Credit Mania Update – The Chase for CCC-Rated Bonds

I hadn’t focused on the latest bout of credit market frothiness until the last couple of months, as investor activity has become so preposterous and disturbing that I simply couldn’t ignore it any longer. Before reading the rest of this post, I suggest catching up on two pieces I highlighted recently on the topic, which should help set the stage:

Is the Credit Bubble Popping? Carlyle Group Warns on Frothiness and Junk Bond Deals Get Pulled

Guest Post: Is There a Massive High Yield Credit Bubble?

Moving along to today’s piece from the Wall Street Journal, which focuses on investors’ insatiable appetite for CCC-rated bonds. We learn that:

Large investors are rushing into the riskiest corporate bonds, frustrated by low interest rates on safer investments and convinced that even companies with shaky finances are in little danger of default.

One sign of that rush: Investors have been buying up corporate bonds with a triple-C rating, a grade that analysts and investors consider highly speculative.

That buying is driving up prices on those bonds and pushing down their yields, which this month fell to 8.187% on a closely watched Bank of America Merrill Lynch index—the lowest level on record. 

This embrace of risky bonds and the retreat from risky stocks reflect a world where interest rates are staying much lower, much longer than most had expected, some investors say. “What we’re seeing is the continued search for yield,” says Matthew Rubin, director of investment strategy at Neuberger Berman, which oversees $247 billion.

The 12-month trailing default rate from low-rated corporate borrowers edged up to 1.7% in April, from a six-year low of 1.57% in March, according to Standard & Poor’s Ratings Services.

The yield gap between junk bonds and U.S. government debt—a measure of the premium investors receive for taking on the risk of junk bonds—has narrowed. On triple-C-rated debt, that gap recently hit 6.97 percentage points, the lowest since November 2007. The all-time low of 4.14 percentage points was hit earlier that year.

A little too many comparisons to 2007 for my taste.

Just understand that your pension is going to be stuffed completely full like a Thanksgiving Turkey with the most toxic financial shit you can imagine by the time this thing blows sky-high.

Muppets will lose, as always.

Full article here.

In Liberty,
Michael Krieger

Like this post?
Donate bitcoins: 1LefuVV2eCnW9VKjJGJzgZWa9vHg7Rc3r1

 Follow me on Twitter.

Credit Mania Update – The Chase for CCC-Rated Bonds originally appeared on A Lightning War for Liberty on May 20, 2014.

continue reading

from A Lightning War for Liberty

NSA Records All Cell Phone Calls in the Bahamas, Finds Some Guy Mailing Marijuana

They know what you did last summer.If you’ve been to the Bahamas
recently, the National Security Agency (NSA) knows who you called
and what you said while you were there. If you called some guy
whose number a friend of a friend provided for you to score some
weed while on the island to help you relax, because you’re one of
those people who actually gets even more wound up while on
vacation, the NSA knows that, too.

The latest big revelation from Edward Snowden’s files is that
the NSA has the ability to record and store the content (not just
the metadata) of all cell phone conversations in the Bahamas and at
least one other country. The Bahamas: A hotbed of terrorism
activity? Of course not. But the popular small island could serve
as a nice testing ground for this surveillance system, code-named
SOMALGET. Snowden’s primary partners in document-dumping, Glenn
Greenwald and Laura Poitras, analyzed the info along with Ryan
Devereaux at
The Intercept

SOMALGET is part of a broader NSA program called MYSTIC, which
The Intercept has learned is being used to secretly
monitor the telecommunications systems of the Bahamas and several
other countries, including Mexico, the Philippines, and Kenya. But
while MYSTIC scrapes mobile networks for so-called “metadata”
– information that reveals the time, source, and destination
of calls – SOMALGET is a cutting-edge tool that enables the
NSA to vacuum up and store the actual content of every conversation
in an entire country.

All told, the NSA is using MYSTIC to gather personal data on
mobile calls placed in countries with a combined population of more
than 250 million people. And according to classified documents, the
agency is seeking funding to export the sweeping surveillance
capability elsewhere.

