Reason TV: Should More Land Use Scholars Be Libertarians?

In a recent Washington Post
, Ilya Somin responded to a provocative question raised
by liberal land use scholar
Kenneth Stahl. Given the failure of so many left-leaning land
use policies, Stahl wondered in
Concurring Opinions
, “should more land use professors be
libertarians?” Somin, a libertarian land use scholar himself,
answered the question in the affirmative, pointing out that he and
other libertarian land use scholars have advocated government
protection of property rights over government planning for

Reason TV’s Todd Krainin recently took a critical look at zoning
laws in Houston and Washington, DC, in a program called “Jay
Austin’s Beautiful, Illegal Tiny House.”

The original release date was August 7, 2014. The original
writeup is below.

Demand for housing in Washington, DC is going through the roof.
Over a thousand people move to the nation’s capital every month,
driving up the cost of housing, and turning the city into a
construction zone. Tower cranes rising high above the city streets
have become so common, they’re just part of the background.

But as fast as the cranes can rise, demand for housing has shot
up even faster, making DC among the most expensive cities in the
United States. With average home prices at $453 per square foot,
it’s every bit as expensive as New York City. And the struggles of
one homebuilder shows just why the city’s shortage looks to
continue for a long time.

“I got driven down the tiny house road because of affordability,
simplicity, sustainability, and then mobility,” says Jay Austin,
who designed a custom 140-square-foot house in Washington, DC.
Despite the miniscule size, his “Matchbox” house is stylish,
well-built, and it includes all the necessities (if not the
luxuries) of life: a bathroom, a shower, a modest kitchen, office
space, and a bedroom loft. There’s even a hot tub outside.

Clever design elements make the most of minimalism. The
Matchbox’s high ceilings, skylight, and wide windows make the small
space feel modern, uncluttered, and open.

At a cost that ranges from $10,000 to $50,000, tiny homes like
the Matchbox could help to ease the shortage of affordable housing
in the capital city. Heating and cooling costs are negligible.
Rainwater catchment systems help to make the homes self-sustaining.
They’re an attractive option to the very sort of residents who the
city attracts in abundance: single, young professionals without a
lot of stuff, who aren’t ready to take on a large mortgage.

But tiny houses come with one enormous catch: they’re illegal,
in violation of several codes in Washington DC’s Zoning Ordinance.
Among the many requirements in the 34 chapters and 600 pages of
code are mandates defining minimum lot size, room sizes, alleyway
widths, and “accessory dwelling units” that prevent tiny houses
from being anything more than a part-time residence.

That’s why Austin and his tiny house-dwelling neighbors at
Boneyard Studios don’t actually live in their own homes much of the
time. To skirt some of the zoning regulations, they’ve added wheels
to their homes, which reclassifies them as trailers – and subjects
them to regulation by the Department of Motor Vehicles. But current
law still requires them to either move their homes from time to
time, or keep permanent residences elsewhere.

The DC Office of Zoning, the Zoning Commission, the Zoning
Administrator, the Board of Zoning Adjustment, and the Office of
Planning all declined to comment on the laws that prevent citizens
from living in tiny houses. But their website offers a clue:

Outdated terms like telegraph office and tenement house still
reside in our regulations. Concepts like parking standards and
antenna regulations are based on 1950s technology, and new concepts
like sustainable development had not even been envisioned.

Complex as it is, the Zoning Ordinance of the District of
Columbia was approved in 1958. That’s over five decades of cultural
change and building innovations, like tiny houses, that the code
wasn’t designed to address.

Exemptions and alterations to the code are possible – many are
granted every year – but they don’t come cheaply. Lisa Sturtevant
of the National Housing Conference estimates that typical approvals
add up to $50,000 to the cost of a new single-family unit. That’s
why large, wealthy developers enjoy greater flexibility to build in
the city, but tiny house dwellers… not so much.

Fortunately, a comprehensive rewrite of the zoning code has been
in the works for much of the last decade. Efforts to allow more
affordable housing are underway, although many of these solutions
favor large developers. Future plans still forbid tiny houses.
Austin estimates that, given the current glacial pace of change
among the city’s many zoning committees, tiny houses are “many
years, if not decades out” from being allowed in the city.

For now, Jay Austin is allowed to build the home of his dreams –
he just can’t live there. The Matchbox has become a part-time
residence and a full-time showpiece. The community of tiny houses
at Boneyard Studios are periodically displayed to the public in the
hopes of changing a zoning authority that hasn’t updated a zoning
code in 56 years.

Runs about 10:30

Produced, shot, written, narrated, and edited by Todd

from Hit & Run

The $70 Trillion Problem Keeping Jamie Dimon Up At Night

Yesterday, in a periodic repeat of what he says every 6 or so months, Jamie Dimon – devoid of other things to worry about – warned once again about the dangers hidden within the shadow banking system (the last time he warned about the exact same thing was in April of this year). The throat cancer patient and JPM CEO was speaking at the Institute of International Finance membership meeting in Washington, D.C., and delivered a mostly upbeat message: in fact when he said that the industry was “very close to resolving too big to fail” we couldn’t help but wonder if JPM would spin off Chase or Bear Stearns first. However, when he was asked what keeps him up at night, he said non-bank lending poses a danger “because no one is paying attention to it.” He said the system is “huge” and “growing.”

Dimon is right that the problem is huge and growing: according to the IMF which just two days earlier released an exhaustive report on the topic, shadow banking (which does not include the $600 trillion in notional mostly interest rate swap derivatives) amounts to over $70 trillion globally.

What he is very much wrong about is that nobody is paying attention to shadow banking: Zero Hedge has been covering the topic since early 2009.

Which is why we urge anyone who is curious to catch up on the issues surrounding non-bank lending, to read our 1,000+ articles on the topic.

However, for those who are time-strapped, here is a recent take from Bloomberg summarizing the IMF’s 192-page report on Shadow Banking released last wee titled “Risk Taking, Liquidity, and Shadow Banking.”

In a summary of the report, the IMF estimated the shadow banking industry at $15 trillion to $25 trillion in the U.S.; $13.5 trillion to $22.5 trillion in the euro area; $2.5 trillion to $6 trillion in Japan; and about $7 trillion in emerging markets.


Not included in the summary were estimates of the size of shadow banking in countries including the U.K., and Gelos said later at a press conference said the industry globally exceeds $70 trillion, citing figures from the Financial Stability Board.

