NYT

The Waymo employee inside the vehicle, Candice Dunson, declined to file charges, and Pinkham got a warning from the police. 

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Martin Armstrong On The Coming Mini Ice-Age

Authored by Martin Armstrong via ArmstrongEconomics.com,

Just because someone claims to be a scientist and states for or against Global Warming, really does not add up to a lot for just as when you go visit a doctor, they always tell you to get a second “opinion” because that is all you are getting.

Previously, I have reported that NASA confirmed we are going into a cooling period – not warming. They have put out a forecast of declining sunspot activity. Now NASA has come out confirming what our computer has been forecasting. They have reported that as the sun is experiencing a rapid decline in sunspots, it is also dimming in brightness or energy output. NASA’s Spaceweather station has recorded during 2017, 96 days (27%) of observing the sun have been completely absent of sunspots.

While NASA has now confirmed that the outer atmosphere is getting cooler. In fact, one of the top NASA scientists has broken camp and warned that the surface temperature of the sun has collapsed so much, he fears a new Ice Age is upon us. Meanwhile, this has been the COLDEST Thanksgiving in 150 years! Interestingly, however, is that this sudden sharp decline in the energy output of the sun coincided with the 2015.75 turning point of the Economic Confidence Model.

I have previously warned that if this trend continues during the next winter, then we have exceeded any short-term reactionary trend and the weather appears poised to continue to get colder going into the distant future. Socrates was projecting that the peak on this cycle aligned with the ECM 2015.75. This is a Longitudinal Cycle, not Transverse. That means peak to bottom varies. This short-term wave should be a 13-year decline from 2015 making it 2028 initially. After that, if we see colder winters beyond 2028, then the next low will be with the peak in the ECM 2032. There is a SERIOUS RISK that we are looking at the final low coming in during the period of 2046.

It appears we are plunging now into a deep mini ice age. There is just no way we can reverse this trend no matter how much the government regulates or increases the taxes. For the next 20 years at a minimum it’s going to get colder and colder on average. There is a very HIGH PROBABILITY that we are declining for 31 years from 2015.

What people fail to understand is that the entire weather system of our planet is extremely dynamic. Research has traced the north-south shifts of the northern-most edge of the tropics back 800 years, which was conducted by the University of Arizona-led international team. They have mapped out the fact that the Tropic Belt is also subject to cyclical movement. I have reported that in ancient times, the region we call the Sahara Desert was lush and green and there were cave drawings showing herds of animals in the region. The research has revealed that indeed the Tropic Belt has moved upward and downward over the centuries and the research has documented where it has moved for the last 800 years.

The University of Arizona wrote:

 “From 1568 to 1634, the tropics expanded to the north, the team found. That time period coincides with severe droughts and other disruptions of human societies, including the collapse of the Ottoman empire in Turkey, the end of the Ming Dynasty in China and near abandonment of the Jamestown Colony in Virginia…”

The Tropic Belt has been gradually moving northward since 1970. There is debate over what is even causing that. The data we hope to also run through our model to see if that also aligns with the future forecasts on climate change our model has been projecting. This too may be yet another confirming link in the outcome we must face.

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Mobile App Lets You Buy And Sell Equity Shares Of Blue-Chip Collector Cars

Launched in 2016, Rally Rd. is an SEC-compliant mobile app where users buy and sell Ferraris, Porsches, Lamborghinis and other exotic automobiles.

The company said it has about 50,000 members that have invested millions. Currently, there are about 20 cars available to purchase stakes in, though Rally Rd. expects to have around 100 available to trade on the app in the second half of 2019, reported TechCrunch.

Rally Rd.’s co-founders Chris Bruno and Rob Petrozzo told TechCrunch back in October that the crypto bubble implosion opened the eyes of many Americans into the digital asset investing space.

The founders recently solidified a $7 million Series A funding round to open what they call a “live investing ecosystem,” a showroom where users can participate in initial car offerings. The first location will be built in New York’s SoHo neighborhood, with other sites to follow in Los Angeles, South Florida, and Texas.

“We want to create that Apple Store atmosphere where anyone can come in and learn about equity investing on the spot,” said Petrozzo.

Here is how the scheme works: Rally Rd.’s deal team finds blue-chip collector cars and are turned into stocks. To do this, they form a new special purpose entity (a subsidiary of an LLC) whose sole function is to hold the car’s title. The company then holds an SEC-registered offering where investors can view details about the investment and if desired purchase equity shares in the entity that holds the car’s title. Each automobile is registered for sale through a registered broker-dealer available in 32 states. 

Similar to the stock market, after the initial offering, shares of the car will trade on an exchange during regular trading hours.

“They’ve literally recreated the NASDAQ or NYSE experience for these assets on the Rally Rd. platform,” investment partner Greg Bettinelli, who has joined Rally Rd.’s board of directors, told TechCrunch.

The special purpose entity structure enables some investors to make a tender offer for all outstanding shares of a specific car, and if investors accepted the offer, the leveraged buyout would enable the buyer to completely own the car.

If a museum wanted to borrow the car, that entity would offer a one-time dividend to all shareholders.

The blue-chip collector cars are stored in a temperature controlled facility which is prepaid for by money raised in each offering. In 2019, investors will be able to watch their investments on a 24/7 live stream. 

