Michael Avenatti Rules Out Running For President In 2020

Since sending out his first trial balloon announcing his intention to seek the 2020 Democratic nomination for president back in October, a lot has changed in the life of “creepy porn lawyer” Michael Avenatti.

And most of that change has been bad.

First, he was accused by his 24-year-old actress girlfriend of domestic abuse and was arrested by the LAPD.  Then his firm was evicted from its office. And his star client, Stormy Daniels, distanced herself from him during an interview, where she also said he launched a ‘legal defense fund’ in her name without her permission.

Avenatti

And though the (formerly) wealthy California lawyer has never demonstrated a pragmatic view of reality, it seems he is preemptively giving up on his dream of challenging President Trump for the presidency in 2020. In a statement released Tuesday, Avenatti said that “after consulting with my family” he no longer intends to seek the 2020 nomination.

Ironically, the lawyer – who has never demonstrated a firm grip on reality – concluded his statement by urging the Democratic Party to find a candidate who would actually have a chance of winning against Trump (Avenatti courted controversy earlier this year when he demanded that the Dems nominate a white man to battle Trump in 2020).

“I remain concerned that the Democratic Party will move toward nominating an individual who might make an excellent president, but would have no chance of actually beating Donald Trump.”

While almost nobody in the world of mainstream politics took Avenatti seriously, he had still managed to recruit a few former Clinton advisors to be “informal” advisors should he decide to launch his campaign – something he had been expected to announce as soon as this month.

Sadly, the American people will now be deprived of all the juicy oppo research findings that Avenatti’s rivals would likely unearth.

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Here Is What Triggered Today’s Sudden Stock Liquidation

Earlier this morning, Nomura’s Charlie McElligott noted something which in retrospect was quite prophetic: the cross-asset strategist highlighted that his Risk Parity model showed that the market’s most important strategy is in “de-risking” mode as the economic cycle turns sharply:

In a positioning confirmation / “nod” then to this growth- and inflation- slowdown scenario, it is finally worth noting that we see our Risk Parity model having added enormous notional size in global Government Bonds (USTs and JGBs) over the past month, against very large selling of global Equities and Credit.

The implication, and confirmation judging by today’s market, is that the trade was a long way from finished, looking at the recent risk parity deleveraging in equities…

… offset by buying of gov’t bonds.

But while ongoing (relatively slow) risk parity deleveraging may explain the pressure on the market over the past month, the reason for the sharp waterfall in US stocks just after 12pm ET…

… has to do with another systematic “trader” type in the market: namely the much faster CTAs.

As McElligott writes in a follow-up note, he notes that Nomura’s CTA Trend model “is again deleveraging massive notional in long US Equities expressions across SPX, RTY and NDX live.

This is more about performance and year-end timing than the curve inversion / “growth scare” story…but that certainly is not helping the sentiment here either, as stops are being triggered across fundamental and rules-based strats.

More importantly, McElligott identifies the specific deleveraging “trigger” behind the S&P waterfall liquidation, which was due to a massive CTA selling order, which was unleashed once deleveraging stops were hit in the S&P. Specifically, the SPX model was triggered to sell down at 2,763 with $32.8B notional for sale, reducing CTAs from “+100% Max Long” down to “+65% Long.”

It could get even messier if the S&P drops another 20 or so points, as the next sell point just under 2,711, where -$32.4B additional notional for sale, with “Max Short” level now lower at 2574, at which point the market would be flooded with -$122B notional in selling volume.

And here are the CTA trigger points visually.

 

 

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Fallout 76 Will Trigger Your Existential Crisis

If you’re anything like me, playing Fallout 76 is likely to provoke bouts of existential self-examination.