The program raises profound questions about the nature and
extent of American surveillance abroad. The U.S. intelligence
community routinely justifies its massive spying efforts by citing
the threats to national security posed by global terrorism and
unpredictable rival nations like Russia and Iran. But the NSA
documents indicate that SOMALGET has been deployed in the Bahamas
to locate “international narcotics traffickers and special-interest
alien smugglers” – traditional law-enforcement concerns, but a
far cry from derailing terror plots or intercepting weapons of mass

Since the Bahamas are a popular travel location for Americans,
and since many Americans have homes there (the article notes that
Bill Gates and Oprah Winfrey have residences there), SOMALGET is
then sweeping up the content, not just the metadata, of untold
numbers of conversations by U.S. citizens.

According to the documents, one other country is getting the
full recording treatment, but The Intercept has decided to
keep the identity of this country a secret because of “credible
concerns that doing so could lead to increased violence.”
Speculation immediately followed that the country they’re refusing
to identify is Afghanistan. Since the system seems to operate with
the help of private firms providing access with wiretap equipment,
it seems possible these people are the ones The Intercept
is trying to protect from harm (it’s also possible that the private
contractors have no idea of the extent of access they’re

One memo indicates that the relationship between the Drug
Enforcement Agency (DEA) and foreign governments may be how the NSA
is putting these surveillance tools into play. The way The
describes it, the DEA may be requesting legal,
specific wiretaps to snoop on targets, with the NSA then using that
access to snoop on the whole network.

What is the NSA getting out of this? Possibly not a whole

[T]he NSA documents don’t reflect a concerted focus on the money
launderers and powerful financial institutions – including
numerous Western banks – that underpin the black market for
narcotics in the Bahamas. Instead, an internal NSA presentation
from 2013 recounts with pride how analysts used SOMALGET to locate
an individual who “arranged Mexico-to-United States marijuana
shipments” through the U.S. Postal Service.

Not even the NSA is immune to crowing about the low-hanging
fruit they’ve gathered to make an extremely expensive system appear
to be successful. But it’s important to remember who “low-hanging
fruit” is to any sort of law-enforcement agency. It’s not the big
drug lords and heads of terror organizations. It’s average joes who
don’t have the resources to protect themselves and are in difficult
economic situations. Is catching a guy mailing dope from the
Bahamas to the United States what this program is all about?

Given that this massive NSA surveillance program hasn’t actually
succeeded in catching terrorists or stopping terrorist plots, one
doesn’t have to be a conspiracy theorist to note that the
government rarely shuts down massive programs just because they
aren’t successful. And, as The Intercept reminds, the DEA
has been using information gathered through secret surveillance to
launch criminal investigations against Americans and then trying to
hide the source through its
“parallel construction” process

from Hit & Run

Advisor To Turkish Prime Minister Kicks Protester, Takes Sick Leave For Leg Pain

For those curious how much further into banana status the “developed” world may further drop, look no further than Turkey which is rapidly becoming the case study of banana governance par excellence.

Last Wednesday, PM Recep Erdogan (who has already served the maximum three terms as prime minister and is expected to run for president in August) visited the coal mine in the western town of Soma where 282 miners were killed in a tragic mining accident which also was the country’s worst mining disaster. But if the purpose of his visit was political and to generate empathy brownie points with the local population, things quickly turned sour after angry protesters heckled Erdogan and scuffles broke out between demonstrators and police in Soma, forcing the Turkish leader to take refuge in a supermarket before being driven off in a black vehicle.

What happened next was shocking: according to Turkish newspaper Hurriyet a protester kicked a vehicle in Erdogan’s convoy, prompting the special forces police to jump in and force the man to the ground. Then Yusuf Yerkel, an advisor to the Rukish prime minister, kicked the protester “three or four times,” the paper said. Unfortunately for Yerkel, the moment was caught on video and immediately made the rounds on recently unbanned Twitter.

As Haaretz reports Twitter was quickly abuzz with posts condemning Yerkel’s action and an opposition party demanded an explanation for it.

