Category: zerohedge

After two ugly auction to start the week, with both the 2Y and 5Y sales tailing badly, today’s 7Y was even worse>

Stopping at 3.034%, the auction tailed by a whopping 0.9bps to the 3.025% When Issued, and also was the first 3%+ 7 Year auction since March 2010.

The internals were also very ugly, with the Bid to Cover sliding from 2.65 to 2.45, below the 2.53 six auction average, and the lowest since March 2018. The takedown was lukewarm, with Direct interest sliding, and taking down just 12.8%, down from 19.0% last month, while Indirects saw a modest lift from 59.5% in August to 62.0% currently right on top of the 6 month average; dealers were left with 25.3%.

Yet despite the auction’s poor performance, the bond market appears to have looked past through and there was no negative reaction in the secondary market as yet another chunk of US debt was easily digested by the market.

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Authored by Thorstein Polleit via The Mises Institute,

US interest rates keep creeping upwards, largely because the US Federal Reserve (Fed) is expected to ramp up borrowings costs further in the coming quarters. The Federal Funds Rate is now in a bandwidth of 1.75 to 2.0 per cent, and the yield on 10-year Treasuries has recently climbed slightly above the 3 per cent level. Higher, let alone further rising, borrowing costs can be expected to have far-reaching consequences for the economy and financial markets in particular.

This becomes clear if we reflect upon the Fed’s interest rate policy by employing sound economic theory. Let us therefore begin with highlighting five effects that result from the Fed lowering market interest rates – by slashing its Federal Funds Rate and/or by bidding up bond prices and thus suppressing capital market yields across the board. For this should help us better understand what the Fed’s current tightening of monetary policy might hold in store.

Effects of interest rate manipulation

1.) The artificially suppressed interest rate induces an unsustainable boom: It discourages savings and encourages consumption and investment, thereby seducing the economy to live beyond its means. Firms hire new staff, increase their production facilities, pay higher wages – and the economy expands.

2.) The forced depression of the interest rate makes firms more likely to engage in long-term investments, which become more profitable as interest rate declines. The overall production and employment structure of the economy gets distorted: Scarce resources are increasingly lured into the capital goods industries, drawn away from the consumer goods industry.

3.) The artificial decline in interest rates inflates stock and housing prices: Future cash flows are discounted at a lower interest rate, thereby increasing their present value and, as a result, their market price. Exceptionally low interest rates also contribute to increasing valuation levels of asset markets – meaning that, for example, stocks and housing become more expensive relative to the incomes they generate.

4.) The fall in interest rates contributes to an increase in all prices of goods and services. This is because firms purchase factors of production at a price that reflects the value added (the “marginal value product”) by employing these factors of production, discounted at the going market interest rate. In other words: Lower interest rates push up prices for intermediary goods such as, say, energy and labour.

5.) Investors’ risk appetite tends to increase as interest rates go down. The low interest rate policy reduces credit costs, making borrowing more affordable – especially so as borrowers’ collateral gains in market value. Credit-hungry consumers, firms and public sector entities can roll-over maturing debt at most favourable interest rates, and low credit costs encourage amassing even more debt.

The “natural rate of interest ”

Against this backdrop, one might be inclined to think that a rise in interest rates must inevitably and immediately cause trouble: slowing down economic expansion; exploding the economy’s production and employment structure; deflating asset prices; putting borrowers under funding pressure. However, things are not that simple, as much depends on the so-called “natural interest rate”.

The (unobservable) natural interest rate is part of the market interest rate, and it is the interest rate at which savings are brought in line with investments so that the economy is doing just fine. If the central bank pushes the market interest rate below the natural interest rate, the economy is driven into a boom; and if the market interest rate is raised above the natural interest rate, the economy is thrown into bust.

So if we want to form a view about what the Fed’s interest rate hiking means for the economy and financial markets, we have to develop an opinion about the level of the natural interest rate: In case the natural interest rate has gone up in recent years, higher Fed interest rates would cause less trouble for the economy and financial markets compared with the case in which the natural interest rate has remained at a very low level.

A trial and error process

The problem is, however, that we do not, and cannot, know the level of the natural interest rate. The capital market cannot provide us this information due to the Fed’s permanent interventions: The central bank keeps issuing unbacked US dollar balances produced by bank credit out of thin air, diverting market interest rates systematically from the levels that would prevail had there been no money issued by the Fed.

