Even Bartenders And Personal Trainers Can Receive Whistleblower Awards From The SEC

Authored by Jordan A. Thomas, chair of the whistleblower practice at the law firm of Labaton Sucharow

Crafted by an ad agency immediately following 9/11, the slogan “if you see something, say something” took hold with astonishing speed. The tagline reflected a tectonic cultural shift; the serious and growing need for public participation in the nation’s enforcement paradigm. In many ways, those six words have come to define a change in guard in which government has effectively deputized everyday citizens to be its eyes and ears.

The Securities and Exchange Commission sought a similar kind of cooperation with a revolutionary program that provides whistleblowers the ability to report anonymously and receive significant monetary awards and employment protections for tipping the agency to federal securities violations.  Its “deputies” are rewarded handsomely. Since its launch, the program has received tens of thousands of tips and has paid out approximately $158 million from a replenishing account funded by penalties, not taxpayer dollars.   

Remarkably, only about half of whistleblower award recipients were current or former employees of the subject companies, according to a 2015 report to Congress by the SEC. While that figure inched up in the subsequent year, even at our firm's practice, over one-quarter of whistleblower clients were not employed by the companies on which they reported. So who are these outsiders and how are they changing the game?

Who Can Blow the Whistle?

Almost anyone can be an SEC whistleblower. Eligibility is more defined by the nature of the intelligence, than the source. That is, qualifying information provided by a tipster must be original and derived from either independent knowledge or independent analysis. Generally, where a whistleblower works does not factor into the eligibility calculus. Whistleblowers can be analysts, forensic accountants, secretaries, investors and even journalists. We have also met successful whistleblowers who gained their knowledge from a personal relationships with individuals at the subject companies. The net is wide; even bartenders, hair stylists and personal trainers could be eligible to receive a monetary award if they learn about possible securities violations from their clients.   

This broad eligibility also extends to outside advisors of the company in question. Pursuant to the SEC guidelines, so-called gatekeepers such as officers, directors, attorneys, accountants and compliance professionals can be whistleblowers, although they must satisfy special procedural requirements. For instance, lawyers must carefully navigate their professional responsibilities, such as the attorney-client privilege.

Outsiders In Action: Historical Awards

When it comes to shining a light on corporate wrongdoing outsiders play a vital role. Consider the case of medical device company Orthofix International NV, which earlier this year agreed to pay over $14 million to settle charges that it improperly booked revenues and made payments to Brazilian doctors in violation of the Foreign Corrupt Practices Act. Four former executives also agreed to pay penalties to settle cases related to the accounting failures.

The case is significant because my firm's clients, the Orthofix whistleblowers, were two independent financial analysts who performed the extensive detective work that enabled the SEC to bring its case. The analysts initially had a hunch that something about the company’s financial performance looked “odd.” They examined publicly available financial information and compared Orthofix’s reported sales and inventory turnover data with that of its peers to unearth evidence of suspicious practices. The whistleblower submission, supported by work from our in-house investigative team, included extensive briefing documents and analysis, which armed the SEC for a successful enforcement action. The analysts will be well rewarded for their diligence and determination: their award is expected to total at least $2.5 million.

In a more recent example, on July 25, 2017, the SEC announced a whistleblower award of nearly $2.5 million to an employee of a domestic government agency. The related SEC order noted that, in general, an employee of a federal, state or local government agency can be a qualified whistleblower. There are some exceptions that apply to employees of certain regulatory agencies or law enforcement organizations, who are charged with uncovering legal violations as part of their responsibilities.

Last year, in announcing an award of more than $700,000 to an outsider who provided the SEC with a detailed analysis that led to a successful enforcement action, Andrew Ceresney, then Director of the SEC’s Enforcement Division, affirmed the important role of outsiders in the new enforcement paradigm: “The voluntary submission of high-quality analysis by industry experts can be every bit as valuable as first-hand knowledge of wrongdoing by company insiders.”

Finally, what was likely the first award issued to an outsider was also one of the largest SEC whistleblower awards ever made. In October 2013, the SEC awarded $14.7 million to an individual who provided key information to halt an ongoing scheme. Years later, in subsequent litigation with his partners, the whistleblower was identified as an investment fund manager who provided information regarding a visa-for-sale scam perpetrated by a Chicago man who raised $147 million from Chinese investors.

What’s A Outsider To Do?

In some respects, outsiders are free from certain pressures that plague employee whistleblowers who anticipate workplace retaliation or may have executed secrecy agreements that attempt to bar the reporting of misconduct. While both are illegal, such instruments and behaviors force employee whistleblowers to operate from positions of fear. Outsiders, on the other hand, can stand up and speak out against wrongdoing from an entirely different platform. And there is no doubt that in crafting the guidelines, the SEC fully intended and expected that outsiders would play a key role in helping to detect and deter securities violations. Indeed, during my tenure at the SEC, I was a part of the small group that developed the statutory and regulatory provisions of the whistleblower program. Recognizing that a panoply of individuals outside of the defendant companies could have actionable intelligence, we designed a program that ensures that virtually all knowledgeable individuals can speak up about possible securities violations—regardless of whether they are insiders or outsiders.    

