Category: zerohedge

70 Is The New 90: The Psychological Impact Of Higher Oil Prices

Authored by Lance Roberts via RealInvestmentAdvice.com,

Today, more now than ever, we are barraged with economic data of which most is lost on the average person. One data point, however, that everyone understands is the price of oil as it directly impacts the average American where it counts the most, in the “wallet.”

The price of oil is plastered just about everywhere from a litany of daily articles to Government policies, the Internet and, ultimately, at every gas station you drive by. Oil prices affect us every day in more ways than just what we are paying for a gallon of gasoline. It affects the cost of just about everything we wear, consume, or utilize, from hard products to services due to rising input costs, fuel surcharges, etc.

This is one reason when the government reports the consumer price index (CPI), and then strips out food and energy to report the core inflation index, it almost always elicits a negative response. Back in 2011, then Fed President William Dudley got a street-corner education in the cost of living when he tried to sell the Fed’s monetary policy to “average Americans.” Dudley tried to explain that while some commodity prices are rising, other prices are falling.

“Today you can buy an iPad2 that costs the same as an iPad 1 that is twice as powerful, you have to look at the prices of all things.”  

What he is addressing here is called “hedonics”. Antony P. Mueller wrote a great piece on the “Illusions Of Hedonics” stating that:

“The Bureau of Labor Statistics (BLS) applies “hedonics” when calculating the price indices and for the computation of the real gross domestic product and of productivity.  The idea behind hedonics is to incorporate quality changes into prices. This way, a product may be on the market at a higher price, but when the product qualities have augmented more than the price in the eyes of the BLS, it will calculate that the price of this product has actually fallen.

Applying the hedonic technique to a host of goods and services means that even when prices were generally rising, but product improvement are deemed to be larger than the price increases, the calculated inflation rate will fall.  With a lower inflation rate, the transformation of nominal gross domestic product (GDP) into real GDP will render a higher result.  Likewise, given a constant labor input, productivity will increase. Hedonics opens the door to producing magical results: a lower inflation rate with generally rising prices, a higher growth rate although the economy may be weaker, and a higher productivity number, although productivity would have been declining without the hedonic imputations.”

It is important to understand this concept as it is why Bill Dudley was immediately lambasted by reporters in the audience following his iPad statement with;

“I can’t eat an iPad” and “When was the last time YOU went to a grocery store?”

The reason the “average American” can’t grasp things like “hedonic” adjustments to the inflation index, or even the idea of stripping out volatile food and energy components of CPI to get a core index, is because they live in a world where their daily lives are affixed to the disposable personal income they bring home. The average American gets a paycheck and then must pay not only for rent, utilities, and health insurance, but also food and gas. In their mind why should you exclude the two items that are currently consuming roughly one-fifth of their wages and salaries?

While there has been a lot of pandering from the talking heads about rising oil prices, but what is more important to note is how these price increases in oil “feel” to the average American. The thing that the Fed and most economists miss, in my opinion, is that the average “American” is dealing with a lot of rising cost pressures that aren’t necessarily included in the inflation calculation. Furthermore, while prices of things like oil, commodities, college costs, insurance, healthcare, etc. have been rising; disposable personal incomes have grown at a much slower rates as shown below.

But even that measure of disposable personal incomes in deceiving because the top 20% of wage earners overly skew the data versus the bottom 80%. For the bottom 80% of income earners, disposable incomes are actually more disappointing.

Therefore, even small price increases have a more dramatic effect on the limited amount of disposable personal incomes available to the consumers in the bottom 80%. For many individuals today, the effects of the “financial crisis” have yet to fade as they are still unable to meet the required costs for their standard of living.

United Way has done a study on a group of Americans they call ALICE: Asset Limited, Income Constrained, Employed. The study found that this group does not make the money needed “to survive in the modern economy.” Between families living below the poverty line due to unemployment or disability, and ALICE, the study discovered that 43% of Americans were struggling to cover basic necessities like rent and food.

But even for those who are making ends meet, they aren’t saving either. Northwestern Mutual’s 2018 Planning & Progress Study, which surveyed 2,003 adults, found that 21% of Americans have nothing saved at all for their golden years, and a third of Americans have less than $5,000. To put that into perspective, it means that 31% of U.S. adults could last only a few months on their savings if they had to retire tomorrow.

