Australians Want Light Rail Contractor to Quit Climate Crusade, Get Back to Building Overbudget, Overdue Light Rail Line

Sydney light railAs nauseating as corporate-sponsored celebrity climate-change videos can be, they are rarely the target of political outrage. Not so for the Spanish firm Acciona’s clip featuring the Australian actor Liam Hemsworth (of Hunger Games fame) plugging the company’s role in building “sustainable solutions in infrastructure” and asking us all to think about how we might invest in the planet.

After Acciona shared the 30-second video on its Facebook page this past week, it got a sharp rebuke from politicians and media in Sydney, Australia, who would prefer that Acciona drop the climate crusade and stick to its day job: building Sydney’s overdue, overbudget light rail extension.

“Instead of finishing the job which is causing mayhem in Sydney’s [Central Business District], they’ve decided to throw money into the celebrity-backed campaign,” writes radio host Alan Jones. “They should just get on with it like most reputable contractors do,” a spokesperson for New South Wales Transport and Infrastructure Minister Andrew Constance tells The Daily Telegraph.

The rage is understandable. Acconia’s stewardship of Sydney’s light rail extension—on which it is the primary construction contractor—has been less than stellar.

The new 7.5-mile line the company is building out from Sydney’s downtown to the southeastern suburbs of Randwick and Kingsford was initially supposed to be finished this year at the cost of AU$1.6 billion.

Costs have since spiraled up to AU$2.1 billion—the project’s critics say the price tag could reach AU$3 billion—and the completion date has been pushed back to March 2020.

Acciona blames these blown budgets and deadlines on the New South Wales provincial government, claiming it failed to adequately inform the company of extensive utility work that would need to be done. The company is now suing the government for $1.1 billion.

Government officials have pointed the finger right back at the company, describing Acciona’s lawsuit as “absurd” and their work as “slow-go.”

All the while, businessesin the construction zone have suffered revenue drops of as much as 30 percent, prompting some to close down. Many of the ones that have managed to stay open lease space from the local government, which has increased rents and electricity rates to cover the costs of the construction.

You can see why lots of Sydney business owners and taxpayers find Acciona’s climate rhetoric less than compelling.

But the company’s real mistake was not in trying to justify a late and expensive project by trying to appeal to a city’s environmental conscience. Acciona’s mistake was not trotting out the global warming guns until its project was already off the rails.

Here in the United States, a grab bag of reasons are unfailingly invoked to justify the expansion of cities’ urban rail networks, from implausible claims about congestion relief to claims that they will bring “racial justice.” Never far from the top are promises that the new investment will cut carbon emissions, thus bettering the environment.

These arguments have been proffered in support of light rail projects from Los Angeles and Nashville. The claims are questionable—the Cato Institute’s Randal O’Toole has found that most urban rail projects increase carbon emissions—but they help cement in the public imagination the idea that light rail is a public virtue from the get-go.

Thus, when the inevitable cost overruns and schedule delays appear, or when promises about boosted transit ridership and congestion relief prove illusionary, any discontent can be discounted against the projects’ purported planet-healing potential.

Acciona made the mistake of reversing this tried-and-true formula, and now it’s being panned for it.

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Coalition Hope Fails: Italian President Sees Fresh Elections Early Next Year

After two months of failed negotiations between the Five Star Movement, the Democratic Party and the center-right coalition (which includes both the far-right Northern League as well as Silvio Berlusconi’s center-right Forza Italia), Italian President Sergio Mattarella has offered the first sign that Italy is likely headed for another election after what was billed as a final push to form a coalition ended in failure on Monday.

During remarks to reporters on Monday, Mattarella called on Italy’s political parties to back a neutral government that would govern the country until the end of December, when new elections would be held, according to Italian newspaper Il Sole 24.

Mattarella

The technocratic government would govern until an agreement is reached, or until the new elections are held, and would step down if an agreement is reached before the election.

Still, the news is a blow to the Five Star Movement (M5S), which won the largest share of any single political party during the March election (though the center-right coalition came out with a plurality). Five Star Movement leader Luigi Di Maio has said he’d be willing to consider somebody else for prime minister, and Matteo Salvini of the anti-immigrant Lega Nord has rejected the idea of a non-partisan prime minister and called for elections in July, a demand that Five Star has seconded. 