As per TechCrunch, Rally Rd. takes no management fees or shares of the offering, but since nothing in this world is free, we would expect some type of hidden fee, additional premium or subscription services in the future to generate revenue for the company.

 The company also said they could expand into other verticals, including art and sports memorabilia. The founders said a worldwide launch of the app should debut later down the road.

As it now seems TINA ‘There Is No Alternative to the stock market’ is dead, cash has been king since the stock market imploded several months ago. With the risk of poor returns from equities over the next ten years high, Rally Rd.’s digital investments of classic cars could be a hit with the baby boomer generation, as blue-chip collector cars have outperformed gold, the S&P500, and New York City Real Estate since 2012.

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One River Asset Management: “QE Has Done Something Much More Damaging Than The Fed Could Have Imagined”

Submitted by Lindsay Politi of One River Asset Management

Ghosts of Investments Future

“I think of the markets like an ecosystem,” the fund manager told me.

“The environment causes some strategies to flourish and multiply, while others die off. The abnormally long, QE-fueled bull market killed off anything that wasn’t, at its core, a short volatility strategy. Now, whether it’s risky credit, levered equities, or risk parity, almost all strategies are taking similar risks. QE has done something much more damaging than the Fed could have imagined. It changed the very nature of the market, destroying the diversity of the market ecosystem, and making it incredibly vulnerable to the smallest change in the macro environment.”

Yields

“Bond guys think they know what they want, but they’re wrong,” my first boss told me. “They think they want lower yields because they drive up bond prices. But that’s a short-term gain collected at the expense of future returns. Client inflows surge, chasing those high returns, but they’re not repeatable unless yields continue falling. What bond guys should really want is high yields, the kind that create long term returns that are attractive to clients. Rising rates are painful in the short-term but higher rates are better in the long run.

Fed Put

“Why did Powell reset the Fed put lower?” he asked “I don’t think Powell saw it that way,” I responded, “but I’m surprised people think a central bank put still exists.”

If we have a recession with overnight rates still at 2.50%, what can the Fed do? They can’t ease 500bps like in past recessions, there’s no room. Coordinated easing with the ECB and BOJ is off the table — their rates are negative and they’re running out of assets to buy for QE. At least the Fed won’t have that issue. With surging budget deficits, the Fed will have plenty of Treasuries to buy. And that’s only just begun, because the next put for the markets is really from fiscal, not monetary policy.

Assume

“What do you think about big data models?” the analyst asked. “There’s a fascination with having ever more data, but quantity can’t make up for quality,” I responded. Some things are easy to model but others are much harder because there’s just not good data. Anyone can build a decent model with great data. The hard part is knowing what to do with bad or incomplete data. The hardest yet is knowing when to pull your model because the data it was built with isn’t representative of the current environment.

How would you build a robust model for a bond bear market? There’s just not great data. Most quants compensate by creating a data series and then treating this made-up data as real. But to create a data series you must make assumptions. Success will come not to those who build the best machines but to those who make the best assumptions.

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2019 From A Fourth Turning Persepctive

Authored by Jim Quinn via The Burning Platform blog,

“An impasse over the federal budget reaches a stalemate. The president and Congress both refuse to back down, triggering a near-total government shutdown. The president declares emergency powers. Congress rescinds his authority. Dollar and bond prices plummet. The president threatens to stop Social Security checks. Congress refuses to raise the debt ceiling. Default looms. Wall Street panics.”

– The Fourth Turning – Strauss & Howe

Strauss and Howe wrote their book in 1996. They were not trying to be prophets of doom, but observers of history able to connect events through human life cycles of 80 or so years. Using critical thinking skills and identifying the most likely triggers for crisis: debt, civic decay, and global disorder, they were able to anticipate scenarios which could drive the next crisis, which they warned would arrive in the mid-2000 decade. The scenario described above is fairly close to the current situation, driven by the showdown between Trump and the Democrats regarding the border wall.

It has not reached the stage where all hell breaks loose, but if it extends until the end of January and food stamp money is not distributed to 40 million people (mostly in urban ghettos) all bets are off. The likelihood of this scenario is small, but there are numerous potential triggers which could still make 2019 go down in history as a year to remember.

As we enter the eleventh year of this Fourth Turning, the fourth Crisis period in U.S. history, the mood of U.S. citizens and citizens around the globe continues to darken. Fourth Turnings are driven by generational configuration and the emotional reaction to events by the Prophet generation leaders, Nomad generation spearheads, and Hero generation cannon fodder.

As we close out this year, stock markets are gyrating wildly, central bankers are trying to reverse their nine years of interventionist strategies to sustain the establishment, civil chaos spreads across the European continent, saber rattling between the U.S., Russia and China increases, the animosity between political parties reaches new heights, the Deep State relentlessly pursues their Mueller led coup against Trump, mega-social media corporations tighten their grip on free speech by silencing conservatives, leftists push their socialist, open borders, normalizing degeneracy agenda, and global recession gains momentum as trade declines and global debt reaches unserviceable levels.

Examining the three prior Fourth Turnings may give us a window into where we stand and what may happen in the coming year. We are in the tenth year of this Crisis, with the eleven-year anniversary slated for September 2019. The American Revolution Crisis was catalyzed in 1773 when the Boston Tea Party forever changed the colonial mood towards revolution. After eight years of struggle and desperate measures, the climax was reached with the surrender of Cornwallis at Yorktown in 1781.

