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Authored by Dan Kurz via DKAnalytics.com,

The good:

“Red state” Americans, yours truly included, are grateful that President Trump is calling out the fake news for what it is: fake — and out to get any powerbrokers that threaten its pervasive media dominance.  Clearly, a media with a revolving-door to bureaucrats has facilitated unprecedented industry consolidation since President Clinton signed the Telecommunications Act of 1996.  The increasingly incestuous, oligopolistic relationship between big government and big business has resulted in a crony press that rivals the Pravda (“truth”) press in the former USSR.  Thus, instead of news and a check on increasingly abusive government power as the Framers intended, the misnamed “Main Stream Media” (MSM) has been generating propaganda supportive of an increasingly fascist regime, i.e., the US government.

Billionaire real estate and successful entertainment tycoon Donald Trump refused to become part of today’s MSM quid pro quo.  He didn’t have to, nor did he want to.  Instead, he took his “America First” (including bringing jobs back home) message to “flyover country” via the Internet/his Twitter account and as supplemented by his frequent, rousing, and well-attended speeches.  Critically, he was also backed by the one largely anti-leftist entity in the MSM, ratings dominating Fox News, which has long resonated with “red state” Americans.  Thus, the battle lines were drawn.  An all-out MSM backlash against this nonconformist ensued, and “news” morphed even more completely into statist, anti-Trumppropaganda, a.k,a., fake news.  It wasn’t only fabricated stories, one-sided allegations or quotes taken out of context, but utter and complete suppression by the vast majority of the MSM of lawless behaviorby those positioned at the top echelons of federal power during the prior administration as well as unconstitutional behavior being carried forward into the current administration and into the 115th US Congress.

The Trump administration, however compromised, appears to be making a largely clandestine effort(via sealed indictments) to smoke out the “deep state” (the unelected bureaucracy and its hangers-on both inside and outside the government) lawlessness it has been a victim of.  Any success here, no matter how unlikely given the de facto “broad daylight conspiracy” — criminal decision makers keeping quiet buttressed by their staffs wanting to maintain the huge bureaucracy’s unconstitutional power, their outsized compensation and their privileged benefits status quo — would be monumental.  Such an achievement could spark a rule of law revival, arresting our B.R. trajectory. Meanwhile, a strategic return to greater constitutional fidelity is getting a sorely needed lift by Trump’s fine judge/justice selections!

The bad:

Trump’s integrity.  Is it there, when it counts, beyond his stellar judge selections and beyond the fact that he isn’t an “unindicted felon,” i.e., Hillary Clinton?  This isn’t an idle concern, for integrity begets and nourishes credibility, which is critical to a president’s “bully pulpit” efficacy in “troubled times.” 

Some worrisome signs include:

• His real estate developer exploitation of the property rights-curdling Kelo New London decisionsuggests neither fidelity to a constitutional anchor (property rights tied at hip to liberty) nor to the lot of everyday Americans.

• His tabloidesque remarks about Ted Cruz’s dad being involved in the JFK assassination give further pause.

• His debate claim of putting Hillary in jail if he’s elected only to pathetically comment, once president-elect, that “Hillary Clinton had suffered enough” is disingenuous at best.

• His apt campaign claims that the low unemployment rate was fake, the recovery was the weakest ever, and the stock market was a bubble susceptible to an interest rate spike morphed into the lowest unemployment rate since the turn of the century, the best economy ever, and the best stock marketever once he sat in the oval office.

• From vowing to crack down on illegal immigration and erecting a wall on the southern border, Trump’s 1.8m “pre-wall” amnesty proposal threatens to effectively “green-light” the very illegal, third world immigration that has led to a massive transfer of property from citizens to aliens while thwarting wages and Balkanizing America.

• From railing against Goldman Sachs cronyism and globalism on the campaign trail to a GS-laced Trump cabinet!

• From vowing to shrink the federal government once elected, Trump signed legislation which further bloats it.

Instead of being honest about the long, tough road ahead to bring America back to manufacturing strength (reindustrialization takes time!), Trump has preferred exerting unconstitutional pressure on select manufacturers to highlight US job preservation thanks to his intervention, even as a closer look at such “agreements” disclosed heightened taxpayer expense and producers’ expanded outsourcing options. How does one spell demagoguery?

The ugly:

A potential Trump trade war is a huge risk to both the US and the global economy, but the US is especially vulnerable.  This is due to America’s largely self-inflicted manufacturing enfeeblement, its huge net dependency on foreign goods (just go to WalMart’s non-grocery aisles) and foreign financing, and its dependency on continued widespread overseas acceptance of dollar-based trade, … despite America’s $7.9trn net debtor status vis-à-vis the rest of the world, over $21trn in US debt, and the US’s decade-long $1trn plus average yearly expansion in federal debt. 

Some reflections:

• Is Trump going the Hoover route (dangerous “interventionism” and an escalating trade war)? Hoover was a leading industrialist before he became president.  Are we about to revisit this dark chapter in history?

• A nation that has an $800bn plus annual deficit in goods trade and has lost a vital portion of its manufacturing base can ill afford to start a trade war, from consumers’ or producers’ perspectives. It needs component parts that are often made only overseas nowadays (think the “787” or US-assembled cars) to produce high-value added finished products for domestic consumption and for exports, much less give it the ability to restore a domestic supplier base and address destructive corporate governance and compensation (more below).

• Tariffs are taxes on Americans that the feds collect – we thought Trump was about shrinking government?

• Protectionism (tariffs) is the worst form of cronyism: domestic steel and aluminum shareholders and their “Wilbur Ross cronies” will do fine, but domestic manufacturers of Maytag washers, Ford trucks, Harley Davidson motorcycles, GE locomotives, CAT dozers, Carrier chillers, etc. (and their workforces) will be negatively impacted or worse (bankruptcy). This is thanks to the resulting uncompetitive materials costs and/or retail prices that are out of consumers’ reach both domestically and in export markets, where outfits such as Harley will face a one-two punch of higher domestic steel and aluminum prices and tit-for-tat import tariffs for US made bikes.