The game raises questions, such as: Who am I? What is the meaning of life? Is there a purpose to my existence? Is it to scour a desolate virtual landscape looking for desk fans while being pummeled by super mutants? To engage in clunky, frustrating shoot-outs with irradiated human husks that somehow manage an astonishing level of accuracy with various firearms? Or maybe to talk to funny robots and listen to audio diaries of dead survivors of a nuclear apocalypse while trying, pathetically, to build a defensible little fort that I will inevitably lose due to a game-breaking glitch that any real-world insurance agent, even the most devout atheist, would doubtlessly categorize as an act of god?

But mostly: Why, dear lord, why am I still playing this game?

Over the past decade or so, I have played hundreds and hundreds of hours of Fallout games—Fallout 3, Fallout: New Vegas, and Fallout 4—and I’ve spent similar amounts of time in the Elder Scrolls games, the sister series of role-playing games created by Bethesda Softworks. And while those games have occasionally caused me to wonder just what, exactly, I am doing with my life, I have always been able to provide an answer: I play for the stories, for the characters, for the world, for the systems of emergent gameplay, for the sheer, overwhelming, immersion of these massive, ridiculous games. And — if I am being honest—every now and then, I play for the desk fans.

To understand why Fallout 76 is such a frustrating mess of a game, you have to understand the appeal of previous games in the Fallout franchise. Since the 2008 release of Fallout 3, the main entries in the series have been single-player open-world role-playing games that you play in a first-person perspective, a lot like a modern shooter. Think of a futuristic, video-game version of Dungeons & Dragons, played by yourself, which you experience looking down the barrel of a gun (or a spiked baseball bat, or a powered punching glove, or a deathclaw gauntlet, or…you get the idea). But the Fallout series differs from conventional first-person shooters in some notable ways. First, unlike nearly all other shooters, the combat doesn’t occur exclusively in real time. There’s a gameplay mechanism called the Vault Assisted Targeting System (V.A.T.S.) that allows you to freeze or slow time, targeting specific parts of specific enemies, making the experience resemble a “turn-based” game like X-Com or Shadowrun or, for that matter, classic tabletop role-playing games like D&D. There are no 20-sided dies present, but the game involves a lot of hidden dice roles. This slows down the pace and makes it more contemplative and tactical, inasmuch as a video game shootout with a horde of mutated rat creatures can be.

Second, the emphasis is as much on story and character as on combat. You spend a lot of time in dialogue trees with various computer-controlled non-player characters, or NPCs. Some of these NPCs have very little to say; they are little more than information kiosks with faces. But in each of the previous games, there were more than a few memorable characters—a robot detective, an Elvis impersonator who ran a gang in a lawless part of town, a freedom-fighting retro radio DJ, irradiated ghouls who have somehow maintained their intelligence, and so on and so forth. In some cases, these characters become your traveling companions, and you spend a lot of time with them, getting to know their quirks and preferences. These are games with a surfeit of personalities, and they give the series a lively sense of the breadth and depth of human (and post-human) weirdness at the margins of existence.

It’s not just about the characters, though. It’s also about the world. The games are set in sprawling mock-ups of post-apocalyptic cities—Boston, Las Vegas, Washington, D.C.—that make deft use of environmental storytelling. Even when you’re just aimlessly wandering, you encounter scenic dioramas that tell succinct stories, often about someone’s untimely end. Some of these scenes are blackly comic; others are tragic. You end up feeling a little like a murder detective, traipsing through a world filled with the dead, examining clues to how they lived and died.

You also run across countless cities and communities, cobbled together from the ashes of the old world, struggling to eke out a measure of survival in a harsh world. Many of these ramshackle communities have ruling orders—governments or town leaders or family elders—and the storylines often revolve around internal political disputes and squabbles over local politics. The Fallout games are premised on the assumption that most people will self-organize into little bands and tribes, that most will be peaceful and some will be violent, and that, in any case, shabby politics will inevitably intrude and make life a little less pleasant. They are set in a world where government has failed, and where it continues to fail.