Nevertheless, it can be tricky for outsiders to move from hunch to knowledge and suspicion to proof. When information about potential violations is based on professional judgment rather than firsthand knowledge, it is mission critical to verify suspicions with in-depth analysis or other tangible (legally acquired) evidence. In our practice, our investigative team is led by a former FBI agent who calls upon seasoned investigators and financial analysts to support our clients’ submissions. This is particularly important for our clients outside the violating company, who want to confirm their suspicions or fill in any evidentiary gaps.

At the end of the day, whether an individual suspects fraud from a distance or is smack dab in the midst of its damaging spiral, law enforcement authorities need the public’s help and should haven’t to go it alone. Frauds are too complex, too far-reaching and our enforcers stretched too thin. This is a public-private partnership of the highest order and the greatest necessity. If tiplines and overt vigilance are the ‘new normal,’ those who report misconduct are the heroes of our generation. And the government will reward their courage.

So much for “tattletales.”

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This $700 Billion Public Employee Ticking Time Bomb Is Only 6.7% Funded; Most States Are Under 1%

We’ve spent a lot of time of late discussing the inevitable public pension crisis that will eventually wreak havoc on global financial markets.  And while the scale of the public pension underfunding is unprecedented, with estimates ranging from $3 – $8 trillion, there is another taxpayer-funded retirement benefit that has been promised to union workers over the years that puts pensions to shame…at least on a percentage funded basis.

Other Post-Employment Benefits (OPEB), like pensions, are a stream of future payments that have been promised to retirees primarily to cover healthcare costs.  However, unlike pensions, most government entities don’t even bother to accrue assets for this massive stream of future costs resulting in $700 billion of liabilities that most taxpayer likely didn’t even know existed. 

As a study from Pew Charitable Trusts points out today, the average OPEB plan in the U.S. today is only 6.7% funded (and that’s if you believe their discount rates…so probably figure about half that amount in reality) and many states around the country are even worse.

States paid a total of $20.8 billion in 2015 for non-pension worker retirement benefits, known as other post-employment benefits (OPEB).  Almost all of this money was spent on retiree health care. The aggregate figure for 2015, the most recent year for which complete data are available, represents an increase of $1.2 billion, or 6 percent, over the previous year. The 2015 payments covered the cost of current-year benefits and in some states included funding to address OPEB liabilities. These liabilities—the cost of benefits, in today’s dollars, to be paid in future years—totaled $692 billion in 2015, a 5 percent increase over 2014.

 

In 2015, states had $46 billion in assets to meet $692 billion in OPEB liabilities, yielding a funded ratio of 6.7 percent. The total amount of assets was slightly higher than the reported $44 billion in 2014, though the funding ratio did not change. The average state OPEB funded ratio is low because most states pay for retiree health care benefits on a pay-as-you-go basis, appropriating revenue annually to pay retiree health care costs for that year rather than pre-funding liabilities by setting aside assets to cover the state’s share of future retiree health benefit costs.

 

State OPEB funded ratios vary widely, from less than 1 percent in 19 states to 92 percent in Arizona. As Figure 1 shows, only eight have funded ratios over 30 percent. These states typically follow pre-funding policies spelled out in state law. Many of them also make use of the expertise of staff from the state pension system to invest and manage plan assets.

 

Looking at the problem on a relative basis, you find that several states have accrued net OPEB liabilities totaling in excess of 10% of the personal income generated within their borders.

Pew compared states 2015 OPEB liabilities with 2015 state personal income to show these liabilities in relation to the potential resources that states could draw on to cover the liabilities. The major ratings agencies and other financial research organizations commonly use personal income as a metric to illustrate untapped revenue sources and as an indicator of how flexible states can be in meeting their obligations under changing budget conditions. The research shows significant overall reported OPEB liabilities, but the relative size varies widely. (See Figure 2).

 

The primary driver for the variation in OPEB liabilities is the difference in how states structure health care benefits for retirees. As a percentage of personal income, the liabilities range from less than 1 percent in 16 states to 16 percent in New Jersey.  Alaska, which has the highest ratio of liabilities to personal income at 42 percent, is a clear outlier among the 50 states because of generous benefit levels that can reach up to 90 percent of premiums for some retired workers. States that provide eligible retirees a monthly contribution equal to a flat percentage of the health insurance coverage premium report the largest liabilities—and could face the greatest fiscal challenges because their costs automatically increase as plan premiums do.

 

Conversely, those states with fixed-dollar premium subsidies provide a smaller benefit and report lower liabilities. Their exposure to health care cost inflation is also lower, because a fixed-dollar subsidy does not rise with the plan premium.  Lastly, the states that only provide access to a retiree health plan, with no subsidy, have the lowest liabilities as a percentage of personal income.  Although these plans do not make an explicit monthly premium contribution to retirees, many offer retirees a reduced premium through a group rate, which is an implicit subsidy. The Governmental Accounting Standards Board (GASB), the private, independent organization that sets accounting and financial reporting standards for U.S. state and local governments, requires plans to recognize these implicit subsidies in plan financial reporting.

 

Meanwhile, the cost increases of healthcare premiums seem to massively exceed inflation and/or wage growth year after year.

In contrast, a number of states with higher premium contributions—including California and New Jersey—reported significantly greater liabilities beginning in 2014, reflecting increases in assumed future costs.   California’s plan actuary attributed $7.1 billion of the state’s $7.9 billion liability increase to changing demographic assumptions to account for longer retiree life expectancy in that year.New Jersey’s 2014 hike included a 5 percent increase in liabilities caused by changes in its mortality assumptions and a 9 percent jump linked to changes in health care cost assumptions. For states with the largest year-over-year change in OPEB liabilities, changes in assumptions were the largest driver in increasing costs.