What is more, there is no fixed, or immutable, relation between figures such as, for example, growth of gross domestic product and the interest rate. In fact, a given level of the natural interest rate can be, depending on the circumstances, compatible with a high or a low level of savings and investment. Having said that, it is only appropriate to consider the Fed’s monetary policy as a “blind flight” when it comes to setting market interest rates.

As the Fed does not and cannot know the correct level of interest rates, its policy is a “trial and error” process. Since the end of 2015, the Fed has embarked, albeit slowly and cautiously, on an interest hiking path. At least so far, the US economy has continued to expand, with production and employment increasing – and this suggests that the Fed has kept the market interest rate below the natural interest rate.

In other words: The current boom that has been going on for quite a while has not yet faced retribution. This, however, is no reason for complacency as it brings forth more malinvestment and more overconsumption, causes people to make more and more unwise decisions, and the Fed’s interest rate hiking is increasing the probability that something will go wrong at some point, that the boom may eventually derail, giving way to a bust.

Mind the “cluster of errors”

Experience tells us that business activity may move along smoothly for quite a while, while malinvestment, which brings production out of sync with market demand, is piling up. Then, all of a sudden, the economy is thrown into disarray: In not just one business sector, but in virtually all of them “clusters of business errors” surface. This is one of the main characteristic features of the real-life boom and bust cycle.

The monetary theory of the trade cycle put forward by the Austrian School of Economic does not only explain the “cluster of errors” phenomenon. It has much more to offer: It makes us understand the economic and ethical problems that come with the structure of our monetary system, in which central banks hold the money production monopoly, creating money out of thin air through bank credit expansion air.

Central bank action causes, for instance, chronic inflation – which benefits a few at the expense of many –; sets into motion boom and bust cycles; and increases the economies’ debt burden. The truth is that keeping the market interest rate artificially low – below the natural interest rate, that is – has become essential to keep the current boom going and prevent the debt pyramid from crashing down.

Sound economic theory conveys a sobering message: There is little reason to think that the Fed, in its “blind flight”, will succeed in upholding the boom indefinitely. Stock and housing markets may continue to go up in price for quite a while – who knows how long. But this does by no means refute the insight that the Fed creates, via its interest rate policy, booms which turn into busts at some point.

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White House spokeswoman Sarah Sanders just confirmed to reporters that President Trump “spoke with Rod Rosenstein a few minutes ago and they plan to meet next week,” adding that “they do not want to do anything to interfere with the hearing.”

Deputy Attorney General Rod J. Rosenstein had arrived at the White House on Thursday morning for a previously scheduled national security meeting.

Earlier in the day, Kellyanne Conway, counselor to the president, told “Fox & Friends”, that “if it needs to get pushed a few hours or to the next day, maybe it will…But they are both committed to speaking with each other and resolving this once and for all.”

Dow Jones Newswires reports that Rosenstein (for now) remains Deputy Attorney General overseeing Special Counsel Mueller’s Russia Probe.

No word yet from Axios on whether he verbally or any other way, resigned again.

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A new report released by Republicans in the House Committee on Oversight and Government Reform shows that no matter how much we hate the TSA, the employees of the agency may loathe it even more. The report describes the TSA as a “toxic” and “abysmal” workplace environment where the culture allows the misconduct of senior officials to go unpunished and where whistleblowers are faced with either retaliation or involuntarily reassignment to other locations.

The committee started its probe back in 2018, reportedly spurred by “credible allegations of wrongdoing”. The report claims that the host of problems that the committee found could be attributable to “low employee morale”.

The low morale is also visible in employee turnover: the TSA has “astronomical attrition rates” that, during the course of the report, were as high as 20% in certain segments. According to a government-wide job satisfaction survey, the TSA is ranked 336 out of 339 agencies and government components.

One senior official investigated in the report is accused of sexually harassing more than one worker. When the supervisor of one of the harassed employees, Mark Livingston, confronted the alleged harasser, he says he was threatened. Of the accused, Livingston said: “[H]e told me if I didn’t lie for him that I was going to be on his ‘S’ list. And then when I told him that I would not lie after he sexually harassed her, he told me that if I didn’t, him and the others couldn’t work with me.”

Reason cited ABC news in stating that the alleged harasser is Joseph Salvator, who is still employed by the agency. His title is “Deputy Director of Security Operations” and in 2016, he was also accused of harassment by Alyssa Bermudez, a former TSA worker, who the Washington Post wrote about in 2016.