You also find a whole lot of leftover, pre-apocalyptic crap. In the Fallout games, there are a huge number of minor objects you can interact with: everything from paint cans to soda bottles to brooms and hot plates and batteries and duct tape and boxes of ancient cleaning products and cereal—and, well, desk fans. These items can be traded to in-game vendors or consumed for health, or, in Fallout 4, broken down and turned into parts that can be used to upgrade your weapons and armor, allowing you customize your armor and armory to a fairly obsessive degree, so long as you’re willing to pick through the heaps upon heaps of stuff the game scatters around the world.

You can also build homesteads in certain locations, setting up what are essentially defensible farms. The more you build, the more they become populated by computer-controlled locals, who scrape at the ground and gripe about the misery of existence and occasionally fight off gangs of AI raiders. You’re not just a scavenger; you’re a wasteland combo of our last two presidents, part real estate developer and part community organizer.

It’s possible to spend as much time scrapping aluminum cans, collecting glue bottles, and upgrading sniper barrels as you do fighting gigantic mutant spider-creatures. (In this way and others it’s more than a little like No Man’s Sky.) The games are virtual havens for those with crap-collector tendencies, and they tend to turn even the most committed minimalists into into hoarders, junk hunters, and DIY weapons enthusiasts. The appeal is in the expansiveness and immersion of the worlds, and the sense of endless opportunity they offer.

Fallout 76 resembles its predecessors in many ways: The open-world exploration, the clunky combat, the mountains of reusable junk. But it differs in one crucial aspect: You don’t play alone.

Instead of computer controlled NPCs, every single other person you encounter is controlled by a real human being here in the real world, who is interacting with the same game world, at the same time as you.

Doin' it for the desk fans. There are story reasons for this; the game is set in the ruins of West Virginia early in the Fallout timeline—after the nuclear war, but before humanity began to resettle the planet. But it changes the experience from a rich, lonely fiction into an awkward social nightmare. Somehow, it makes the game feel more lonely than ever.

It means, among other things, that the combat now takes place entirely in real time, since you can’t slow time for one player but not another. (A V.A.T.S. system still exists, but it’s a kludgy, real-time auto-aim that often works less well than just pointing and shooting.) It means that there are no robot detectives or freedom-fighting DJs to meet, no surprisingly intelligent irradiated ghouls to befriend. It means that every community you find is dead, and that the stories are all told via the audio logs and notes of survivors who ultimately didn’t survive. There are a handful of friendly robots, but they exist primarily as vendors or dispensers of mission details; they are as interesting to converse with as an automated telephone system. Press seven to start your next boring quest.

Yes, the game carries over the series’ bleakly comic skepticism of government and politics (an early mission that takes you through a bombed out capitol building filled with notes and recordings that tell a story about corrupt dealings between politicians and local mining interests). But the “characters” are all long expired; the narratives are just diaries of the dead. As a result, the game feels cold and lifeless, like a long walk through a fictional mausoleum.

When you do happen to encounter another player, it disrupts any sense that you’ve been transported to a fictional place. Looting hot plates from a bombed-out skyscraper is still fun, in a way, until you run into Woodchipper67 or BernieFanSince09 trawling through the same building. In theory, you could team up with these people, but it’s not clear why you’d want to; game objectives must still be triggered individually, coordination opportunities are limited. Fallout 76 is just more proof that hell is other people.

The presence of others is also a huge departure from the isolation that made previous entries in the series so enjoyable. When I play a Fallout game, I want to lose myself in an immersive post-apocalyptic landscape set against the ruins of a dysfunctional America. Adding a social aspect makes it more like Twitter.

Okay, bad analogy.

What all this means is that the core of Fallout 76 is collecting and modifying stuff: hunting for junk, scrapping it, and using it to build up your weapons, armor, and home base. The game takes the base building system from Fallout 4 and emphasizes it even further, but drops the socio-political aspect. You’re no longer a settlement organizer; you’re just building a hideout for yourself…so that you can…do more of that. It feels pointless. It is pointless. But you search and collect and scrap your way through the game anyway, because that’s all there is to do. In Fallout 76, it’s all desk fans.