But we’re sure it’s OK, it’s not as if there is a massive wave of baby boomers that are about to retire and ask for these benefits to be paid anytime in the near future…

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Trump’s China-Sanctions Madness Imperils The Dollar

Authored by Ryan McMaken via The Mises Institute,

Last week US Treasury Secretary Steve Mnuchin warned the US will impose new sanctions on China if it doesn't conform to UN sanctions on North Korea:

"If China doesn’t follow these sanctions, we will put additional sanctions on them and prevent them from accessing the U.S. and international dollar system, and that’s quite meaningful."

In other words, the administration wants to sanction one of the US's biggest trading partners, and the world's second-largest economy.

China is the world's third-largest recipient of Americans exports, behind only Canada and Mexico. China is the world's largest source of imports for Americans, slightly ahead of both Mexico and Canada.

In 2016, Americans exported $169 billion in goods and services to China while importing $478 billion of goods and services. Every year, both consumers and producers benefit from the importation of Chinese electronics, machinery, food, footwear, and more.

Ratcheting up economic warfare with China could serve to cut off these avenues of trade and thus will only cost consumers and small business owners who currently benefit from lower-cost machinery, clothing, and more.

For the mercantilists in the Trump administration, of course, American consumers import "too much" from China anyway, and Americans and ought to be prohibited by the US government from purchasing what they want. The North Korea situation could serve as a convenient excuse for slapping prohibitions on American consumers in the name of "fair trade" while also serving as a foreign policy tool.

The last thing the US consumer needs is a trade war with China.

At this point, however, the US isn't talking about cutting off trade in such a blunt manner.

As Mnuchin notes, the strategy here is to "prevent [the Chinese] from accessing the U.S. and international dollar system." In practice, this would likely mean restricting access to the so-called SWIFT system which facilitates international transactions in dollars.

This idea is highly problematic in its own way. Were the Chinese to be cut off from the dollar, this would only create an enormous incentive for the Chinese to move away from the dollar into other currencies — including its own. China's largest trading partners would likely follow China in this exodus. Moreover, China and Russia have already foreseen the possibility of SWIFT being "weaponized."

As Jeff Thomas notes:

China, Russia and others have seen this day coming and have created their own SWIFT system, world cable network and world banking system. All that’s needed to kick it all into gear is a major international need to bypass SWIFT. The US government has just provided that need with this threat. There would certainly be teething pains in getting the new system running on a massive scale, but the sudden worldwide need would drive the implementation.

Moreover, China is a key trading partner for Germany, Russia, Australia, Japan. Brazil, and South Korea. Will these countries simply write off China as a trading partner because thy can't settle accounts in dollars?  It's unlikely. 

While this would not necessarily destroy the dollar, a movement away from the US dollar would greatly diminish the dollar's standing as the world's reserve currency. It would diminish the dollar's role as the go-to currency, and this would, in turn, drive up borrowing costs — i.e. interest rates — for the US government. This would turn the US's currently sustainable debt problem into an unsustainable one. Massive domestic budget cuts in the US would follow. 

The fact is, as Foreign Policy noted last year, China is becoming "too big to sanction." Todd Williamson writes on how the IMF has now added China’s currency, the renminbi (RMB), to its basket of four reserve currencies known as Special Drawing Rights. In doing so, Williamson notes, the IMF "may have delivered a severe blow to the strength of a key tool in the West’s geopolitical arsenal: financial sanctions."

He continues: 

The RMB is currently the fourth-most traded currency on the global market (behind the dollar, euro, and pound). It now holds the third highest percentage in the basket, at just under 11 percent, placing it ahead of the pound’s 8 percent (though far below the dollar, which holds more than 40 percent). The IMF’s decision to include the RMB is more than a symbolic sign of the currency’s liberalization: It’s also a big step toward the RMB’s regular usage outside of China. The SDR determines the mix of currencies in which the IMF lends out — a total of $112 billion in 2015 — and the RMB’s inclusion in this distribution mechanism will likely drive up the currency’s demand. The comfort level of the RMB’s usage in global transactions among central banks, sovereign wealth funds, and other massive financial institutions will rise with the currency’s greater accessibility.

In other words, slapping financial sanctions on the Chinese is nothing at all like doing the same to the Iranians or the Venezuelans. The Chinese economy and the Chinese currency are already huge global players which huge trading partners. 

Now, as Thomas notes, if the US forces China away from the dollar will not be without pain. If it were painless, the Chinese state would have abandoned the dollar already. 

China Is Highly Motivated to Go Its Own Way on North Korea

Should the US force the Chinese regime's hand, the regime will be highly motivated to stay the course on North Korea, in spite of the potential for economic disarray. 

China already feels itself surrounded by Western client states, including Japan, South Korea, Taiwan, and the Philippines. The Chinese state is not going to abandon its buffer state in North Korea. Were North Korea to be absorbed into a Greater Korea on American terms, this would be seen as a disaster by the Chinese, since it would place US forces right on a Chinese land border, just across the Yalu River. 

To get a sense of why the Chinese will not cave to US attempts at regime change in North Korea, imagine how the US would behave if China threatened the US with sanctions — unless the US permitted Chinese troops on the south bank of the Rio Grande. 