That data supports the chart below which shows the gap between the inflation-adjusted median standard-of-living versus the disposable income and credit required to pay for it. Beginning in 2007, even after all the disposable income had been spent and credit cards maxed out, there is a growing deficit (currently over $7000) to support the living standard. This is why more individuals than ever are working multiple jobs, not retiring, or just curtailing spending.

Only So Much To Go Around

Of course, when the consumer is under pressure at home, they eventually must reduce consumption. The chart below shows inflation-adjusted oil prices as compared to inflation-adjusted disposable personal income and oil prices. Since oil prices are a direct input cost to so many different aspects of the daily lives of the average “American,” price spikes in oil have a very real impact on the way that consumers “feel” about their ability to make ends meet.

What we find is that when oil prices spike there is an immediate shock to the disposable personal incomes for individuals. For example, during the Iran crisis oil peaked at $109 per barrel, but for consumers it “felt” like $242 a barrel. Then at the peak of the oil market in 2008, when oil traded for $138 a barrel, it felt much closer to $258 as real disposable incomes had declined. Today, as oil trades around $71 a barrel, consumers “feel” like it is closer to $90.

This psychological “cost pressure” obviously impacts the way that consumers behave with their money. While the government tries to massage the differences in inflationary pressures to suppress adjustments to Social Security and Medicare; the average American is rapidly coming to grips with reality.

At some point the process of kicking the can down the road will meet its inevitable conclusion in this game of chicken as consumers continue to leverage themselves to extremes and neglect to save in order to support their standard of living. The evidence is clear that Keynesian economics is a failure, not just recently, but over the last 40-years as increased monetary supply, and lower interest rates, have led to declining wages, savings and the dollar which in turn induced malinvestment.

The declines in income, which have been covered up by increased household leverage as shown above, leaves little true disposable income with which to absorb higher costs from health care, energy, rent and food costs.

At some point, the Fed may well witness another type of deflation, but this time it won’t be just falling prices. Rather, it will be from the masses struggling to maintain a shrinking standard of living as the change shrinks from “Let Them Eat iPads” to just “Eat This!”

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New Documentary Shows A Devastated Ben Rhodes Trying To Process Hillary’s Loss; Then Came The Remixes

A video clip from a new HBO documentary The Final Year has been making its way around the internet, showing a completely devastated Ben Rhodes beside himself as he tried to “process” Hillary Clinton’s historic loss in the 2016 U.S. election.

Rhodes, Obama’s former deputy national security advisor for strategic communications, dons a thousand-yard-stare. “I came outside just to process all this,” Rhodes says, beside himself. “I can’t even…ah, uh…I can’t…I mean I, I, I, I can’t, I can’t, I can’t, I can’t put it into words, I don’t know what the words are.” 

And then came the remixes… 

Rhodes, like so many others, were convinced Hillary was going to win and that it was #HerTurn. Alas, despite wildly inaccurate polls and an overconfident Clinton, her victory was not to be. 

Of course, let us all remember that it wasn’t her fault – nothing ever is, and that had a laundry list of other people not interfered, she would have won the election. 

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The Vatican’s Latest Anti-Capitalist Paper Calls for More Government Regulation

Authored by Ryan McMaken via The Mises Institute,

In the classic 1966 film, A Man for All Seasons, the family of Thomas More – chancellor of England and eventual Catholic saint –counsels Thomas to arrest power-mad Richard Rich because they suspect (correctly) Rich will betray Thomas and because “that man’s bad.” To this, More replies “there’s no law against that.” Another family member retorts: “yes there is – God law.” More answers with: “then God can arrest him.”

Robert Bolt, the learned atheist who penned A Man for All Seasons knew enough about Catholic philosophy to communicate important Catholic concepts with this scene.

Among these is the fact that, in the Catholic view, as voiced by Bolt’s Thomas More, not every sin, moral defect, or character flaw justifies intervention by the state. The fact that Richard Rich was a betrayer and liar was not sufficient, More understood, to apply More’s police powers as Chancellor of England. After all, for centuries, many Church leaders had long agreed that applying state coercion to cure every social ill was often a cure that was worse than the disease. As Thomas Aquinas notes: “Accordingly in human government also, those who are in authority rightly tolerate certain evils, lest certain goods be lost, or certain evils be incurred.”