It doesn’t help that the game is riddled with bugs. Once again, the social aspect makes this worse. Previous Fallout games have been glitchy, but you could usually go back to a recent save. Because 76 is always online, there’s no conventional saving (saving is essentially a way of reversing time), so if you’re inexplicably booted from the server, you often end up outside of the quest area, forced to fight your way through enemies you’ve already killed again. There are other issues: Enemies appear in front of you with no warning, your base disappears, the stuff you’ve collected becomes inaccessible. The problems are so frequent and so infuriating that I sometimes wondered if the developers were actively attempting to undermine my play. Why was I playing this game?

Arguably more than any other form of entertainment, video games implicitly raise the question: Are they worth your scarce and precious time? The best video games, like the best novels or television shows or board games, are in some sense self-justifying: In exchange for your time they offer beauty, amusement, cleverness, suspense, wit, drama, pleasure, or escape. Up until now, the Fallout franchise has offered enough of these to keep me coming back. Fallout 76, sadly, fails to justify its own existence. This wasteland journey is just a waste.

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Cable Slides To 18-Month Low After May Loses Historic Contempt Vote

The pound has fallen to its lowest level of the year after Theresa May lost a key Parliamentary vote on Tuesday that will force her administration to publish legal advice that she had hoped to keep secret. After her government was found in contempt by Parliament – 321 to 221 – for defying an earlier vote demanding that No. 10 Downing Street release the full details of Attorney General Geoffrey Cox’s legal advice on May’s Brexit Treaty.

May elicited widespread outrage on Monday when her office released a “detailed summary” of Cox’s legal advice that many suspected stripped out controversial findings about the possibility that the UK could become “trapped” within the EU Customs Union if a new trade deal with the EU wasn’t reached before the end of the transition period in 2020. A prime minister being found in contempt in Parliament is an action without precedent in recent British history. Cable dropped to a $1.2656 on the vote – its lowest level since June 2017.

Pound

What’s worse, this stunning defeat comes on a day when debate over May’s plan was supposed to begin ahead of a planned Dec. 11 vote. Andrea Leadsom, leader of the House of Commons, said the government will begrudgingly release the full legal advice on Wednesday.

As analysts were quick to point out, this doesn’t bode well for May’s prospects for passing her deal.

“The outcome from the government contempt vote could be an early indication that the proposed Brexit deal may not pass the House next week,” Credit Agricole strategist Valentin Marinov.

 

 

 

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Resources Have Become Nearly 5 Times More Abundant Since 1980

ProgressHumanity is enjoying a world of increasingly cheap and ever more abundant mineral, argicultural, forestry and energy resources reports a brilliant new study, the Simon Abundance Index. This analysis by Marian Tupy,* editor of Human Progress at the Cato Institute, and Professor Gale Pooley from Brigham Young University – Hawaii uses data on 50 different commodities to track their price trajectories over the past 37 years from the World Bank and International Monetary Fund. They find in real price terms their basket of commodities decreased by an average of 36.3 percent between 1980 and 2017.

That’s great, but their breakthrough insight is that, since 1980, global real hourly income rate per capita has grown by more than 80 percent, which means that the commodities that took 60 minutes of work to buy in 1980 now take only 21 minutes of labor to buy in 2017. As a result, the “time-price” of their basket of commodities has fallen by 64.7 percent.

Tupy and Pooley also devise a price elasticity of population (PEP) measure that finds that resource abundance increases faster than population does. In economics, they explain, elasticity is a measure of a variable’s sensitivity to a change in another variable. They report:

Between 1980 and 2017, the time-price of our basket of commodities declined by 64.7 percent. Over the same time period, the world’s population increased from 4.46 billion to 7.55 billion. That’s a 69.3 percent increase. The PEP indicates that the time-price of our basket of commodities declined by 0.934 percent for every 1 percent increase in population.