One can see why Dimon is concerned.

“Shadow banking can play a beneficial role as a complement to traditional banking by expanding access to credit or by supporting market liquidity, maturity transformation and risk sharing,” the IMF said in the report. “It often, however, comes with bank-like risks, as seen during the 2007-08 global financial crisis.”


The report urges policy makers to address shadow banks with “a more encompassing approach to regulation and supervision that focuses both on activities and on entities and places greater emphasis on systemic risk.”


“Shadow banking tends to take off when strict banking regulations are in place, which leads to circumvention of regulations,” Gaston Gelos, chief of the IMF’s global financial analysis division, said in a statement accompanying portions released today of its Global Financial Stability Report. The full report is scheduled to be released Oct. 8.


Non-traditional lending “also grows when real interest rates and yield spreads are low and investors are searching for higher returns, and when there is a large institutional demand for ‘safe assets’” such as insurance companies and pension funds, he said.


Shadow banks include money-market mutual funds, hedge funds, finance companies and broker-dealers. They pose a risk to the broader financial system because they rely on short-term funding, “which can lead to forced asset sales and downward price spirals when investors want their money back at short notice.”

Below are the main findings reported by the IMF regardign shadow banking. Note: those following our periodic updates on the state of the US and global shadow banking system know all of this.

  • Although shadow banking takes different forms around the world, the drivers of shadow banking growth are fundamentally very similar: shadow banking tends to flourish when tight bank regulations combine with ample liquidity and when it serves to facilitate the development of the rest of the financial system. The current financial environment in advanced economies remains conducive to further growth in shadow banking activities.
  • Most broad estimates point to a recent pickup in shadow banking activity in the euro area, the United States, and the United Kingdom, while narrower estimates point to stagnation. Whereas activities such as securitization have seen a decline, traditionally less risky entities such as investment funds have been expanding strongly.
  • In emerging market economies, shadow banking continues to grow strongly, outstripping banking sector growth. To some extent, this is a natural byproduct of the deepening of financial markets, with a concomitant rise in pension, sovereign wealth, and insurance funds.
  • So far, the (imperfectly) measurable contribution of shadow banking to systemic risk in the financial system is substantial in the United States but remains modest in the United Kingdom and the euro area. In the United States, the risk contributions of shadow banking activities have been rising, but remain slightly below precrisis levels. Our evidence also suggests the presence of significant cross-border effects of shadow banking in advanced economies. In emerging market economies, the growth of shadow banking in China stands out.
  • In general, however, assessing risks associated with recent developments in shadow banking remains difficult, largely because of a lack of detailed data. It is not clear whether the shift of some activities (such as lending to firms) from traditional banking to the nonbank sector will lead to a rise or reduction in overall systemic risk. There are, however, indications that, as a result, market and liquidity risks have risen in advanced economies.
  • Overall, the continued expansion of finance outside the regulatory perimeter calls for a more encompassing approach to regulation and supervision that combines a focus on both activities and entities and places greater emphasis on systemic risk and improved transparency. A number of regulatory reforms currently under development try to address some of these concerns. This chapter advocates a macroprudential approach and lays out a concrete framework for collaboration and task sharing among microprudential, macroprudential, and business conduct regulators

The main risks surrounding shadow banking per the IMF:

  • Run risk: Since shadow banks perform credit intermediation, they are subject to a number of bank-like sources of risk, including run risk, stemming from credit exposures on the asset side combined with high leverage on the liability side, and liquidity and maturity mismatches between assets and liabilities. However, these risks are usually greater at shadow banks because they have no formal official sector liquidity backstops and are not subject to bank-like prudential standards and supervision (see Adrian 2014 for a review).
  • Agency problems: The separation of financial intermediation activities across multiple institutions in the more complex shadow banking systems tends to aggravate underlying agency problems (Adrian, Ashcraft, and Cetorelli 2013).
  • Opacity and complexity: These constitute vulnerabilities, since during periods of stress, investors tend to retrench and flee to quality and transparency (Caballero and Simsek 2009).
  • Leverage and procyclicality: When asset prices are buoyant and margins on secured financing are low, shadow banking facilitates high leverage. In periods of stress, the value of collateral securities falls and margins increase, leading potentially to abrupt deleveraging and margin spirals (FSB 2013b; Brunnermeier and Pedersen 2009).
  • Spillovers: Stress in the shadow banking system may be transmitted to the rest of the financial system through ownership linkages, a flight to quality, and fire sales in the event of runs (see Box 2.1 and the section “Systemic Risk and Distress Dependence”). In good times, shadow banks also may contribute substantially to asset price bubbles because, as less regulated entities, they are more able to engage in highly leveraged or otherwise risky financial activities (Pozsar and others 2013).

And for the visual learners, here is the chart breakdown:

Much more in the usual place

via Zero Hedge Tyler Durden

Did Oil’s Decline Take the Stock Market Down?

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

If oil has been leading the broad markets lower, should it find support at $84 and reverse, that could presage a reversal in the broader market.

Did the sharp sell-off in crude oil trigger the meltdown in stocks? While there are plenty of potential reasons for the stock market to drop–stretched valuations, the slowdown in Germany, Japan and China, etc.–it occurred to me that the recent sell-off in crude oil might have served as a trigger.
Any sell-off in a sector that represents a significant share of the stock market has the potential to trigger more selling, which then begets more selling. Energy is a sector that is generally well-represented in institutional holdings and mutual funds.
Once oil broke key supports, institutional money managers reading projections of $60/barrel oil apparently decided to exit oil and oil services en masse.
Given the weight of this sector in portfolios, mass unloading of oil stocks would negatively impact the entire S&P 500. If oil being dumped caused the market to breach key technical levels, that would cause managers to trim risk-onportfolios. This selling would then beget more selling as the downtrend gathered momentum.
We can look for some correlation by comparing the charts of WTIC (crude oil) and SPX (S&P 500). Oil topped in June and rolled over into a downturn that gathered momentum once the 50-day moving average (breached in early July) and 200-day moving average (breached at the end of July) gave way.
An attempted reversal in crude oil failed in late September, ushering in a brutal $10 cascade down to the $84 level.
Interestingly, though the SPX continued slogging higher after oil rolled over, the MACD of SPX began declining in July along with oil.
Shortly after oil broke its critical 200-day moving average, the S&P 500 suffered a cascading downturn that sliced right through its 50-day MA.
As oil continued its slide, the SPX recovered and reached new highs. But once oil broke down in late September, the SPX started wobbling. Once it lost its 50-day MA, it yo-yo'ed violently for a few days and then broke down to its 200-day moving average.
Crude oil has declined to possible support around $84, and the stochastic has turned up, signaling a potential reversal.
If oil has been leading the broad markets lower, should it find support at $84 and reverse, that could presage a reversal in the broader market.

