S&P Adds Insult To Bill Ackman’s Injury, Puts Pershing Square Holdings On Downgrade Watch

As if the historic collapse of Valeant and his hedge fund crashing by 26% YTD was not enough, moments ago S&P added insult to injury when it warned it may downgrade Pershing Square, because “Pershing Square Holdings’ net asset value has dropped substantially, largely because of a precipitous decline in the market value of Valeant  Pharmaceuticals”  and “as a result, Pershing Square’s debt-to-total assets ratio increased to  above 20% as of March 15, 2016, from 15% at the end of October 2015. We are placing our ‘BBB’ issuer credit and senior unsecured debt ratings  on the company on CreditWatch with negative implications.”

It concludes that “the CreditWatch negative reflects the fund’s weak investment performance,  which has resulted in higher leverage.”

Full note below:

Standard & Poor’s Ratings Services  today said it placed its ‘BBB’ issuer credit and senior unsecured issue  ratings on Pershing Square Holdings Ltd. (PSH) on CreditWatch with negative implications.

“We placed the ratings on CreditWatch negative to reflect the substantial drop in PSH’s NAV over the past five months as a result of very weak investment performance,” said Standard & Poor’s credit analyst Trevor Martin. NAV was $5.3 billion at the end of October 2015 and $3.8 billion on March 15, 2016, primarily because of the steep drop in Valeant Pharmaceuticals’ stock price. The Valeant stock price fell about 50% on March 15. As a result of the weakness in the portfolio since October, PSH’s debt to total assets has increased from about 15% to above 20%.

While debt as a percentage of total assets has increased materially beyond our original expectations, liquidity (as measured by free cash) has strengthened, and we believe management has taken proactive steps to respond to the turmoil. PSH’s investors were informed that the fund completed a block sale of Mondelez International shares on March 16, raising substantial free cash. Subsequent to the sale, the level of cash held in the fund exceeded total debt.

Valeant’s stock price fell dramatically as the company again revised its earnings guidance for the next 12 months on March 15. Furthermore, the company has not reported its 10-K in time and is now seeking a waiver from banks on its credit agreements, introducing incremental risk of a bankruptcy to Valeant (although it has until the end of April to resolve the covenants in the credit agreement to avoid acceleration). In the event of bankruptcy, we would likely lower the rating.

“We aim to resolve the CreditWatch once we have more clarity on the situation regarding Valeant and we have reassessed the fund’s investment performance and leverage,” said Mr. Martin. “We expect to have the information to resolve the CreditWatch in the next 90 days, but we could extend the CreditWatch period if that is not the case.”

We could lower the rating if Valeant files for bankruptcy or if PSH materially reduces free cash before Valeant’s stock price has substantially recovered. Even if the position were to stabilize, we could still downgrade PSH if the investment performance of the portfolio as a whole deteriorates further.


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One Nation Under Surveillance – U.S. Government Pushed Tech Companies to Hand Over Source Code

Screen Shot 2016-03-17 at 12.07.32 PM

Our founding fathers studied power structures over the millennia and knew exactly what they were doing when solidifying the Bill of Rights into the U.S. Constitution. All it took was a couple hundred years, an extraordinarily ignorant and apathetic American public, and a major terror attack to roll back this multi-generational gift.

For many years, I and countless others have been screaming from the rooftops that a society should never trade civil liberties for security. Life on earth has always been dangerous for us humans, and what has historically separated free and noble civilizations from stunted tyrannies is a willingness to acknowledge such a precarious existence while at the same time demanding and defending one’s dignity and liberty. In the aftermath of the attacks of 9/11, the American public has demonstrated no such strength of character or historical maturity, thus allowing a corrupt, deceptive and lawless government to run roughshod over freedom with very little resistance.

– From the post: War on Terror Turns Inward – NSA Surveillance Will Be Used Against American Citizens

Freedom? Liberty? Don’t be ridiculous.