Mattarella said elections in the summer are possible, but that it would be difficult for people to vote. Should Italian politicians reject the technocratic solution, Mattarella said elections would likely be held in the fall.

Of course, Italy’s Five Star Movement, which has grown from a semi-serious political party founded by comedian Beppe Grillo into a national political force, has only seen its popularity increase since the March vote, according to polling data.

We speculated earlier that talks between Five Star and the League broke down because of League leader Matteo Salvini and his enormous ego.

Di Maio, whose anti-corruption movement won around 32 percent of the vote, said he would give up his claim on the premiership if the League agreed to enter into a coalition with them — as long as they get rid of their scandal-tainted coalition ally, Silvio Berlusconi.

M5S has rejected the Northern League’s overtures because they don’t approve of the League’s coalition partner, Silvio Berlusconi, a former prime minister of Italy, who leads the more moderate Forza Italia. Berlusconi was convicted of tax fraud in 2013.

But Salvini, whose coalition won 37.5% of the national vote compared with M5S’s 33%, turned down Di Maio’s offer. However, the League alone received just 22% of the vote.

Mattarella also warned that calling for another round of elections could harm markets, as investors worried about worsening political instability in one of Europe’s most indebted countries.

In Italy, the president is the official head of state and the steward of the country’s government. It is not generally viewed as a political position.

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WSJ Explores The Mystery Of Michael Flynn’s Guilty Plea

In recent months, The Wall Street Journal Editorial Board has not been shy of criticizing the establishment as much as the rest of the media-moonscape criticizes Trump. Having jabbed at “too conflicted” Mueller, urging him to step down, and daring to point out that it was Trump who started the trade wars, but China; the authors turned their angry gaze at the mystery of Former Trump national security adviser Michael Flynn’s guilty plea… especially considering FBI agents said he did not commit a crime…

Via The Wall Street Journal Editorial Board,

One of the stranger moments of Robert Mueller’s special counsel probe is Michael Flynn’s Dec. 1, 2017 guilty plea for lying to the Federal Bureau of Investigation.

The former White House national security adviser pleaded guilty to a single count of making false statements, even though then FBI director James Comey had told Congress in March that the two FBI agents who interviewed Mr. Flynn believed he hadn’t lied.

These columns reported this Comey testimony based on sources at the time of Mr. Flynn’s plea (“The Flynn Information,” Dec. 1, 2017). Now comes confirmation from a less redacted version of the House Intelligence Committee’s Russia report released late Friday.

On pages 53-54, the report notes that in March 2017 “Director Comey testified to the Committee that ‘the agents . . . discerned no physical indications of deception. They didn’t see any change in posture, in tone, in inflection, in eye contact. They saw nothing that indicated to them that he knew he was lying to them.’” The quotes are from the committee transcript of Mr. Comey’s remarks.

The report goes on to say that then Deputy FBI Director Andrew McCabe “confirmed the interviewing agent’s initial impression and stated that the ‘conundrum that we faced on their return from the interview is that although [the agents] didn’t detect deception in the statements that he made in the interview . . . the statements were inconsistent with our understanding of the conversation that he had actually had with the ambassador.’

Recall that the inconsistency concerned whether Mr. Flynn had discussed U.S. sanctions against Russia with the Russian ambassador to the U.S. Vice President Mike Pence had said publicly that Mr. Flynn had not discussed sanctions, and once it came to light that he had, Mr. Flynn resigned.

But Mr. McCabe also nonetheless told the House Intelligence Committee that “‘the two people who interviewed [Flynn] didn’t think he was lying, [which] was not [a] great beginning of a false statement case.’”

All of this relates to the mystery of why Mr. Flynn pleaded guilty to making false statements. It made little sense for him to lie since as a seasoned intelligence officer he would know the U.S. eavesdrops on the Russian ambassador. He also willingly sat for the FBI interview with no legal counsel, suggesting he felt no risk in doing so.