This correlation is of course very speculative and may turn out to be a mere mote in my eye. Nonetheless, it bears watching WTIC in the weeks ahead to see if its turns continue to impact the broader market's direction.


*  *  *

Additionally, the total collapse of bullish bets on Brent crude in the last few weeks – to record lows – suggest the long-squeeze may be running dry of ammo…


*  *  *

Crucially, as we explained in detail here and here, if the manipulation of prices of crude oil lower by the Saudis is indeed a US-friendly anti-Russian move, how much equity market pain (and thus created wealth) is America willing to take for the use of "The Oil Weapon"?

via Zero Hedge Tyler Durden

“Game Over For Aussie Coal” As China Levies Tariffs After 10-Year Hiatus

Just months after unofficially entering the currency wars, China has torn another page from the ’causes of the great depression’ playbook. As Reuters reports, for the first time in almost a decade, China – the world’s top coal importer – will levy import tariffs on the commodity crushing Australian (the biggest shipper of coal to China) dreams of a commodity-based renaissance. “China is clearly moving to protect its local miners,” explained one analyst, which is key since so much of the credit market is predicated on these mal-invested entities – as the China National Coal Association, urged Beijing to act swiftly to support the besieged sector, where 70% of the miners were making losses and more than half owed wages. Crucially, Indonesia – the second-biggest shipper of the fuel to China – will be exempt from the tariffs, which one trader exclaimed, means “It is game over for Australian coal.”

As Reuters reports,

China, the world’s top coal importer, will levy import tariffs on the commodity after nearly a decade, in its latest bid to prop up ailing domestic miners who have been buffeted by rising costs and tumbling prices.


The sudden move by China to levy import tariffs of between 3 percent and 6 percent from October 15 is set to hit miners in Australia and Russia – among the top coal exporters into the country.


Traders said Indonesia, the second-biggest shipper of the fuel to China, will be exempt from the tariffs since a free trade agreement between China and the Association of Southeast Asian Nations (ASEAN) means Beijing has promised the signatory nations zero import tariffs for some resources.


A 3 percent import tariff imposed on lignite last year did not include Indonesia.


“China is clearly moving to protect its local miners. Given that the tariff also covers coking coal, Australia, being the top supplier to China, is likely going to be the most affected,” said Serene Lim, an analyst at Standard Chartered.


The Ministry of Finance said in a statement on Thursday that import tariffs for anthracite coal and coking coal will return to 3 percent, while non-coking coal will have an import tax of 6 percent. Briquettes, a fuel manufactured from coal, and other coal-based fuels will see their import tariffs return to 5 percent.


Import taxes for all coals, with the exception of coking coal, was at 6 percent prior to 2005 before they were scrapped in 2007. Coking coal import taxes were set at 3 percent before being abolished in 2005.



“With the latest tax, Chinese can only offer around $62, which means Australian sellers will need to cut prices by about $3.50-$4 a tonne,” said a senior trader at major international trading house.


“It is game over for Australian coal.”

So Protectionism it is…

The latest effort to limit imports comes after nearly a year of intense lobbying by China’s top miners for Beijing to stem the flood of cheap supplies that have inundated the domestic market and dragged local prices to a six-year low.



The China National Coal Association, which had submitted proposals to reduce domestic output, reduce the tax burden and regulate imports, had urged Beijing to act swiftly to support the besieged sector, where 70 percent of the miners were making losses and more than half were owing wages.


On a broader level, the persistent slump in coal prices has put a severe financial strain on coal-dependent provinces such as Inner Mongolia, Shanxi and Shaanxi, which are already struggling with high debts and a weakening property market.



Separately, trade sources said Beijing has also asked its state-owned power utilities to cut coal imports by as much as 40 million tonnes from September to December, a move that is set to hit imports in the fourth quarter.

*  *  *

The news brought an angry reaction from the federal opposition and the Australian mining sector. The Minerals Council of Australia has urged the Australian government to initiate urgent discussions with Chinese counterparts to seek the reversal of the decision.

*  *  *
That won’t help global trade volumes and growth…

via Zero Hedge Tyler Durden

Ebola And The Five Stages Of Collapse

Submitted by Dmitry Orlov via ClubOrlov blog,

At the moment, the Ebola virus is ravaging three countries – Liberia, Guinea and Sierra Leone – where it is doubling every few weeks, but singular cases and clusters of them are cropping up in dense population centers across the world. An entirely separate Ebola outbreak in the Congo appears to be contained, but illustrates an important point: even if the current outbreak (to which some are already referring as a pandemic) is brought under control, continuing deforestation and natural habitat destruction in the areas where the fruit bats that carry the virus live make future outbreaks quite likely.

Ebola's mortality rate can be as high as 70%, but seems closer to 50% for the current major outbreak. This is significantly worse than the Bubonic plague, which killed off a third of Europe's population. Previous Ebola outbreaks occurred in rural, isolated locales, where they quickly burned themselves out by infecting everyone within a certain radius, then running out of new victims. But the current outbreak has spread to large population centers with highly mobile populations, and the chances of such a spontaneous end to this outbreak seem to be pretty much nil.

Ebola has an incubation period of some three weeks during which patients remain asymptomatic and, specialists assure us, noninfectious. However, it is known that some patients remain asymptomatic throughout, in spite of having a strong inflammatory response, and can infect others. Nevertheless, we are told that those who do not present symptoms of Ebola—such as high fever, nausea, fatigue, bloody stool, bloody vomit, nose bleeds and other signs of hemorrhage—cannot infect others. We are also told that Ebola can only be spread through direct contact with the bodily fluids of an infected individual, but it is known that among pigs and monkeys Ebola can be spread through the air, and the possibility of catching it via a cough, a sneeze, a handrail or a toilet seat is impossible to discount entirely. It is notable that many of the medical staff who became infected did so in spite of wearing protective gear—face masks, gloves, goggles and body suits. In short, nothing will guarantee your survival short of donning a space suit or relocating to a space station.