Add in the fact that the Chinese state is not subject to elections, and we can see the political will to carry on with de-dollarization in the face of US sanctions would be significant indeed. 

Another likely outcome of financial sanctions would be to encourage the Chinese to dump their holdings of US debt. China currently holds seven percent of all US bonds. Were the Chinese to dump these holdings, it will become far more difficult for the US and its central bank to continue paying rock-bottom interest rates on its 20-trillion-dollar debt. 

If the US wants to really continue with this sanctions game, it need also be prepared to face the reality that its not 1989, and that the world may not be willing to treat dollars and US sanctions in the way the US expects it to. The likely response will only be the latest evidence that the US "unipolar moment" is over.

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Lawrence O’Donnell’s Outtakes Proves He’s a True Boss

Content originally published at iBankCoin.com

Everyone is making such a big deal about these outtakes. If anything, it makes Larry look like a good olde Irish boy, having a grande olde time with the teevee cameras. I’m sure Larry had an extra pint after all of the insanity was in his ear, hammering and the like.

Full clip.

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“Bitcoin Jesus” Says Another Network Split Is Coming In November

Since its current world-beating bull run began in late 2015, bitcoin has surmounted a series of pitfalls that were supposed to kill the market.  The list is remarkably long. The DAO hack. The PBOC crackdown. The ICO craze. The SEC’s rejection in March of two proposed bitcoin ETFs. And, most recently, the network split that spawned bitcoin cash. All were supposed to burst the roaring valuation bubble, yet in almost every example, a temporary pullback was followed by another leg higher.

Considering that it was the culmination of three years of acrimonious infighting among bitcoin core devs and the miners, the August split – particularly the market reaction – was surprisingly cavalier. Now, the faith of bitcoin investors is being tested once again as key players in the market are warning that another network split could create a third version of bitcoin as soon as November.

According to Bloomberg, bitcoin evangelist Roger Ver, better known as “Bitcoin Jesus,” said that some of the miners who supported the controversial software upgrade that triggered the split in August have withdrawn their support just as bitcoin core developers are preparing to implement the second step of the update. This could create a rift between what Ver calls “legacy bitcoin” and “the SegWit2x version of bitcoin.”

“There’s probably going to be another split between bitcoin legacy and SegWit2X version of bitcoin but that just gives me more coins that I can sell for the Bitcoin Cash version,” Ver said in an interview on Bloomberg Television at a conference organized by Bitkan in Hong Kong.

Ver was an early adopter of bitcoin. Since the split, he’s been a vocal supporter of bitcoin cash. Ver, who was born in the US but renounced his citizenship and is currently a citizen of Saint Kitts and Nevis, has also been denied visas to travel back to the states in the past. Of course, Ver has been badly wrong before. Back in the summer of 2013, he traveled to Tokyo to visit Mt. Gox shortly after customers started having issues withdrawing their funds, which the exchange attributed to unspecified "liquidity problems." Ver attested that Mt Gox CEO Mark Karpeles had shown him bank statements proving that the exchange's troubles were a result of being temporarily shut out of the traditional banking system, and that customers' assets were safe. Of course, this excuse was merely a ruse for a massive hack that resulted in the theft of tens of thousands of customer bitcoins.

To be sure, Ver isn’t alone in warning about another potential split. Samson Mow, chief strategy officer at blockchain startup Blockstream, also says a rift is likely as more miners and developers reject the pending upgrade to SegWit2X.

“Many developers, users, miners, and businesses have already stated they do not agree with the pointless 2x fork, so we’ll likely end up with three chains,” said Samson Mow, chief strategy officer at Blockstream, which has close associations with Core developers. “Long-term, only the main bitcoin chain which has the support of users and developers can survive.”

Bloomberg summarizes the circumstances that could lead to another split below:

“If another tear occurs in November, it would create a third version of the cryptocurrency and potentially further scatter capital and resources as three offshoots of bitcoin emerge.

 

SegWit2x refers to a compromise proposal developed to deal with the surge in transactions. In August, miners agreed to implement the first phase of the proposal, or SegWit. They were expected to increase the blocksize to two megabytes around November in a second phase.

 

Avoiding such a splinter requires miners to reach at least 92-percent consensus on supporting the second phase of SegWit2x, but that’s becoming increasingly unlikely, according to Wang Chun, co-owner and chief administrator of F2Pool, one of the world’s largest mining pools.

 

Even though SegWit2x garnered more than 93 percent support in July, miners and developers seem to be backing away from the proposal, a compromise that harbors characteristics disliked by extremists on both sides. Wang said he thinks the split will “happen, 100 percent.”

 

Many Core developers agree. Several have said they’d prefer to focus on writing code in the future for only the SegWit chain: currently the largest version of bitcoin at about $64 billion in market value.”

So, would the creation of a third iteration of bitcoin (and, we presume, the spontaneous generation of billions of dollars’ in “value”) be enough to trigger the great crash that naysayers like J.P. Morgan Chase & CO CEO Jamie Dimon and Bridgewater Associates founder Ray Dalio have warned is coming?

What say you?
 

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Watch Live: US SecState Tillerson Holds On-Camera Briefing (After Meeting With Iran Officials)

US Secretary of State Rex Tillerson will give on-camera press briefing at 7:40pm, according to a White House statement. There are no details specifying what Tillerson will address in briefing, but we note that he was set to meet today with counterparts from Iran and countries that signed Iran nuclear deal.