[P]eople often assume that population growth leads to resource depletion. We found the opposite. Over the past 37 years, every additional human being born on our planet appears to have made resources proportionately more plentiful for the rest of us.

Tupy and Pooley combine their findings with regard to time-price and PEP trends to derive the Simon Abundance Index (SAI). The index is named in honor of University of Maryland economist Julian Simon. Simon famously bet Stanford University population bomber Paul Ehrlich and his colleagues that the real prices of a basket of commodities chosen by Ehrlich priced $1,000 would decline between 1980 and 1990. In October 1990, Ehrlich mailed Simon a check for $576.07, meaning that the price of the commodities had fallen by more than 50 percent.

The new SAI, explain Tupy and Pooley, represents the ratio of the change in population over the change in the time-price, times 100, with the base year at 1980 and a base value of 100. They report that “between 1980 and 2017, resource availability increased at a compounded annual growth rate of 4.32 percent. That means that the Earth was 379.6 percent more abundant in 2017 than it was in 1980.”

They also report that the SAI rose to 479.6 in 2018, meaning the Earth was nearly five times more plentiful with respect to the 50 commodities they track than it it was when Ehrlich and Simon laid their famous wager. What about the future? Tupy and Pooley calculate if current trends continue that “our planet will be 83 percent more abundant in 2054 than it was in 2017.”

“The world is a closed system in the way that a piano is a closed system. The instrument has only 88 notes, but those notes can be played in a nearly infinite variety of ways. The same applies to our planet,” write the authors. “The Earth’s atoms may be fixed, but the possible combinations of those atoms are infinite. What matters, then, is not the physical limits of our planet, but human freedom to experiment and reimagine the use of resources that we have.”

The SAI devised by Tupy and Pooley elegantly refutes the primitive zero-sum intuitions peddled by the likes of Ehrlich and his acolytes that afflict so much of popular and policy discourse with respect to population and resource availability trends.

*Disclosure: Marian Tupy and I are working together on book that tracks and explains nearly 100 global population, income, commodity, and environmental trends.

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Strand Bookstore Owner Says NYC’s Efforts to Preserve Her Building Could Doom It

The owner of the famous Strand Bookstore in Manhattan doesn’t want the city’s help preserving her building. She doesn’t want tax breaks or government subsidies. She just wants to be left alone.

But the city may have other ideas. Nancy Bass Wyden was set to attend a public hearing today before NYC’s Landmarks Preservation Committee (LPC). In September, the commission agreed to begin the process of designating the Strand and six other area buildings as historic landmarks. Later, the LPC’s Research Department issued a designation report calling the Strand “a center of literary life in Lower Manhattan” and “an internationally recognized bookstore and destination,” according to The New York Times. The building is also notable for its architectural style and for the fact that renowned architect William H. Birkmire helped design it, the report said.

So why doesn’t Wyden want her building, which is worth roughly $31 million, to be designated a historic landmark? It’s simple. The Times reports:

Like many building owners in New York, Ms. Wyden argues that the increased restrictions and regulations required of landmarked buildings can be cumbersome and drive up renovation and maintenance costs.

“By landmarking the Strand, you can also destroy a piece of New York history,” she said. “We’re operating on very thin margins here, and this would just cost us a lot more, with this landmarking, and be a lot more hassle.”

Wyden has the support of multiple prominent writers. But some people say she has no reason to be worried. “No one is doing this to hurt the Strand, or add difficulties,” Peg Green, president of the advocacy group New York Landmarks Conservancy, told the Times. “They’re doing it to honor the building.”

That doesn’t quite tell the whole story. The effort to “preserve” the Strand and nearby buildings was sparked by the announcement last year that a 258,000-square-foot tech-focused building would replace an old P.C. Richard & Son in the area. Preservation groups were not happy, believing more development projects would soon follow. Led by the Greenwich Village Society for Historic Preservation, activists asked the LPC to designate nearly 200 buildings as historic landmarks.