It’s been a little while since I’ve updated readers on the shady, shameless surveillance practices of the U.S. government. As usual, it’s worse than we thought.

ZDNet reports:

NEW YORK — The US government has made numerous attempts to obtain source code from tech companies in an effort to find security flaws that could be used for surveillance or investigations.

The government has demanded source code in civil cases filed under seal but also by seeking clandestine rulings authorized under the secretive Foreign Intelligence Surveillance Act (FISA), a person with direct knowledge of these demands told ZDNet. We’re not naming the person as they relayed information that is likely classified.

continue reading

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Venezuela Runs Out Of Electricity, Will Shut Down For A Week, El Nino Blamed

When last we checked in on our favorite socialist paradise, Venezuela, President Nicolas Maduro’s opponents “had gone crazy.”

Or at least that’s how Maduro described the situation in a “thundering” speech to supporters at what he called an “anti-imperialist” rally in Caracas last Sunday.

Meanwhile, thousands of demonstrators held counter-rallies calling for the President’s ouster. Maduro angered the opposition – which dealt Hugo Chavez’s leftist movement its worst defeat at the ballot box in history in December – last month when he used a stacked Supreme Court to give himself emergency powers he says will help him deal with the country’s worsening economic crisis.

“Now that the economic emergency decree has validity, in the next few days I will activate a series of measures I had been working on,” he said, following Congress’s declaration of a “food emergency.”

Needless to say, Maduro’s “measures” didn’t do much to help the situation on the ground, where Venezuelans must queue in front of grocery stores and where 90% of medicine is scarce.

Venezuela is the world’s worst performing economy and barring a sudden (not to mention large) spike in crude prices, the country will in all likelihood default this year as 90% of oil revenue at current prices must go towards debt service payments.

But that hasn’t deterred Maduro, who has vowed to remain defiant in the face of (loud) calls for his exit. “Let them come for me,” he bellowed on Sunday. “I will hang on to power until the final day.”

Maybe so, but one place that’s not “hanging onto power” is the Guri Dam, which supplies more than two-thirds of the country’s electricity. As The Latin American Herald Tribune writes, the dam “is less than four meters from reaching the level where power generation will be impossible.”

“Water levels at the hydroelectric dam are 3.56 meters from the start of a ‘collapse’ of the national electric system,’” The Tribune continues, adding that “Guri water levels are at their lowest levels since 2003, when the a nationwide strike against Hugo Chavez reduced the need for power, masking the problem.”

(arrow shows where the water shoud be if the dam were operating at capacity)


It is not Guri that is in disarray, it is the whole system. Rates frozen, companies nationalized, capacity that was supposed to be installed was never installed and maintenance not carried out”, Miguel Lara, an engineer who worked in the industry for three decades said.

Not so says Maduro. The problem isn’t mismanagement, it’s El Nino. 

“The emergency decision we took is due to El Nino,” he said. “We will save more than 40% from these measures.” 

The “emergency measures” the Tribune references amount to a shutdown of the country. “Venezuela is shutting down for a week as the government struggles with a deepening electricity crisis,” Bloomberg writes. “President Nicolas Maduro gave everyone an extra three days off work next week, extending the two-day Easter holiday, according to a statement in the Official Gazette published late Tuesday.”

“We’re hoping, God willing, rains will come,” Maduro told the country on Saturday.

Yesterday, Venezuela’s energy minister took back his warning that water levels at Guri were set to plunge the country into an electricity crisis, but did ask the public to do as Maduro asks. “It’s a matter of cooperating,” he said.

Right. But as The Tribune points out, “Venezuela is now seeing three street protests a day, according to NGO Observatorio de Conflictividad Social [and] on any given day, one of those protests has to do with blackouts — even though rates have been frozen since 1982.” 

It would certainly appear that Venezuelans are sick of “cooperating.” 