But there was still thirteen more years of crisis as the new states forged a Constitution, elected Washington its first president, and he withstood the Jacobins, put down the Whiskey Rebellion and finalized a treaty with England. In year ten of the crisis, two years past the climax, the Treaty of Paris was signed, British troops left the continent, and Washington resigned as commander of American troops. The Articles of Confederation had been ratified in 1781 and remained in place until succeeded by the U.S. Constitution in 1789.

There was no tenth or eleventh year of the Civil War Crisis. Lincoln’s election with only 40% of the popular vote, prompting the attack on Fort Sumpter, and subsequent secession of Southern states, triggered the bloodiest conflict in world history, with 8% of all white men aged 13 to 43 killed in the war, including 6% in the North and 18% in the South. The acceleration of this Fourth Turning into a five-year window from 1860 to 1865 was not a positive development.

The extreme intensity of the conflict resulted in 700,000 tragic deaths. The catalyst occurred five years too soon and the resolution a generation too soon. A more extended crisis may have allowed tempers to moderate and the conflict to end in a more constructive manner. Instead, with the surrender at Appomattox and assassination of Lincoln, the resolution felt more like a defeat than a victory. Turmoil continued for at least a decade after the resolution.

The Great Depression/World War II Crisis saw its tenth and eleventh years as the most ominous, dangerous and destructive for Great Britain, as they bore the brunt of the German onslaught. 1939 saw the Nazi invasion of Poland and the official start of World War II. In May of 1940 Germany launched its blitzkrieg offensive through Holland and Belgium, defeating the French and British forces in a matter of weeks. Chamberlain resigned as Prime Minister, replaced by Churchill, as France surrendered in late June.

The Battle of Britain raged from July through October as Hitler relentlessly bombed England, trying to force their surrender. Germany, Italy and Japan signed the Tripartite pact in September, setting the stage for the U.S. eventual participation in the war. Einstein informed FDR of the potential for an atomic bomb during 1939 and the Manhattan Project was born. The climax of the crisis occurred with the successful D-Day invasion. The dropping of two atomic bombs on Japan and successful demobilization of military forces marked the end of the crisis.

History may not repeat, but human nature never changes, so the 80-year cycles of manmade crisis will repeat. The length of time from the American Revolution climax in 1781 until the Civil War climax in 1863 was 82 years. The next climax in 1944 was 81 years after the Civil War climax. Therefore, we can expect a climax to this current Crisis sometime in the 2025 range. The question is what events will transpire between 2019 and 2025 before a climax is reached.

Based upon history, the resolution will not be based on compromise, civility, reason, or peaceful means. The combustible combination of unpayable debt, civic anarchy, and global chaos are set to detonate, creating an era of maximum darkness, death, destruction, and decisions. Making America Great Again will require personal sacrifice, dreadful choices, survival skills, intelligent decisions, and the courage to win at all costs.

The first ten years of this Crisis were the early Winter solstice period when public order began to pass its nadir. The coldest days of Winter beckon with the harshest years of the Crisis ahead. Many melancholy days lie ahead, as bitter winter winds and blizzard like conditions sweep the bleak landscape, testing the mettle of even the bravest souls. The catalyst for the Crisis was the Wall Street created global financial meltdown in 2008. The election of Trump marked the beginning of the regeneracy, with Trump as the Gray Champion.

The last two years have certainly marked a new more volatile phase of this Crisis, setting the stage for the fireworks to come. The regeneracy is less like FDR’s New Deal initiated unification of the country and more like the Lincoln regeneracy after the First Battle of Bull Run when he ordered the enlistment of a half million men to fight a like number of fellow American men. Both American factions were unified in their cause. The chain reaction of emergencies and unyielding responses will continue unabated until a final resolution is achieved.

“In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies.

The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” – The Fourth Turning – Strauss & Howe

Strauss and Howe foresaw the core elements which would surely propel the next Fourth Turning. They were plain to see for people who chose to see the world with eyes wide open. Debt, civic decay and global disorder are on center stage as we enter the fateful year of 2019. A madness seems to be gripping the nation, a melancholy realization all is not right. Everything has a chaotic feel, as financial markets are falling, politicians threaten and attack each other, government dysfunction is laid bare for all to see, Deep State snakes slither behind the scenes trying to bring down Trump, racial tensions grow, foreign governments topple, Russia and China challenge U.S. hegemony, and the global debt Ponzi scheme is entering its collapse phase.

There are no moderates, only pro-Trump and anti-Trump factions. Compromise and workable solutions to our deep-seated problems are off the table. The mood of the populace ranges from frustrated and angry to depressed and stressed. The aroma of conflict wafts through the air as battle lines are being drawn.

The initial spark of a global financial meltdown created by greedy Wall Street banks, the feckless Fed, and corrupt government officials was driven by bad debt, outright control fraud by the financial industry, captured rating agencies, easy money provided by the Wall Street owned Fed, and utter contempt for properly regulating the Wall Street cabal by the Fed and SEC.