There is a test that shows whether someone is infected with Ebola, but it is known to produce false negatives. Other methods do even worse. Current effort at “enhanced screening,” recently introduced at a handful of international airports, where passengers arriving from the affected countries are now being checked for fever, fatigue and nausea, are unlikely to stop infected, and infectious, individuals. They are akin to other “security theater” methods that are currently in vogue, such as making passengers take off their shoes and testing breast milk for its potential as an explosive. The fact that the thermometers, which agents point at people's heads, are made to look like guns is a nice little touch; whoever came up with that idea deserves Homeland Security's highest decoration—to be shaped like a bomb and worn rectally.

It is unclear what technique or combination of techniques could guarantee that Ebola would not spread. Even a month-long group quarantine for all travelers from all of the affected countries may provide the virus with a transmission path via asymptomatic, undiagnosed individuals. And even a quarantine that would amount to solitary confinement (which would be both impractical and illegal) would simply put evolutionary pressure on this fast-mutating virus to adapt and incubate longer than the period of the quarantine.

Treatment of Ebola victims amounts to hydration and palliative care. Transfusions of blood donated by a survivor seem to be the only effective therapy available. An experimental drug called ZMapp has been demonstrated to stop Ebola in non-human primates, but its effectiveness in humans is now known to be less than 100%. It is an experimental drug, made in small batches by infecting young tobacco plants with an eyedropper. Even if its production is scaled up, it will be too little and too late to have any measurable effect on the current epidemic. Likewise, experimental Ebola vaccines have been demonstrated to be effective in animal trials, and one has been shown to be safe in humans, but the process of demonstrating it effectiveness in humans and then producing it in sufficient quantities may take longer than it would for the virus to spread around the world.

The scenario in which Ebola engulfs the globe is not yet guaranteed, but neither can it be dismissed as some sort of apocalyptic fantasy: the chances of it happening are by no means zero. And if Ebola is not stopped, it has the potential to reduce the human population of the earth from over 7 billion to around 3.5 billion in a relatively short period of time. Note that even a population collapse of this magnitude is still well short of causing human extinction: after all, about half the victims fully recover and become immune to the virus. But supposing that Ebola does run its course, what sort of world will it leave in its wake? More importantly, now is a really good time to start thinking of ways in which people can adapt to the reality of a global Ebola pandemic, to avoid a wide variety of worst-case outcomes. After all, compared to some other doomsday scenarios, such as runaway climate change or global nuclear annihilation, a population collapse can look positively benign, and, given the completely unsustainable impact humans are currently having on the environment, may perhaps even come to be regarded as beneficial.

I understand that such thinking is anathema to those who feel that every problem must have a solution—or it's not worth discussing. I certainly don't want to discourage those who are trying to stop Ebola, or to delay its spread until a vaccine becomes available, and would even help them if I could. I am not suicidal, and I don't look forward to the death of roughly half the people I know. But I happen to disagree that thinking about what such an outcome, and perhaps even preparing for it in some ways, is necessarily a bad idea. Unless, of course, it produces a panic. So, if you are prone to panic, perhaps you shouldn't be reading this.

And so, for the benefit of those who are not particularly panic-prone, I am going to trot out my old technique of examining collapse as consisting of five distinct stages: financial, commercial, political, social and cultural, and briefly discuss the various ramifications of a swift 50% global population collapse when viewed through that prism. If you want to know all about the five stages, my book is widely available.

Financial collapse

Our current set of financial arrangements, involving very large levels of debt leading to artificially high valuations placed on stocks, commodities, real estate, and Ph.D's in economics, is underpinned by a key assumption: that the global economy is going to continue to grow. Yes, global growth started stumbling around the turn of the century, stopped for a while during the financial collapse of 2008, and has since then remained anemic, with even the most tentative signs of recovery having much to do with unlimited money-printing by the world's central banks, but the economics Ph.D's remain ever so hopeful that growth will resume. Nevertheless, this much is clear: halving the number of workers and consumers would not be conducive to boosting economic growth.

Quite the opposite: it would mean that most debt will have to be written off. Likewise, the valuations of companies that would supply half the demand with half the workers would be unlikely to go up. Nor would the houses, half of which would stand vacant and dilapidated, increase in value. If the supply of oil suddenly outstrips demand by 50%, then this would cause the price of oil to drop to a point where it no longer covers the cost of producing it, and oil producers will be forced to shut down. This would not be a happy event for those countries that are heavily dependent on energy exports in order to afford imports of food to feed their populations. Nor would such developments spell a happy end for those countries that need to continuously roll over trillions of dollars of short-term debt in order to continue feeding their populations via government hand-outs (the United States comes to mind).

“But what about wealth preservation?!” I hear some of my readers screaming in anguish? “How do I hedge my portfolio against a sudden 50% global population drop?” Well, that's easy: you need to be short all paper. Short it all: currency, stocks, bonds, debt instruments, deeds on urban real estate. Get out of most commodities: energy, obviously, but also precious metals, because you can't eat gold. Go long people (who will be in ever-shorter supply) and arable land (because people have to eat) and stockpile everything else that they will need to learn to feed themselves. If they are sufficiently grateful for all you help, they will feed you too. Alternatively, you can just sit on your paper wealth as it dwindles to nothing, and wait for the torches and the pitchforks to come out. Since wealthy people squander a disproportionate amount of wealth on themselves and their families, killing them off is a good wealth preservation strategy—for the rest of us, so feel free to do your part.

Commercial collapse

It would be a challenge to keep global supply chains in operation while commodity prices plummet in value, credit becomes unavailable, and other knock-on effects of financial collapse make themselves felt. Since a lot of production depends on overseas suppliers, it would shut down shortly after international credit becomes unavailable. Countries that have food security, strong central control, many state-owned companies and long-term barter agreements with other countries (Russia and China come to mind) may find it possible to switch their economies into the old command and control mode, so that the few products that are key for keeping the survivors alive remain available.

It should be expected that certain forms of production—those particularly capital intensive—would disappear entirely. Examples might include integrated circuit manufacturing, pharmaceutical industry, offshore oil drilling, satellite technology and so on. Certain long-lasting forms of technology, such as manual printing presses, manual typewriters and solar panel-powered shortwave radios, would remain in use, treasured and passed along as technological heirlooms.