Certainly the statements about the FBI agent’s impression of Mr. Flynn would not have helped Mr. Mueller’s case at trial had Mr. Flynn not pleaded guilty. The plea deal noted that Mr. Flynn’s sentence would depend on his “assistance in the investigation,” and perhaps Mr. Flynn felt he lacked the money to defend himself in court. He also may have wanted to spare his son, whom Mr. Mueller was also targeting.

In any case it is a dubious practice for a prosecutor to force a cooperating witness to plead guilty to a crime he didn’t commit. Perhaps Mr. Flynn is supplying testimony behind the scenes that puts all of this in a better light, but the facts on the public record to date don’t reflect well on Mr. Mueller’s prosecutorial tactics toward Mr. Flynn.

The House report also reflects poorly on Mr. Comey’s credibility.

Despite the transcript of his testimony, Mr. Comey at least three times on his book tour has denied telling Congress that the FBI agents did not think Mr. Flynn was lying.

“Did you tell lawmakers that FBI agents didn’t believe former national security adviser Michael Flynn was lying intentionally to investigators?” Fox News’ Bret Baier asked Mr. Comey on April 26.

“No,” Mr. Comey replied, adding that “I didn’t believe that and didn’t say that.”

Asked a similar question by NBC’s Chuck Todd, Mr. Comey responded, “Not true. And I don’t know what people heard me say, if they’re reporting it accurately, what they heard me say, they misunderstood. But that’s not accurate.”

Perhaps Mr. Comey’s memory is faulty, as happens with human beings, though then he might commiserate with Mr. Flynn. On the other hand, Mr. Comey has jailed many Americans for false statements to the FBI, with no accommodation for mistakes of memory.

The latest House release also shows again the games that the Department of Justice and FBI are playing with redactions. The FBI has for weeks fought Intelligence Committee requests to declassify this portion of its report, though the only harm from public knowledge is to Mr. Comey’s reputation and to the credibility of Mr. Mueller’s prosecution.

The FBI has a conflict of interest in overseeing redactions given that the behavior of its leaders and agents are in question. This is one more reason for President Trump to use his authority to declassify all of the Russia 2016 files.

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Is The Taxpayer About To Rescue Elon Musk Again?

It is no longer a secret that Elon Musk’s car-making company is a cash-burning monster that now admittedly needs to raise more cash.

And while the bond market remains extremely skeptical of Musk’s visions, his threats of a “short burn of the century” this weekend…

Seems to have spooked a few weak shorts out of the stock (but not the bonds)…

So the question everyone is asking is simple – is this the last desperate ‘vinegar strokes’ of the new millennium’s ‘Enron’? Or does Musk have yet another rabbit up his sleeve (mixing metaphors wildly)?

Today we may have got the answer.

As The Daily Caller’s Jason Hopkins reports, California is widely expected to become the first state in the U.S. to require solar panel installations for nearly all new homes.

The California Energy Commission will vote Wednesday on whether to enact a sweeping new mandate that will artificially propagate the state’s solar energy sector. If passed, the proposed rule will require solar panels to be installed in all new homes, apartment buildings and condos up to three stories high, beginning on Jan. 1, 2020. Exceptions will be made for homes that are blocked by trees or taller buildings, or can’t fit a solar panel. The five-member commission is expected to pass the measure.

“California is about to take a quantum leap in energy standards,” Bob Raymer, technical director for the California Building Industry Association, stated in a local interview published Friday. “No other state in the nation mandates solar, and we are about to take that leap.”

The impending mandate will radically change the energy industry in The Golden State. Only 15 to 20 percent of new single-family homes in California currently use solar installations. A vast amount of new homeowners will soon be forced to invest in solar panels whether they like it or not — and at a steep price. As Jason Hopkins continues…

The mandate will raise the cost of building a new home by around $25,000 to $30,000. Supporters of the measure point to an estimated $50,000 to $60,000 savings on energy bills over 25 years to offset these initial costs. These savings, however, are largely possible through subsidized rates, where panel owners are compensated for the energy they put back into the grid at a retail rate, not the cheaper wholesale rate.