The LPC decided to move forward on just seven of those buildings. One of those was the Strand, despite the fact that Wyden does not plan on selling the building to a developer.

The LPC is considering designating one of the oldest and most famous traditional book stores in the world as a historic landmark around the same time that Amazon—which has come to dominate the book-selling industry—announced it was opening a new headquarters in Queens. As Reason‘s Eric Boehm noted earlier this month, Amazon is receiving $1.2 billion in refundable tax credits, as well as a cash grant of $325 million. In total, the state pledged more than $1.52 billion for 25,000 jobs.

Meanwhile Wyden, who employs 230 people at the Strand, doesn’t want any help from the government. “I’m not asking for money or a tax rebate,” she told the Times. “Just leave me alone.”

Wyden is right to be wary of the city’s efforts. While historic landmark designations supposedly help preserve old buildings, their main goal is often to stop the development of new buildings. That seems to be what’s happening in this case. It’s a relatively common phenomenon; Reason‘s Christian Britschgi has pointed out two egregious examples just this year.

A San Francisco man, for instance, wanted to develop his single-story laundromat into a 75-unit apartment building. But concerned neighbors pressured the city to make Robert Tillman’s life difficult. Among other objections, the city’s Planning Department said his property might be a “historic resource.” It was a ridiculous claim, based on the fact that his property housed a local employment agency in the 1970s and that it used to feature a mural depicting the life of Latina women. Tillman had to pay $23,000 for a report that proved his property was not a historic resource, only for the city to ask him to perform another study, this one related to the effects of his proposed apartment building’s shadow on a nearby school.

In Seattle, strip club magnate Roger Forbes wanted to redevelop a property he owns from a famed music venue called the Showbox to an apartment building. The city had already deemed the Showbox unworthy of historic protection numerous times in the past, but after supporters and local musicians complained over Forbes’ plans, the city council passed emergency legislation to include the Showbox in a nearby historical district.

The Strand, meanwhile, isn’t a historic landmark yet. However the Times notes that most buildings considered by the LPC are approved as landmarks. In the end, Wyden’s protests might not end up mattering.

That’s wrong, of course. The Strand doesn’t belong to the city—its Wyden’s property. And she clearly plans to take care of it so customers keep coming in. Hopefully, the city’s efforts won’t doom the family business.

Bonus link: In 1965, NYC Mayor Robert F. Wagner Jr. signed the Landmarks Preservation Law. Here’s how that legislation bulldozed the future:

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House GOP Suffer “Major” Hack During 2018 Midterms; FBI Alerted

Members of the House GOP suffered a “major” hack during the 2018 midterm election, exposing thousands of sensitive emails to an unknown intruder, according to Politico, which cites three senior party officials. 

The email accounts of four senior aides at the National Republican Congressional Committee were surveilled for several months, the party officials said. The intrusion was detected in April by an NRCC vendor, who alerted the committee and its cybersecurity contractor. An internal investigation was initiated and the FBI was alerted to the attack, said the officials, who requested anonymity to discuss the incident. –Politico

That said, the hack was concealed from senior House Republicans, including Speaker Paul Ryan (R-WI), Kevin McCarthy (R-CA) and Steve Scalise (R-LA) – who had no clue about the intrusion until Politico contacted the National Republican Congressional Committee (NRCC) with questions about the hack. 

Committee officials say they decided to withhold the information pending their own investigation, and thought that revealing the hack would compromise their efforts to uncover who did it. 

“We don’t want to get into details about what was taken because it’s an ongoing investigation,” said one senior party official. “Let’s say they had access to four active accounts. I think you can draw from that.”