“Do his responsibilities include beating up and kicking protesters or citizens? On which legal grounds was he given this authority?” lawmaker Ugur Bayraktutan asked in a question submitted to parliament for the government to answer. The prime minister’s office distanced itself from the incident, with one official saying the issue was Yerkel’s “own personal matter.”

But that’s not the punchline.

What was the proverbial cherry on top is that yesterday Yerkel “went on sick leave due to soft tissue trauma he sustained in his right leg. According to the report in Hurriyet an Ankara hospital granted Yerkel a week of sick leave to recover from his injuries.

So let that be a lesson to you: the next time you kick protesters already manhandled by angry cops, be prepared to reap the soft-tissue consequences. And if doing so in the US, be sure to have Obamacare for when the doctor invoice with many zeros comes in the mail.

via Zero Hedge Tyler Durden

Payment Processors, Patents and a Dollop of Healthy Paranoia

picsay-1400512647Reggie Middleton discussion UltraCoin at the 2014 FinTech conference at Dechert LLP.

Coindesk asks “Do Patent Filings from eBay and Western Union Pose a Threat to Bitcoin?” I feel  the question is in and of itself missing the point. To explain this fully, I have to share a little bit about myself, particularly my weaknesses. I’m the type of person who is very knowledgeable about his strengths and his weaknesses, but sometimes I don’t see my strength for what it is, and that is tantamount to a weakness in a highly competitive environment.

Case in point, in discussing whether or not competing patents have been filed for smart contract transacion processes by those who seek to be in my space with my contract engineer (a very skilled software architect and IP attorney), I displayed what I considered a healthy level of paranoid concern. I found it hard to believe that no one bothered to patent the most innovative, disruptive and groundbreaking aspect of this new crop of digital currencies – the ability to program them. As those who follow me know, I’ve spent a lot of resources developing, designing, refining and patenting advanced smart contracts (see How Reggie Middleton’s Start-up Patented The Future of Global Finance!). I actually found it highly unlikely that no one had come up with this idea before me. Matt (my contracts engineer) said, “You know, it actually takes an uncanny amount of vision to have seen the scope of this stuff and act upon it, not to mention to have done so 6 months ago. Not many people are like you.” Right then and there, it hit me. People really do not see things the way I do! 

Most know me from my prescient calls in banking, finance, real estate and tech (see Who is Reggie Middleton?). I’ve demonstrated a knack for seeing future trends and determining when things (such as valuations and opportunities) are out of whack. With that being said, the big media interest in Bitcoin combined with the increasing VC interest in Bitcoin companies (reference BitPay Gets $30 Million in Venture Capital Funding) is a very good thing for the industry, but also illustrates shortsigtedness in both the investment community and many practitioners.

The problem with the processors…

When bitcoin is as easy as PayPal to use then it will be on the path to mass adoption, but to assume that’s the most lucrative path to take in bitcoin company private equity investment begs the wrong question. Here’s the strategic landscape as I see it.

Bitcoin is very inexpensive to use as a transfer agent. A transaction may be safely sent without fees if these conditions are met (this is excerpted directly from the Bitcoin Wiki, verbatum):

  1. It is smaller than 1,000 bytes.
  2. All outputs are 0.01 BTC or larger.
  3. Its priority is large enough

Otherwise, the reference implementation will round up the transaction size to the next thousand bytes and add a fee of 0.1 mBTC (0.0001 BTC) per thousand bytes. Note that a typical transaction is 500 bytes, so the typical transaction fee for low-priority transactions is 0.1 mBTC (0.0001 BTC), regardless of the number of bitcoins sent.

Bitcoin as of 5/18/2014 is $444.74m, thus the fee for this transaction is roughly 4 cents, if not outright free. If a processor is transferring $10,000 on behalf of a customer, whether at one time or 100 times throughout the course of a month, the processor’s fee cost would range from $0 to $4, while the processor would likely charge (as of the date of this writing, $0 to $100). The traditional processors such a Visa or Paypal  would charge hundreds (as in up to 50x more!) for the same deal!