• Trump should solely be talking up lowering tariffs globally — e.g., seeking Mexico’s zero tariffs to 44 nations.

• As is widely known, our top brass corporate compensation structure (CEO compensation was some 20x the average worker in 1965 and 271x in 2016), including $7m CEO signing bonuses and relatively rapid vesting of untold millions of underpriced options, coupled with litigation and regulatory insanity have come together to yield a “slash & burn” business model. In today’s world, the C-Suite a) no longer has parallel strategic organic growth interests (p. 5) with the American workers, taxpayers, and communities, b) is incentivized to cut/gut domestic cap ex instead of investing, and c) is motivated to outsource and fire domestically instead of hiring and training American workers.  Today’s senior management is rewarded for slashing costs while buying back stock with both cash flow and by issuing trillions in new debt to give EPS a “financial engineering lift.”  The C-Suite focus: drive up the stock price ASAP instead of focusing on building globally competitive products, which is an unending effort.  As such, “corporate anorexia“ has become the destructive norm.  Coupled with lacking trade schools, a failing educational system, and perpetually large government deficits, these are the true flies in the ointment!

Unfortunately, such truths don’t make for great soundbites, but they remain truths.  Plus, other high-wage workforces (with generally better paid workers than in the US) operating in generally strong currency nations — e.g., Switzerland, Germany, and, for a long time, Japan — have generated sustained and substantial trade surpluses of recent vintage that sometimes extended for decades, and typically included surpluses with China.

Commensurately, those that blame high US wages or a strong buck as “America’s chief culprits” are just not getting the big picture right, much less how to best address it: with “brick-by-brick” home-grown solutions (for largely home-made problems) instead of with misleading, silly, and patronizing claims of having (virtually) instantly “made America great again!”  Moreover, reputational integrity does matter when a president is attempting to make constructive deals for his country.  Yes, Virginia, both policy and integrity (character) matter.

Allocation conclusion:

If, against all odds, the rule of law is restored in the US and the lawless actors infesting the governing class/controlling the instrumentalities of power are brought to justice, the profound and breath-takingly stunning “gravity of it all” would rapidly turn greed into fear in terms of so-called “traditional asset” valuations.  In other words, sales would drive risk premiums much higher and net present values much lower, pricking today’s “bubble valuations.”

In the meantime, the US government’s reckless, deficitary fiscal policy would be even more exposed in a GDP-pummeling trade war — we are already way overdue for a recession amidst a historically weak, productivity-waning, debt-encumbered, artificial recovery.  Huge US commitments, political calculations, and a fiat currency — “The US can pay any debt …, it just can’t guarantee purchasing power” — could result in unprecedented amounts of dollar printing.  It appears to be more a question of “when” rather than “if.”  This suggests that the buck will be sacrificed in a tactical attempt to protect money center bank balance sheets (and the Fed itself) from “valuation meltdowns” and to meet “nominal dollar commitments” of a strategic nature.  Monetization of debt would become permanent and be expanded upon.  How does one spell doubling-down on currency debasement?  Against this backdrop, it is hard to imagine a secularly more bullish case for undervalued precious metals — and a more opportune time to reduce exposure to massively overvalued bonds and stocks.  (And please recall, markets are “reversion beyond the mean machines!”)

Finally, it is fitting indeed, on Independence Day, that we celebrate America’s historical blueprints — The Declaration of Independence, which led to the first-ever strict enumeration of governmental powers and codification of individual liberty and inalienable rights, otherwise known as the US Constitution, including the Bill of Rights.  How appropriate that Americans, and proponents of codified freedom around the globe, still have the unique opportunity to fortify their financial fortunes with the very “constitutional money” that could prove pivotal in the challenging times ahead in terms of supporting their families and in terms of helping to rebuild a return to free market capitalism and constitutionalism.  An increasing number of originalist/constitutional judges should be of strategic help.  Thank you, Mr. President.

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A senior Kremlin official tells Bloomberg that Vladimir Putin is preparing to offer significant concessions to President Trump at their July 16 summit in Helsinki, Finland in the hopes of beginning to repair strained relations between Russia and the United States. Chief among them, according to the official, is a discussion on Iran’s role in Syria – an issue that Moscow is simultaneously coordinating with Tehran.

Putin has agreed in principle to U.S. and Israeli demands that Iranian-backed forces in southern Syria be kept away from Israel’s border, replaced with troops loyal to the government in Damascus, two Kremlin advisers said.

After studying Trump’s meeting with North Korean leader Kim Jong Un, during which he announced a surprise halt to U.S. military exercises with South Korea, Putin decided he needs to negotiate with the billionaire personally, the senior official said, without elaborating. The two leaders may meet without aides, as Trump and Kim did in Singapore, Kremlin spokesman Dmitry Peskov said. –Bloomberg

In advance of the summit, U.S. ambassador to Russia, Jon Huntsman, briefed President Trump during a one-on-one conference call Thursday – saying that Trump will go into the meeting with “eyes wide open.” 

Trump, meanwhile, has broken with Obama’s policy of demanding that Syrian leader Bashar al-Assad be removed from power, a position reportedly formed before Russia and Iran turned the tide of the Syrian civil war in Assad’s favor against U.S. backed rebels. This sentiment was backed by U.S. National Security Adviser John Bolton – who on Sunday told CBS News that Assad is no longer “the strategic issue” in Syria. Instead, Iran is now the focus. 

“We’ll see what happens when the two of them get together,” said Bolton, who never met a regime he didn’t want to change. “There are possibilities for doing a larger negotiation on helping to get Iranian forces out of Syria and back into Iran, which would be a significant step forward.”