As the 2018 midterms unfolded, the hack became a major source of internal turmoil within the NRCC – which brought on D.C. law firm Covington and Burling and Mercury Public Affairs to manage the response to the hack. The two firms were paid hundreds of thousands of dollars by the GOP Committee, while NRCC chief legal counsel, Chris Winkleman, has spent hours of his time to addressing the issue. 

While party officials would not say when the hack began or who they think did it, they privately think it was a foreign agent due to the nature of the attack

“The NRCC can confirm that it was the victim of a cyber intrusion by an unknown entity. The cybersecurity of the Committee’s data is paramount, and upon learning of the intrusion, the NRCC immediately launched an internal investigation and notified the FBI, which is now investigating the matter,” said Mercury VP Ian Prior – a former DOJ official and NRCC operative. 

“To protect the integrity of that investigation, the NRCC will offer no further comment on the incident,” he added.

Party officials claim that none of the information obtained in the hack – namely thousands of emails from senior NRCC aides, has appeared in public, while there were no attempts to approach the NRCC or its leadership to threaten exposure of the data. That said, Politico notes that the hack and subsequent coverup “is likely to prove embarrassing at a time when Republicans are grappling with an election in which they lost 40 seats and control of the house.” 

Rep. Tom Emmer (Minn.) will take over as NRCC chairman this cycle, a selection that was directly approved by McCarthy. Emmer is in the process of hiring his own senior aides for the committee, a normal procedure when a new chairman takes over a party committee. Emmer was first briefed on the hack on Monday evening.

Cybersecurity remains a pressing concern for politicians and political committees, heightened by the high-profile Russian hacking of the Democratic National Committee and Hillary Clinton campaign chief John Podesta during the 2016 election cycle. It’s not clear, however, what the NRCC could have done to avoid this intrusion.

The hack was first detected by an MSSP, a managed security services provider that monitors the NRCC’s network. The MSSP informed NRCC officials and they, in turn, alerted Crowdstrike, a well-known cybersecurity firm that had already been retained by the NRCC.

So now the question becomes – who is Putin rooting for? According to former DNC Chairwoman Donna Brazile, there may be as many as 30 candidates who run in 2020… 

One name she thinks won’t toss their hat in the ring? Hillary Clinton

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Lenin would be so proud

Several years ago back in 2004-2006, if you had a pulse, you could borrow money from a bank to buy a house.

In fact, bank lending standards were so loose back then that there were some infamous cases of people who DIDN’T have a pulse who were still able to borrow money.

That’s right. Some banks were so irresponsible that they actually loaned money to dead people.

Of course, it turned out that lending money to dead people… or people with terrible credit who had a history of default, was a bad idea.

And the entire financial system almost blew up as a result of this reckless stupidity.

But then something even crazier happened: the Federal Reserve came in and bailed out all the banks with trillions of dollars of free money.

That was utterly nuts. Instead of being wiped out by their idiotic mistakes, the banks learned that they would always be bailed out no matter how stupid or greedy they acted.

The key lesson was that there would be zero consequences for bad behavior.

So if the Fed is going step in with a bailout every time banks screw up, why bother being conservative and responsible?

That’s why we’re seeking the same mistakes over and over again.

Instead of loaning money to dead people, banks and funds are loaning money to dead companies who perennially lose money and go deeper into debt each year.

We talk about some of the most notorious cases like WeWork and Netflix regularly in this letter… but there are countless other examples.

Even worse, banks and other financial institutions even loaned money to Argentina (a country that has defaulted EIGHT TIMES on its debt), buying government bonds that have a maturity of 100 years!

Hey, if they screw up and the investment goes bad, they’re going to be bailed out anyhow.

That’s not the way capitalism is supposed to work. Stupid decisions are supposed to be punished.

Market crashes, recessions, and economic downturns are nature’s mechanism to wipe out all the unproductive, useless businesses… and the investors who funded them… making way for new, better businesses to flourish.

But there are always bureaucrats and politicians who feel that no one should ever lose. It’s like the economic equivalent of a participation trophy… no one should go home empty handed.