For many operations, different staffing arrangements would need to be put in place. For instance, ships would need to double their crews, in expectation that at least half the crew might drop dead during any given trip. This would not be as problematic as it sounds: during the age of discovery it was not unusual for half the crew to be lost during a voyage from causes ranging from blunt trauma to scurvy. The shift to double-staffing would be particularly important for operations that affect public safety in a major way, nuclear power plants in particular.

Political collapse

A 50% reduction in global population would no doubt accelerate the already speedy process by which nation-states fail and turn into ungovernable regions. Not a year goes by without one or two more countries joining their ranks: Iraq, Afghanistan, Somalia, Libya, Syria, Yemen, Ukraine… Several African countries may join this list before the year is out.

Especially at risk are those countries that would be unable to continue feeding their populations once oil prices plummet. Saudi Arabia, for instance, would be quickly wiped out as a country once the vast welfare state supported by the House of Saud ceases to function. As soon as that happens, Saudi Arabia would become a particularly soft target for the Islamic Caliphate, with very interesting consequences for the entire region.

There is one effect that would be common to all countries, or at least to those who have not yet undergone political collapse: since the population would become much younger, gerontocracy would become a thing of the past. The swift die-off would cause life expectancies to plummet, but we should expect the effect to be much more pronounced at the higher end of the spectrum. In many of the prosperous, developed countries in particular, there is currently a very large bulge near the geriatric end of the age spectrum. In these countries, people have been living longer and longer thanks to aggressive medical interventions: cancer surgeries, drug regimens and a variety of therapies. Many of these people are living longer but in increasingly poor health, and we should expect Ebola to carry them off in disproportionately large numbers. Organizations such as the US senate, with an average age over 60, would be expected to lose much more than half of their members—to most Americans' inordinate glee, if public survey numbers are to be believed.

For those countries that manage to remain stable, the disproportionately heavy die-off among the aged may pave the way to large-scale economic and political reforms. Older people tend to vote more than the young, and they tend to vote for the preservation of the status quo rather than for change. This pattern is particularly clear in some countries, such as the US, where older people vote to maintain the privileges that had accrued to them during prosperous times, thereby depriving their children and grandchildren of a viable future. The demographic projection where soon there will be just two working-age people supporting each retiree would be invalidated. Other types of rapid positive change may occur; for instance, many academic disciplines, in which nothing can change until the old guard dies, may begin to see rapid progress.

Social collapse

There would likely to be a wide spectrum of outcomes. Those communities that are ethnically homogenous, well-defended, strongly bound together by conservative and uniform social and religious traditions, with a history of favoring self-sufficiency and perseverance, would be likely to survive and recover. On the other hand, those communities that are ethnically diverse with a history of bigotry, racism and ethnic strife, with weak, optional, or nonexistent standards of public morality, which are integrated into the global economy in non-optional ways, and which are unaccustomed to hardship, are likely to perish.

Cultural collapse

The cultures most favored to survive would be those that can be preserved autonomously at a small scale. Particularly favored to survive would be those that have a strong oral tradition, teach their own children within families rather than submitting them to government-run schools, and insist on internal systems of jurisprudence and governance in defiance of any external interference. It is hard to imagine that the Roma of the Balkans or the Pashtuns of Waziristan would fail to pass on their culture just because half of them suddenly die. Such circumstances may sound dire to most of us, but to these long-suffering tribes it's a sunny day in the park and a boat-ride on the pond, and they would be sure to add a few epic poems about it to their repertoire once it's over.

At the other extreme are those cultures that depend entirely on book-learning, and have a writing system sufficiently abstruse to require many years of schooling just to achieve a basic level of literacy (English, Chinese). Education relies on transmitting information from those who are older to those who are younger, and as the die-off compresses the age spectrum toward its younger end, the number of teachers will dwindle. Coupled with other inevitable disruptions, formal schooling may become impossible in many areas, resulting, a generation or so later, in very low levels of literacy. Severed from its main mechanism for acquiring knowledge, the culture of the people in such areas would disintegrate. At the very far end of the spectrum are found roving bands of feral children, speaking a language that no adult is able to understand. It is at this point that we are able to conclude that cultural collapse has run its course.

Mitigation strategies

I have already mentioned that it may be a good idea to make arrangements through which survivors would be able to feed themselves, and provide them with the few other necessities for survival.

Beyond that, there are the basic mechanics of handling the pandemic. The current strategy treats it as a medical problem, best handled by doctors and nurses working in hospitals and clinics. This strategy only works for as long as the epidemic can be said to be under control; once it can be said to be out of control, the surviving doctors and nurses (medics are usually the first to be exposed—and to die) would be well advised to specifically refuse to handle Ebola patients.

In absence of any curative or preventive therapies, Ebola patients need shelter, hydration, hygiene, palliative care and, if and when they die, sanitary disposal of the remains. The goal is to do what is possible to give patients a chance to recover more or less on their own. To this end, it is very important to do all the things necessary to make sure that people are dying just from Ebola, and not from exposure, dehydration, or from any of the opportunistic diseases that thrive in disrupted circumstances, such as cholera and typhus. Sanitation is the most important aspect of the entire operation.

These services need not be provided by trained medics. The main two requirements for such service are: 1. psychological immunity to scenes of horrific suffering and death; and 2. immunity to Ebola. The first of these requirements comes down to natural talent; some have it, some don't. The second requirement is being provided free of charge by the Ebola virus itself, in cooperation with the survivors' immune systems.

English lacks a good word to describe this type of specialist, but we don't have to reach far to find one: the Russian word for it is “sanitar.” A popular Russian saying goes “wolves are sanitars of the forest” because they take care of disposing of the sick, the weak and the lame, thus giving those that survive a better chance. A sanitar need not be medically trained, but some training is needed: in diagnosis, palliative care, sanitation procedures and corpse disposal.

A third requirement is one that applies to the sanitation service as a whole: the number of sanitars has to scale with the rate of infection. Since the number of those infected is increasing exponentially, the number of sanitars assigned to serve them has to be able to increase exponentially as well. It seems outlandish to think that sufficient numbers of people will spontaneously volunteer for the job, and this means that they have to be press-ganged into service. And a super-obvious way to do just that is to simply never discharge Ebola survivors: once you are in, you are in until the pandemic is over, or until you die, whichever comes first. If you recover, you are given a bit of training, and then you go to work.