This emergency was met by an unyielding response from the establishment, with the easiest money policies in world history, bailing out criminal bankers with taxpayer funds, increasing global debt by $80 trillion to $250 trillion (318% of global GDP), running fiscal deficits exceeding $1 trillion per year, and pretending all that debt will be repaid. Pretend and extend has been the solution.

The Deep State has taken extraordinary measures to try and retain their stranglehold on the wealth of the nation and control of the political, financial, social and media levers of society. They have utilized a combination of propaganda disguised as news, social media distractions, technological surveillance, misinformation campaigns, welfare to keep the poor sedated, and the continued issuance of debt to keep the masses satiated with consumer goods as their wealth dissipates. But the teetering edifice of debt, delusion and deception is poised to topple in 2019.

As we enter 2019, year eleven of this ongoing Crisis, you can sense the panic and distress permeating from the pores of the establishment figures and their rich shadowy benefactors trying to maintain their unseen presence behind the curtain as they pull the strings – operating as the invisible government running the show for their own benefit. It seems the unanticipated election of Trump has thrown a monkey wrench into their well- oiled pillage machine, forcing them to reveal themselves as they attempt a not so subtle coup against a sitting president.

Fourth Turnings always sweep away the existing social order in a torrent of violent upheaval and the blood of young men. But that doesn’t mean the existing establishment will give up their wealth, power and control without a fight. And the fight is underway. The volcano has erupted and the molten lava could flow in numerous pathways over the next six or so years.

“Imagine some national (and probably global) volcanic eruption, initially flowing along channels of distress that were created during the Unraveling era and further widened by the catalyst. Trying to foresee where the eruption will go once it bursts free of the channels is like trying to predict the exact fault line of an earthquake. All you know in advance is something about the molten ingredients of the climax, which could include the following:

  • Economic distress, with public debt in default, entitlement trust funds in bankruptcy, mounting poverty and unemployment, trade wars, collapsing financial markets, and hyperinflation (or deflation)

  • Social distress, with violence fueled by class, race, nativism, or religion and abetted by armed gangs, underground militias, and mercenaries hired by walled communities

  • Political distress, with institutional collapse, open tax revolts, one-party hegemony, major constitutional change, secessionism, authoritarianism, and altered national borders

  • Military distress, with war against terrorists or foreign regimes equipped with weapons of mass destruction” 

– The Fourth Turning – Strauss & Howe

The ingredients of distress in the next phase of this Crisis could include any or all of those pondered by Strauss and Howe twenty-two years ago. I can make the case for multiple levels of distress breaking free from their channels, making 2019 as historic a year as 1939 or 1940. My prognosis for 2019 follows:

Economic Distress

Economic distress is mounting, as the machinations of the Fed, Wall Street and the U.S. government prove to be nothing more than debt financed illusions. Once the easy money spigot is turned off and the tide of zero interest debt for Wall Street and mega-corporations recedes, you realize everyone was swimming naked. The national debt grew by $1.4 trillion in 2018 during “the best economy ever”, according to Trump.

We added $12 trillion to the national debt and have generated a historically weak recovery, especially for the working class. We’ve gone nine years without recession and the longest period in U.S. history between recessions was ten years. Without the tax cut stimulus, interest rates higher, corporate profits flagging, global trade waning, and central bankers withdrawing liquidity, recession is likely in 2019 – driving deficits towards $2 trillion.

The number of zombie companies (GE, Sears, JC Penney, Chesapeake, all fracking companies) propped up by cheap junk bond debt is astronomical. National debt default is still a ways off, but a tsunami of corporate debt defaults will inundate the economy once the recession knocks the legs out from beneath this faux recovery. Corporations and consumers have never been more indebted. Stock valuations have never been higher.

An economy that begins to self destruct when interest rates approach 3% proves the “solutions” implemented by those in power did nothing for the average American, while further enriching the parasitical class pulling the strings. At this point, a specific triggering event is unnecessary to provoke the economic conflagration. The unbearable weight of unpayable debt is going to cause the structure to collapse at free fall speed, like the Twin Towers pancaking everyone in the floors below.

With a recession inevitable in 2019, we know the stock market declines 30% to 40% during recessions, on average. When a stock market is this overvalued, based solely on Fed easy money and corporate buybacks (Apple has lost $9 billion on their buybacks this year), the withdrawal of liquidity combined with recession and declining profits will knock 50% to 60% off current prices. I wonder how many middle-class 401k contributors expect this to happen. Well this will be the third time in 18 years, so you would think they’d learn by now.

Recession means job losses, consumer debt defaults, less tax revenue for the government, more wasteful spending by politicians pretending to care, soaring deficits, currency gyrations, and the potential for rising interest rates as no one will be willing or able to buy the newly issued debt. Will we have massive deflation or hyperinflation? Anything is possible in a collapse scenario. What is certain will be millions of angry Americans looking for someone to blame and politicians seeking to distract them with some foreign “threat” to their safety and security. This is when trade wars morph into real wars.

Social Distress

The social distress sweeping the country gets the majority of attention on the left-wing corporate media propaganda machines as they purposely fan the flames of divisiveness. Keeping the sheeple angry at each other keeps them distracted from the continued pillaging of the national wealth by the Deep State scum operating in plain sight. The daily war against the normals has reached new heights of hypocrisy and idiocy.