The vote Wednesday by the California Energy Commission is just the latest in what has been a bullish environmental agenda in the state.

Jerry Brown, the state’s outgoing Democratic governor, has pushed legislation that makes the state’s renewable portfolio standard reach 33 percent by 2020 and 50 percent by 2030. More notably, state leaders have waged war on the White House regarding vehicle emissions standards. The Trump administration is pushing to ease regulations on the car industry, but Brown has vowed to keep his own, stricter standards in place. Such a different emission standard between the federal government and California, the country’s most populated state, would wreak confusion on the car industry.

The move to mandate solar panels for every home could further complicate a growing dilemma. Utility companies are already struggling to operate in a state that is increasingly diversifying its energy portfolio, pushing more customers to turn away from investor-owned utilities and creating a more volatile market. Uncertain of how many customers they will have in the future, utilities are becoming more hesitant to sign long-term contracts with power generators.

Michael Picker, president of the California Public Utilities Commission, is sounding the alarm bell, warning that California might be at risk of a second energy crises. Customers could soon be subjected to skyrocketing electricity prices and rolling blackouts — unless the state leaders act accordingly. Picker’s office released a report Thursday explaining how they can properly reform the electricity market and avoid an energy shortage similar to the one California experienced in 2000 and 2001.

So, will Solar City get the contract to install non-Chinese, made-in-America solar panels on all new homes in California at the Government’s behest and subsidized by the US taxpayer?

We shall see, but one thing is for certain, without the intervention of the US government and its benevolent taxpaying sheeple, Musk would be more ‘no jobs’ than ‘steve jobs’.

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The Worst Trades In History

Authored by Alex Kimani via SafeHaven.com,

To err is human–it’s a fact of life that people make mistakes, all the time. Fortunately for the majority of us, our biggest mistakes on the job end up being quite tolerable and good learning experiences. But in the much bigger corporate arena where multi-billion-dollar deals are par for the course, blunders can be exceedingly costly whether they involve striking regrettable deals or passing up great opportunities.

A recurring theme of hubris tends to underline many corporate gaffes though some are plainly due to poor judgement.

Without further ado, the brass tucks. Here are the top 5 corporate blunders in history:

#1 Excite Fails to Buy a Young Google

They say never to despise small beginnings. Well, that’s exactly what former search giant Excite is guilty of. Back in 1999, Excite was the second-largest search engine behind only Yahoo, while Google was a little-known upstart.

Google’s founders, Larry Page and Sergey Brin, then offered to sell the startup to Excite for $1 million at first, an offer that Excite turned down. They then lowballed the offer to $750,000, a screaming bargain in hindsight, yet Excite still passed up.

Several reasons have been advanced to explain Excite’s strange decision. But we all know it turned out to be one of the biggest lost opportunities considering how Google has grown to become the world’s largest search company, with assets worth about $210 billion and an enterprise value of $620 billion. Ouch.

#2 Bank of America’s Buyout of Countrywide Savings

When ailing subprime lender, Countrywide Savings , offered itself for sale to Bank of America for $4.1 billion in 2008, BofA CEO Ken Lewis thought it was a ‘rare opportunity’ too good to pass up. What he did not know was that he was getting the short end of the stick.

The most recent financial crisis was beginning to take shape, and the deal would end up saddling the giant bank with $40 billion in fines and settlements, BofA shares losing $500 billion in the market as well as costing Lewis his job. Countrywide CEO Angelo Mozilo got off a lot more lightly, managing to keep most of his $83 million paycheck for the deal after a couple of out of court settlements.

#3 Time Warner Merger with AOL

The dotcom crash of 2000-2002 wiped off $5 trillion in market value of tech companies in one of the worst episodes of capital destruction–and both Time Warner and AOL know all about it.

In 2001, Time Warner, a media powerhouse that was captivating the world with shows like The Sopranos and Sex and the City, together with America Online, the dominant provider of dial-up internet to millions of Americans, decided it was time for a tie-up.

On paper, the merger looked like a marriage made in heaven, with Time Warner getting its hands on AOL’s 25 million subscribers, while AOL would benefit from its partner’s extensive cable network and rich content.