If you don't like the mitigation strategy I am proposing, please feel free to propose your own. Keep in mind, however, that what you propose has to automatically scale with the increase in the rate of infection, which is exponential. Sure, you can propose setting a public health budget, but then it has to double every couple of weeks—and keep doubling until the number of patients is in the billions.

via Zero Hedge Tyler Durden

Senior Citizens Support Medical Marijuana Initiative in Florida

This November, Floridians will vote on a ballot initiative that
would legalize the use of medical marijuana in the state. A
Quinnipiac University poll conducted this spring found strong
support for the intiative, including, amazingly enough, among
Florida’s senior citizens. A whopping
84% of voters over 65 support Amendment 2

Earlier this year Reason TV took a look at how seniors in
Oakland, California, are benefiting from medical marijuana in a
program called “How Medical Pot Is Helping Seniors Get Off
(Prescription) Drugs.”

Original release date was February 18, 2014. The original
writeup is below.

“Talk to almost anybody over 65-years-old and there’s a list of
medications that they’re taking. And very often, the side-effects
from those medications are worse than the symptoms they’re
supposedly treating,” says Steve DeAngelo of the Harborside Health
Center in Oakland, California.

The National Institute on Drug Abuse (NIDA) has a monopoly on
the legal supply of marijuana for research purposes. Because NIDA
is more focused on studying marijuana abuse than its potential
benefits, researchers in the U.S. have had difficulty getting their
hands on marijuana to use in their studies. One notable exception
is a research project initiated by the University of California in
2000. The Center for Medicinal Cannabis Research has found that
cannabis may offer benefits to people suffering from pain as a
result of nerve damage, HIV, strokes, and other conditions.

The mounting evidence that cannabis has medicinal value is
becoming increasingly difficult to deny. For example, Dr. Sanjay
Gupta, CNN’s chief medical correspondent, was a medical cannabis
skeptic when he wrote a 2009 TIME magazine article called “Why I
Would Vote No on Pot.” After digging deeper into research conducted
in other countries, Gupta changed his mind, saying, “We have been
terribly and systematically misled for nearly 70 years in the
United States, and I apologize for my role in that.”

At the Harborside Health Center, Steve DeAngelo and his team are
well aware that cannabis is an effective treatment for a wide range
of health problems, including many of the ailments that afflict the
elderly. The problem, however, is that seniors tend to be
uninformed or misinformed about cannabis. So a few years ago,
DeAngelo hired Sue Taylor, a retired Catholic school principal, to
reach out to seniors in the Oakland area. As Taylor puts it, “I am
here to remove the stigma of medical cannabis.”

Approximately 5:45 minutes.

Produced by Paul Feine and Alex Manning.

from Hit & Run

As Monday Looms, Experts Warn Japan’s Half-Trillion Dollar Fat-Finger-Trade “Could Absolutely Happen” In The US

Just over a week ago, the Japanese stock market participants were stunned when stock orders amounting to a whopping $617 billion (yes Billion with a B) – more than the size of Sweden’s economy – were canceled for reasons still unknown in what was one of the biggest 'fat finger' trading errors of all time. Since then, US equity markets have suddenly become notably more volatile – and fallen significantly, VIX has seen odd intraday 'spikes', S&P futures saw the very odd 'satan signal', and USDJPY has suffered its worst losses in 3 years. This raises the question of whether US market microstructure is any better than Michael Lewis' Flash Boys' book describes.. (as we head into a bond market holiday, dismal liquidity, and a potential Black Monday), “That could absolutely happen here,” Tabb Group's Larry Tabb warns Bloomberg.


A week ago, this happened… (From Bloomberg)

At 9:25 a.m. Tokyo time, orders for shares in 42 companies totaling 67.78 trillion yen ($617 billion) were canceled, according to data compiled by Bloomberg from the Japan Securities Dealers Association. A representative at the organization wasn’t immediately available to comment.


The biggest order was for 1.96 billion shares of Toyota Motor Corp., or 57 percent of outstanding shares at the world’s biggest carmaker, for 12.68 trillion yen through an off-exchange transaction. Toyota declined to comment. Other stocks with scrapped transactions included Honda Motor Co. (7267), Canon Inc., Sony Corp. and Nomura Holdings Inc.


“Fat finger” trading mistakes occur periodically. In 2009, UBS AG mistakenly ordered 3 trillion yen of Capcom Co. convertible bonds. Still, today’s scrapped trades were of a different magnitude.


“I’ve never heard of orders this big being canceled before,” said Ayako Sera, a Tokyo-based market strategist at Sumitomo Mitsui Trust Bank Ltd., which oversees about $474 billion in assets. “There must have been an error.”


While no harm’s been done because the orders were canceled, there should be an explanation to alleviate concerns, Sera said.


“It’s not rocket science that there was a fat finger here, but it reopens the question about accountability,” said Gavin Parry, managing director at Hong Kong-based brokerage Parry International Trading Ltd.

It may not be rocket science, but one wonders: just who has the potential to trade over half a trillion in market orders, let alone screw it up?

*  *  *

And since then..VIX Spikes have been frequent – and unexplained (as Nanex showed in the past)

Recently there have been frequent spikes in the VIX index such as the ones shown in the 1 minute chart below. We drilled down to the underlying data (option prices) used in calculating the VIX and found that almost all the quotes in the near term options used in the VIX calculation suddenly widened which causes the spike. Why this happens is unknown…

Stocks have dropped notably with very high intraday volatility, and USDJPY has collapsed…


*  *  *

And ahead of Monday's open, with the bond-market closed (and liquidity likely extremely low), market infrastructure experts raise a red flag…

A funny thing happened after Michael Lewis’s book “Flash Boys” put the structure of the U.S. stock market under a microscope in March: The whole system ran pretty smoothly, at least compared with its recent past.


Sure, the electronic cat-and-mouse trading game that Lewis called a “rigged” system and others called “market making” may not have changed much. On the bright side, however, there have been no major technological meltdowns like the one that almost bankrupted Knight Capital Group Inc. or fouled Facebook Inc.’s initial public offering in 2012, or caused an almost 1,000-point plunge in the Dow Jones Industrial Average in 2010.


Now today, that nascent confidence is being undermined in a big way after 67.78 trillion yen ($617 billion) of mistaken over-the-counter stock orders flooded Japan’s equity market. Don’t for a minute believe that the U.S. market structure is fine-tuned enough to avoid a similar situation, according to Larry Tabb, founder of research firm Tabb Group LLC.


“That could absolutely happen here,” Tabb said in an e-mail. “While we do have circuit breakers and pre-trade checks for items executed on exchange, I do not believe that there are any such checks on block trades negotiated bi-laterally and are just displayed to the market.”