Russia views the upcoming Trump-Putin summit as an opportunity to mend fences with the United States. Relations have soured dramatically since the days Bill Clinton was hanging out at Putin’s Moscow estate – within hours of collecting $500,000 for a speech to a Kremlin investment bank – in the same month Russia assumed control over 20% of U.S. uranium under Hillary Clinton’s State Department. But that was 2010. Since then, Russia annexed Crimea in 2014 and allegedly hacked the 2016 U.S. election – which the Kremlin has been heavily sanctioned for. 

Still, major questions remain over Putin’s ability to actually enforce any agreement governing Iran’s actions in Syria, even if he offers to stabilize the border with Israel by sending troops into the area. This has in turn caused some in Washington and among Western allies in Europe that Trump may prematurely tout the Helsinki meeting without actually achieving real concessions. 

Russia may have supplanted America as the indispensable arbiter in various Mideast conflicts but there’s only so far Putin is willing to go to appease Trump when it comes to Iran, according to Andrei Kortunov, head of the Russian International Affairs Council, a research group set up by the Kremlin. –Bloomberg

“Trump can’t force Putin to turn away from Iran,” Kortunov said. “Putin is not willing to push Iran too hard and he cannot rely on Trump.”

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Authored by Antonius Aquinas via AntoniusAquinas.com,

Two recent articles (here and here) have again demonstrated that the greatest “terrorist” entity on earth is not the boogeymen – Russia, China, Iran, North Korea – so often portrayed by Western presstitudes and the American government; but the United States itself!  Ever since World War II, the US has been the most militaristic, far surpassing all of the Communist and dictatorial regimes combined.

Some startling and rarely reported facts:

• Currently, the US drops on someone or something a deadly explosive once every12 minutes

• W. Bush’s military dropped 70,000 bombs on five different nations during his murderous regime

• Nobel Peace Prize recipient, Barrack Obomber, launched 100,000 bombs on seven countries

• Funding this mass murder is a reportedly $21 trillion (!) that is unaccounted for in the Pentagon’s coffers

Despite all of the “America First” bluster at the start of the Trump Administration, little has changed but, in fact, things have escalated.  While G.W. Bush in his wicked eight years dropped over 24 bombs per day and his successor upped that total to 34 bombs per day, the current Bomber-in-Chief has, in his first year in office, averaged 121 bombs per day!  For the initial year of his Presidency, 44,000 bombs were dropped on people and lands despite the fact that the US is not officially at war with a single country!

Despite these grisly statistics, which are hardly ever reported by the mainstream press, the military industrial complex and the controlled Western media outlets have propagated the lie of “precision bombing.”  Precision bombing has been trumpeted to minimize the effect of US aggression to the public that only true belligerents are targeted and not innocents.

When US bombing is reported by the press, the actual casualties and property damage are never accurately given.  The most notorious example of this mendacity was the coverage of Bush II’s Iraq war.  “The US and its allies ruthlessly carpet-bombed Iraq,” a UN report acknowledged, “reducing it from ‘a rather highly urbanized and mechanized society’ to a ‘pre-industrial age nation.’”

Later accounts of what actually happened showed that “only seven percent of the 88,500 tons of bombs and missiles devastating Iraq were ‘precision weapons.’”

Despite these facts, US policy makers have the gall to call certain regimes “rogue” and/or “terrorist.”  Do not look for any de-escalation, however, as “defense” spending for 2018 is set at $700 billion with an increase of $16 billion in the following year.  Yes, more taxes extorted from the public for the pulverization of peoples and their homes across the globe!

Even if these statistics were of common knowledge, do not look for things to change.  The majority of the American public loves its military and government and has been conditioned to overlook and accept nearly all of its military engagements and the propaganda that attempts to justify them.

What must change is ideology which, at one time, was strongly anti-interventionist, but gradually became pro-war.  Through education, the press, books, and the electronic media, the intelligentsia was able to manipulate public opinion.  Americans began to glorify war under the guise of spreading democracy and “freedom” to everyone, whether they wanted it or not.

Under current ideological conditions, a reversal of thinking to a non-interventionist foreign policy is not likely.  The only way that the nation’s rampaging foreign policy will be checked is through an economic collapse or a severe dollar crisis, the latter of which would end the greenback’s status as the world’s reserve currency.

If America no longer has the means to fund its military around the world, its imperialism will quickly come to an end.  It is extremely burdensome on a domestic economy to maintain a global empire and one that is actively engaged in costly military operations.  If the nation’s economy severely contracts or the dollar can no longer be printed with impunity, the bombing of other peoples and political involvement in overseas affairs would have to cease, or be drastically curtailed.  A historical example of this is Great Britain after WWII.

As it stands now, only financial calamity will bring down the world’s foremost terrorist state.  If such a scenario comes about, the US may become the recipient of the destruction, loss of life, and mayhem it has unleashed upon the world.

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The BLS will publish the June jobs report at 830am ET on Friday, just hours after Trump declares trade war on China, and Beijing retaliates, slapping mutual tariffs on $34 Billion of Chinese and US exports.

Analysts expect 195k nonfarm payrolls (Goldman is at 200k) were added to the US economy in June, a decline from the 223k added last month and just below the 6-month average of 202K, with the far more important for the Fed’s tightening regime average hourly earnings print seen rising by 0.3% M/M, and from 2.7% to 2.8% an a Y/Y basis (any unexpected spike higher and watch out below). Meanwhile, Trump’s preferred indicator, the unemployment rate, is expected to remain unchanged at 3.8%.

Heading into the payrolls report, the whisper number is for a below-consensus print as a result of several factors including Thursday’s ADP private payroll data which came in below expectations in June, jobless claims edging up over the month, planned job layoffs rising in the month, and employment sub-components in the ISM and PMI surveys all moderating slightly.