That 25x markup on the high end is significant (even for the Bitcoin companies), and ripe for disintermediation itself (that’s right, the disintermediaing agents are poised for disintermediaion). Particularly once the UX of Bitcoin evolves, as email and web browsing did, and users realize how easy and cheap it is to jump onto the blockchain and do this stuff themselves.

Even assuming users don’t follow the historical model of those that left proprietary walled gardens (think AOL) and jumped directly into the open World Wide Web themselves, there are no material barriers to entry to enter into the processing business other than potentially a money transmitter license. The only material barrier, hence the business opportunity, is that Bitcoin is cumbersome to use. As the UI/UX polish increases and the amount of competitors in the space increase, the lower the prices charged – hence the margins – will be.

With such low barriers to entry and potentially humongous markups to exploit, what do you think happens next? The wild, untamed hordes of competitors swoop down upon the masses, and we have a concerted race to zero, and likely negative margin as competitors attempt to make processing a loss leader to draw users into the folds of richer, higher margin services!!!

 The race to marginal zero, then negative, does not make a strong business plan. So, what do these companies such as BitPay, Coinbase, etc. do once that point is reached (rather quickly)? They look to value added (high margin) services on top of their low margin, utility-like payment infrastructures.

Enter smart contracts and the true use of programmability in the crypto-currencies. The easiest and the likely first implementation of such will be multi-sig operations which allow multiple parties to share funds without having to worry about trusting and single party in a transaction. Our ZeroTrust Letters of Credit (patent pending) is just such a product. It allows for multiple parties to tranfer payment for simple and complex transactions contingent upon the mutual agreed upon successful execution of said transactions. This is done without the parties having to:

  1. Know each other
  2. Trust each other
  3. Have any form of proximity to each other;

and can be done using micropayments all the way up to multi-million dollar macro payments. The barriers to this business are much higher. For one, it takes more than just programming code. You have to be able to congeal the legal logic of the conventional law in equity contract into code. You have to be able to congeal the business logic into code, and you have to be able to implement it into the blockchain or whatever other underlying transmission mechanism you choose to utilize.

Once the race to negative zero is in full swing, a few of the wiser companies will wake-up and say “Hey, there has to be a better way, and we think we found it!”. It is at that point Reggie Middleton’s UltraCoin products and assets will shine. It is not hard to foresee that the entrenched companies (Visa, Mastercard, PayPal, Western Union) may enter a bidding war with the new comers armed with material VC warchests (much more than we’re seeing with $30 million investments of today – all over the guys who had the foresight to see the next evolutionary step in plain vanilla payments – smart transactions and self-executing digital contracts and transactions.

We’re actively looking for financial and intellectual capital. If you, as an accredited investor, are looking for an opportunity in the higher end of the digital currency space, I think we should talk. In addition, if you are a higher level Java/C++ developer willing to take risk, we need to talk. I’m available at reggie at

via Zero Hedge Reggie Middleton

After Killing The Biotech Bubble, Congress May Just Have Ended M&A Mania

Having pricked the Biotech bubble with the simple questioning of the ballooning prices of drugs, it appears Congress may be well on its way to bursting the M&A Mania as Senator Carl Levin pushes his anti-inversion legislation by increasing, once again, the complexity of the tax code:



“This is about leveling the playing field and rooting out flagrant tax abuse in our system that could lead to billions of dollars of lost revenue,” said Sen. Tim Kaine, D-Va.


“In order to fully restore budget certainty, we need to look at abuses in the tax code as much as spending. The fact that companies can change their tax liability to low-tax jurisdictions on paper while maintaining operations and ownership in the U.S. is unacceptable and I’m pleased to join my colleagues to introduce this important fix.”