Just a month ago, a technical error at CME Group Inc. prompted a four-hour trading halt at the world’s largest futures market, preventing buying and selling of contracts tied to major stock indexes, Treasuries, oil and gold. In May, a trading error at Barclays Plc caused split-second swings in dozens of U.S. stocks including AOL Inc. and Caterpillar Inc., people familiar with the matter told Bloomberg News at the time.


No human system is perfect and every day computer systems that interact with the markets are being upgraded and modified, said James Angel, a Georgetown University finance professor who studies market-structure issues.


“As Darth Vader said in one of the Star Wars movies, ‘Don’t put all your faith in technology,’” Angel said in an e-mail.

*  *  *

Don't forget who is long (and looking for a greater fool to dump to)…

via Zero Hedge Tyler Durden

The 5–Year Bond is Emblematic of Careless Risk Taking in Bond Markets

By EconMatters



Dovishness Begets Excessive Risk Taking by Speculators


The Fed minutes came out this past week and they mentioned the strong dollar and less than stellar growth out of Europe, basically more over the top dovishness which just encouraged more unwise risk taking in the bond markets. This week Dallas Fed’s Fisher said that they have identified areas of risk in markets, and James Bullard has said on several occasions that the markets are even behind the most dovish participants at the Federal Reserve regarding the forecasts for rate hikes, and the actual market actions of participants.  


Market participants may say that the Fed will raise rates mid-year in 2015, but they are speculating in bonds far out of touch with this reality. In other words, bond speculators just like any other speculators will push price as far as they can up until the last possible moment until they literally are forced out of the market by real fear of rate hikes, and the more dovish comments out of the Fed just reinforces this risky speculation.

The 5-Year Bond Yield is Under the Forecasted Fed Funds Rate for 2015 by the Fed



For example take the US 5-Year Bond trading with a Yield of 1.53%, remember this is for a 5 year time period, and if the Fed starts raising rates by June of 2015, roughly 8 months from today, the Fed has 10 members forecasting a Fed Funds Rate above 1% by the end of 2015, with 4 members between 1.75% and 2%. There is no way in hell the 5-Year Bond trading with a Yield under what the Fed Funds Rate could be in 2015 by their own Fed Forecasts, (with a highly dovish Fed slant by the way) there is no way this is a safe investment strategy. There is no way in hell this bond is any good this time next year with the current price and yield.




But remember this is a 5–Year Bond, so theoretically an investor is locking up the money for 5 years, and even based on the Fed`s own forecasts for Rate Hikes for 2017 (only 3 years from now) 15 Fed Members forecasts are all above 3% for the Fed Funds Rate. Remember this is for the Fed Funds Rate, and doesn`t even include an inflation forward looking component added to every bond, or just call it a risk premium that inflation could spike during the duration of this bond. By the way, Inflation is currently running at 1.6% by the government models. 


Negative Real Rates – Doesn`t apply with ZIRP Financing


In essence current bond holders have a negative real rate, the only way they make this risky trade is if they can borrow at essentially zero percent borrowing costs, use insane leverage, and ‘speculate’ on the low borrowing cost to bond yield Delta and also benefit from price appreciation by pushing the bond prices up as far as they can. I am sure this is the kind of risky behavior the Fed wants to encourage with their ZIRP program versus promoting sound long-term investment decisions that aren`t a threat to the financial stability of the system. Remember all these bond purchases that are only viable in a ZIRP Environment will have to be unwound – this unwinding is the systemic risk that the Fed has created! This is where the Unintended Consequences of ZIRP come back to bite the Federal Reserve. They cannot provide ZIRP with no restrictions and expect investors to make rational sound investment decisions, the cheaper the liquidity and the more available the liquidity is in direct correlation with the ‘riskiness’ of the investment choices.


Read More >>> Central Banks Biggest Concern Should Be Market Stability


Do These Bond Speculators ever Plug These Trades into a 5-Year Model



Literally the 5-Year Bond has to be one of the ill-advised investments in the history of stupid investments by speculators who bought this bond the past week. There is no way in hell this is sound risk reward investing, it isn`t even sound speculating. It is the most idiotic place one could store one`s money, and is indicative of what James Bullard and many see as major problems ahead for these speculators in the bond market induced by ZIRP borrowing costs. These investors will literally pick up pennies in front of a massive steamroller, more money has been lost chasing yield in the history of financial markets than any other mainstream trading strategy. It is amazing how risky and stupid speculators can be when their gains are rewarded by profits and fat bonuses and theirs losses are subsidized by bank bailouts! 

Market Participants May Say they are onboard for June 2015 Rate Hikes, However they haven`t come to terms with this Reality given the positions they are putting on, and the length of time required to unwind said positions without causing major market dislocations


I think the Fed needs to get out their calculator and start realizing just how off-sides the mainstream bond market is in ‘actual terms’ to their own forecasts for rate hikes, calculate the amount of losses ahead for anyone holding a 5-Year Bond with a yield of 1.53% today, with a conservative Fed Funds Rate of just 3% during this 5 year period. Moreover, guess who are holding a lot of these bonds, financial institutions, namely banks. Is the Federal Reserve prepared to bail out these banks or buy these bonds all over again with an already stretched 4.5 Trillion Dollar Balance Sheet? 


Janet Yellen Failing to do the kind of ‘Prudential Regulation’ that she advocates


This is the kind of “Prudential Regulation” that Janet Yellen should be doing right now in assessing over the top risk taking due to zero percent cheap money slushing around the banking sector. This has encouraged all kinds of “imprudent risk-taking” by investors, and the Fed better wake up to the actual numbers we are talking about here, especially once you calculate the interconnectedness of financial assets, and the fact that many of these bonds are used as leverage and collateral for other investments.


The Federal Reserve is seriously asleep at the wheel to the massive bubble building in what is supposed to be a conservative market, but losses are losses, just start doing the math Janet Yellen. The Bond Market is in a massive bubble even by your own conservative forecasts, she better start doing some “Prudential Regulating” and developing a real hawkish tone just to get some of these overzealous speculators to start unwinding these massive positions. Forget the stock market, commodities, or Social Media Stocks they can go up or down; no real threat to the financial system, but the size of the bond market, and the sheer bubble that exists, is the real threat to financial stability of the entire system. 