The unceasing mantra of diversity, trying to normalize the lifestyles of the mentally ill, glorifying socialism as Venezuela implodes due to socialism, promoting the climate change agenda to abscond with more taxes, and trying to force left wing agendas down the throats of white traditional family-oriented people, is on the verge of starting civil violence as we are witnessing in France. The ruling class has gone too far in accumulating the wealth of the nation through the capture of regulatory, political, financial, and communication structures. Wealth inequality arisen through fraud, deception and corruption will lead to class warfare – likely after the next financial collapse.

The current government shutdown over funding for a border wall is essentially a showdown over the racial makeup of the country and allowing unfettered access to welfare benefits to illegal invaders who will loyally illegally vote for their Democrat benefactors for eternity. Racial politics is what has kept blacks enslaved on the welfare plantation in decaying urban ghettos run by Democrat politician plantation owners.

A black uprising led by Kanye West has struck fear into the hearts of Democrats, giving them further incentive to keeping the southern border open to new Democrat voters.  With gun grabbing liberal politicians attempting to disarm the deplorables in flyover country, while supporting antifa and black lives matter terrorists, and thwarting efforts to keep criminals and terrorists from illegally entering the country, a violent showdown is inevitable.

Political Distress

The political distress since the 2016 election has reached levels not seen since the Civil War Crisis period. The Deep State controllers’ next hand-picked figurehead president – Hillary Clinton – inexplicably lost the election to a NYC reality star real estate mogul who boasted about grabbing pussies and had a weakness for strippers and Playboy bunnies. Clinton’s arrogance and hubris were her downfall as the deplorables she ridiculed and a majority of white women in the country gave Trump a slim victory and drove millions of pussy-hat wearing feminazis into a rage.

College students across the land sobbed in their safe spaces and missed their Queer Theory or Pick your Gender classes. But not only were snowflakes across the land melting, but the surveillance state spooks who attempted to rig the election in Clinton’s favor went into a frenzy, as fear of their traitorous machinations being revealed forced them to begin a coup attempt against Trump. The Mueller, Comey, Clapper, Brennan, Obama, Clinton reactive coup attempt is ongoing and will come to a head in 2019.

The outcome of this epic struggle between the Deep State and the non-approved upstart president could create civil war like conditions. How will Trump supporters react if they believe their leader is removed through impeachment, based on false charges? Will they take to the streets in armed insurrection? Will the police and military fire on their fellow citizens? What if Trump refuses to step down, creating a Constitutional crisis? What if he is assassinated?

On the other hand, what if Trump’s allies within the DOJ and Military present evidence of collusion against the Obama administration, Clinton and top officials in the FBI, DOJ and CIA? How would the left wingers react to military tribunals with their beloved leaders in the docket? Even if these earth-shattering events don’t come to fruition, a Democrat controlled House will thwart everything Trump attempts to accomplish as they position themselves for the 2020 presidential election. The anger and disillusionment of the masses will deepen.

Military Distress

The potential for catastrophe on the military front hasn’t been higher in decades. The linear thinking lemmings dismiss the possibility of a global conflict because they are just as obtuse as “experts” before them throughout history. Since World War II we have only experienced proxy wars where the outcomes would not change the course of world history. There have been no “total wars”, where the loser is utterly shattered and complete victory is attained.

Those who practice revisionist history act as if the previous two Fourth Turning total wars were completely predictable before they began. In 1858 no one believed a Civil War taking the lives of 700,000 Americans was just over the horizon. Exactly 80 years later in 1938, few believed a global conflict which would kill 65 million people in six years was imminent. Here we are exactly 80 years later and anyone predicting a global conflagration killing millions is declared a loon.

Every previous Fourth Turning has ended in total war with victory of the “good guys” always in doubt. Every total war has ratcheted up the level of death and destruction, as technological “advancements” enhance our war making abilities. Human nature DOES NOT change. We are not smarter, less war-like, more humanitarian, or less arrogant than our predecessors throughout history. Hubris, power, and miscalculation by egomaniacal leaders leads to war.

We know the climax of this Fourth Turning is slated for around 2025. This infers a high likelihood of a major war involving the U.S. in the foreseeable future. Will it ignite in 2019? All the combustible elements are present. The onset of a global depression, trade wars, China & Russia feeling pushed into a corner and the volatile political situation in the U.S. and EU provide a potential pathway to global conflict.

Economic indicators from China show the slowest economic growth in a quarter century. Their natives are restless. Plunging oil prices will throw the Russian economy into recession. The EU economies, led by Germany, are seizing up with the slowdown in global trade. Japan has essentially been in recession since the 1990s. The U.S. is poised for a recession in 2019.

Immigration chaos in Europe, Brexit, Ukrainian nazis provoking Russia, South China Sea territorial disputes, the Syria, Turkey, Iran, Israel ticking time bomb, Saudi anarchy, socialist South American regimes imploding, and U.S. political pandemonium have created a perfect storm of domestic and international disasters. What do low-life politicians do when faced with terrible domestic issues? They seek to distract their citizens with a foreign threat. See “Blame Russia for Everything” as an example of this tried and true propaganda technique.