As AP reported earlier, Secretary of State Rex Tillerson has opened the highest-level meeting between U.S. and Iranian officials since the start of the Trump administration.

Tillerson is meeting at the United Nations with diplomats from the nations that are part of the 2015 nuclear deal. The group includes Britain, China, France, Germany and Russia.

Iranian Foreign Minister Mohammad Javad Zarif walked into the meeting first. He was followed by Tillerson and then U.S. Ambassador to the U.N. Nikki Haley. Russian Foreign Minister Sergey Lavrov came in after.

The meeting comes as Trump decides whether to withdraw from the nuclear deal.

Live Feed:

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Mauldin: Americans Don’t Grasp The Magnitude Of The Looming Pension Tsunami

Authored by John Mauldin via MauldinEconomics.com,

Total unfunded liabilities in state and local pensions have roughly quintupled in the last decade.

You read that right—not doubled, tripled, or quadrupled—quintupled. That’s nice when it happens on a slot machine, not so nice when it’s money you owe.

You will also notice in the chart that much of that change happened in 2008.

Why was that?

That's when the Fed took interest rates down to nearly zero, meaning it suddenly took more cash to fund future payments.

According to a 2014 Pew study, only 15 states follow policies that have funded at least 100% of their pension needs. And that estimate is based on the aggressive assumptions of pension funds that they will get their predicted rate of returns (the “discount rate”).

Kentucky, for instance, has unfunded pension liabilities of $40 billion or more. This month the state budget director notified local governments that pension costs could jump 50–60% next year.

That’s due to a proposed reduction in the system’s assumed rate of return from 7.5% to 6.25%—a step in the right direction but not nearly enough.

Think About This as an Investor: How Can You Guarantee 6–7% Returns These Days?

Do you know a way to guarantee yourself even 6.25% average annual returns for the next 10–20 years? Of course you don’t. Yes, some strategies have a good shot at doing it, but there’s no guarantee.

And if you believe Jeremy Grantham’s seven-year forecasts (I do: His 2009 growth forecast was spot on), then those pension funds have very little hope of getting their average 7% predicted rate of return, at least for the next seven years.

Now, here is the truth about pension liabilities. Let’s assume you have $1 billion in funding today. If you assume a 7% compound return—about the average for most pension funds—then that means in 30 years that $1 million will have grown to $8 billion (approximately).

Now, what if it’s a 4% return? Using the Rule of 72, the $1 billion grows to around $3.5 billion, or less than half the future assets in 30 years if you assume 7%.

Remember that every dollar that is not funded today means that somewhere between four dollars and eight dollars will not be there in 30 years when somebody who is on a pension is expecting to get it.

Worse, without proper funding, as the fund starts going negative, the funding ratio actually gets worse, sending it into a death spiral. The only way to bring it out of the spiral is huge cuts to other needed services or with massive tax cuts to pension benefits.

The Situation Is Dire Even in the Best-Case Scenario. But What If…

The State of Kentucky’s unusually frank report regarding the state’s public pension liability sums up that state’s plight in one chart:

The news for Kentucky retirees is quite dire, especially considering what returns on investments are realistically likely to be. But there’s a make or break point somewhere.

What if pension plans must either hit that 6% average annual return for 2018–2028 or declare bankruptcy and lose it all?

That’s a much greater problem, and it’s a rough equivalent of what state pension trustees have to do. Failing to generate the target returns doesn’t reduce the liability. It just means taxpayers must make up the difference.

But wait, it gets worse.

The graph we showed earlier stated that unfunded pension liabilities for state and local governments were $2 trillion. But that assumes an average 7% compound return. What if we assume 4% compound returns?

Now the admitted unfunded pension liability is $4 trillion.

But what if we have a recession and the stock market goes down by the past average of more than 40%? Now you have an unfunded liability in the range of $7–8 trillion.

We throw the words a trillion dollars around, not realizing how much that actually is. Combined state and local revenues for the US total around $2.6 trillion.

After the next recession (whenever that is), the unfunded pension liabilities for state and local governments will be roughly three times the revenue they are collecting today, and that’s before a recession reduces their revenues.

Can you see the taxpayer stuck between a rock and a hard place? Two immovable objects meeting? The math just doesn’t work.

We are starting to see cities filing for bankruptcy. That small ripple will be a tsunami within 7–10 years.

It Goes Beyond a Financial Crisis. It’s a Social, Political Catastrophe

Many state and local governments have actually 100% funded their pension plans. Some states and local governments have even overfunded them.

What that really means is that the unfunded liabilities are more concentrated, and they show up in unlikely places. You think Texas is doing well? Look at some of our cities and weep.

Look, too, at other seemingly semi-prosperous cities all over the country. Do you think the suburbs of Dallas will want to see their taxes increased to help out the city? If you do, I may have a bridge to sell you – unless you would rather have oceanfront properties in Arizona.

This issue is going to set neighbor against neighbor and retirees against taxpayers. It will become one of the most heated battles of my lifetime. It will make the Trump-Clinton campaigns look like a school kids’ tiddlywinks smackdown.

I was heavily involved in politics at both the national and local levels in the 80s and 90s and much of the 2000s. Trust me, local politics is far nastier and more vicious. And there is nothing more local than police and fire fighters and teachers seeing their pensions cut because the money isn't there. Tax increases of up to 100% are going to become commonplace.