Bermudez says she was driven to protest by the allegedly piggish behavior of men with whom she worked at the Transportation Security Administration headquarters across the street. These men ogled her, she claims, snickered about her being in a “harem” because she’s pretty, and retaliated against her when she complained, ultimately stripping her of employment five days before her probationary period ended.

“TSA has a saying: If you see something, say something,” Bermudez, 33, says one afternoon. “Little did I know that when I said something, I would be fighting the agency. It’s a very daunting task.”

In addition, the report found that a TSA employee who was arrested for DWI in 2015 tried to blame another TSA employee who previously drove her car before eventually confessing to the DWI. When the TSA’s office of professional responsibility recommended that she be fired, she was instead given a two-week suspension.

Another instance brought to light in the report was the case of a senior TSA official at a Midwestern airport who reportedly called Muslims “stupid rag heads” and also made “mooing” sounds at another worker who was pregnant. Employees reportedly complained numerous times but the official was still allowed to engage in inappropriate behavior for at least seven years, according to the report. 

The same worker was also found to have compared the size of a subordinate employee’s breasts to his daughter.

He admitted to making inappropriate remarks after failing a polygraph test, when he then tried to convince the polygraph examiner that he was being retaliated against for not giving the woman a promotion, the report states.

The report concludes that senior officials were able to get away with such misconduct because whistleblowers and “disfavored employees” were punished with involuntarily directed reassignments, meaning they would sometimes be moved hundreds of miles away to work at different locations. The TSA has since changed this reassignment policy, but not before it was reported to have paid out at least $1 million in settlements to affected workers in the past.

To make matters worse, the TSA then obstructed investigations into the misconduct and retaliation that the report talks about. When the office of special counsel from the Department of Homeland Security attempted to investigate many of these allegations, the TSA wouldn’t release relevant documents or produce documents that weren’t “very heavily redacted”.

And so the next time you’re being groped by a TSA agent at your local airport, just remember, it could always be worse: you could be working with them. 

You can read the full report’s findings here.

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Authored by Charles Hugh Smith via OfTwoMinds blog,

Want to understand the full scope of neofeudalism in America? Follow the money and the power and privilege it buys.

The repugnant reality of class privilege in America is captured by the phrase date rape: the violence of forced, non-consensual sex is abhorrent rape when committed by commoner criminals, but implicitly excusable date rape when committed by a member of America’s privileged elite.

Compare the effectiveness of excuses offered by privileged elites (we were both drinking, I didn’t hear her say no, etc.) when offered in court by less privileged males on trial for rape. The privileged elite is acquitted or given a wrist-slap while the commoner gets 20 years in prison.

This implicit privilege to non-consensual sex was known as Droit du Seigneur(right of the lord) in feudal Europe. While scholars debate whether the right of lords to have their way with female subjects was institutionalized, it doesn’t take much imagination to see the lack of recourse unmarried female serfs had if summoned to the lord’s lair.

The “right” to non-consensual sex is simply one facet of class privilege in America. One need only examine the histories of Harvey Weinstein and Bill Clinton to see how Droit du Seigneur works in America: from the perverse perspective of the privileged, the female “owes” the “lord” sex as “payment” for his interest in her, or (even more offensively, if that’s possible) the female is “fortunate” to have attracted the violent sexual gratification of the “lord.”

While the standard presumption of sexual assault / date-rape is that it’s all about sex, the much more disturbing reality is that it’s a crime of violence.Force and violence are also privileges of the New Aristocracy, both the direct violence of sexual assault and indirect violence threatened or manifested by the innumerable thugs that surround the New Aristocracy.

This right to violence and force manifests in all sorts of ways: the New Aristocracy constantly threatens and abuses underlings (the neofeudal equivalent of serfs), opponents with less power and other nations; violence and force are rights across the entire spectrum.

Another implicit right of the Privileged Few is a free pass / way out: caught shoplifting? Pressure is applied and charges are dropped. Drunk driving? Ditto, unless the incident is recorded and posted publicly.

The financial crimes of fraud and embezzlement never come back to cost the instigators. Their shell corporations pay a pro forma fine and the criminal New Aristocrats walk away, free to indulge their “right” to insider scams.

The New Aristocrats are also entitled to can’t-lose “opportunities” to reap millions from crony-capitalist / insider skims unavailable to commoners. These “opportunities” come from a multitude of sources: from elite-university classmates, well-connected fathers-in-law, senior partners in the firm, political fixers, Hollywood / entertainment execs, etc. that are exclusive to upper-caste insiders.