Here’s what to expect tomorrow courtesy of RanSquawk

• Non-farm Payrolls: (Exp. 195k, Prev. 223k)
• Unemployment Rate: (Exp. 3.8%, Prev. 3.8%) (the FOMC projects unemployment will hit 3.6% at the end of 2018)
• Average Earnings Y/Y: (Exp. 2.8%, Prev. 2.7%)
• Average Earnings M/M: (Exp. 0.3%, Prev. 0.3%)
• Average Work Week Hours: (Exp. 34.5hrs, Prev. 34.5hrs)
• Private Payrolls: (Exp. 190k, Prev. 218k)
• Manufacturing Payrolls: (Exp. 15k, Prev. 18k)
• Government Payrolls: (Prev. 5k)
• U6 Unemployment Rate: (Prev. 7.6%)
• Labour Force Participation: (Prev. 62.7%)

LABOUR MARKET TRENDS:

Last month, the US added 223k nonfarm payrolls, above the 3-month moving average (179k – below 200k for the first time since January), the 6-month moving average (202k – fairly stable at this level over the last couple of months) and the 12-month moving average (197k – highest 12-month moving average since March 2017).

ADP PAYROLLS: The ADP reported 177k payrolls were added to the US economy in June, missing expectations of 190k. However, the previous figure was upwardly revised to 189k from an initially reported 178k. While the number was below the trend rate of payroll growth, analysts are unclear whether this was due to weaker demand, or a lack of supply. “At this stage it’s just not possible to know if this is a response to the uncertainty triggered by the trade tariffs and ongoing disputes with trading partners, or simply a reflection of diminishing labour supply,” Pantheon Macroeconomics wrote. The consultancy notes that the ADP’s estimate is based on an array of macro inputs, as well as last month’s official nonfarm payrolls data, whereas the official payroll data measures the actual number of new jobs, and Pantheon says “that is not necessarily the same as the number of people firms wanted to hire.” Nevertheless, Pantheon cuts its forecast for June’s nonfarm payroll figure to 170k from 200k.

LAY-OFFS: Challenger reported that job cuts for US-based employees rose by 18% to 37,202 in June, and up 19.6% versus June 2017. Challenger noted that it was no surprise that employers are hanging on to their current workforces, as four months of this year have seen job cut totals under 40,000. However, it added that in the wake of announced tariffs, we may be entering a period of increased cuts going forward. “The Trump Administration’s tariffs on steel have already begun to cost jobs”, Challenger said and “this figure could increase in the third quarter, as companies that import steel grapple with increased costs.”

UNEMPLOYMENT CLAIMS: Since the previous payrolls report, weekly initial jobless claims data has been trending between 218k and 231k (the latter was the latest print), and the four-week moving average has changed only slightly in that window, falling to 224,500 in the latest week, from 225,500 going into the previous payrolls report. The recent spike higher may be a result of seasonal quirks, some noted, and this may have further to run given that next week’s claims data covers the 4 July holiday, which often distorts seasonal adjustments.

BUSINESS SURVEYS: The employment sub-component in the manufacturing ISM report fell a touch to 56.0 from 56.3, extending a run of positive employment growth in the sector to a 21st straight month. “Employment maintained a modestly strong level of expansion and supported production growth during the month,” ISM said, “respondents noted labor market issues as a constraint to their production and their suppliers’ production capacity.” NOTE: an employment sub-index above 50.8 percent, over time, is generally consistent with an increase in the Bureau of Labour Statistics (BLS) data on manufacturing employment. For non-manufacturing sectors, the ISM’s employment sub-component fell to 53.6 from a prior 54.1, largely due to a reduction in employment in the accommodation and food services sector, the information sector, and educational services (three sectors reported decreases in employment, while 12 industries reported an increase). Respondents, however, said that “employee retention is getting much more competitive,” and “more clients awards, so need to hire more people.”

Finally, a qualitative take on tomorrow’s job report from Goldman:

Arguing for a stronger report:

Service-sector surveys. Service-sector surveys improved meaningfully n on net in June, and our non-manufacturing employment tracker rose 1.8pt to 56.7, close to its cycle-high. Service-sector job growth picked up to +171k in May after +109k in April, and job growth in the sector has averaged 141k over the last six months.

Manufacturing-sector surveys. Manufacturing-sector surveys were generally strong in June across both their headline and employment measures. Our manufacturing employment tracker rose 1.5pt to a cycle-high level of 60.6, and our headline aggregate also reached a new cycle high (of 60.7). This strength echoes commentary in the May Beige Book indicating that production activity “shifted into higher gear.” Manufacturing-sector payrolls rose 18k in May and have increased 26k on average over the last six months.

Labor supply constraints. We view the labor market as somewhat beyond full employment, and as slack diminishes further, this should exert upward pressure on wages and (eventually) downward pressure on job growth. In June however, labor supply constraints have historically been less binding. As shown in Exhibit 1, in years with relatively tight labor markets, payroll growth tends to accelerate in June. One potential driver of this tendency is that firms may aggressively hire students and recent graduates if they had difficulty filling positions earlier in the year.

 

Arguing for a weaker report:

ADP. The payroll processing firm ADP reported a 177k increase n in June private payroll employment, 13k below consensus. In past research, we’ve found that large surprises in the ADP report tend to be predictive of the subsequent nonfarm payrolls report, but the surprise in the June ADP data was relatively modest.

Job cuts. Announced layoffs reported by Challenger, Gray & Christmas edged up 2k to 40k in June (SA by GS), towards the middle of its 12-month range. On a year-over-year basis, announced job cuts rose 6k.

 

Neutral factors:

Jobless claims. Initial jobless claims rebounded during the five weeks between the payroll reference periods (averaging 224k vs. 214k in May and 232k in April) but nonetheless remain very low. Continuing claims continued their downtrend,  falling 35k between the survey weeks.