And that’s bad news for Latin America’s “best” leader…


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Bad News For The Bears: Gartman Will Be Long VIX Until The S&P Hits 2,118

Yesterday morning, after reading the latest Gartman letter, we reported that in what may have been the worst possible news for vol longs, Gartman said he had become a “buyer of the VIX.” As a reminder this is what he said:

NEW RECOMMENDATION: we are taking a “punt” on the short side of the equity market, but this time we shall do so by buying volatility; that is, we shall buy the VXX volatility index ETF listed on the NYSE and we shall do so upon receipt of this commentary and the market’s opening. We’ll have a stop in tomorrow’s TGL, but for now we do not wish to risk more than 5% on this trade… a rather large stop to be certain for our purposes in the past but we’ll tighten that up measurably over the course of the next day or two. This is unusual action on our part ahead of an FOMC meeting given the historical tendency of equities to rise after these meetings; but call it trader’s intuition or call it what you will we think a “one unit” punt is warranted and reasonable.

To which we responded:

We must admit that we pray that for once Gartman’s “trader intuition” is correct because we tend to agree: we have gotten to a point where complacency is fully back courtesy of the central bankers, where the market is substantially overvalued as even Goldman admits, where the earnings picture continues to deteriorate (Q1 EPS is expected to plunge by over 8%) and where none of the world’s problems have been “fixed” in the past few months yet where central banks have once again merely “kicked the can” with even more stimulus and more negative rates, while China’s debt bubble and proposed “debt for equity” swaps are now beyond rational comprehension.

That said, we were resigned: “Then again, it is Gartman…”

That proved to be indeed sufficient, because not only was the equity “tendency to rise” after the FOMC confirmed as the S&P bounced yesterday and again today, but since Gartman’s recommendation, the VIX has undergone a quick 15% freefall lower, and recently was trading below 14.

 

That said, we were eagerly looking for today’s Gartman Letter to find out what the “stops” on his VIX long position are, just so we can know when it is safe to, well, go long VIX again and short the market. Here is the answer:

Short One Unit of the US stock market via the VIX: Yesterday… Wednesday, March 17th… we “punted” on the short side of the equity market, but this time doing so by buying volatility; that is, we bought the VXX volatility index ETF listed on the NYSE upon the market’s opening. We’re giving this a rather wide birth and are willing to allow the equity market to move 5% against us before exiting the trade and that means a move by the S&P to and through 2118, but we intend to move that stop down sharply in the next day or two.

In other words, Gartman has basically doomed the market to soar back to its all time highs. Sorry bears.


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Be very wary of the, “choices,” that you are, “given.”

 

As someone that has herded a fair bit of livestock, I can honestly say:  Be very wary of the, “choices,” that you are, “given.”
-hedgeless_horseman

Down here in East Texas, there is an old rivalry between the Dallas Cowboys and New Orleans Saints.  I have been in the home of Saints fans that have furnishings with the Saints NFL logo and gold and black carpeting.  The lady of the house screams and yells at the television on game day.  They actually pray for God to intervene in the game on their team’s behalf.  They absolutely hate the Dallas Cowboys.

I know more than a few Cowboys fans that never even played football, yet have painted their vehicle blue and silver, decorated it with the Dallas Cowboy’s NFL logo, Cowboys license plate bracket, and vanity plates.  Riding in their vehicles, I have witnessed them as they listen to sports talk radio, screaming profanities, absolutely elated when their team wins, and emotionally depressed when they lose.

I have had the opportunity on more than dozen occasions to spend significant time with both Jerry Jones, the owner of the Cowboys, and Tom Benson, the owner of the Saints.  Both men obviously have a high degree of business acumen and each have had incredible success.  I find both men hard working, intelligent, and likable. On two occasions, I have personally witnessed these two men together, and they seem to be on very good terms, if not even very good friends. 

As NFL League owners, they understand that with each game there must be a winner and a loser on the field.  In fact, they openly promote the concept of parity, the state where all teams are equal in terms of talent.  The best teams get the lower draft picks for new talent, etc.  The NFL League owners also understand that regardless of who wins the game on the field, what really matters is that they are all financial winners every year, and that they protect The League monopoly at all costs.