Desperate politicians do desperate things to retain power. Desperate Deep State actors care not one wit for their fellow countrymen. They are willing and able to sacrifice the youth of their nation to fight wars which will further enrich themselves and their fellow traitorous benefactors. We are nothing but cannon fodder to this psychopathic scum. Putin and Xi are essentially dictators who have no fear of elections every two years. They are serious men in possession of nuclear missiles, capable of destroying the world.

Blaming them for all the ills in your own country is a fool hardy tactic. The ever- increasing saber rattling, whether in the Ukraine, Syria, South China Sea, or during antagonistic trade negotiations can easily lead to unintended consequences. All leaders have enormous egos and are prone to over-confidence and miscalculation regarding how their opponent will react. Someone is going to do something stupid and then all hell is going to break loose.

No Escape

“The risk of catastrophe will be very high. The nation could erupt into insurrection or civil violence, crack up geographically, or succumb to authoritarian rule. If there is a war, it is likely to be one of maximum risk and effort – in other words, a total war. Every Fourth Turning has registered an upward ratchet in the technology of destruction, and in mankind’s willingness to use it.

History offers no guarantees. Obviously, things could go horribly wrong – the possibilities ranging from a nuclear exchange to incurable plagues, from terrorist anarchy to high-tech dictatorship. We should not assume that Providence will always exempt our nation from the irreversible tragedies that have overtaken so many others: not just temporary hardship, but debasement and total ruin. Losing in the next Fourth Turning could mean something incomparably worse. It could mean a lasting defeat from which our national innocence – perhaps even our nation – might never recover.” – Strauss & Howe – The Fourth Turning

There is no escape from the Fourth Turning. We are midway through this crisis and the existing social order retains tenuous control over the levers of finance, government and the legacy media. History tells us our society will be reshaped and transformed before this crisis resolves itself sometime between now and 2029. It would be the utmost of arrogance to believe our nation will be protected from destruction by an all-powerful God. We’ve made bad choices, deferred hard decisions, squandered our financial resources, allowed our educational system to be corrupted and valued all the wrong things.

There will be consequences. The overt last- ditch financial debt schemes concocted by the entrenched establishment, to prolong their power and control, are unraveling and a death and rebirth of the social order through a chaotic cleansing is in the offing. I believe the real fireworks will begin during 2019.

I don’t eagerly await the terrible storms headed our way. I wish we didn’t have to withstand the brutal gales of this coming winter, but we have no choice. You have to survive Winter to experience the blossoming Spring. The coming decade will try our souls and force everyone to make choices that will make a difference. The specific events are unknowable, but how we react and who we support during the events will be the decisive factor in whether this Fourth Turning is resolved in a positive way. Having it resolved in negative way could be an unimaginable tragedy.

Patrick Henry made his famous “Give me liberty or give me death” speech during the first American Fourth Turning. His words ring true today. We are already at war. Sides have been drawn. We are going to have to fight whether we like it or not. Our only other choice is chains and slavery. The time to choose has arrived. Welcome to 2019.

  “The war is actually begun! The next gale that sweeps from the north will bring to our ears the clash of resounding arms! Our brethren are already in the field! Why stand we here idle? What is it that gentlemen wish? What would they have? Is life so dear, or peace so sweet, as to be purchased at the price of chains and slavery? Forbid it, Almighty God! I know not what course others may take; but as for me, give me liberty or give me death!” – Patrick Henry – 1775

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Repo Rate Soars Most On Record As Yield Curve Goes Nuts In Year-End Liquidity Chaos

While markets were in a festive mood on New Year’s Eve, with the S&P enjoying a last second 15-point spike even as 10Y yields tumbled to the lowest level since January…

… something strange took place in both overnight funding markets and the Treasury market.

While it is well-known that dealers tend to “window dress” their books on the last day of the year by curtailing activity in financing markets to shore up balance sheets, what happened on Monday left quite a few mouths wide open: with the General Collateral rate trading around 2.50% on Friday, Monday saw a historic surge in overnight GC repo, that sent the rate surging by the most ever, spiking sharply to 6.125% on Monday morning, with the bid/ask trading 6.50%/5.75% just after 10am after opening Monday at 3.75%/4.00%, which was already nearly 1.50% higher than the Friday close (incidentally, the Broad General Collateral Rate (BGCR) was set at 2.45%, the same as the Tri-party General Collateral Rate).

In fact, the closing print of 6.125% was the highest GC repo rate observed since January 2001, and just under 400 bps higher than the Fed funds rate.

“The cash never came in,” said Scott Skyrm, EVP at Curvature Securities, noting that “funding pressure should be about 50 basis points. This was 350 basis points.”

Indeed, confirming the need for cash, on the last day of 2018, 17 counterparties took only $41.8BN at the Fed’s overnight reverse repo operation on Monday, up from $3.21b on Friday, which was the second-smallest quarter-end usage since the RRP was created in 2013, and suggesting that instead of padding books with cash-equivalent securities to satisfy regulatory requirements, banks were suddenly strapped for cold, hard cash.

Clearly there was something amiss with year end liquidity: while there have been year end spikes in the repo rate all prior years, not once in the past decade was the surge as high as it was this time, prompting questions if there were broader year-end liquidity plumbing issues in the market than just traditional window dressing.

Meanwhile, in yet another bizarre manifestation of year-end liquidity events, on Monday shortly after a 52-week Bill auction priced amid unremarkable results, the short-end of the curve inverted dramatically, with the yield on the 1Y finding itself more than 10bps higher than the 2Y.