And if we print enough money and put enough safety nets in place, everyone will win, nobody will lose, and we’ll all link arms and sing kumbaya.

Economist Roger E.A. Farmer, for one, doesn’t think the Fed did enough after the financial crisis 10 years ago by dropping interest rates to zero and printing trillions of dollars to bail out the economy.

Moreover, he thinks the Fed should step in and start buying stocks to prop up the stock market.

Farmer’s idea isn’t new. Several governments around the world have already started buying stocks to maintain asset prices and keep the economy going.

Japan is a notable example.

The Bank of Japan, the biggest offender to date, is a top-10 shareholder in nearly half of the companies that trade in that country’s stock market.

It hasn’t really worked. Japan can’t seem to get out of its low-growth economic morass.

But according to Farmer, this failure is because Japanese authorities haven’t bought ENOUGH stock.

Apparently he won’t be satisfied until the Japanese government owns 100% of ALL the companies in Japan.

And he wants to apply that same strategy to the US economy.

Farmer also thinks that the US government should ban investors from trading US stocks, essentially creating a government monopoly of the stock market.

What a great idea.

While we’re at it, in fact, we should also have the government start buying  houses in order to prop up the real estate market.

The government could also bail out every small business that fails to make sure no one ever loses a job. It could buy up all the automobiles and hand them out to people who need cars to get to work.

It’s genius!

In all seriousness, this lunacy is all based on the premise that recessions and corrections are bad (and should be avoided).

That’s just plain wrong.

Recessions, corrections, depressions… they’re all critical phases in the market. The whole purpose is to wash out all the excess and punish people that have been stupid.

If you don’t have consequences for stupid actions, you erase good judgment.

And that’s the greatest hazard of all… to think that you can do whatever you want and there will always be someone to bail you out if things go bad.

Not to mention, this whole idea of the government owning all the businesses and assets has already been tried before.

It was called the Soviet Union.

Lenin would be so proud.

Source

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Feel-Good Story of the Day Until Someone Puts an Eye Out

Here’s the feel-good story of the day, at least until somebody put an eye out.

Nine-year-old Dane Best lives in Severance, Colorado, where a ban on snowball fights has been in place for 100 years. Even though the rule wasn’t enforced, the kid was pissed about that, explains Newsweek.

“I think it’s an outdated law,” Best said. “I want to be able to throw a snowball without getting in trouble.”

The young boy asked his mom’s permission before taking his first steps in the political sphere. “She called the town hall and then she told me I had to make a speech,” he explained to CBS Denver.

Best also gathered more than 20 signatures toward a petition on the issue, the outlet stated.

On Monday, the young politician gave his presentation to the Severance Town Board. “The children of Severance want the opportunity to have a snowball fight like the rest of the world,” Best said during the speech, according to The Greeley Tribune. “The law was created many years ago. Today’s kids need a reason to play outside.”

Although he faced difficult questions from the board—including: “Can we amend this ordinance to say that if you’re over 60, no one can throw a snowball at you?”—officials were impressed with the boy’s performance and agreed to repeal the ban.

Mayor Don MCleod then presented ceremonial snowballs to Best and his little brother Dax. The pair went on to became the first legal snowball-throwers in Severance’s history.

Chalk one up for the little guy and the forces of free-range parenting everywhere.

I’m sure I’m not the only who is a little disappointed that the Best brothers didn’t immediately take those snowballs and whip them directly into the collective mushes of the Severance Town Board. Which might explain why some of us can’t have nice things.

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Stocks Slammed, Erase All Trade-Truce Gains As Yield Curve Inversion Deepens

The euphoria of Sunday night’s futures open has collapsed into a dysphoric dump as stocks tumble into the red, erasing all the trade-truce gains…

The Dow is crashing, down over 400 points…

 

And the yield curve inversion continues to accelerate.

“that wasn’t supposed to happen…”

 

 

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