Well, we’re glad they know what’s best for all of us…

As Bloomberg summarizes,

Sen. Carl Levin, D-Mich., proposing legislation imposing 2-year moratorium on inversions, raising shareholder threshold to 50%, according to summary of legislation ( adramatic shift from current law where shareholders of non-U.S. company must own 20% of combined company)


It’s become increasingly clear in recent weeks that a flood of tax avoidance by multinational corporations is looming,’’ Levin tells reporters


Levin responding to at least 13 cos. that have conducted inversion mergers since 2011 to move headquarters out of U.S. into lower-taxed jurisdiction


Sen. Finance Cmte Chairman Ron Wyden has said he also wants to limit inversions retroactive to May 8; House Speaker Boehner said earlier today inversions are one reason tax overhaul is needed

Carl Levin’s Fill Statement:

Summary of the Stop Corporate Inversions Act of 2014
Tuesday, May 20, 2014


The Stop Corporate Inversions Act of 2014 would significantly reduce a tax loophole that allows U.S. companies  that merge with foreign companies to reincorporate offshore in lower-tax jurisdictions – known as an “inversion” – to avoid being subject to U.S. tax on their overseas earnings. 


Under current U.S. tax law, the merged company is treated as a foreign company if more than 20 percent of the stock of the merged company is owned by stockholders who were not stockholders of the U.S. company or if the merged company has at least 25 percent of its employees, sales and assets where it is incorporated.


The Stop Corporate Inversions Act of 2014 increases the needed percentage change in stock ownership from 20 percent to 50 percent and provides that the merged company will nevertheless continue to be treated as a domestic U.S. company for tax purposes if management and control of the merged company remains in the U.S. and either 25 percent of its employees or sales or assets are located in the U.S.


The bill provides a two year moratorium on inversions that do not meet the stricter tests in the bill so that Congress can consider a long-term solution as part of general corporate tax reform.  But we can’t wait for tax reform to stop the bleeding.  If we continue to wait, we risk more American companies opting out of the U.S. corporate tax base by reincorporating in lower-tax foreign jurisdictions under the much more permissive current law applying to inversions.


The president’s FY15 budget contains a proposal to close this loophole, and the Stop Corporate Inversions Act largely mirrors that proposal.

While the US makes the tax code so complex everyone wants to get out of the country, in italy the PM wants to simply it so much people can file by text message:

Premier Matteo Renzi said Tuesday that the government’s planned simplification of Italy’s fiscal system should make it possible for people to pay their taxes via mobile phone text messages. “I’m convinced that if we work at it, we can make it possible to pay them (taxes) via an SMS,” Renzi said. “Italy is a country that makes simple things complicated, but paying taxes must be simpler”.


Renzi has embarked on an ambitious reform programme of institutional and economic reforms since unseating Enrico Letta, his colleague in the centre-left Democratic Party (PD), in February to become Italy’s youngest premier at 39.

via Zero Hedge Tyler Durden

Peripheral European Bond Risk Surges To 2-Month Highs

The last few days have been the worst for peripheral European bonds in well over a year. Spain, Italy, Greece, and Portugal have all seen yields jump and credit spreads soar in the last week as ‘faith’ in Draghi appears to be faltering. The reason this is concerning is, as we explained here, in the new normal, negative feedback loops have gone and instead we have hyperbolic loops which, when broken, end much more badly than a self-correcting un-rigged market would.


By way of example, here is Italian bond risk…


and that new Greek bond issue is underwater…


and the entire European periphery in the last week…



this can only last so long…


via Zero Hedge Tyler Durden

Japan and China Can’t, but Europe Can?

Many observers and policy makers expressed frustration with Japanese officials in late 2012 and early 2013 for seemingly making the exchange rate an objective of policy and explicitly talking the yen down. European and US officials insisted in February 2013 that Japan pledge to use monetary policy for domestic purposes and not target foreign exchange rates.

More recently China’s yuan has depreciated, and there is some evidence that Chinese officials got the ball rolling and may be continuing to guide the currency lower. From the middle of January through the end of April, the yuan depreciated by 3.5%.

This has been the cause of great consternation for G7 policy makers. Some suspect that China is sanctioning currency depreciation to boost its flagging exports. High frequency data is often noisy and using a moving average helps smooth it out. The three month moving average of year-over-year export performance was negative in April (-7.9%) for the third consecutive month. It is the first such contraction since 2009. The 12-month average stands at 1.6%, its lowest level since 2010.