Moreover in response to the retort that “God’s law” demands action, Aquinas notes that even God himself is tolerant of moral defects:

Human government is derived from the Divine government, and should imitate it. Now although God is all-powerful and supremely good, nevertheless He allows certain evils to take place in the universe, which He might prevent, lest, without them, greater goods might be forfeited, or greater evils ensue.

So, when More jokes that “God can arrest” Rich if He sees fit, More is giving voice to an already established strain of thought in Catholic thinking.

Moreover, Aquinas’s views toward the state are relatively benign compared to others — Augustine, for instance — who viewed the state as a necessary but violent evil to be tolerated only because it might restrain the excesses of even worse criminals.

The Modern Preference for State Action on Everything

Needless to say, these ideas of a barely-tolerated and restrained state are long gone in the current crop of modern European bishops who rarely meet a new government program they don’t like.

The latest case in point on this interventionist enthusiasm is this month’s anti-market missive titled “Oeconomicae et pecuniariae quaestiones“ (“Considerations for an ethical discernment regarding some aspects of the present economic-financial system”).

Although often attributed in the media to the current Pope, this document really issues forth from the bowels of the Vatican bureaucracy and reflects not merely the Pope’s thinking but a more general attitude among the European intellectual classes who compose such documents which are read by few, and quickly forgotten.

Nevertheless, the document is worth noting because it highlights the ongoing current trend during this Pontificate toward calling for state action under the cover of a discussion that is ostensibly only about ethical and moral issues.

Kept strictly to the moral and ethical realm of course, such a document would be purely within the competence of bishops who might raise a number of questions as to the moral legitimacy of an individual’s actions within the current economic and financial system. 

Nowadays, however, beneath this surface bubbles a constant assumption that coercive action by states is the proper way of dealing with moral shortcomings among individuals.

“Oeconomicae et pecuniariae” contains numerous statements that betray this preference for state action. For instance, the document calls for state regulation of credit instruments, concluding there is a

need for a public regulation, and an appraisal super partes of the work of the rating agencies of credit, becomes all the more urgent, with legal instruments that make it possible to sanction the distorted actions and to prevent the creation of a dangerous oligopoly on the part of a few.

And also:

an imposition of the taxes, when it is equal, performs a fundamental function of equalization and redistribution of the wealth not only in favor of those who need appropriate subsidies, but it also supports the investments and the growth of the actual economy.

And then there is:

it was calculated that a minimum tax on the transactions accomplished offshorewould be sufficient to resolve a large part of the problem of hunger in the world: why can’t we undertake courageously the way of a similar initiative?

At nearly 10,000 words, this is a long and detailed document which describes at length any number of perceived problems in the current economic system.

At many points the document comes to conclusions not supported by the economic data, of course, and one wonders if the world really needs a mid-level Vatican bureaucrat’s take on credit-default swaps, as is given in the text. Perhaps most tellingly, this document, which purports to offer solutions to economic cycles, makes no mention of central banks. 

Given the flawed economic analysis — issued by writers in a role not exactly imbued with qualification to comment on such matters — it’s not even clear that the proposed legal sanctions would even solve the stated problems. Nevertheless, it is clear that the authors are attempting to cure a problem of greed through robust state action. They advocate for a number of new taxes and regulations to be implemented within the financial sector by states and their agents — all in the name of expunging vices that were once considered incurable by state intervention. 

Ultimately, the authors — as is now common practice — fall back on a concept known as the “universal destination of goods” which correctly — from the Catholic perspective — draws attention to the fact that charity dictates that one always be open to generously and voluntarily sharing one’s possessions with the poor. Ambrose of Milan summed it up in the 4th century:

You are not making a gift of what is yours to the poor man, but you are giving him back what is his. You have been appropriating things that are meant to be for the common use of everyone. The earth belongs to everyone, not to the rich.1

But how shall this be accomplished? Shall the state be employed to coercively wrest wealth from the hands of “the rich” through threats of violence in order to redistribute it? That is, after all, what taxation is. If so, how can this be called charity, since it is involuntary?

Apparently, in the minds of many modern bishops, this is, in fact, a perfectly legitimate function of the state — and it can then in the minds of advocates be termed “charity” or a matter of “the common good.”

An earlier view, however, regarded charity quite differently.