So a deal was struck, AOL happily paying $162 billion for Time Warner’s assets. But the promised synergies never materialized. By late 2002, the value of the combined entity had cratered from $260 to a measly $20 billion in the worst M&A deal in corporate history.

#4 Blockbuster Rejects Offer to Buy Netflix

Baby boomers are probably as closely acquainted with Blockbuster Video as millennials are with Netflix. In 2000, Blockbuster was the biggest name in video rental stores when Netflix, a 2-year old mail DVD startup, offered to sell its in-store business to Blockbuster for $50 million.

According to Netflix’s CFO Barry McCarthy, Blockbuster’s executives literally laughed Netflix’s officials out of the building, a move they probably rue up to this day.

Ten years later, Blockbuster went belly up, killed by none other than Netflix’s internet video streaming business while Netflix has gone on to become a $140 billion (enterprise value) giant. Meanwhile, the rest of us wtih no affiliations to Blockbuster are probably glad things worked out the way they did.

#5 Ron Wayne sells his 10% stake in Apple

Ever heard of the guy who, back in 2010, bought two pizzas for 10,000 Bitcoins? Well Laszlo Hanyecz, as he is called, just exchanged an asset that would have been worth a cool $9.2 million at current Bitcoin prices for two pizzas worth $25.

Hanyecz though has nothing on Ron Wayne, one of the three original founders of Apple Inc., who in 1976 sold his 10-percent stake in the company for $800.

If you are a stickler for detail, $800 in 1976 is worth $3,553.50 in 2018 after adjusting for inflation. Not too shabby, but nothing like the $90 billion that Wayne’s stake would be worth today.

Wayne was convinced that co-founder Steve Jobs’ reckless spending would drive the company to the ground. Well, Apple did nearly go bankrupt in the mid-1990s–in Job’s absence. Ironically, Steve Job’s return to the company in 1996 is credited with bringing it from the brink.

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Short-Squeeze Lifts S&P To Critical Technical Level; Bonds, Dollar Shrug

The Dollar is practically unchanged (amid some volatility) and Treasury yields are officially unchanged across the entire curve… but that doesn’t stop the short-squeeze continuing to lift Nasdaq stocks 1% higher and the S&P back to its 50DMA

Just keep buying…

 

With “Most Shorted” stocks now up 5% from Thursday European close…

 

Lifting the S&P 500 to its 50DMA, having bounced off its 200DMA

 

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“Bitcoin will go to $40,000 this year. . .”

Every year around this time I attend a small, private event to break bread with some of the most invigorating people I know.

There’s only about 100 people in the room– but they’re all at the top of their game… business and intellectual leaders from a variety of industries.

And we gather each year to build relationships with one another and hear about some cutting edge ideas that are usually 2-3 years from hitting the mainstream.

This past weekend’s event, for example, showcased some revolutionary medical advances, including an approach that targets specific proteins to treat afflictions that are caused by, or exacerbated by inflammation– including cancer, arthritis, etc.

It’s really exciting to see what’s on the near horizon with medical technology.

Among other speakers was also a prominent crypto evangelist who spoke about what the future of cryptocurrency will look like in the coming years.

No major surprises– he told the audience that crypto is still in its infancy and has an incredibly bright future.

I agree. And his analogy to illustrate this point was looking at the growth of the tech sector from the early 1980s through today.

Back in late 1970s before personal computers became ubiquitous, there was serious doubt (even within the industry) that consumers would ever adopt the technology.

Ken Olsen, founder of Digital Equipment Corporation, famously stated in 1977 that “there is no reason anyone would want a computer in their home.”

That very year saw the introduction of the Apple II, Commodore PET, and Tandy TRS-80 personal computers, all of which proved extremely popular with consumers.

By 1982 the computer replaced “Man of the Year” by Time Magazine, and several dozen companies had jumped into the industry designing hardware and peripherals.

Technology stocks began to rise, and shares of companies like IBM and Hewlett-Packard quickly doubled in the early 80s.

But at that point a bunch of investors and market analysts began musing that the technology trend had reached its peak.