Bond Haircuts & Risk Modeling



Just look at the 5-Year Bond and tell me that price and yield makes any sense, (just do the math it doesn`t add up) this is symptomatic of the bond market in general, there is no way that any of those 10-Year European Bonds are any good during this duration of time, and many banks have these toxic assets on their books right now because of global ZIRP incentives. 



The difference between 2007 and today is these were largely sub-prime loans and overvalued real estate mortgages in the financial crisis of 2007/08; but this is the entire global bond market from Spain and Greece to the United States 5-Year Bond with rates rising by everyone`s standards in 8 months’ time by the Federal Reserve. There is no capacity in the ECB or the US Federal Reserve to buy all these toxic and deteriorating by the minute bond assets on banks` balance sheets. This time the only option is major haircuts by bond holders, shoot even the best house on the block in the United States has a 5-Year Bond that from a price and yield perspective is going to cause major losses for these investors going forward! 


© EconMatters All Rights Reserved | Facebook | Twitter | Email Subscribe | Kindle

via Zero Hedge EconMatters

Monetary Policy And Impact On Assets

Submitted by Matthew Corso

Monetary Policy and Impact on Assets

The last note briefly addressed the benefits associated with the reverse repurchase facility (RRF). Indeed liabilities have increasingly moved from bank balance sheets to the Fed, freeing lending capacity. One must recall reserves are not fungible outside of the banking system (but can act as collateral for margin). With flow decreasing, the opportunity for small relative volume bids spread over a large quantity of transactions (most instances per unit time) decreased with market prices in many asset markets. Is more downside coming?
A cost of QE is high quality debt remains siloed. As previously described, the RRF allows for assets previously purchased by the Fed to serve the market only in a limited capacity. While they are not able to the reused as collateral, they do replace a portion of the demand for high quality assets in the market, leaving relatively more available for reuse. At present, the 5bps paid by the Fed essentially attempts to put a floor under the short-term price for money. The Fed established an overall cap in September, supposedly because MMFs would view the Fed as a more secure counterparty than banks. I take a different view: They Fed is balancing net income from securities lent with the monetary policy goal of keeping rates up. As Stone & McCarthy recently pointed out, demand exceeded the $300 billion cap, limiting the amount paid-out by the Fed at the 5bps rate, with excess bid via Dutch auction. In the recent auction coinciding with quarter-end the low bid hit a price of –20bps (the counterparty receives less than deposited in order to rent the high quality assets from the Fed). While one may count the result as a limited success in controlling the lower bound of short-term interest rates, the Fed controls the cap for the 5bps rate. Interest on reserves (IOR), at 25bps, holds the entire system afloat, where otherwise extreme supply (especially relative to demand) would dictate a lower price; In economic depression even more so. To improve the optics of control, causality is reversed when speaking of the price of money. The interbank interest rate for reserves is set by market forces, and daily, the central bank adjusts reserves to match. Mechanically the Fed’s “target” is just that, and nothing more. Alternatively, with IOR and the RRF, the prices at the each extremis of the corridor are fiat, and impact the Fed balance sheet.
Quantity theory posits price inflation follows from base money creation, meanwhile in developed markets we see the opposite. Investment managers and students of economics need to recognize the quantity theory of money passed away gradually as the link to precious metals was severed. A new paradigm began to unfold with the economic performance leading up to 1968. The market demanded portion of base money, coinage and bank notes, follow from price inflation. Causality between increases in base money and rising prices must does not result from the reserve creation. As Peter Stella pointed out recently:

“The extremely inconvenient fact for the QTM regarding the causal power of the bank reserves component of the monetary base is that—to take the US example—the nominal value of bank reserves held at Federal Reserve Banks between end-1958 and end-2007 fell by 19 percent while the Consumer Price Index rose by 612.5 percent. Therefore, the long-run relationship between US bank reserves and US inflation is actually negative.”

What then accounts for the loss in purchasing power outside of the core price inflation metric? From Peter Stella’s Exit Path Implications for Collateral Chains:

“In 1951, total commercial bank deposits at the Fed were $20 billion larger than they were at the end of 2006.


Over the same period, total US credit-market assets rose by over 10,000%”

The result is a consolidated approach must be used to ascertain the quantity of effective money. Austrian true money supply (TMS) best captures one part, and as recently explained by none other than the Treasury Borrowing Advisory Committee, the other part is high quality collateral lent in which further credit is extended against in private institutional markets (including reuse).
By using a consolidated view of money the crisis of 2008-2009 can be visualized, where TMS alone is insufficient.
Looking forward, the Fed will cease the flow of reserves, and has the capacity for a “ceremonial rate-rise”. A brief overview of the impact on assets follows. With the mechanics now explained, one can see why the end of previous rounds of QE saw long Treasuries and short equity outperform. As previously forecast, we will see this pattern repeat as yield seeking combined with capital preservation desires finds US sovereign debt heads and shoulders above low effective yields in EU or Japanese sovereign debt. Furthermore, the US Treasury is to cut bill issuance trimming ~$60 billion overfunding through end-2015. Less supply, more demand: higher price (and a lower effective yield). The US dollar outperformed as predicted, and the yen may be next on increasing liquidity and capital preservation concerns. Electrical consumption, rail and airline data from China continue to surprise to the downside. Their bubble dwarfs the US housing crisis, and may prove both an even worse misallocation and the catalyst. There will be a rotation as corporate bond excesses unwind along with many REITs and MLPs. Securities representing companies catering to a tapped out consumer, and capital structure safety will prove prudent over longer terms. Generally speaking, US banking system survives a conflagration (due to recapitalization), while some banks in Europe and Canada may not be as prepared. Commodities will bifurcate over time as drought, industrial collapse and war overpower their common dollar denomination. Short the Australian dollar against the US dollar from 1.05 performed well (now .86) and iron ore was previously cited as vulnerable (mid-2013), they remain so. Oil in mid-2014 priced in demand not considerate of recession alongside the return of intermittent supply. Near $110 I recall saying it “can fall anytime now”. Near $85 a barrel now, $75 is likely and results similar to the last crisis are possible. Escalation in war would maintain, or see a return to a more modern price; therefore if drawdown is tolerable over a medium term, oil can be viewed as insurance. In that vein, the precious metals continue to change hands, facilitated as they are apparently viewed only as a Giffen good by western ideology. Lastly, with palladium and platinum demand being mostly absorbed through economic activity, the former is most overpriced of the two.

via Zero Hedge Tyler Durden