Augustine, in his letter to a wealthy woman named Proba, admonishes her to be charitable:

Many holy men and women, using every precaution against those pleasures in which she that lives, cleaving to them, and dwelling in them as her heart’s delight, is dead while she lives, have cast from them that which is as it were the mother of pleasures, by distributing theirwealth among the poor, and so have stored it in the safer keeping of the treasury of heaven.

But, Augustine notes, this act of redistribution must be up to the wealthy person herself, since:

If you are hindered from doing this by some consideration of duty to your family, you know yourself what account you can give to God of your use of riches. For no one knows what passes within a man, but the spirit of the man which is in him.” We ought not to judge anything  before the time until the Lord come who both will bring to light the hidden things of darkness, and will make manifest the counsels of the hearts, and then shall every man have praise of God.

In this view, not even a bishop is in a position to determine the extent to which a wealthy person needs his or her possessions. How much more ridiculous would it be, then, to claim that civil authorities ought to be in the position of redistributing wealth to “equalize” incomes and punish those who are insufficiently “charitable?”

Note that Augustine — unlike his modern episcopal brethren — does not wax philosophical about the 5th-century version of credit-default swaps, or lecture Proba on whether or not she should be employing tax shelters.

Yes, it’s true that the economies of the late Roman Empire were far less sophisticated that those of today. But had Augustine taken his cues from a 21st century Vatican bureaucrat, he surely could have come up with a variety of ways to “suggest” specific regulations and taxes on the part of local civil authorities.

Fortunately, however, Augustine busies himself to matters more appropriate to a bishop, and fails to issue a discourse on the economic science of offshore tax havens or the need for an international bureaucracy to manage carbon emissions.

In the modern world, one could imagine that scene with Thomas More playing out quite differently. “Arrest that man” would rarely be met with a retort of “there’s no law against that.” Instead, we’d hear endless demands for states to arrest, reform, and impose virtue on hapless citizens who happen to invest in the “wrong” investment instruments, or purchase the “wrong” goods. If it is “God’s law” that the wealthy give freely to the poor, then why rely merely on admonition and moral suasion? Why not force on them an economic system where “charity” is mandatory under penalty of a lengthy prison sentence? Indeed, when we have such a powerful state at our fingertips, why tolerate any deviation at all?

Sure, Aquinas might have insisted that God tolerates countless shortcomings and vices in people in order to avoid other evils — such as those of an unrestrained state. But Aquinas didn’t have a modern bureaucratic state at his disposal. We do. And surely, we know better.

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Trump Expecting Letter From Kim Jong Un After Pompeo Meets With Top North Korean Officials

President Trump is expecting a Friday delegation from North Korea to deliver a letter from leader Kim Jong Un, two days after Kim’s right-hand man, Kim Yong-chol, met with US Secretary of State Mike Pompeo for two days of discussions as the two nations attempt to salvage their planned nuclear summit. 

Yong-chol was blacklisted from visiting the United States until recently.

In comments to reporters Thursday before boarding Air Force One for a trip to meet with families affected by a school shooting earlier this month, President Trump said that talks between US and North Korean diplomats were going “very well.”

“They’re going to be coming down to Washington on Friday. And a letter is going to be delivered to me from Kim Jong Un,” he said.

Trump said that while he’s not sure if an agreement is taking shape, the negotiations “are in good hands” after the he pulled out of talks amid heightened rhetoric from Kim’s government over their nuclear ambitions and comments made about Vice President Mike Pence. 

Hours later, Trump indicated he was still open to meeting with Kim – penning a letter to the North Korean leader which reads in part: 

I was very much looking forward to being there with you. Sadly, based on the tremendous anger and open hostility displayed in your most recent statement, I feel it is inappropriate, at this time, to have this long-planned meeting. Therefore, please let this letter serve to represent that the Singapore summit, for the good of both parties, but to the detriment of the world, will not take place. You talk about your nuclear capabilities, but ours are so massive and powerful that I pray to God they will never have to be used.

I felt a wonderful dialogue was building up between you and me, and ultimately, it is only that dialogue that matters. Some day, I look very much forward to meeting you. In the meantime, I want to thank you for the release of the hostages who are now home with their families. That was a beautiful gesture and was very much appreciated.

Meanwhile a senior State Department official tells the BBC that Pompeo and Kim Yong-chol have been trying to get to know each other better after initial meetings in Pyongyang earlier in the year – however they needed to close the gap in understanding between the extent and pace of North Korean nuclear disarmament before the summit with Trump could proceed. 