The owners don’t really care if we cheer for the black and gold team, or the blue and silver team, as long as you do cheer, do watch the games on TV, and do purchase their League’s tickets and paraphernalia. 

I have also had the opportunity to personally spend more than a week with Donald Trump at his home and have twice had brief conversations with Bill and Hillary Clinton in person.  I have spent even more time talking with past leadership of both the DNC and RNC.  It would seem obvious, but these are all very intelligent, hard working, and charismatic people. Yes. Even Hillary. 

At this point, it is important to remind readers that we have not had television in our home for more than a decade.  This means that I have never seen Trump’s Apprentice program.  Neither have I watched any of the debates, or television “news” programs.

What may not be obvious to readers that do watch television, as both the DNC and RNC attack Trump, and Trump attacks Hillary, is that they all seem to me, in person, to be on very good terms, if not even very good friends. 

Now, I shall plagiarize from wikipedia.  Please read carefully the following:

In politics and sociology, divide and rule (or divide and conquer) is gaining and maintaining power by breaking up larger concentrations of power into pieces that individually have less power than the one implementing the strategy. The concept refers to a strategy that breaks up existing power structures and prevents smaller power groups from linking up.

Traiano Boccalini cites “divide et impera” in La bilancia politica, 1,136 and 2,225 as a common principle in politics. The use of this technique is meant to empower the sovereign to control subjects, populations, or factions of different interests, who collectively might be able to oppose his rule. Machiavelli identifies a similar application to military strategy, advising in Book VI of The Art of War[1] (Dell’arte della guerra),[2] that a Captain should endeavor with every art to divide the forces of the enemy, either by making him suspicious of his men in whom he trusted, or by giving him cause that he has to separate his forces, and, because of this, become weaker.

The maxim divide et impera has been attributed to Philip II of Macedon, and together with the maxim divide ut regnes was utilised by the Roman ruler Caesar and the French emperor Napoleon.

The strategy, but not the phrase, applies in many ancient cases: the example of Gabinius exists, parting the Jewish nation into five conventions, reported by Flavius Josephus in Book I, 169-170 of The Wars of the Jews (De bello Judaico).[3] Strabo also reports in Geography, 8.7.3[4] that the Achaean League was gradually dissolved under the Roman possession of the whole of Macedonia, owing to them not dealing with the several states in the same way, but wishing to preserve some and to destroy others.

The strategy of division and rule has been attributed to sovereigns ranging from Louis XI to the Habsburgs. Edward Coke denounces it in Chapter I of the Fourth Part of the Institutes, reporting that when it was demanded by the Lords and Commons what might be a principal motive for them to have good success in Parliament, it was answered: “Eritis insuperabiles, si fueritis inseparabiles. Explosum est illud diverbium: Divide, & impera, cum radix & vertex imperii in obedientium consensus rata sunt.” [You would be insuperable if you were inseparable. This proverb, Divide and rule, has been rejected, since the root and the summit of authority are confirmed by the consent of the subjects.] On the other hand, in a minor variation, Sir Francis Bacon wrote the phrase “separa et impera” in a letter to James I of 15 February 1615. James Madison made this recommendation in a letter to Thomas Jefferson of 24 October 1787,[5] which summarized the thesis of The Federalist #10:[6] “Divide et impera, the reprobated axiom of tyranny, is under certain (some) qualifications, the only policy, by which a republic can be administered on just principles.” In Perpetual Peace: A Philosophical Sketch by Immanuel Kant (1795), Appendix one, Divide et impera is the third of three political maxims, the others being Fac et excusa (Act now, and make excuses later) and Si fecisti, nega (when you commit a crime, deny it).[7]

Elements of this technique involve:

  • creating or encouraging divisions among the subjects to prevent alliances that could challenge the sovereign
  • aiding and promoting those who are willing to cooperate with the sovereign
  • fostering distrust and enmity between local rulers
  • encouraging meaningless expenditures that reduce the capability for political and military spending

Historically, this strategy was used in many different ways by empires seeking to expand their territories.