But even these new revenues won’t be enough… because we will be acting with too little, too late.

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WSJ Turns On Antifa: Violent, Black-Clad Protesters Are “Dividing The Left”

Since Bay Area TV anchor Frank Somerville published an honest description of "the hate" he experienced from "violent, clad in black" protesters while trying to document a right-wing rally in Berkeley, the liberal media has decidedly turned against AntiFa – the loosely organized band of black-clad thugs who show up to “counter-protest” at conservative events and demonstrations around the country. WSJ's report describes the group as the left-wing equivalent of the fascists and white supremacists that AntiFa claims to oppose – characterization that the media has so far been reluctant to embrace.

This week, The Wall Street Journal has jumped on the bandwagon, publishing a deeply researched history of the group, and interviewing other leftist organizers who’ve criticized the group for being too violent and damaging the credibility of the left. 

In one scene, WSJ recollects how Antifa protesters viciously attacked a small crowd of right-wing demonstrators who showed up last month’s “No to Marxism” rally in Berkeley, even though the rally had been canceled. Using clubs and wooden shields emblazoned with “no hate,” groups of around half a dozen beat and chased their outnumbered “adversaries” out of the park.

As one long-time liberal activist in Massachusetts noted, Antifa’s tactics are dividing the resurgent leftist movement that has coalesced around opposition to President Donald Trump.
AntiFa “doesn’t represent us,” she told WSJ.

“The antifa tactics are testing the liberal movement that has galvanized in opposition to Mr. Trump—creating a rift among its leaders, organizers and demonstrators about whether to denounce a radical fringe, some of whose antidiscrimination objectives, if not tactics, they share.

 

James Hannon, a psychotherapist and seasoned liberal organizer in Massachusetts who marched at a recent Boston rally against racism, said elements of the antifa movement that use confrontational tactics allow others to blur the line between leftist groups and the hate groups against which they protest.

 

“The social justice, the peace movement, the left or just progressives really have to start calling out the antifa and say, `Hey, hey, hey, you don’t represent us,’ ” said Mr. Hannon, 67 years old. “’We’re surrendering a moral high ground.’”

As we reported last week, one leader of an AntiFa group based in Washington DC explained in an editorial published by the Hill that violence is a core tenant of the group’s philosophy. He also explained his bizarre belief that Nazis and fascists have infiltrated the highest levels of US police departments and the military.

One WSJ reporter described being threatened by an AntiFa protester while attempting to peacefully document the rally.

“Protesters in dark get-ups set off smoke bombs, toppled police barricades and smashed the cameras of some journalists and bystanders. “You do it again, I’ll break your phone,” a man in a Spider-Man mask told a Wall Street Journal reporter who was taking photographs.”

Even Berkeley’s major condemned the black-clad protesters following last month’s rally.

Mayor Arreguin of Berkeley disagreed: “We saw a large group of black-clad extremists who really turned a peaceful protest on its head.”

A Green Party organizer who spoke with WSJ said she opposes AntiFa’s willingness to resort to violence, and its anti-democratic messaging.

“At a March antiracism rally in Minneapolis, she said, activists chanted “punch a Nazi in the face” and lighted on fire a scarecrow dressed as a white nationalist. “The people who end up taking the rap for it are black organizers,” said Ms. Pree-Stinson, 36, who described herself as a black Latina.

 

In Boston, masked counterprotesters distributed fliers titled “WHY ANTIFA?” The leaflets criticized the “liberal” approach of believing that elections, courts, the Constitution, a free press and other institutions would “prevent things from going too far.”

 

They called for “uncompromising militancy” against fascists and said antifa “must force their hate out of public spaces by any means necessary.”

By our count, WSJ is the fifth mainstream media organization to publish a story criticizing the group, which came to national prominence after its involvements with rioting at President Donald Trump’s inauguration.

Here's a collection of some of the other headlines…

Bloomberg:

 

The Washington Post:

The Atlantic:

The LA Times:

A Whitehouse.gov survey published last month demanding that the White House label AntiFa a terrorist group received the 100,000 signatures needed to demand a response. Meanwhile, last month, the media reported that the Department of Homeland Security described AntiFa as a purveyor of "domestic terrorism" in internal communications.

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“Pizza Price Parity”: Where Is Pizza Most And Least Expensive In America?

Via Priceonomics.com,

Between 2007 – 2010, a USDA study estimated that 1 in 8 Americans ate some form of pizza on any given day. That number climbs to about 1 in 4 for males and 1 in 5 for females when looking specifically at Americans age 12 to 19. There’s no escaping it; pizza is engrained in our diets.

Pizza is not only a pillar of the American diet, but also of our culture.

Through saturation of TV, movies, and now the internet, it has entered the zeitgeist. How do you make characters as strange as the Teenage Mutant Ninja Turtles more relatable? Make them love pizza. Right now, you can search on Amazon to find pizza sweatshirts, pizza pool toys, and pizza cologne. Even new disruptive and trendy technological innovations need their connection to pizza. That’s why there’s a pizza cryptocurrency and drone pizza delivery.

We noticed that pizza prices and availability can vary dramatically across the United States. We analyzed data from Priceonomics customer, Datafiniti, a data company that has digitized menus across America. Which states and cities have the most pizzerias? How much can you expect to pay for pizza across the country?