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Rickards: The Threat Of Contagion “Is Now More Dangerous Than Ever”

Authored by James Rickards via The Daily Reckoning,

Each crisis is bigger than the one before. In complex dynamic systems such as capital markets, risk is an exponential function of system scale. Increasing market scale correlates with exponentially larger market collapses.

This means that the larger size of the system implies a future global liquidity crisis and market panic far larger than the Panic of 2008.

Today, systemic risk is more dangerous than ever.

Too-big-to-fail banks are bigger than ever, have a larger percentage of the total assets of the banking system and have much larger derivatives books.

To understand the risk of contagion, you can think of the marlin in Hemingway’s Old Man and the Sea. The marlin started out as a prize catch lashed to the side of the fisherman Santiago’s boat.

But, once there was blood in the water, every shark within miles descended on the marlin and devoured it. By the time Santiago got to shore, there was nothing left of the marlin but the bill, the tail and some bones.

An even greater danger for markets is when these two kinds of contagion converge. This happens when market losses spillover into broader markets, then those losses give rise to systematic trading against a particular instrument or hedge fund.

When the targeted instrument or fund is driven under, credit losses spread to a wider group of fund counterparts who then fall under suspicion themselves. Soon a market-wide liquidity panic emerges in which, “everybody wants his money back.”

This is exactly what happened during the Russia-Long Term Capital Management (LTCM) crisis in 1998. The month of August 1998 was a liquidity crisis involving broad classes of instruments. But, the month of September was systematically aimed at LTCM.

I was right in the middle of that crash. It was an international monetary crisis that started in Thailand in June of 1997, spread to Indonesia and Korea, and then finally Russia by August of ’98. It was exactly like dominoes falling.

LTCM wasn’t a country, although it was a hedge fund big as a country in terms of its financial footings.

I was the general counsel of that firm. I negotiated that bailout.  The importance of that role is that I had a front-row seat.

I’m in the conference room, in the deal room, at a big New York law firm. There were hundreds of lawyers. There were 14 banks in the LTCM bailout fund. There were 19 other banks in a one billion dollar unsecured credit facility. Included were Treasury officials, Federal Reserve officials, other government officials, Long-Term Capital, our partners.

It was a thundering herd of lawyers, but I was on point for one side of the deal and had to coordinate all that.

It was a 4 billion dollar all-cash deal, which we put together in 72 hours with no due diligence. Anyone who’s raised money for his or her company, or done deals can think about that and imagine how difficult it would be to get a group of banks to write you a check for 4 billion dollars in 3 days.

Systematic pressure on LTCM persisted until the fund was almost broke. As Wall Street attacked the fund, they missed the fact that they were the creditors of the fund. By breaking LTCM, they were breaking themselves. That’s when the Fed intervened and forced Wall Street to bail out the fund.

Those involved can say they bailed out Long-Term capital. But if Long-Term Capital had failed, and it was on the way to failure, 1.3 trillion dollars of derivatives would’ve been flipped back to Wall Street.

In reality, Wall Street bailed out itself.

The panic of 2008 was an even more extreme version of 1998. We were days, if not hours, from the sequential collapse of every major bank in the world. Of course, the 2008 panic had its roots in sub-prime mortgages, but quickly spread to debt obligations of all kinds especially money market funds and European bank commercial paper.

Think of the dominoes again. What had happened there? You had a banking crisis.

Except in 2008, Wall Street did not bail out a hedge fund; instead the central banks bailed out Wall Street.

And as I mentioned earlier, today systemic risk is more dangerous than ever. Each crisis is bigger than the one before.Too-big-to-fail banks are bigger than ever, have a larger percentage of the total assets of the banking system, and have much larger derivatives books.

The next crisis could well begin in the private bank debt market. The specific culprit is a kind of debt called “contingent convertible” debt or CoCos.

These bonds start out like ordinary debt, but a bank in distress could convert them to equity to improve its capital ratios. The problem is that bondholders know this and start dumping the bonds before the bank can pull the trigger on the conversion clause. This can cause a run on the bank and trigger cross default clauses in other bonds. Far from adding safety to bank capital structures, CoCos can make banks more unstable by igniting panics.

This is just one more example of capital market complexity and it signals the fact that the next crisis will be worse than the last.