The existence of a New Aristocracy is now undeniable, and this is upsetting the commoners’ faith that America is a meritocracy. The sobering reality is some are more equal than others in America.

Who’s in the New Aristocracy? Start with this chart: the top .1%, and everyone they can buy, for example politicos.

The New Aristocrats feel entitled to remain untouchable, regardless of the enormity of their crimes. People are starting to wake up to neofeudal realities of life in America, but the sexual privileges of this class are only the tip of the iceberg. Want to understand the full scope of neofeudalism in America? Follow the money and the power and privilege it buys.

*  *  *

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In the aftermath of the Fed’s latest rate hike on Wednesday, which despite a hawkish dot plot was dovish in its removal of the “accommodative” language – a staple of the ZIRP period over the last decade – there was some immediate market confusion as to what the US dollar should do next, with a kneejerk reaction first lower, then higher, before eventually settling at unchanged.

It was not meant to be, however, and today the dollar has resumed its ascent higher, rising to the highest level since September 17, amid a sharply weaker Euro (due to the return of the Italian budget drama), Yen and even Yuan (overnight the PBOC failed to raise rates as it has traditionally done in the past alongside the Fed).

And while the market may have finally realized that there was little dovish in the Fed statement, especially after Powell explicitly said that “accommodation” remains, largely as a function of easy monetary conditions, and is starting to price in another 3 hikes in 2019 (after the December rate hike which now also appears guaranteed), a more notable move has been observed in various FX basis swaps, all of which are blowing out today, and are back to the widest levels of 2018.

It’s not just one pair, but an across the board move, which suggests that overnight there has been a sharp repricing of dollar liquidity.

What may be causing this? Two possible explanations have emerged: i) contrary to popular narrative, the Fed’s hike was not priced in and a rate differential-driven imbalance emerged, resetting basis swaps to reflect a continuation of the tighter US regime; ii) quarter end is approaching and coupled with the rate hike, financial institutions suddenly find themselves very short dollars.

Whatever the reason, the consequence is clear: there is an acute dollar shortage. Meanwhile, one consequence of this basis swap repricing is that USD-denominated treasuries are suddenly more expensive to hedged foreign buyers to the tune of roughly one rate hike. Which, all else equal, would mean that there is now that much less demand by international buyers for TSY paper on the long end. Could this shift in supply-demand mechanics impact the yield on long-dated paper? Judging by the leak wider in the 10Y yields which alongside the dollar were trading at session highs, all those traders who have been praying for at least some steepening in the curve may finally get their wish.

The second question is whether the latest Fed hike, and the sharp move in basis swaps, indicates that going forward every incremental rate hike will finally result in sharply tighter financial conditions.

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The most significant and dangerous risks stem from policymaking. And on top of the list is, of course, the protectionist crusade of the Trump administration to disrupt the post–World War II global economic order the US was instrumental in building.

The impact of President Trump’s escalating trade war with China is already being felt, auto experts warn, and not in a good way.

Retaliation by China to tariffs already in place have made some American auto exports uncompetitive, and could collapse US auto sales by 2 million vehicles per year, resulting in the loss of up to 715,000 American jobs and a devastating hit of as much as $62 billion to the US GDP.

As per NBC News, the Center for Automotive Research (CAR) warns that the auto industry could receive a devastating blow if Section 232 declares foreign-made cars and car parts a threat to national security.

Kristin Dziczek, a vice president and senior economist at CAR, said if Section 232 is enacted, it could trigger a “downward cycle” in the auto industry – not seen since the last great recession.

The latest research from CAR demonstrates how the trade war is disrupting the complex web of international supply chains, the repair of which will be expensive, and the jump in automobile costs could damage global and US markets. The uncertainty surrounding the trade war is also seen as extremely disruptive to business planning and hence investment plans.

The indirect effects on business investment may damage the auto industry on a medium-term basis.

Already announced tariffs on imported aluminum and steel have added about $240 to the cost of producing a new automobile in the US, said Peter Nagle, a senior economist at IHS Markit. The first round of tariffs with China has also increased the cost of foreign parts used on American assembly lines. Nagle added that the series of trade tariffs would “exacerbate” the difficulties the auto industry currently faces as it struggles to thwart the first downturn in sales since the last recession.

President Trump activating tariffs using Section 232 rules would be disastrous, he warned.

Nagel estimated consumers would be “looking at price increases of $1,300 for a typical mass-market product, up to $5,800 for a luxury vehicle.” He said those increases would not be limited to just imported vehicles. Toyota, for example, has forecast the price of a US-manufactured Camry would jump by about $1,600.