In fact, the yield on the 52-week Bill closed Friday at 2.5986%, higher than the yield on the 7Y TSY which was at 2.5869%, meaning the 1s7s was inverted.

The last time the 1s7s curve inverted? You guessed it – the same time the overnight repo rate surged as much as it did on Monday – back in early 2001.

One reason cited for the bizarre shape of the yield curve was the bond market’s confusion about what the Fed will do, with the short-end still anticipating perhaps one or more rate hikes, while the longer-end increasingly pricing in deflation, rate cuts and, eventually, QE, although since both of those expectations are what makes up the shape of the yield curve by definition, that explanation was left wanting.

As for the record spike in repo, rates traders were left scratching heads, with Curvature’s Skyrm warning that market participants may have to start pricing in the fact that if repo rates “spike up a bit, they could go much higher.”

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What If Theranos Was A Hedge Fund?

Submitted by Michael Edesess of Advisor Perspectives

The amazing story of Theranos, a company started in 2003 by a 19-year-old Stanford dropout, is told in page-turning detail in a recent book by Wall Street Journal reporter John Carreyrou. Despite an incredibly distinguished board, leading venture capital investors, raves from a respected Stanford dean and contracts with consumer chains Walgreen and Safeway, the company’s claims were finally revealed in 2015 to have been fraudulent.

But what if Theranos had been a hedge fund instead of a healthcare company? The comparison shows why investment “science” is not science.

The story of Theranos

Elizabeth Holmes always had her sights set high. Carreyrou records that at age nine or 10 when she was asked, “What do you want to do when you grow up?” she said without hesitation, “I want to be a billionaire.”

As a Stanford student in 2003, she spent a summer in Singapore testing the blood of patients suspected of carrying the severe acute respiratory syndrome (SARS) virus. It convinced her there must be a better way to test blood.

In late 2003, at the age of 19, with the help of Stanford’s School of Engineering Associate Dean Channing Robertson, in whose laboratory she had worked, she incorporated the company that would become Theranos and dropped out of college. Theranos’s goal was to perform a wide range of blood tests with only the blood from a finger-prick, using a miniaturized analytic device.

With Robertson’s and Stanford’s network, and Holmes’ charisma and impressive delivery of her idea, she quickly acquired funding and staffed up. She gave successful presentations of the technology to major companies like the Swiss pharmaceutical giant Novartis.

But as early as 2006 some of her staff noticed that the technology presented to Novartis was fake. Depicted as a video of a blood sample being processed in real-time by the miniature analyser, the video actually was a recording of a successful test that had been performed earlier. The analyser usually didn’t work.

When Theranos’s CFO learned of this he told Holmes, “We’ve been fooling investors. We can’t keep doing that.” As soon as he told her that, he was summarily fired.

This scenario was played out again and again. Tests that were supposedly done by the microanalyzer using blood from a finger-prick were actually done by a large conventional Siemens analyzer using a venous draw. Anyone who expressed scepticism or pointed out that the technology wasn’t working was forced out of the company. Turnover was extremely high. Employees had been required to sign very restrictive non-disclosure agreements upon hiring, and were made to turn over all documents and devices upon departure as well as to sign additional restrictive agreements.

Management by Holmes and particularly her second-in-command (and secretly, boyfriend) Sunny Balwani was aggressively autocratic. Theranos departments, even those that should have been working together, were kept apart by reporting separately to Holmes so that they would not share information. Departed employees who might go public with information detrimental to the company were threatened with lawsuits by the law firm of David Boies, probably the most prominent attorney in America, on the pretext of protecting trade secrets; just how frightening became crystal clear to Carreyrou and his sources in 2015 as he pieced together his eventual article unmasking Theranos’s fraud.

This continued, astonishingly enough, for more than a decade. Meanwhile, glowing articles were written about Holmes and Theranos in numerous magazines and newspapers, including Fortune, Forbes, USA Today, Inc., Fast Company, Glamour and The Wall Street Journal itself. Segments were heard on radio and seen on television stations. Her board of directors included former secretaries of state Henry Kissinger and George Schultz, General James Mattis, and other prominent individuals.

When Carreyrou’s article was published in The Wall Street Journal on October 16, 2015, it began the unravelling of the company. Eventually, its largest investor, Rupert Murdoch, who had invested $125 million, sold his shares back to Theranos for one dollar to take the tax loss. Holmes, Balwani, and Theranos were charged with “massive fraud” by the SEC. If it hadn’t been for Carreyrou, the fraud – which caused actual harm to patients – might have continued for years.

What if Theranos had been a hedge fund?

Now let’s go beyond what Carreyrou wrote and change the scenario. Elizabeth Holmes comes up with a brilliant-sounding idea for an investment strategy using complex derivatives. With her charisma, hypnotic presentation skills, networking abilities and radiant intelligence, she quickly raises seed capital for a hedge fund.

She hires top investment talent and makes them sign strict non-disclosure agreements, keeping them separated from each other to prevent leaks. Understandably, she goes to great lengths to ensure that anyone who leaves the company does not reveal information about it, including hiring the top law firm in the nation, known for its tactics of intimidation.