Also. new automated trading algorithms like high-frequency trading techniques used in stock markets could add to liquidity in normal times, but the liquidity could disappear instantly in times of market stress. And when the catalyst is triggered and panic commences, impersonal dynamics take on a life of their own.

These kinds of sudden, unexpected crashes that seems to emerge from nowhere are entirely consistent with the predictions of complexity theory.

In complex dynamic systems such as capital markets, risk is an exponential function of system scale. Increasing market scale correlates with exponentially larger market collapses. This means that the larger size of the system implies a future global liquidity crisis and market panic far larger than the Panic of 2008.

The ability of central banks to deal with a new crisis is highly constrained by low interest rates and bloated balance sheets, which despite some movement in that direction, still have not been normalized since the last crisis.

For now, it’s not clear which way things will break next. Markets are still in a precarious position and volatility has returned. Regardless of which direction markets go from here, yesterday’s threat of contagion is a scary reminder of the hidden linkages in modern capital markets.

Next time we may not be so lucky.

We’ve already had a correction this year. But the next correction could turn into a 30% or 40% crash.

The conditions are in place. But you can’t wait for the shock to occur because by then it will be too late. You won’t be able to get your money out of the market in time because it’ll be a mad rush to the exits.

The solution for investors is to have some assets outside the traditional markets and outside the banking system.

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Starbucks Quietly Walks Back “Homeless Shelter” Bathroom Policy In New “Color Brave” Employee Manual

Starbucks has quietly walked back their “all inclusive” bathroom policy, perhaps after realizing that their employees and customers alike weren’t responding well to the prospect of vagrants using their stores as a homeless shelter.

As part of their new “Third Place Policy” which the company shuttered 8,000 stores to pound into employees heads on Tuesday, Starbucks says “We want our stores to be the third place, a warm and welcoming environment where customers can gather and connect. Any customer is welcome to use Starbucks spaces, including our restrooms, cafes and patios, regardless of whether they make a purchase.”

Ok – so far so good for homeless people looking to catch some free air conditioning this summer or simply drop that massive cabbage dump that’s been brewing. 

But wait – what’s this? Starbucks’ new Third Place Policy also reads: 

When using a Starbucks space, we respectfully request that customers behave in a manner that maintains a warm and welcoming environment by:

Using spaces as intended

Being considerate of others

Communicating with respect

Acting responsibly

Uh oh, this isn’t looking good for those looking to take a sink-bath while breathing in freshly brewed coffee…

On occasion, the circumstances of a customer’s disruptive behavior may make it necessary to prohibit that customer from returning to our stores.

Excuse us?

In these situations, Starbucks partners should follow “Requesting A Customer Restriction” procedure for U.S. company-operated stores.

Starbucks Executive Vice President Rossann Williams gave an example of how an employee should approach a “disruptive” customer using foul language:

“You are in our store every day, and we love that this is your third place, but from one human to another human, the language that you are using is making other customers uncomfortable. So either you have to change your behavior, and stay and be a part of our third place, or I’m going to have to ask you to leave, and you can come back at a later time, when you feel like you can be a part of our third place. And in fact if you want to go have a seat, I’ll bring you over a cup of water, just to make sure that it’s a great rest of your day.”

Not so inclusive now, are we Starbucks? Sure, the marginally diverse group of well dressed customers pictured below might be able to enjoy using the facilities at Starbucks, but what about the differently housed? What constitutes a “disruption?”

The new 68-page employee guidebook and over a dozen videos shown during the Tuesday training session included racial bias training, with much of the coffee seller’s new ethos focused on teaching employees to be “color brave” – reminding everyone that institutional racism permeates society.

“Here’s my belief: Growing up, there was a term called ‘color blind,’ which described a learning behavior of pretending not to notice race — that doesn’t even make sense,” said CEO Kevin Johnson. “So today we are starting a new journey, talking about race directly — what my friend and Starbucks board member Mellody Hobson calls being ‘color brave.’”

The training also focuses on prejudices in public spaces, complete with a documentary which focuses on the history of prejudice. Employees were given little notebooks to record their “private thoughts,” and were instructed to keep a diary about how they feel about such things as “what makes me, me? And you, you?” and “In your life, where do you feel a sense of belonging?” 

All this because one manager at a Philadelphia Starbucks called the cops on two black men, Rashon Nelson and Donte Robinson, who were waiting for a friend without having ordered anything. 