Job availability. The Conference Board labor market differential—the difference between the percent of respondents saying jobs are plentiful and those saying jobs are hard to get—pulled back by 1.4pt to +25.1 in June after reaching a 17-year high in May. The measure nonetheless remains elevated, and we note that job openings rose to a new all-time high of 6,698k at the end of April, according to the JOLTS report.

Weather. May job growth likely received a boost from warmer weather and payback from unusually high snowfall in March and April. Indeed, job growth in weather-sensitive industries (construction, retail, leisure and hospitality) was +77k in May, compared to the 12-month average of +52k. While temperatures were a few degrees above normal in June, we view weather as a neutral factor for month-over-month payroll growth in tomorrow’s report.

Finally, also note that the stock of unemployed job leavers is now high relative to the quit rate (see Exhibit 2), implying a longer-than-usual stint of unemployment for these individuals.

A normalization in the average “time between jobs” would exert further downward pressure on the unemployment rate. To Goldman this suggests that the jobless rate will dip by another 0.1% to 3.7%, a fresh cycle low.

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Authored by Dan Lyman via NewsWars.com,

Over 16,000 complaints have been logged with the City of San Francisco regarding ‘feces’ in the last seven days.

A website and related app that allows local residents to request maintenance or non-emergency services from the city has received 16,034 complaints with the keyword ‘feces’ in the last week at the time of this writing, and many pertain to human waste in public places.

Additionally, words and phrases synonymous with ‘feces’ are found in thousands more grievances.

Many of the complaints also connect the fecal matter to vagrants and homeless encampments – a sight all too common now across California.

Users can geotag the location in question, and also provide photos to support their claim.

“Homeless encampment is blocking sidewalk and creates a health hazard w trash and feces,” writes one user.

“Please move them, and send a cleaning crew. Sidewalk is impassable, forcing pedestrians into the street.”

“Homeless individuals sleeping along Funston between Clement and Geary,” writes another user. 


“Observed homeless people shooting up at 5pm on Monday, July 2nd. Lots of feces and garbage in the area. Please clean up area and see if homeless individuals need services.”

A local Fox affiliate reported earlier this week about a “big bag of poo” filled with approximately 20 pounds of feces discarded on a San Francisco sidewalk.

Residents filed multiple complaints with the city about the debris, and it was eventually removed.

“Strong smell of feces on post on block between cedar and post,” wrote one denizen. “There must be a ton of it somewhere nearby.”

“We don’t know what it’s from and we’re not going to test it,” said a Department of Public Works spokeswoman. “We just got rid of it. This is very unusual.”

In April, the International Union of Operating Engineers filed a complaint with the California Department of Transportation on behalf of Caltrans workers, alleging that their safety was being jeopardized due to a variety of factors, including human waste produced by vagrants living near freeways and associated property.

“Feces and urine and feminine products and all kinds of things on the ground; needles, syringes – you know they use buckets, five-gallon buckets for toilets, and it gets really disgusting,” said Steve Crouch, Director of Public Employees.

Infowars has been documenting the decay of California, which is now home to more than a quarter of the nation’s homeless population.

On January 1, 2018, California officially declared itself a “sanctuary state” for illegal aliens and criminals.

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This week on the MacroVoices podcast, host Erik Townsend welcomed Eric Peters, the CEO and CIO of One River Asset Management, for a discussion about the long-term future of the US economy, and how demographics, the expanding US debt, and the waning influence of central banks will impact growth, inflation and – most importantly – markets.

After a brief discussion about the future of USD hegemony, and the factors that could lead to the dethroning – so to speak – of the dollar, the two plunged into a discussion about one of the most vexing issues of the modern US economy: Why sub-4% unemployment hasn’t driven a runup in inflation back toward levels witnessed before the financial crisis.

We’ve all looked at the stats, and we’re now at an unemployment rate in the US of sub-4% – 3.8%–3.7%. I think what a lot of people focus on is if the participation rate were back where it was pre-2008 you’d end up with an unemployment rate that had an 8 handle or something like that. So that’s what people are referring to. But making comparisons like that is difficult because a lot of things are changing. The US labor force is shrinking because people are getting older. There is the opioid issue. And this disability issue. Which are difficult to really handicap in terms of how big an impact that’s having on the US labor force.

Up until recently, the actions of central bankers have been much more important to markets in a general sense than the behavior of politicians. But that’s about to change…

If the central banks have been the ones who have gotten us here, they just – by definition – they’re not the ones that are going to get us out of here. So I think – look, we’re always going to look at what central banks are doing, they will be important. But I think that they’re no longer going to be dominant. What’s going to be dominant are the politicians. You’re seeing that in the US right now. I know that everyone loves to hang on every word that Powell speaks. And they look at the Fed statement. And people are still trained to look at the Fed dot plots (which are probably going to go away). People are trained to look at all of these things because that’s what they’ve done their whole careers. But they just are not going to matter that much anymore. Whether the Fed’s terminal rate is 2.25 or 2.5 or 2.75 – we’re not talking about much. What are we going to do in terms of immigration policy? What are we going to do in terms of trade policy? How is that going to impact all of the major corporations’ global supply chains? These are the things that are really going to matter.

With the interview drawing to a close, Townsend asked for Peters’ thoughts about the popular macro view that shifting demographics (aka a shrinking population) will deliver long-term deflation, and a secular bear market in equities. In theory, fewer consumers equals less demand for goods (and financial securities). But Peters believes the opposite is just as likely: That Millennials and Generation Z will face a spike in inflation as the stock of consumers outpaces the stock of workers.

But as you really start to age, what happens is the labor force shrinks dramatically (in this really simple society), the retired pool expands rapidly. All of a sudden you have a lot of demand because, while the older people may be consuming less than when they were actively working, they’re still consuming. And you have very few workers left.

And, ultimately, in that society you end up with huge inflation in the price of labor, whether it’s for producing goods at a factory or for services. You ultimately end up with all the old people exchanging all of their financial assets and their homes for even the most basic services. I kind of joke, the last person will exchange their house for one last diaper change. And that’s – if you take it to the extreme – that’s kind of what that society looks like.