After a little while it is discovered internally that her original brilliant-sounding investment strategy doesn’t work very well. But it is now only one of many strategies being tested and deployed by her by-now large staff. Results for most of these strategies are ho-hum, but they are written off with unverifiable explanations, such as that they are strategies that protect against down markets while slightly underperforming in up markets. Furthermore, of the many strategies being tested and used, there are one or two that have succeeded, so far, moderately well, though they are run-of-the-mill long-equity investment strategies departing only in small ways from closet-index funds.

Arcane quantitative measures and performance goals are adapted and devised to show that the funds are meeting their objectives. The results are presented in complicated PowerPoints to potential and existing investors, and to consulting firms, who nod their heads affirmatively. The PowerPoints continue to highlight the original strategy using complex options, conveying the impression that this is the strategy being used.

Mostly, though, the investment results do not come close to matching the initial exuberant hype. Holmes says it takes time for her investment strategy to work. The institutions and wealthy investors in her funds and their consultants are still impressed by her and stay with her, saying they “aren’t concerned about the short-term performance of these funds.”

Holmes co-authors articles with prominent academics, who are on her payroll, using complicated-looking mathematics, reaching bold conclusions that support the strategies her funds use (but to a discerning eye, don’t agree with the mathematics). These articles are published in peer-reviewed financial journals, helped by the fact that her co-authors and reviewers understand how that system works. She speaks regularly at conferences, and is the frequent subject of admiring articles in magazines and newspapers.

Falsifiability and science

Unlike Theranos the healthcare company, “Theranos” the hedge fund can never be proved to have misrepresented the effectiveness of its approach. There is no way to prove analytically that an investment strategy cannot work, except for the most patently absurd strategies, such as buying and selling the same stock simultaneously – although many have tried and have laid false claims to do so. Other than the most fundamental conclusions based on the no-free-lunch principle – higher expected return will come only with higher perceived risk – there is little that can be proved using pure reason or mathematics.

There is also almost no chance of using evidence to prove statistically that the strategy does or does not work. The statistical record for a proposed strategy will take years to accumulate and by that time the strategy may have changed, the investment environment will have changed, and the likelihood of establishing superiority to the statistics of its background population are extremely low given the chaotically random nature of those data – although again, many have tried and have laid false claim to do so.

When sceptical questions were posed outside the firm – as by media correspondents (the ones who weren’t completely starstruck) – Theranos CEO Holmes brushed them aside with easy explanations. (When they were posed from inside the firm, the questioner was immediately fired.) Some of the explanations were outright lies; more often they were vague half-truths that could only be unmasked once it was finally learned how fraudulent all the claims were.

But for the alternative Elizabeth Holmes, the imaginary hedge fund CEO, explanations that are vague half-truths are delivered routinely – and readily accepted – because such responses are the industry norm. Performance was poor because the markets were in an inscrutable, unpredictable irrational bubble (or panic); it was poor because the strategy lags in up markets but more than makes up for it in down markets; it was poor because the strategy was out of style.

These vague half-truths will never be unmasked as fraud, like those of Theranos’s Holmes were, because it is impossible to verify whether they were true or false. This applies not only to many hedge funds but to other investment managers, mostly those saying they use “quantitative” strategies and claiming to be doing science.

Karl Popper, the famous 20th century philosopher of science – whose lifespan almost coincided with the brilliant economist and critic of “scientism” Friedrich Hayek – introduced the term “falsifiability” to the philosophy of science. According to Wikipedia, Popper “proposed that statements and theories that are not falsifiable are unscientific. Declaring an unfalsifiable theory to be scientific would then be pseudoscience.”

Popper argued that if a theory is inconsistent with possible empirical observations it is scientific, whereas if it is consistent with all possible observations it is unscientific.

That is, if there is some possibility of making an observation that will prove the theory or claim false – i.e. if it is falsifiable – then it can be regarded as a scientific theory or claim. But if there is no possibility of observing something that cannot be explained away by modifications of, or additions to the theory or claim, then it is unscientific.

Theranos’s claims were scientific. It was doing science, after all. It claimed to have a miniature device that could do more than a hundred blood tests with the blood from a single finger-prick. When all the facts were finally put together, this claim was shown to be a falsehood. That is the nice thing about scientific claims – you can actually prove whether they are false.

The claims of the hedge fund “Theranos” are not scientific. Whatever is observed, it can be explained away by some prevailing circumstance, or some vague modification of the claim. Its claims are not falsifiable. It is not doing science – no matter how much mathematics it applies, or how much mathematics it purports to use to substantiate its claims.

If all that she wanted was to be a billionaire, Holmes should have started a hedge fund.

But wait, maybe she still can. Watch for it.

And she can still call it “science,” because the academic-industrial investment complex doesn’t understand what science is.

Economist and mathematician Michael Edesess is adjunct associate professor and visiting faculty at the Hong Kong University of Science and Technology, chief investment strategist of Compendium Finance, adviser to mobile financial planning software company Plynty, and a research associate of the Edhec-Risk Institute. In 2007, he authored a book about the investment services industry titled The Big Investment Lie, published by Berrett-Koehler. His new book, The Three Simple Rules of Investing, co-authored with Kwok L. Tsui, Carol Fabbri and George Peacock, was published by Berrett-Koehler in June 2014.

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