We have argued against such an interpretation. China’s exports are import intensive. That is to say that China’s inputs for its exports are often invoiced and paid in US dollars and yuan denominated inputs are relatively small. Another way of saying this is the value-added generated in China is modest, meaning that it likely takes a substantial depreciation of the yuan to boost the price competitive of exports.

We find it more persuasive that Chinese officials helped engineer the reversal of the yuan as part of an attempt to let manage the deflation of some financial excesses that had built up under the gradual multi-year yuan appreciation campaign. During this period, the PBOC widened the band the yuan can move against the dollar to 2% (from the officially set reference rate or “fix”). PBOC officials have not deigned to explore the entire range, but it has accepted somewhat more price movement, and this is reflected in the more than doubling of the (three-month) historic volatility.

In any event, the US and Europe have pushed back against Japan and Chinese efforts that weakened their respective currencies. Now, however, European officials have been purposely talking the euro lower. In fact, much of the discussion about the ECB’s policy options relate to combating the strength of the euro. It is not just French officials, like Economic Minister Montebourg, who are entering the fray, trying to talk the euro lower. It was the ECB’s Draghi who first crossed the Rubicon and other ECB officials have followed suit, though quick to add that the central bank has not target (except apparently lower).

Consider that the latest polls show the center-right with a slight lead over the center-left in this week’s EU Parliament elections. The presidential candidate for the center-right EPP) is the former Prime Minister of Luxembourg and Eurogroup head Jean-Claude Juncker. He indicated that the treaties allow the EC to suggestion the general orientation to European finance ministers who then could instruct the ECB. Juncker was clear he wanted to give the ECB instructions on the exchange rate (though he refused to comment about instructions on interest rates).

In its semi-annual report on the foreign exchange market and international economic policy, the US Treasury was critical of Germany’s large trade and current account surpluses. The report noted this is in contravenes to the G7/G20 agreement to reduce global imbalances. Previously, the German surplus offset the deficits in most of the remainder of the euro area. However, now a combination of demand compression in the periphery and an adjustment in relative prices means that the deficits in the periphery are been reduced, or completely disappeared.

We have argued that if the problem is one of lackluster growth and the ECB wants to ease monetary policy more than it can due to the zero-bound that it could take a page from the Swiss National Bank and buy foreign rather than domestic (i.e., euro area bonds). This would have the appearance of selling euros and buying US Treasuries. Euro area officials, however, haranguing about the currency has tainted this approach, as much as the some of the officials in the Abe government who had tried to talk the yen down.

Some observers seem confused. They want to equate currency manipulation with interest rate manipulation. Manipulation is manipulation, they say, defending some sort of free market purism. However,this is not the issue. The crux is that manipulating foreign exchange prices simply borrows (steals, if you are so inclined) demand from elsewhere. It is a zero-sum exercise. Interest rate manipulation can increase aggregate demand. It is a non-zero-sum exercise.

via Zero Hedge Marc To Market

Thomas Massie Eats Hemp on Live TV

What happens when a state legalizes the growing of industrial
hemp but the drug war-addicted federal government intercepts the
seeds? Well, the state (in this case, Kentucky)
sues the feds
, for one.

Talking about this absurd and infuriating situation on The

last night
was the young libertarian-leaning Rep. Thomas Massie
(R-Kentucky), a man who so loves his hemp that he started gobbling
the stuff on live television:

Reason on Massie

from Hit & Run

The Decline Of Small Business = Decline Of Basic Skills

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

An economy where most people work for the state or a global corporation is an economy that has lost its knowledge of the key entrepreneurial building blocks.

The decline of small business has numerous long-term consequences. One is the decline of the middle class, as entrepreneurial enterprise is a key pathway to generational wealth-building and prosperity.

Another is the loss of employment opportunities. As U.S. businesses are being destroyed faster than they’re being created, there are fewer sources of employment.

Since many people get their first job at small businesses, the decline of small business has an outsized effect on entry-level employment opportunities.