Peters devoted the final minutes of the interview to dispelling the notion that, over time, equity prices always move higher. One result of Japan’s decades of deflation and economic stagnation is that the Nikkei is – in nominal terms – unchanged since 1987.

Okay, really high-level. People assume that equities always go up. And they certainly have been for an awful long time in the US. But they can go through really long periods of sideways movement.

If you look at the NIKKEI – I started my career in 1989. The NIKKEI today, in nominal terms, is where it was in 1987. It’s where it was before I started my career. It’s moved sideways during that period. The S&P is up over 800% in that period of time. So we’ve outperformed the NIKKEI from 1987 by over 800%. Euro Stoxx, European, their big equity index, it is unchanged from where it was in 1998 – 20 years ago. We’re up 130% during that period of time, the S&P 500. And the Shanghai Composite is unchanged from where it was in 2006, at this point. So it’s unchanged over the past 12 years, despite the enormous real and nominal GDP growth out of China. Their equity market is flat for 12 years. We’re up 90%.

So it’s just a reminder that we go through these periods of assets doing extremely well – pricing in all kinds of robust growth for the future – and then periods where they can obviously have big corrections, but even over long periods of time they can just move sideways.

Listen to the full interview below:

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Authored by Jeff Thomas via InternationalMan.com,

For many years, I’ve forecasted that the US will evolve into a police state; that it will begin slowly; then as more and more freedoms are removed, the creation of the police state will accelerate.

We’re now seeing that acceleration, as more and more Americans are detained, questioned, and having their property confiscated than ever before.

As an example, in 2016, some 20,000 travellers in and out of the US were stopped, often at random. Typically, their baggage was searched, their documents photocopied, access codes to their electronic devices demanded and their files copied. In most cases, no explanation was given, but they were advised that if the search was refused, they would be detained indefinitely.

The following year, in 2017, the numbers of people detained rose by 50%, to 30,000.

It’s important to note that the travellers were not threatened with arrest, which suggests that the authorities were working on the basis that the Patriot Act of 2001 allows all of the above activities – without cause being given, without a warrant being obtained, without access to a phone call or legal representation being allowed, and that the individuals in question may be detained, indefinitely.

This, of course, is in direct violation of the Fourth Amendment to the Constitution, which states that people have the right “to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures.”

However, when people travel, they are particularly vulnerable, so the travellers in question are extremely unlikely to refuse. They understand that, “indefinitely” means, “until a Supreme Court ruling is passed, overturning the Patriot Act as unconstitutional.” If it hasn’t happened yet and isn’t under consideration, it’s safe to say that the level of police state allowed under the Patriot Act is permanent.

Police States have been implemented countless times throughout history. They tend to be most prominent where collectivism has already been instituted.

Wherever collectivism is already firmly established, new crackdowns are generally introduced suddenly. In Germany, in 1938, under existing Nazi rule, Kristallnacht took people by complete surprise. Later, in 1961, under existing Soviet rule, the Berlin Wall went up with no previous announcement. In both cases, the collectivist tyranny was already in place and the people had already successfully been subjugated. These events were merely further losses of freedom.

But what of a country that still enjoys a few of its former freedoms and is in the process of being transformed into a full-blown collectivist state? Well, in such cases, the loss of freedoms is often done in slo-mo.

Another way of describing this is the old adage of boiling a frog. Since a frog will jump out of a pot of hot water, place him in a pot of lukewarm water and slowly turn up the heat. Before he knows it, he’s being boiled to death.

Likewise, when the intention is to convert a country to collectivism, make the early changes in stages. Get the people to accept that the losses of freedom are for the benefit of their safety. Then, the further along you go, the more you can accelerate the process.

At present, a majority of Americans appear to now understand that they’ve experienced a significant loss of their “guaranteed” freedoms. They’re now worried and, at each new stage of oppression they tend to say, “I’m not happy about this, but I can probably live with it… and, besides, they say that they’re doing it for my own safety.”

However, I think that it’s safe to say that a family returning from a holiday that’s just been isolated from each other, interrogated separately, frisked, had all their belongings pored through and copies of their papers and electronic files taken, without even being told the reason, does not feel as though it’s been done for their safety.

Remember, the 30,000 above were just hoping to reach their destination with no trouble from anyone. A generation ago, they never would have tolerated such a violation to their rights. But now, they submit and accept whatever they’re told to do.

But, upon release, they most likely assumed that the authorities had been looking for something specific. They were not. In recent years, there have been very few actual prosecutions from such Gestapo-like shakedowns, in spite of the copying of documents and confiscation of minor items. The object here is not to prosecute anyone; it is to teach people to submit.

This will be important later on.

What we’re witnessing is a loss of freedom in slo-mo. Just as Germans stood by and accepted Kristallnacht; just as they stood by and watched the Berlin Wall be built that would close off their freedom of migration, the great majority of Americans ultimately will stand by and watch the last of their freedoms be removed, because they’ve already been trained to submit to whatever indignities and restrictions are placed upon them.

After World War II, Lutheran Pastor Martin Niemöller was questioned as to how he and other Germans could possibly have simply stood by and watched as freedoms were removed, resulting eventually in total domination of the German people. He said,

First they came for the Socialists, and I did not speak out because I was not a Socialist.

Then they came for the Trade Unionists, and I did not speak out because I was not a Trade Unionist.

Then they came for the Jews, and I did not speak out because I was not a Jew.

Then they came for me – and there was no one left to speak for me.

Pastor Niemöller was able to make the above statement in 1976, as he was one of the few survivors of the concentration camps.

But, in addition to the above insight, there’s another very significant lesson to be learned here. Historically, whenever a government is instituting the transition into a collectivist state, one of the early warnings is a limitation on travel outside the country (getting the people used to the idea that they don’t have a right to leave). The US has now reached that point. The next development will be to teach them that, by travelling outside of the country, they are automaticallysuspect. The implication will be money laundering, drug trafficking, or terrorist activities.