The manager was fired, and Starbucks then committed to this “homeless shelter” outreach in a desperate act of damage control… which they’ve now just walked back. 

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“Prepare For Action” – Cryptic Emergency Alert Sparks Panic For Oregon Residents

Yet another glitch in the government’s emergency alert systems sent out a cryptic warning to residents living in Salem, Oregon, and surrounding areas.

As SHTFplan.com’s Mac Slavo details, the head of Oregon’s emergency management agency has since apologized, but that was too little too late after many were left in a state of panic.

A cryptic emergency alert was forced out to cellphones in and around Oregon’s capital city, displaying the words “Civil Emergency” and “Prepare for Action,” but carrying little other information. 

Andrew Phelps said late Tuesday that a technical glitch had cut off the crucial information in the alert. There were elevated levels of a natural toxin in a local reservoir. Children and people with compromised immune systems have been told not to drink tap water in the Salem, Oregon, area after an algae bloom caused the spike.

“The integrated public alert warning system inadvertently defaulted to a generic message,” Phelps said in a video posted on the social media by the Office of Emergency Management. 

“I apologize for the confusion and the anxiety this incomplete message has caused.”

Wednesday morning Cole Mahaffey, a Salem resident, set down a case of bottled water he was carrying down the sidewalk and described the uneasy feeling of seeing the first alert arrive on his phone, with an ominous warning but no other information.

“It almost made me not want to go outside,” Mahaffey said, adding that the alert caught him at the gym and that he had interrupted his exercise routine to ask the staff at the front desk if they knew what it was about.

“I didn’t know if there was something going on in the area, or if there was a shooter, you just had no way of knowing.”

Following a false alarm sent out by Hawaii officials in January warning of an incoming ballistic missile, the incident marked a high-profile glitch in government authorities’ use of emergency alert systems. Phelps said Oregon’s cryptic message had also been broadcast via local television stations, likely heightening the panic.

The government’s emergency alert systems are capable of pushing messages directly to every cellphone in a given area even if users haven’t subscribed or downloaded an app.

Officials sent a second message 31 minutes later with more information about the contaminated water and a link to a municipal website, which briefly crashed under the stressful load of people desperately looking for information.

Water is now selling out in supermarkets in Oregon as a result of the algae in the government’s water system.

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Here Are The 500 Million Real Reasons Why Italian 2-Year Bond Yields Plunged Today

In case you were wondering what really prompted the 65bps collapse in 2Y Italian bond yields today – since we now know that Salvini’s bait-and-switch leaves the newly formed government with even more euroskeptical and anti-immigrant officials than Mattarella originally refused?

Then look no further than the  Italian Ministry of Finance…

They decided today was the day to buy EUR 500 million of two-year BTPs…this was not previously announced.

The Ministry of Economy and Finance announces that, today, a government bond purchase operation was carried out through the assignment of mandates to intermediaries identified among the Specialists in Government Bonds, using the Treasury availability account balances .
 
The subject of the purchase transaction were the following titles:

Artificially supporting the market and signaling to the world that ‘Italy is fixed’…

Who needs Mario and The ECB?!!

Is there any doubt this whole charade is rigged now?

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Liquidity Crisis Looms: Here, There, Everywhere

Authored by Mike Shedlock via MishTalk,

Jim Puplava thinks a liquidity crisis is on the horizon. I agree, adding that the problem is global…

Please pay attention to Jim Puplava at Financial Sense. He says a Liquidity Crisis Looming.

In total, index funds represent $7 trillion of U.S. stock funds that have no active manager. All buying and selling are done automatically. Active management has gone out of fashion, Puplava noted, and as this sea change occurs, the market’s ability to price companies diminishes.

Ownership of stocks in the S&P 500 is concentrated with three companies; Vanguard, BlackRock, and State Street. They represent about 88 percent of the S&P 500, and if we include Schwab and Fidelity, over 90 percent of the S&P 500 is basically now in the hands of five companies.

“It’s really mindless investing,” Puplava said. “The crux of the problem is that mutual funds own more bonds that seldom trade than ever before, but they’re still promising to pay out investors within seven days of redemption, a promise they may not be able to fulfill in the next downturn or crisis.”

Global Problem

The problem is global.

Central bank actions explain most of what you need to know. Italian bonds provide a good example.