The concept is also mentioned as a strategy for market action in economics to get the most out of the players in a competitive market.

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Finally, I will once again post my favorite quote of Boss Tweed, the politician who, “bribed the state legislature, fixed elections, skimmed money from city contractors, and diverted public funds on a massive scale. During his reign at Tammany Hall and then in a variety of elected posts, including as U.S. senator, Tweed wielded almost total control over New York State and City politics.”

 

“I don’t care who does the electing, so long as I get to do the nominating.”

 

 

– Boss Tweed

 

Sometimes we do not have any good choices, only responses.

Peace!


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“It’s All F**ked”: Brazil Descends Into Chaos As Rousseff, Lula Wiretaps Trigger Mass Protests

Just yesterday, we said the following about Brazil: It seems as though this country can’t get through a single day without some piece of political news or economic data creating confusion and turmoil.

We said that on the way to noting that central bank chief Alexandre Tombini looked set to resign for fear that former President Lula’s new cabinet position and attendant promise to “turn the economy around” would lead invariably to government interference in monetary and FX policy.

As regular readers and Brazil watchers alike are no doubt aware, the BRL has been on a veritable rollercoaster ride of late and it’s all thanks, one way or another, to Lula. The currency rallied on his arrest, sold off when he was offered a position in Rousseff’s cabinet, and now, is headed sharply higher after a court injunction blocked his nomination as chief of staff.

The injunction appears to stem from some 50 audio recordings released to the media on Wednesday by Judge Sergio Moro, the lead prosecutor in the car wash probe. At least one of the recordings seems to suggest that Rousseff did indeed offer Lula the ministry post in order to shield him from prosecution.

The most damning call was recorded on Wednesday afternoon, when Rousseff can be heard telling Lula that she is sending him his ministerial papers “in case of necessity.” Obviously, that sounds a lot like an attempt to make sure Lula has proof of his new position in case authorities come to arrest him before he’s sworn in. In Brazil, ministers can only be tried in the Supreme Court which, as you might imagine, could take virtually forever compared to lower courts.

Lula was questioned earlier this month in connection with the possibility that he received luxury properties in exchange for favors tied to the Petrobras scandal.

On other calls recorded Wednesday Lula can be heard cursing the court, telling Rousseff the following: “…we have a totally cowardly supreme court, a totally cowardly high court, a totally cowardly parliament … a speaker of the house who is fucked, a president of the senate who is fucked, I don’t know how many legislators under threat, and everyone thinking that some kind of miracle is going to happen.”

Well, he’s got one thing right: everyone is “fucked,” and Moro doesn’t care. “Democracy in a free society requires that the governed know what their governors are doing, even when they try to act in the dark,” he said.

“Moro also said he believes Lula had advance warning of the raid on 4 March and may have known his phone was tapped,” The Guardian notes, adding that “by midnight on Wednesday there were reports of demonstrations against the government in at least 17 of Brazil’s 26 states. In the southern city of Curitiba, where Moro is based, hundreds gathered in front of the court to show support for the judge and his investigation.”

(protests on Wednesday night in Sao Paulo)

(demonstrations in Brasilia)

Rousseff says the court and the media’s interpretation is incorrect. She claims that she was trying to tell Lula that she was sending him his papers early in case he was unable to attend the swearing-in ceremony. 

Put simply: no one was buying that excuse. 

“Military police fired tear gas at demonstrators outside government buildings in Brasília, while groups set fire to a doll resembling the ex-president and waved banners calling for his imprisonment,” FT recounts, “[While] thousands of protesters filled São Paulo’s main avenue, Rio de Janeiro’s Copacabana beach and cities in at least 15 other states.” 