Whether it’s accomplished through the use of a physical barrier, such as a wall, or through the intimidation of random searches and interrogations, as is presently underway in the US, or whether it’s simply the appearance of armed guards in ports of exit (like the armed guard in the photo above), the objective is not to obtain copies of your emails to your friends, or to go through socks in your luggage. It’s to teach you that your rights have been lost and you are expected to submit to any and all indignities and restrictions imposed on you.

Historically, the end-product is always the same. The final acceptance that you’ve waited too long to leave the increasingly oppressive country—and that you’ve been successfully locked in.

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A day before the White House’s first round of China-specific tariffs are set to take effect, Bloomberg is reporting that President Trump has narrowed down his list of potential Supreme Court candidates to three federal appeals court judges: Amy Coney Barrett, Brett Kavanaugh and Raymond Kethledge. Among these three candidates, Trump is said to favor: Kavanaugh and Kethledge, according to two insiders.

Meanwhile, Trump has reportedly interviewed at least seven candidates to replace outgoing justice Anthony Kennedy. Trump has said he’ll name his nominee July 9, and the White House aims to have Kennedy’s successor confirmed in time for the court’s next session in October. That could be difficult as legislators head out for their summer recess, as Bloomberg reminds us.

The confirmation process promises to be a fight. As soon as Kennedy announced his retirement plans in late June, Democrats mobilized against Trump’s eventual pick, arguing that anyone he selects would help roll back abortion rights, Affordable Care Act protections, same-sex marriage and scores of other decisions that have shaped modern America while ruling in favor of corporations and against under-represented minorities.

Even though Democrats pulled out the so-called “nuclear option” back in 2013 to make it easier to push through presidential nominees, Republicans’ slim 51-49 advantage means that the success of Trump’s nominee will turn on a handful of moderate votes from Senators like Alaska’s Lisa Murkowski. Murkowski and her moderate peers like Susan Collins of Maine are wary of approving a justice who would support the overturn of Roe v. Wade.

The confirmation process promises to be a fight. As soon as Kennedy announced his retirement plans in late June, Democrats mobilized against Trump’s eventual pick, arguing that anyone he selects would help roll back abortion rights, Affordable Care Act protections, same-sex marriage and scores of other decisions that have shaped modern America while ruling in favor of corporations and against under-represented minorities.

With Republicans holding just a 51-49 advantage in the Senate, the fate of the nominee will turn on a handful of Senate outliers in both parties — Republicans who support abortion rights and Democrats who don’t.

Barrett, 46, is currently on the 7th Circuit Court of Appeals after being nominated by Trump in mid-2017 and confirmed in October. Before joining the bench, she was a professor at Notre Dame Law School, her alma mater, and two decades ago, clerked for the late Supreme Court Justice Antonin Scalia. Like four of the five Christians on the court, Barrett is a Roman Catholic. If confirmed, she would be the fifth woman to join the court and one of four currently on the court.

Responding to a question about Barrett during an interview on Air Force One last month, Trump praised her profusely, calling her “an outstanding woman.” Meanwhile, hobbyist forecasters placing bets in the online market see Kavanaugh as the frontrunner, with Kethledge representing a close second.

Kavanaugh, 53, is a judge on the US Court of Appeals for the Washington DC circuit who has a background in politics. Before he was nominated to the Washington DC circuit court back he was Bush’s White House staff secretary and worked for Bush during the 2000 Florida vote recount. He also played a lead role in drafting Independent Counsel Kenneth Starr’s 1998 report on Bill Clinton. He is a Yale Law School graduate.

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Authored by Mark Glennon via Wirepoints.com,

As America celebrates its Independence this week, it seems only right to consider the most far-reaching questions raised by Illinois’ crisis:

Did the Founding Fathers miss something? Did we miss something the Founders stood for? Is our form of democracy fundamentally flawed?

The importance of those questions is part of why Wirepoints exists, and why we hope other states follow Illinois’ story.

Illinois inherited assets most states and nations would envy. Its GDP remains larger than all but fifteen countries of the world. More importantly, it inherited constitutional self-government.

But it’s failing.

Illinois is bankrupt. The state and many of its towns and cities sink further into insolvency each day — the facts and numbers are irrefutable. Illinois government is morally bankrupt as well. Its moral insolvency is less quantifiable but no less apparent. Graft, both legal and illegal, is exposed incessantly, usually to no end. Scandal fatigue overtook the state long ago. Numbed voters left politicians free to do little good and plenty wrong. Not a single major reform, fiscal or otherwise, is currently under serious consideration in Illinois.

How can a democracy have done this to itself?

The reasons are myriad. Many are debatable. Some are particular to Illinois. Most of the 20,000 articles we’ve linked to or written on this site are about those reasons.

But on the overarching question of universal importance – whether Illinois has exposed some fundamental flaw of democracy – the story hasn’t ended. Nobody knows how Illinois’ crisis ultimately will sort out, but there is reason for qualified, partial optimism, albeit over a long time with much pain in the interim.

That optimism derives from the likelihood that much of our crisis will be resolved in courts — federal courts exercising their place in the federal system we inherited — and the hope that those courts will honor the foundational principles of American government. The Founders’ foresight, not their failure, perhaps may yet shape Illinois’ history. Perhaps.

The initial questions that might end up in the federal courts have already gotten some attention. If Illinois amended its constitution to delete its pension protection clause, would the United States Constitution’s Contract Clause still prohibit pension reform? Could the federal Bankruptcy Code be amended to allow bankruptcy for states? Could some other form of federal legislation authorize adjustment of pension obligations? And if Illinois eventually authorizes bankruptcy for municipalities, which is probably unavoidable at some point, many questions about that process remain unanswered by courts.