They had no idea what miraculous advances were still to come, and instead viewed the entire sector as an expensive fad.

Share prices languished for several years– IBM stock went nowhere from 1983 until 1986.

But then Microsoft went public in March of 1986. And suddenly the market realized there was a whole new component to technology: software.

Microsoft’s stock price exploded, doubling in its first twelve months, and increasing 10x in four years.

But by the early 1990s the tech boom had once again run out of steam. Investors thought that the big software trend was totally overdone and that there really wasn’t much room for the tech sector to keep growing.

Share prices languished again, as the market had no idea what was coming next.

Then, in the mid 1990s, people caught wind of this thing called the “Internet”, which back then they referred to as the “Information Superhighway”.

People realized there was yet another component to the tech boom. And so the investment bonanza continued.

This cycle has repeated itself again and again… with mobile, social media, e-commerce, etc.

All along the way, investors occasionally went through periods believing that technology had nowhere else to grow… or that it was all just a fad. They never had a clue what was coming next.

This is a pretty reasonable comparison to cryptocurrency.

It’s similar to the early 1980s when people thought that these technologies were just silly fads… or that the tech stocks were already expensive and they had missed the opportunity to invest.

A lot of folks probably felt that way about Microsoft stock in 1990, after it had increased 10x from its IPO price four years earlier: “I missed it, the opportunity is gone.”

Microsoft’s share price, of course, would grow by another 10x before the end of the decade. And it’s up 100x through today.

People are saying the same thing about crypto. It’s either too expensive to buy (“I missed it”), or it’s some sort of passing fad that will eventually go away.

Most likely neither one of those is true.

Now, here’s where I started to strongly disagree with this past weekend’s speaker.

At the end of his remarks, he told the audience unequivocally that “Bitcoin will go to $40,000 this year.” (And some attendees in the room actually bought Bitcoin based solely on this statement…)

Certainly there’s some data to support the assertion. Various cryptofinance companies are working on ways to open up more investment in the sector to large banks and institutions.

Right now, crypto is dominated by small investors. If you want to by $1,000, or even $1 million, worth of crypto, you can.

But if you’re a large fund with $50 billion under management, and you want to buy hundreds of millions of dollars worth of cryptocurrency, it’s REALLY difficult.

The infrastructure doesn’t exist. Not yet. But they’re working on it.

The banks and funds themselves are designing their own platforms to trade crypto, and even NASDAQ is getting in on the game.

Once they succeed, there could be a flood of institutional capital into cryptocurrency. Bitcoin could certainly benefit. Or perhaps it won’t.

Remember the old quote from F. Scott Fitzgerald: “The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.”

Bottom line– you have to be able to understand both sides. There are ALWAYS risks.

Specific to Bitcoin, for example, a truly honest assessment of the core software may lead to the conclusion that it’s technologically inferior to newer tokens and coins.

It’s also possible that large investors may bypass Bitcoin altogether and buy newer generation tokens.

No one has a crystal ball, especially in crypto. And it’s inappropriate to make blanket assertions that the price will reach X by date Y.

Understand the obvious big picture trend. But also understand the risks. Then, based on the balance of the two, and a long-term view, make a RATIONAL decision to invest.

Source

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Munger Massacres “Scumbag, Immoral” Bitcoin Traders, Gates “Would Short It” If He Could

Following the weekend’s Buffett and Munger bitcoin-bashing (“Someone else is trading turds and you decide I can’t be left out”), the 181-year-old pair were joined by Bill Gates in a lengthy CNBC interview this morning… and Munger went rogue once again on cryptos…

“Bitcoin is worthless artificial gold which if it succeeded would facilitate a lot of illicit actvitiy.”

“That is not something that the world needs.”

“The fact that is clever computer science does not mean it should be widely used and that respectable people should encourage other people to speculate on it.”

“Bitcoin reminds me of Oscar Wilde’s definition of fox-hunting: the pursuit of the un-eatable by the un-speakable,” which confused the anchor and so Munger summarized…

“I think [bitcoin] is a scumball activity.”