Starting with this business data, we searched for restaurants serving pizza. This data set gave us thousands of different listings to comb through for more detailed location and menu information. To control for differences in price because of toppings and sizes, we needed a standardized item for evaluation, so we found the price of a large plain pizza in each restaurant record. This baseline allowed us to compare prices across cities and states more accurately.

So, where can you find the most places serving pizza? Accounting for population, you can find the most pizza places concentrated in the Northeast, particularly Connecticut, Massachusetts, Rhode Island, and New Jersey. At the city level, the trend is not as clear, with Orlando, FL, Buffalo, NY, and Minneapolis, MN taking the top three spots. 

How much will you pay for a large cheese pie? Median prices range from $7.25 to as much as $15. Despite only looking at plain cheese pizza, there are subtle stylistic differences that likely lead to price variation. The neighborhood family-friendly pizza place and the typical franchise have much lower prices than artisanal wood-fire pizzerias. Other regional differences, like Chicago deep dish, lead to higher prices as well.

And the cities with the most expensive cheese pizzas in America? Buffalo, NY, Nashville, TN, and San Francisco, CA take the top three spots.

Despite those geographical differences, there is one universal truth: no matter where you are, you’ll be able to find pizza.

*  *  *

To start our investigation, we will want to see how pizza places are distributed across the country. To account for differences in population, our metric of interest will not be absolute number of restaurants, but instead number of restaurants per 100K residents. Controlling for populations makes sure some states, like California, do not dominate the top of our charts.

Data source: Datafiniti

The state with the most restaurants serving pizza is Connecticut, with 13.2 restaurants per capita. Smaller northeastern states with large Italian populations dominate the list, including Massachusetts (11.7), Rhode Island (11.6), and New Jersey (9.6).

New York and Illinois, two states that are known for their distinct styles of pizza, are in the second tier of states, along with areas of West, the upper Midwest, and Florida. 

States in the Deep South have the fewest number of pizza places per capita. We expect this result as these states don’t have distinctive pizza styles. Hawaii, despite having an eponymous pizza (the Hawaiian, which features pineapple and ham), is also in this group.

So looking at these states, what is the cost of the average large plain cheese pie?

Data source: Datafiniti

North Dakota and Wyoming have the most highest median prices. While there is no distinct regional trend, there are some possible explanations for what we see. These states have fewer pizzerias, which tend to be more upscale, artisanal sit-down restaurants. So in cases where you can find pizza, it’s just a more expensive variety. Maine and Alaska have the cheapest pizza options. While that’s not exactly the attribute you want your pizza to be known for, it is a great thing for pizza lovers in these states.

Now we will go one level deeper and take a look at America’s cities. Where can we find the most pizza restaurants per capita? When working with this data, we limited our comparison to the 50 cities with the greatest absolute number of pizza places.

Data source: Datafiniti

Orlando, FL sits at the top of our list with 21.6 restaurants per 100K residents. While Orlando is not known for any pizza tradition, a few things could be causing the abundance of pizza. Florida, in general, is known for tourism, Orlando especially. Pizza is guaranteed to interest tourists no matter where they’re from and it’s a great option for families when traveling. Ft. Lauderdale likely has a similar story.

Number two is a city from New York that is not NYC; it’s Buffalo (20.2). This mid-sized city has a sizable Italian community and its own style of pizza. It’s a medium-thick crust round pie that is somewhere between New York and Chicago pizza styles. 

Our third place city, Minneapolis (21.1), may seem like the odd-man-out at first, but the Midwest also has its own distinct pie. Its square shape and medium-thick crust is similar to the traditional Neapolitan pie that families would bake at home. You’re likely to see this shape of pizza across the Rust Belt, as far east as Detroit.

Now that we know where to find pizza, we should learn more about prices. Again we will look at the median price of a large plain pizza to compare our cities. 

Data source: Datafiniti

The city with the highest median price is Buffalo, NY at $14.79 for a large plain pie. In general, large metropolitan areas or mid-sized eastern cities compose the most expensive cities for pizza. Most likely their prices are just a product of the higher cost of living. 

At $5.99, Lexington, KY has the least expensive median price. Overall these cities are smaller and more often in the center of the country. Two of the cities with the most pizzerias, Orlando and Minneapolis, are also on our list for least expensive plain pies. That’s great news if you are a pizza lover in either of these cities. While we would need much more data to verify this idea, it could be possible that the high number of restaurants leads to greater competition and therefore better prices for customers.

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Of Penguins And A Nuclear Iran: Will Trump Scrap “The Deal”?

Netanyahu: “Penguins have no difficulty recognizing that some things are black and white.”

Trump: “I have decided…I’ll let you know.”

Rouhani: “Iran’s defense capacities are only a deterrent.”

President Trump has been notoriously hard to read when it comes to high stakes foreign policy issues. On Wednesday he told the media, “I have decided” concerning whether he’ll scrap the Iran nuclear deal, though not actually indicating what he’s decided. But will the US really unilaterally pull out? Like with Trump’s backing off of regime change in Syria even after bombing the country last April, will Trump’s bark be harsher than his bite on the Iran nuclear deal?”

In his UN General Assembly speech on Tuesday Israeli Prime Minister Benjamin Netanyahu had little to say on the Palestinian issue but as was expected blasted the Iran nuclear deal. President Trump, speaking earlier that morning, reiterated his words that the UN-backed deal is “an embarrassment” while echoing Bush’s “axis of evil” rhetoric, calling out Iran as a “rogue nation” along with North Korea and Venezuela. Multiple observers reported a visibly elated Netanyahu, who in his address seized on the momentum to say of Trump’s speech that, “none were bolder, none more courageous and forthright than the one delivered by President Trump today,” and added, “together we can seize the opportunities for peace, and together we can confront the great dangers of Iran.”