The report from CAR and IHS confirms that new auto sales would plunge by around 2 million vehicles annually, to 16.5 million per year from 2019 to 2025. In other words, America’s auto industry is on the cusp of a nasty recession. Caught in the crossfire, some medium-sized and smaller parts suppliers could be forced into bankruptcy, unable to afford the expenses of relocating their operations back to the US. That could result in disruptions at assembly plants, said Nagle.

Auto experts said that China is the leading supplier to the automotive aftermarket, with parts such as tires, wheels, filters, and wiper blades.

The consumer who is currently experiencing negative real wage growth will be shocked when parts for their vehicles become much more expensive.

And when it comes to auto exports, the US is already starting to feel the shock. Before the Trump administration enacted the first round of tariffs on Chinese goods, Beijing announced plans to reduce its duties on imported vehicles from 25 percent to 15 percent. Chinese imports of US autos are now subjected to 40 percent tariffs, making them even less competitive with auto imports from Europe and or Japan.

The escalating trade war with China “will further harm the U.S. auto industry and American workers and consumers,” said John Bozzella, CEO of the Association of Global Automakers. “Retaliation by China to tariffs already in place has made U.S. auto exports uncompetitive and will eliminate our bilateral auto trade surplus.”

There are no winners in trade wars, even if the ultimate goal is a noble one. The immediate impact is likely to ripple through the entire US auto industry, experts warn, even at the dealership level. The CAR study estimates as many as 117,000 employees at the country’s 17,000 new car dealerships could lose their jobs.

Lessons from past trade wars signal that the US auto industry is in for a walloping.

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Submitted by The Macro Tourist

 

The other day I was flipping through my database of research, saved quotes and most importantly – amusing pictures, and I stumbled upon this gem:

I love this quote because it clearly shows the absurd valuation of SUN Microsystems at the height of the “DotCon” bubble. For those too young to remember, there was a time that trading desks (but more importantly – the rest of the internet server ecosystem) was chocked full of beasts like these.

These computers were the cat’s-meow in serious computing power. Windows PCs were toys compared to these behemoths. I think back with amusement to the time in 1999 when I charged into my senior boss’s office after being turned down by the IT department for a new $40,000 Ultra-80 because I “traded too much already.” Good times.

Anyways, back then, SUN Microsystems was going to rule the world, and Scott McNealy’s company was priced for perfection. Actually I take that back. It was priced so far beyond perfection that it was head-shakingly-stupid.

I posted Scott’s tweet because I wanted to remind readers at how absurd valuations were way back then.

Well, it turns out I lifted this quote from super-nice-guy Jesse Felder’s blog and he was kind enough to send me his post – “What Were You Thinking?.

Ironically, in the context of the entire article, instead of making my point about the relative overvaluation of 2000 versus today, Jesse had some great stats regarding the number of modern-day-SUN-Microsystems that are trading for more than 10-times revenues.

Specifically Jesse, along with the AquirersMultiple.com created this terrific chart that plotted the total number of these over-priced-monstrosities.

In chatting with Jesse, we realized it would be great to have some up to date data for this chart, so we set about creating a Bloomberg query to recreate the data and get the latest values.

All I can say is Whoa!

I had no idea.

It’s not 2000-level-of-stupidness, but there can be no denying there is certainly no shortage of 2018-style-SUN-valuation stories out there today.

It’s not what I was expecting, so I have no profound observations, but I thought it would be a good stat to share. I know my bearish brethren (like my pal Jesse Felder) will use this as further ammunition to argue the market is priced for perfection and that this is a disaster in the making, but in my mind, it still doesn’t feel anywhere near as frothy as 2000.

Yet, I need to acknowledge that numbers don’t lie, and according to this metric, we are only a few ticks away from equaling “DotCon” stupidity. Someone phone up Scott McNealy and ask him what he thinks…

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Crypto prices surged on Wednesday after Beijing-based Bitmain published its long awaited IPO prospectus, publicly disclosing for the first time just how enormously profitable the purveyor of crypto mining rigs and chips has become since it was founded in 2013 by crypto billionaires Jihan Wu and Micree Zhan. The company, which controls roughly 85% of the market for crypto mining rigs and chips, has seen its profits expand from just $12.3 million at the end of 2015 to more than $700 million during the first six months of 2018 alone. Importantly, its revenues and profits have continued to expand, even as the market for cryptocurrencies has cooled since the start of the year.