Despite the recent, massive selloff in Italian bonds, 10-year Italian bonds still trade at roughly the same yield as US 10-year bonds.

Is there no default risk? No eurozone exit risk?

Of course there is. But those bonds trade where they do because the ECB is engaged in QE to a far greater extent than the the Fed ever did. How nuts is that?

88% of the S&P is with Vanguard, BlackRock, and State Street. How nuts is that?

Close to $7 trillion in bonds trade with a negative yield. The figure was close to $10 trillion at one point. How nuts is that?

According to LCD, covenant-lite loans now account for a record 75% of the roughly $970 billion in outstanding U.S leveraged loans.

Covenant-lite agreements vary, but they allow things like paying interest with more debt rather than cash or skipping repayments entirely for periods of time. How nuts is that?

Totally Nuts

This is totally nuts, across the board.

Puplava calls it “mindless”. I suspect he would be the first to admit that he seriously understated the concern.

My “totally nuts” position is also too mild, but I also struggle for the precise words.

Crisis Looms

A global liquidity crisis looms. It is entirely central-bank sponsored.

Just don’t expect me, Puplava, or anyone else to tell you precisely when the crisis will hit. But it will. And when it does, don’t fool yourself into believing that you can necessarily escape in time.

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“Hotter And Faster” Lava Spreading Across Hawaii, Dramatic Footage Shows Evacuation, Devastation

Kilauea’s volcano is now spewing the hottest and fastest-moving lava yet as Hawaii officials on the Big Island were forced to issue new evacuation orders in two coastal neighborhoods over fears that the rapidly advancing flows might trap residents.

The lava has been moving fast enough to cover approximately six football fields an hour, according to U.S. Geological Survey (USGS) scientist Wendy Stovall. 

“Hawaii County Civil Defense decided to evacuate all of lower Puna to ensure that people would be able to get out,” Stovall said.

Hawaii County Mayor Harry Kim said on late Tuesday that anyone who failed to evacuate would be on their own. As of Wednesday, 71 homes had been destroyed, a number officials expect to rise, along with 400 utility poles. 

Meanwhile, dramatic drone footage shows the moment that an emergency flight crew evacuated a man from his Leilani Estates home, right before it was overcome by fast moving lava. Police say he fired a gun and assaulted another man after demanding that the man and his friends evacuate the area Tuesday. 

Approximately two dozen recent fissures in the area have resulted in ominous lava fountains spewing the hottest and most fluid magma to date up to 200 feet in the air. 

“This is the hottest lava that we’ve seen in this eruption, even just a matter of 50 degrees centigrade makes a big difference in how quickly lava flows can move and how they behave once the magma exits the vent,” Stovall said.

“It can’t get hotter than where we are,” Stovall added. “We are pretty much tapping mantle temperatures right now.”

Hawaii County officials say that lava has destroyed electrical equipment on the highway, knocking out power to Vacationland and Kapoho Beach Lots. 

“It took the road,” Civil Defense Administrator Talmadge Magno told Hawaii News Now. “We lost 132 and there’s no power down to that area and, as explained to me, it’s gonna be an extended outage.”

“You are at risk of being isolated due to possible lava inundation,” the Hawaii County Civil Defense agency advised the public.

Several small earthquakes also shook Kilauea’s summit Wednesday, as the volcano’s vent inside the Halemaumau Crater has increased in size while experiencing a series of explosive eruptions sending rock and ash thousands of feet into the sky. 

Meanwhile, Bloomberg reports that Hawaii Volcanoes National Park will remain closed, and that dangerous glass particles accumulating on the ground in Leilani Estates pose a health risk. 

Hawaii Volcanoes National Park remains closed because of the volcanic activity at the summit and the ongoing eruptions on Kilauea’s eastern flanks. Park officials said that crews are working on clearing another roadway on the south side of the park that was covered by lava from previous eruptions. They hope the roadway will provide an alternative escape route if lava cuts off more roads to the north.

Strands of volcanic glass called as Pele’s hair was accumulating on the ground in Leilani Estates and surrounding neighborhoods, and winds may blow lighter particles farther away, scientists said. The strands can cause irritation and respiratory problems when it comes in contact with people. –Bloomberg

Wind has been spreading clouds of volcanic gas emissions – or vog (volcanic smog) over the Big Island. 

We wonder how many lives this little kitty has gone through over the past couple of weeks?

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