More fundamentally, it’s only a matter of time before a federal court faces a situation somewhere in Illinois where essential, basic government services fail. A court will face a “police power” question, as it’s called.

Illinois courts have frowned on the concept but federal courts recognize it in exceptional circumstances such as those Illinois eventually will face.

It’s that concept that I suspect will become central and will be recognized in some fashion, whether under the label “police power” or otherwise. Government must function. Though the Illinois Supreme Court has essentially read the state constitution to be a suicide pact, permanently committing the state to pension obligations that are insurmountable, federal courts, I hope and expect, will see things differently.

Perhaps they will even give life to the Guaranty Clause in Article IV of the United States Constitution. Through it, the Founders affirmatively obligated the federal government to guaranty to every state a “republican form of government.” Never mind what “republican” means for now. We’ll come back to that. At a minimum, it means a government of some kind. If basic services truly fail, federal courts will seek to restore them. They will find a way, and the Guaranty Clause would help if it were honored.

A conspicuous portion of the Janus decision handed down last month by the Supreme Court is pertinent. The majority of the court seemed to go out of its way to describe Illinois’ financial problems. Because they are so grave, the court held that the First Amendment prohibited forced union membership because a member should be free to advocate as he chooses on them. “To suggest that speech on such matters is not of great public concern is to deny reality,” the Court said.

The depth of Illinois’ problems, in other words, influenced the Court’s ruling on the First Amendment. So it will be, I suspect, on other Illinois matters ending up before the Court.

But democracy in Illinois does have a flaw that federal courts probably cannot undo. It’s one Benjamin Franklin identified: “If when the people find that they can vote themselves money that will herald the end of the republic.”

That’s Illinois.

Alexis De Tocqueville, author of Democracy in America, warned of the same thing in 1835: “The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.”

Did the Founding Fathers indeed leave that issue unaddressed?

No. but their check on it has faded away.

The Founders didn’t believe in democracy. They all believed in republicanism — indirect democracy with firm protections for minorities that trump simple majority rule. Republicanism, they believed, provided the check on tyrannical majorities.

“A democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty-nine,” said Thomas Jefferson. From John Adams, “Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself.”  At the Constitutional Convention in 1787, Franklin was asked if we got a republic or a monarchy. With no hesitation, Franklin responded, “A republic, if you can keep it.”

We haven’t kept it. Illinois government wields unchecked power incompetently and voraciously. Homes, particularly in lower income communities, have been confiscated by absurd property taxes used to pay pension promises that were awarded through legislative incompetence and legal bribery. Unfunded mandates became ubiquitous, making the simplest fiscal reforms impossible for municipalities. Legislative maps drawn by legislators let politicians pick their voters instead of the other way around.

In short, statism replaced republicanism. The coalition majority in Illinois became rapacious and tyrannical, exactly as the Founders feared.

Undoing the power of that tyrannical majority in Illinois, however, will be difficult. Federal courts cannot be expected to do it alone because so much of that coalition’s power has become institutionalized, in contrast to the republic the Founders envisioned. The job will be left to the electorate and, in Illinois, the majority of the electorate has shown little understanding of the nature and depth of the state’s problems.

So, has democracy failed in Illinois? Yes, but don’t blame the Founders or their vision of government. Maintain a degree of optimism that federal courts will end up enforcing constitutional checks the Founders gave us and hope Illinoisans eventually will see fit to endorse some state version of the foundational principles the Founders envisioned.

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The Manhattan real estate bubble appears to have just burst – as 54% of sales in the second quarter closed below asking price, according to Bloomberg. The lowball offers coincide with a significant 17% decline in sales vs. 2017 – resulting in the lowest second quarter tally since 2009.

Manhattan homebuyers are getting bolder these days, demanding bargains or walking away from deals in a market where inventory is swelling. In the three months through June, purchases fell 17 percent from a year earlier to 2,629, according to a report Tuesday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. That was the lowest tally for a second quarter since 2009, when the global recession chilled deals. –Bloomberg

Meanwhile, 37% of sales closed at asking price, however as Bloomberg notes, prices had already been reduced in many cases. Combined, “the share of purchases without a premium was the biggest since the end of 2012,” at 91%. 

“It’s about perception — that the market went way up, and it went way up real fast, and it’s not happening anymore, and I am not going to be the fool who gets burned by overpaying,” said Douglas Ellman CEO Steven James, who adds that buyers “do believe that over time, the market will go up, but it’s not going up right now.”

Meanwhile, the median price for Manhattan homes sold in Q2 dropped 7.5% to 1.1 million – the second year-over-year decline, according to the firms, while the number of homes listed for sale (6,985) at the end of June jumped 11% over last year; the most in the second quarter since 2011. 

The sales slump is likely to continue this year. Contracts to buy homes fell 9 percent from a year earlier to 3,108, the lowest number of pending deals in a second quarter since 2011, brokerage Corcoran Group said in its own report Tuesday. –Bloomberg

“We are in a price correction, there’s no doubt about that,” said Hall Willkie, co-president of brokerage Brown Harris Stevens. “Buyers are very resistant to paying anything that isn’t justified.”

Brown Harris Stevens, in a joint report Tuesday with Halstead, said previously owned Manhattan apartments sold at the biggest discounts off their asking prices in five years in the second quarter.

On the Upper East Side, the median price for three-bedroom resales tumbled 16 percent from a year earlier to $3.075 million, according to the report. Similar apartments on the Upper West Side sold for a median of $3.13 million, down 6 percent. In that neighborhood, the median for two-bedroom resales dropped 5 percent to $1.49 million, and the one-bedroom median fell 4 percent to $785,000.  –Bloomberg

“There was a time for many years that if buyers had the money and they were asked to pay 10 percent above comparables, they said, ‘You know what? It will be worth that next year or in two years, why not?’” Willkie said. “That mentality is gone.”

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