According to MarketWatch, the company’s profits increased by more than 800% from the prior year to $700 million. It revenues, meanwhile, expanded ten fold to $2.8 billion.

Bitmain was founded in 2013 by Wu and Zhan just as bitcoin was entering the mainstream. The price of a single coin peaked at around $2,000 in November of that year before plunging to around $200 following the spectacular collapse of Mt. Gox in February 2014. At the time, Gox was the largest crypto exchange in the world.

Speculation about an IPO has been metastasizing for years, but many believed that the secretive company would shelve its plans following the $600 billion drop in aggregate crypto valuations.

According to its prospectus, Bitmain’s business model revolves around the design of ASIC chips for both crypto mining and AI purposes. According to a consulting firm cited in the prospectus, Bitmain is one of the largest ASIC-based crypto mining company. Still, the success of its IPO is far from certain. As Bloomberg points out, two of the company’s biggest rivals, Canaan Inc. and Ebang International Holdings Inc., are also pursuing IPOs. And some analysts cited by BBG fear that the company could lose its competitive edge. If it follows through with the IPO (which is a big if considering Hong Kong’s benchmark index has fallen 16% from its January highs), analysts will view the offering as the first big test of investor appetite for crypto firms working on an industrial scale.

But like we said – that’s still a big if.

Read the prospectus below:

 

HIP1809026e Genesis AP by Zerohedge on Scribd

 

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Authored by Jim Quinn via The Burning Platform,

“Facts are threatening to those invested in fraud.” ― DaShanne Stokes

Insiders at US companies unloaded $5.7 billion of their company stock this month, the highest in any September over the past decade, according to TrimTabs Investment Research.  Insiders, which include corporate officers and directors, sold over $10 billion of their company stock in August, also at the fastest pace in 10 years. With the stock market at all time highs and valuations, based on all historically accurate measures, off the charts, it makes sense for knowledgeable insiders to sell high. Of course, if they were expecting the profits of their companies to soar because Trump says we have the best economy in history, why would they be selling?

When these Ivy League educated superstar CEOs go on CNBC, Bloomberg, and Fox to tout their companies and field softball questions from bimbos and boobs disguised as journalists, they proclaim a glorious future and declare their stocks to be undervalued and a screaming bargain. Buy, buy, buy. They talk the talk, but don’t walk the walk. They personally do the opposite with their own funds versus what they do with shareholder funds. Ethics among corporate executives has never been one of the required traits. Lying with a straight face is the key to being a successful CEO in today’s warped amoral world.

While dumping stock like there’s no tomorrow these very same CEOs of the largest US public companies have authorized a breathtaking $827.4 billion of stock buybacks in 2018 — already a record for any year, according to TrimTabs. Annualized, these CEOs will will buyback in excess of $1.2 TRILLION when stocks are at all-time highs. In contrast, in 2009 when they could have bought their stocks at 10 year lows, they bought back less than $100 billion. Buy high and sell low. How can they go wrong?

These feckless financiers know exactly what they are doing. Corporate executive compensation is mostly stock based, so they have tremendous incentive to boost Earnings Per Share by reducing the number of shares. That is so much easier than investing corporate cash in workers and new facilities to increase profits over the long-term. All that matters to these greedy scumbags is beating next quarter’s earning estimate to boost the stock price and enrich themselves. The stock price is all that matters.

When you hear corporate balance sheets have the most cash ever, take it with a grain of salt. Corporate balance sheets have the most debt ever. The Fed’s nine years of 0% interest rates lured these greedy bastard CEOs into loading up with debt to buy back their shares. And with Trump cutting corporate tax rates from 35% to 21%, the excess profits which were supposedly going to result in massive hiring and massive new capital investment, have mostly been utilized to buy back stock, which adds no value to the nation or the economy. Of course, it probably benefits the most expensive restaurants in NYC and real estate agents in the Hamptons, but doesn’t do much for the deplorables in flyover country.

The fact is these corporate executives know it’s late in the game and they are personally cashing out their chips, while gambling with shareholder chips, because there is no personal downside for these slimy bastards. When the crash “suddenly” occurs they’ll plead ignorance. How could they have known? They’ll be lying through their teeth as they beg for another taxpayer handout and massive helpings of Fed liquidity. The song remains the same. And the music is still playing. You can do as they say, or do as they do. Your choice.

“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” – Chuck Prince – Citicorp CEO – 2007

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