Rousseff now intends to take legal action against Moro for “breaking the constitution. Here’s a summary of Rousseff’s comments, some of which are outright hilarious in light of the circumstances:

  • Says justice system should be focused on proof
  • There’s no justification for selective leaks in probes
  • There’s no justice when constitutional guarantees are violated
  • We want to know who authorized phone taps between her and Lula
  • This is a serious act
  • Says she has always defended the search for truth
  • Convulsing society based on lies is serious, coups can start that way
  • Says she won’t retreat from what happened yesterday
  • Brazil fights corruption, respects individual rights
  • Brazil counts on my work and determination
  • Says she counts on Lula’s experience, his ability to understand the people
  • Whoever bet on my separation from Lula was wrong
  • Brazil confronting economic, political difficulties
  • At this moment, we have to be together for Brazil
  • We have to leave political paralysis behind us
  • We want to reduce inflation, are acting to recover employment
  • We extend an open hand to all who want best for Brazil
  • People wanting coup won’t pull us off our path, won’t bring people to their knees

A lawyer for Lula called Moro’s release of the tapes “arbitrary.”

Right. “Arbitrary.” In fact, there was nothing “arbitrary” about it. Moro was due to decide on whether to arrest Lula this week and effectively, he and Rousseff were about to circumvent the entire investigation by using ministerial immunity to keep the car wash probe from reaching any higher up in the government than it already has. In other words, it was now or never for Moro and as you might have noticed, he isn’t one to let things go. 

The release of the tapes led to a raucous session in Congress where some lawmakers chanted for Rousseff’s head, figuratively speaking… we think. Here are some clips from the protests that swept the country on Wednesday:

This, ladies and gentlemen, is what’s called chaos. Just ask Delcídio do Amaral, the senator whose testimony has only added to Rousseff’s troubles. “I am a prophet of chaos,” he told reporters after the court accepted his plea deal.

According to Eurasia, the leaked phone calls put Rousseff on the brink of impeachment, with odds of her ouster now rising to 75%. A vote, Eurasia says, could come as early as May.

“We’re in the hands of leaders who are bandits,” said Arivaldo Gomes, 54, a deliveryman. “I’m ashamed of this country,” he told The New York Times. But perhaps Josias de Souza, a political commentator put it best: “Brazil is being governed by a joke. It’s turned into an aspiring banana republic.”


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Left-wing Protesters Brought Mob Violence to UC-Berkeley Event Featuring Metallica Drummer

Lars UlrichLiberal students attempted to shut down an event at the University of California-Berkeley earlier this month by resorting to one of the worst kinds of censorship tactics: mob violence. 

The event featured a discussion between notable people, including Metallica drummer Lars Ulrich. Ulrich’s elderly father participated in the forum, as did wealthy entrepreneur Marc Benioff. 

Members of the Student Labor Committee, the group that crashed the event, didn’t object to these specific speakers. Rather, they have urged a boycott of all speakers until the administration agrees to their demands, which concern the allegedly subpar conditions endured by contract workers on campus. 

Ulrich, who hosted the event, went so far as to allow a protester to speak at the beginning of the event. This was not sufficient for the aggrieved. Eventually protesters stormed the stage and even assaulted Benioff. The police were forced to intervene. 

In an op-ed for The Daily Californian, shocked members of the UC community described the spectacle as “violence dressed up as protest.” According to the op-ed: 

This disruption, however, emblemized neither. More than just an attempt to exercise the heckler’s veto, this was a planned, violent, bullying act, with the express purpose of destroying a core activity of the campus. 

All groups at UC Berkeley have the right to free expression, but none have the right to prevent others from doing likewise, least of all by using violence. The disruption last week was not an example of protest, it was not the exercise of free speech.  

The Foundation for Individual Rights in Education’s Nico Perrino put it this way

Nobody has a First Amendment right to engage in mob censorship to shut down a speaker. Assault in any context is a crime—not the kind of expressive conduct the First Amendment protects. 