Trump hinted as he’s done many times before that the six nation brokered deal negotiated under Obama, would be nixed. Trump said of Iran, “We cannot let a murderous regime continue these destabilizing activities while building dangerous missiles, and we cannot abide by an agreement if it provides cover for the eventual construction of a nuclear program,” and continued further with,  “I don’t think you’ve heard the last of it, believe me.”  


Spoof image of the Israeli Prime Minister’s presentation at the UN which went viral inside both Iran and Israel soon after he made reference to penguins in the speech: “You laugh, but penguins have no difficulty recognizing that some things are black and white, are right and wrong.” Via Twitter. 

Trump went so far as to invoke rhetoric which sounded like a call for regime change: “The entire world understands that the good people of Iran want change, and, other than the vast military power of the United States, that Iran’s people are what their leaders fear the most,” he said. “This is what causes the regime to restrict internet access, tear down satellite dishes, shoot unarmed student protesters and imprison political reformers.”

The president added further that, “It is far past time for the nations of the world to confront another reckless regime, one that speaks openly of mass murder, vowing ‘death to America,’ destruction to Israel, and ruin to many nations and leaders in this room.” Trump issued a litany of other nefarious Iranian actions in the region including support for Hezbollah, enabling Assad’s survival, and fueling the crisis in Yemen.

But despite the bellicose rhetoric, common among all presidents of the past decades regarding Iran, it doesn’t appear that much immediate action will be taken to revoke the deal. US Ambassador to the UN Nikki Haley told CBS early on Wednesday that Trump’s words were “not a clear signal that he wants to withdraw, but it is a clear signal he is not happy with the deal, and that the United States is not safer because of it.” Like with Syria of late, it may be that Trump’s bark on Iran is much harsher than his bite. 

The Israeli Prime Minister for his part, and in usual fashion during his typically colorful UN speeches, used over the top and at times comedic language to present a scenario of Iran-sponsored doom and gloom in the region should the 2015 Joint Comprehensive Plan of Action (JCPOA) deal be maintained. After highlighting UN “absurdities” when it comes to Israel, which he defined as its generally pro-Palestinian stance and softness on Syria when it comes to the Golan, Netanyahu painted a picture of the world that has already embraced Israel’s “exceptional” abilities from fighting terrorism to technological innovation. But he then implied that the Iran deal ought to be a “black and white” while employing some interesting imagery:

After 70 years, the world is embracing Israel, and Israel is embracing the world. One year. Six continents. Now, it’s true. I haven’t yet visited Antarctica, but one day I want to go there too because I’ve heard that penguins are also enthusiastic supporters of Israel. You laugh, but penguins have no difficulty recognizing that some things are black and white, are right and wrong.

Though Israel’s stance has always been firmly against any deal perceived as soft on Iran, some Israeli officials see Netanyahu’s recent rhetoric as going too far while in actuality lacking any coherent or substantive policy vision. However, one particular item which did catch the attention of both allies and enemies was the odd penguin reference. An image spoof of Netanyahu’s 2012 UN speech wherein he held up a cartoon-like bomb began going viral on social media Tuesday in both Israel and Iran. 

Netanyahu maintained Israel’s position that the nuclear deal “doesn’t block Iran’s path to the bomb, but actually paves it” while calling perceived Iranian nuclear ambitions a “dark shadow” which Iran’s rulers will use “to destroy my country”. He challenged the international brokers of the deal with, “Change it, or cancel it. Fix it, or nix it… Nixing the deal means restoring massive pressure on Iran, including crippling sanctions, until Iran fully dismantles its nuclear weapons capability.”

But it is likely that President Trump is attempting to walk a fine line (despite his hawkish tone) between satisfying the aggressive lobbying attempts of Netanyahu along with the generally pro-Israel conservative base in America on the one hand, while being unwilling to unilaterally pull out of the deal on the other. The international powers backing the deal include the United Kingdom, Russia, France, China, and Germany – all of which are set to meet separately on the sidelines of the General Assembly to assess progress. Recent nuclear inspections found no evidence of Iranian violations of the agreement. It is further likely that the White House sees North Korea as the greater pressing issue, and collapsing the Iran deal would signal to North Korea that any possible future negotiations with the US would prove futile.

Tehran has repeatedly affirmed its position that the existing terms of the JCPOA are non-negotiable, especially after Congress passed controversial legislation requiring Iran to limit missile testing and other activities which are not actually stipulated as part of the original deal. Iranian President Rouhani warned early this week that US abandonment of the deal would come at a “high cost” to Washington. 

On Wednesday Rouhani reacted fiercely to Trump’s Tuesday speech in his own address to the UN, calling Trump a “rogue newcomer” bringing “ugly, ignorant words”. Furthermore, the timing of the General Assembly meeting is sensitive – Trump must tell Congress by October 15 whether or not he plans to abide by the deal. No matter if Trump’s intentions have at any point been more cautious and based in realpolitik, we are in for a whole new round of barbs traded between world leaders, and this alone could shift Trump’s thinking, assuming this is still possible. At least by mid-October we will all know the deal’s fate.

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