Bill Gates then added that he was given some for a birthday and decided a few years later to sell it. He does not own any Bitcoin now.

“There’s some really good technology such as sharing databases and verifying transactions, but Bitoin and ICOs, I agree [with Munger] completely – it’s one of the crazier speculative things… because as an asset class you’re not producing anything… you shouldn’t expect it to go up

It’s a pure greater fool theory type investment and I would short it if there was an easy way to do it.

Munger: Bitcoin is worthless artificial gold from CNBC.

However, Munger was not done in his counter-crypto rant, as he told Yahoo Finance that bitcoin is a “combination of dementia and immorality.” (Some argued, he would know). Munger then went to savage bitcoin further…

“The computer science behind bitcoin is a great triumph of the human mind,” Munger started. “They created a product that’s hard to create more of but not impossible. [But] I see an artificial speculative medium,” he said, in which people can sell it to someone else at a higher value with no intrinsic value behind it. It’s “anti-social, stupid and immoral,” he said.

“Immoral?” asked the interviewer.

“Suppose you could make a lot of money trading freshly harvested baby brains. Would you do it?” Munger asked.

“To me bitcoin is almost as bad.”

And finally Munger concluded…

“I regard the whole thing as a combination of dementia and immorality. I think the people pushing it are a disgrace. There ought to be some things that are beneath you, that you just don’t do, and this is one.”

But Charlie… how do you really feel about crypto?

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A Market In Transition

Authored by Sven Henrich via NorthmanTrader.com,

Can markets extend and sustain new gains without a new free money carrot coming their way?

Since the financial crisis bad news hasn’t mattered as markets always had the next free money carrot to look forward to courtesy central bank induced low rates and QE.

2017 was the icing on the cake marked by record global central bank intervention and a large US tax cut resulting in record low volatility and steady market ascension. A market nirvana if you will.

The resulting euphoria that extended into early 2018 produced historic overbought readings which triggered a short term technical correction in February and since then we’ve seen markets engaged in a multi month price chop with heightened volatility making this a great trader’s market for active and flexible investors as technicals are working a charm.

Now markets are in transition as no new free money carrot is dangling in front of them and, for the first time in many years, bad news may actually matter. Indeed what we are witnessing is a market negotiating the benefits of record earnings with increasing headwinds such as trade tariffs, earnings growth considerations into 2019/2020, rising yields, etc.

To be sure there is still artificial intervention by central banks (but less so) and a lot of the tax cut money is making its way into corporate buybacks and these are keeping an artificial bid under the market to the tune of over $850B in buyback announcements so far in 2018.

Key considerations:

Despite record earnings so far in 2018 we have to recognize that 70% of earnings growth this year is driven by tax cuts. That artificial growth benefit will lesson in impact in 2019 an 2020. Where is extended growth to come from in these years to make up the slack? In this context the concern is that we are seeing peak earnings growth in 2018 and any headwinds that suggest margin compression may cause major problems. Think tariffs, rising yields, price inflation, debt levels etc.

Most indices are either down or flat on the year so far. The narrow leadership of 2017 has become even thinner. Case in point: Even previous $FANG leaders such as $FB and $GOOGL have struggled to make gains, yet $AAPL and $AMZN are standing tall at record highs while 60% of the $NDX components remain below their 50 day moving average:

One may argue that the larger market is entirely dependent on just a handful of stocks not correcting. That’s very thin ice and an issue I had an opportunity to discuss with Brian Sullivan on CNBC earlier today:

In this context to note: $NDX is up for 10 years in a row and current up 6 quarters in a row:

In short, there is precious little evidence of a correction even having taken place.

Looking at $SPX we can observe a very distinct pattern of lower highs and higher lows in 2018:

Key observations:

Firstly, note the pattern of lower highs and higher lows is coming to a decision point, likely in May or June at the latest.

Second, note the lower supporting trend line connecting the US election lows and the February lows. This trend line has been key support in 2018 including last week again. This is critical support full stop and my view is this trend line is key to watch in 2018.