The behavior of the protesters was shameful, censorious, and even dangerous. If would-be visitors to campus—including interesting figures like Ulrich and Benioff—fear for their safety, they will decline invitations to speak. Such an outcome would deprive students of one of the main benefits of attending university in the first place.

Watch video footage of the assault, below.

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At the University of Arizona, the Oppressors Are ‘Marginalized’ Students

|||Imagine how much tuition would have to increase at the University of Arizona if student-protesters—who are demanding, among other things, $500,000 for diversity initiatives—got what they wanted. 

U. of A’s self-proclaimed Marginalized Students, much like the Assembly for Power and Liberation at Western Washington University, think the university needs a fundamental restructuring: one that places social justice activism and education on a higher pedestal than just about anything else. As I argue in a recent column for The Daily Beast, these demands would not only transform the campus into a profoundly hostile place for free expression, but they would also exacerbate administrative bloat and drive up costs for all students—marginalized or not: 

It’s difficult to overstate how burdensome such demands would be for students and professors, since no one can predict exactly what words, concepts, images, videos, or other forms of expression will bother a random person. Nor is it appropriate to ask teachers to do so. The learning process involves grappling with uncomfortable truths: If students are unable to speak frankly—and potentially problematically—with each other, they aren’t really participating in an educational university experience.  

Of course, they would have a hard enough time simply paying tuition, if the activists got their way. A $500,000 allotment for diversity initiatives is just the tip of the iceberg: Demands to hire more left-leaning faculty, create residence communities geared toward specific group identity, and employ more counselors would also impact U of A’s bottom line.  

Read the full thing here. I conclude by noting that further marginalization of the so-called Marginalized Students might be in the best interests of everyone whose sole preference is for a more affordable U. of A. 

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Stockman Slams “Simple Janet”‘s Incoherent Babble

Submitted by David Stockman via Contra Corner blog,

Listening to even a small portion of Simple Janet’s incoherent babble makes very clear that the nation’s central bank is well and truly impaled on its own petard. According to the dictionary, the latter term refers to…

…a small bomb used for blowing up gates and walls when breaching fortifications. It is of French origin and dates back to the 16th century. A typical petard was a conical or rectangular metal device containing 2–3 kg (5 or 6 pounds) of gunpowder, with a slow match for a fuse.

Maybe that’s what they have been doing all along—–that is, waiting for their slow match monetary fuse to finally ignite the next financial conflagration.

After all, the Fed is now 87 months into its grand experiment with the lunacy of zero interest rates. If our monetary central planners still can’t see their way clear to more than 38 bps of normalization, then, apparently, they intend to keep the casino gamblers in free carry trade money until they finally blow themselves up——just like they have already done twice this century.

In fact, by Yellen’s own bumbling admission the inhabitants of the Keynesian puzzle palace—-into which the Eccles Building has long since morphed—–can’t see their way to much of anything. They couldn’t even decide if the risks to the outlook are balanced to the upside or downside. And that roundhouse kind of judgment isn’t even remotely measureable or exacting; it requires nothing more than a binary grunt.

 

As a practical matter, the joint has lapsed into a state of mental entropy – apparently under the risible assumption that they have abolished the business cycle and have limitless time to normalize. Yet we are already at month 81 of this so-called expansion, and the signs of approaching recession are cropping up daily.

This week, for example, we got another month of declining industrial production, which is now down nearly 2% from its recent peak and falling business sales, which are 5.1% lower than they were in mid-2014.

Somehow Yellen deduced from the chart below that the US economy has been “very resilient in recent months”. Since the commerce department’s report on total business sales includes manufacturing, wholesale and retail, and despite the current slump still clocked in at a $15.5 trillion annualized run rate in January, it might be wondered just exactly what hidden crevice of the US economy is exhibiting all that “resilience”.

At the same time, CapEx orders are down by 7% from September 2014 levels and the inventory to sales ratio is at its highest level since April 2009.