Correspondent Kevin K. identified a third long-term consequence: the erosion of opportunities to learn basic skills with economic value. As low-skill work is increasingly replaced by software and robotics, work with a future requires not just higher-level skills but a spectrum of building-block skills and values–what I call the eight essential skills of professionalism in my book Get a Job, Build a Real Career and Defy a Bewildering Economy.

Many of these skills are fundamental life-skills that are not taught in classrooms; they are learned on the job. If the kind of jobs that enable the learning of these basic building blocks of economic value go away, so do the opportunities to gain these skills.

Here is Kevin's commentary:

In The Decline of Small Business and the Middle Class, you wrote:

It is not coincidental that the middle class and small business are both in decline. Entrepreneurial enterprise and small business have long been stepping stones to middle class incomes and generational wealth, i.e. wealth that is passed down to future generations rather than consumed.

For me the big take-away is that as fewer people in America work for small business owners who often share with employees what they did to create "middle class incomes and generational wealth", we will have fewer people who know how to do this (or even imagine it is possible).

My first "real" (as defined by a job paid for by a non-family member) was pulling weeds for a neighbor (at $0.60/hour a.k.a. "a penny a minute"). I later made $1/hour when I started mowing his lawn then $2/hour until I had to stop at 14 when I started working all day every Saturday at the grocery store making $3/hour.

Unlike today where most gardening jobs have a guy that does not speak English working for a guy that speaks a little English, I was working for a contractor that owned his own business and a home and was into cars (my Dad knew nothing about cars).

He came over and gave us some pointers on turning a corner of our basement into a new room for me (and let us his hammer drill to make holes for the Red Heads to hold the wood to the floor). When I turned 16 he accompanied me a couple times to look at used cars (and saved me from buying a car with major rust/rot).

Working in the little grocery store (owned by two butchers born in Italy), I not only learned about the retail grocery and meat business but how to patch a leaking flat roof with Henry wet patch and how to maintain HVAC systems and commercial refrigeration systems. Today in a WalMart grocery store you typically have a kid working for minimum wage doing what his "manager" (that was probably making minimum wage a year ago) doing what the latest corporate memo told them to do.

When I spent a winter in Lake Tahoe getting vacation homes ready for renters, I not only learned a lot about the rental market and the real estate market, I also learned how to do low-cost home maintenance from owners that have been doing it for years and got to work side by side with them. Kids today working for a giant corporation don't have that opportunity and as a result don't learn nearly as much.

Thank you, Kevin, for describing the process of learning entrepreneurial life-skills. In a neofeudal economy dominated by the government-corporate partnership, the erosion of small business goes hand in hand with an erosion of building-block skills, opportunities to learn these essential life-skills, and the cultural knowledge of how to start and operate an independent enterprise.

An economy where most people work for the state or a global corporation is an economy that has lost its knowledge of the key entrepreneurial building blocks and its opportunities for independence from the neocolonial Company Store: Is Small Business a Threat to the Status Quo?)

via Zero Hedge Tyler Durden

Caterpillar Retail Sales Plunge By 13%, Most Since February 2010; Decline For 17 Consecutive Months

If someone was looking for a reason to buy CAT stock (alongside the company’s stock buybacking -sic- management), and send it to fresh all time highs, today’s latest monthly report of CAT April dealer retail sales should be sufficient.

First, the good news: US retail sales of machines in the US posted its fourth monthly pick up, rising 12% compared to April of 2013 which print, however, was the biggest, at -18%, annual drop for US sales since 2010 so this was merely a modest stabilization relative to depressed comp levels.

As for the bad news, well: everything else. The drubbing in sales across all other markets continued, with sales in Asia/Pacific, EAME and Latin America all dropping by more than 20% compared to last year.

End blended result: global retail sales have now declined Y/Y for 17 consecutive months, which incidentally is just shy of the longest stretch of declining retail sales on record. Worse: the -13% drop in world retail sales matched the biggest annual drop since February of 2010.

Frankly, we are surprised that CAT hasn’t started reporting non-GAAP retail sales: those which exclude all negative numbers.

via Zero Hedge Tyler Durden