As long as it holds markets can bounce from here and try to overcome some of the open price gaps above, namely 2705, 2750 and 2850 and even new highs beyond that (see also 2018 Market Outlook for potential upside technical targets), but note each gap will be technical resistance. Mission critical: Markets need to start making higher highs and move above the upper descending trend line.

If they don’t, the lower trend line may be broken and that opens up a much larger technical risk zone into February lows and possibly into last summer’s lows:

On this weekly chart note $SPX is engaged in a series of bearish patterns currently showing a potential bear flag. I say potential because it hasn’t confirmed yet. If this bear flag triggers along with a break of the trend line I mentioned before see risk into 2400-2470 on $SPX.

But fear not, this risk zone, if it triggers, may then set up as a tradable buy.

*  *  *

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Putin Sworn In For Another Six Years As Russian President “To Serve The People And The Fatherland”

Vladimir Putin was sworn in for another six-year term as Russian president, his fourth, buoyed by popular support but weighed down by the ongoing confrontation with the West, a fragile economy and uncertainty about what happens when his term ends.

As described by ABC, standing in the ornately-decorated Andreyevsky Hall of the Grand Kremlin Palace, with his hand on a gold-embossed copy of the constitution, Putin swore to serve the Russian people, to safeguard rights and freedoms, and protect Russian sovereignty.

Putin’s inauguration for a fourth term as Russian President followed two months after more than 70% of voters backed him in an election in which he had no serious challengers.  Putin’s most dangerous opponent, Alexei Navalny, was barred from running and on Saturday Navalny, together with hundreds of supporters, was again detained by police while protesting against Putin’s new term.

In a speech after the swearing-in ceremony, Putin said that in the next six years Russia would prove a “strong, muscular player on the world stage, backed by a powerful military”, while pushing hard to improve life for its citizens at home.

“Taking up this post, I feel a colossal sense of responsibility,” Putin told his audience of Russian officials and foreign dignitaries, among them former German chancellor Gerhard Schroeder…

… and, yes, Steven Seagal was also spotted.

As ABC notes, for the brief trip from his office to the inauguration ceremony, Putin travelled in a new Russian-made limousine; according to Russian TV, the limousine will replace the fleet of imported vehicles Putin uses, state television reported.

With Putin sworn in, immediate attention turns to whom Putin will nominate as his prime minister.

If he asks the current holder of the post, his loyal lieutenant Dmitry Medvedev, to stay on, that will signal continuity. If he chooses someone new, that could presage a fresh approach on policy and will also trigger speculation that Mr Putin is grooming a successor.

As a reminder, once this term ends in 2024, the constitution bars him from running again, although as recent events in China showed, where Xi Jinping changed the constitution to make himself eligible to rule for ever, that will hardly be a major hurdle.

What happens next?

It is unlikely that Russia’s tense standoffs with the West that have dominated the past four years will ease during Putin’s new term, especially since any hopes for a detente with the US have been dashed as Trump scrambles to prove every day to Mueller that he is not a Putin puppet. In fact, clashes in the past few weeks over US sanctions on Russia, the conflict in Syria, and the poisoning in England of former Russian spy Sergei Skripal have left some diplomats worried that the confrontation could spiral out of control.

Meanwhile, opinion polls show Putin has high levels of support among Russian citizens, while his chief opponent, Navalny, has not been able to inspire a nationwide upsurge of protests. But the Russian economy remains a potential weakness for Putin.

Buffeted by lower oil prices, falls in the rouble, inflation and the impact of sanctions, average monthly wages have fallen from the equivalent of $867 ($1,154) in 2013 to $736 last year.

Which means that just like Saudi Arabia, the biggest variable for Putin will be the price of oil; the higher the better.

* * *

Fast forward to 2024, when absent major shocks, there is little clarity what happens next:  then Mr Putin will be 71.

In the meantime, Putin is set to become the longest-serving Russian ruler; soon he will have ruled longer than Soviet Communist leader Leonid Brezhnev, whose 18-year rule from 1964 to 1982 was primarily associated with stagnation. Among the possible options include Putin leaving the Kremlin but continuing to run the country from another post, or bowing out of public life and handing over to an anointed successor.

Putin’s full inauguration below

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