The Fed has never seen a recession coming, of course. It apparently doesn’t even believe that business cycles die of old age, too much credit expansion and malinvestment or even of its own inept handiwork. The cause is always an “external shock” or even an extraterrestrial “contagion”, as per Bernanke’s specious history of the September 2008 market meltdown.

Still, you might think that a posse of economists, which purportedly is laser-focussed on the “incoming” data, might have noticed the deteriorating trends so starkly evident in the chart below. Why do they think all of this is just “transient” and that they have until 2018 by their own latest “dot plot” to get money market rates out of what will have been a decade long sojourn in negative real rate land?

In other words, if a recession has not already commenced, they are using up the recovery phase runaway real fast. But never mind the very real risk that the entire global economy is sliding into a deflationary contraction, and that normalization would then be put off indefinitely.

By her own assertion Yellen espies no such danger, and even asserted during the presser that there are “upside risks to global growth”.

Let’s see. In the most recent months, the three bellwether economies of Asia reported plunging exports. Japan was down 13% from last year, South Korea was off by 20% and China’s exports tumbled by 25%.

Beyond that, there is a veritable CapEx depression underway throughout the global energy, mining, shipbuilding, steel, aluminum and most other heavy industrial sectors; China is drifting ever closer to a spectacular credit collapse and violent labor unrest; and its satellite economies like Brazil are rapidly becoming economic basket cases.

Yet Simple Janet could not explain why the Fed has lapsed again to a “hold” position or when global economic conditions would actually permit it to resume its path toward normalization.

The unstated effect of the Fed’s perpetual “hold” policy, therefore, would seem to be free gambling chips for the Wall Street casino, world without end.

And we do know how that ends.

We also now have an absolutely clear idea of why the Fed is impaled on its own petard. Yellen explained to her ever credulous audience of financial journalists that all of its shilly-shallying is due to the fact that the “neutral value” of federal funds is currently very “low” by historic standards, and that, accordingly, an exceptional degree of “accommodation” is warranted.

Here’s a newsflash for the passel of shills who attended the post-meeting press conference.

First, as a technical matter there is no Federal funds market. It has been killed deader-than-a-doornail by the Fed’s massive money printing campaign since September 2009. The resulting $2.4 trillion of excess bank reserves parked at the New York Fed simply suffocated the Federal funds market in its crib.

More broadly, there ain’t no such thing as the “neutral value” for federal funds or any of the related money market instruments. It’s an entirely imaginary construct conjured up by Keynesian academic scribblers, and ultimately rests on purely religious belief.

Indeed, Yellen might as well have been reciting the rosary and fingering her beads.

The only valid price of money is that set by the interaction of supply and demand in an honest free market. But that was quashed decades ago when Greenspan inaugurated the present regime of bubble finance.

What we have in this age of monetary central planning, instead, is pegged rates arising from abstract theory and the blundering pretensions of the bubble-blind apparatchiks ensconced on the FOMC.

At the end of the day, pegged rates will prove to be the ultimate destroyer of capitalism. They transform financial markets from organizers and allocators of real capital and the savings of producers and workers into gambling casinos which fuel massive speculative bubbles.

Until the blow. Someone should tell Janet to let go of the petard.


via Zero Hedge http://ift.tt/1Xy2G3Q Tyler Durden

Hacker Group “Anonymous” Releases Trump’s Social Security, Phone Numbers

Earlier this month, infamous hacker collective Anonymous declared “war” on Donald Trump who they accuse of being a fascist and seeking to institute a dictatorship in America. 

We’re not sure how many people took them seriously and we’re almost positive Trump himself got a good, hearty laugh at the threat (after all, the group also declared “war” on Bakr al-Baghdadi) but on Thursday, the group claims it has released Trump’s phone number and social security number

Here’s the clip:

Do with it as you will,” the group’s trademark mask says, “but just be aware that you are responsible for your own actions.”


via Zero Hedge http://ift.tt/1UjcMaA Tyler Durden