Mapping The World’s Great Divides: “Chasms Are Widening Too Fast And Too Much”

Authored by Raul Ilargi Meijer via The Automatic Earth blog,

Something hit me this week. The maps which came out on Monday and detailed the outcome of the French elections, were telling a story, and a familiar one by now. A story of deep division. There are a number of such maps now depicting the Brexit vote in the UK, the US presidential elections, and its French counterpart.

In all three cases they leave me wondering something along the lines of: ‘Are you guys sure you want to remain in the same country with each other?’ Because to me that is not all that obvious, and I think it’ll get less so as time passes. For instance in the case of France, the ‘ideological’ differences between Macron and Le Pen are substantial to say the least, they’re worlds apart.

And if you’re worlds apart, why live in the same country? Here’s that French map:

 

As you see, the country is sharply divided between west (Macron) and east (Le Pen). So much so that you wonder what these people still have in common, other than their language. There’s no doubt it’s also a dividing line between the richer part of the country, and the poorer.

Thing is, that same dividing line is visible in a similar map of the November 8, 2016 US election results, in a slightly different way.

 

In the US it’s not east versus west, it’s coast versus interior (flyover land). But the difference is equally clear and sharp. In fact, probably what we’re looking at is that France has only one coastline, while the US has two, and in both countries people living close to the ocean are on average richer than those who live more inland.

And in both cases there is no doubt that wealth is a deciding factor in dividing the nations to the extent that they are. We see that in an ‘urban versus rural area’ comparison as well. Cities like New York, LA and Paris are strongholds for the incumbent and establishment, the parties that represent the rich.

There can be no doubt that we’ll see more of that going forward. It won’t be there in smaller countries, Holland for instance is not nearly large enough for such dynamics. But Italy very well might. It’s always had a strong north-south-divide, and its present crisis has undoubtedly deepened that chasm.

Looking at things that way, it’s also glaringly obvious that Macron is Obama (and is Renzi is Cameron etc.). A well-trained good looking mediagenic puppet with a gift of teleprompter gab, fabricated and cultivated by the ruling financial and industrial world to do their bidding. Macron, to me, looks the most artificial of the crop so far, the Obama, Rutte, Cameron, Renzi crop. There will be more, and they will get more artificial. Edward Bernays is just getting started.

Of course there is also a strong move away from established parties. It is more pronounced in France -where they were eradicated at least in the presidential elections- than in the US or UK, but that may be more of a superficial thing. Trump and Bernie Sanders are simply America’s version of France’s ‘ultra’ right wing Le Pen and ‘ultra’ left wing Melenchon. And Trump is running into problems with the remnants of the established parties as much as Macron will if he’s elected president.

Anglo countries seem to take longer diversifying away from tradition than others, but they too will get there. The various deteriorating economies will make sure of that.

A third map is of the UK Brexit vote. Once again, a sharp division, and once again with a ‘character’ of its own. If you ignore Scotland for a moment, what you see is blue=poor and yellow=rich. Broad strokes, I know, but I’ve been doing that with the first two maps too. There are only a few pockets of yellow=rich=remain. But yeah, fewer people live there. Same thing as in the US and France.

That the whole Brexit thing should now be negotiated by the Tories is a cynical irony the country owes to its adherence to tradition. That is how that backfires, too little flexibility. How the UK will solve its many ignored issues is anyone’s guess. Will Scotland leave the no-longer-very United Kingdom? Will voters wake up in time to not present the Tories with a free hand to make the rich-poor divide even worse?

 

There’s one more, and more detailed, map of France, which shows even better to what extent ‘Le Pen country’ is eerily similar to America’s flyover land. It’s almost poetic, a poem about how countries fall apart, about centers that cannot hold. It also makes me think of a locust invasion, by the way.

 

Every French and European body and their pet hamster is presently telling voters in France to please please not vote for Le Pen, in a move that resembles similar calls against Trump and Brexit. And who knows, it might work this time around. The anti-Le Pen frenzy is even stronger than the others, and it has Marine’s crazy father to use as a warning sign.

But as these maps show, it’s not about Le Pen, or Trump, or Nigel Farage. It’s about people being left behind in ever larger numbers, susceptible to voices other than the ones they’ve known for a long time and who never listened to them. And nothing is being done to address these people’s claims; on the contrary, things are only getting worse for them.

I saw a headline today that said ECB president Mario Draghi’s “Stimulus Could Blunt Populism as Unemployment Declines”. There’s only one possible reaction to that: what happens when he stops his stimulus?

The growing divides that all these maps bear witness to will keep growing, unless someone decides that neo-liberalism has gone too far. But the only person who could make such a decision would have to be one who neo-liberalism itself has made rich and powerful. So don’t count on that happening.

Count instead on more Trumps and Le Pens and Sanders’s. And also on more Obama’s and Macrons for the rich to deploy to protect their power and hold on to their riches. Increasingly it would seem they have to limit democracy -even further- to remain in power. So count on that happening too.

But don’t count on all these countries surviving as sovereign nations. The chasms are widening too fast and too much.

via http://ift.tt/2oNWYQu Tyler Durden

US Consumers Tap Out: Credit Card Defaults Surge To 4 Year High And It’s Getting Worse

Two weeks ago, when JPMorgan launched Q1 earnings season, we noted that while the results were generally good, one red flag emerged: the company’s credit card charge offs rose to just shy of $1 billion, the highest in four years.

It wasn’t just JPM: all other money-center banks reported similar trends, so we decided to look into it.

What we found was not pretty. According to the latest data from the S&P/Experian Bankcard Default Index, as of March 2017, the default rate on US credit cards had jumped to 3.31%, an increase of 13% from a year ago, and the highest default rate since June 2013.

This is how S&P/Experian explained the recent 5 consecutive month surge in bank card default rates:

The bank card default rate recorded a 3.31% default rate, up nine basis points from February. Auto loan defaults came in at 1.00%, down five basis points from the previous month. The first mortgage default rate came in at 0.75%, up one basis point from February and reaching a one-year high.

 

The National bank card default rate of 3.31% in March sets a 45-month high. When comparing the bank card default rate among the four census divisions, the bank card default rate in the South is considerably higher than the other three census divisions. Upon further analysis to the South’s three census regions, East South Central – comprised of Kentucky, Tennessee, Alabama, and Mississippi – has the highest bank card default rate. 

“Currently the debt service ratio for consumer credit – the percentage of disposable income required to service consumer credit debt – is 5.58%, up from its recent low of 4.92% in 2012 but lower than the 6.01% peak seen shortly before the financial crisis.  The higher interest rates that most analysts expect over 2017-2018 are likely to combine with continued growth in consumer credit to push the debt service ratio back towards the 6% level,” said David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices

Making matters worse, based on the latest credit card data reported overnight from pure-plays Discover and CapitalOne, the deteriorating trends are rapidly accelerating (resulting in the stock of both DFS and COF getting slammed).

Add to this what CoreLogic warned earlier in the day, namely that that stalwart of any viable business cycle, mortgage performance, has finally started to deteriorate…

While loan performance improved across various loan types throughout the first five years of the expansion, over the last year three of the four major types of loans began experiencing a deterioration in loan performance. The exception to the deterioration in credit performance was real estate, which continues to improve. However, a closer look reveals performance is deteriorating, albeit from pristine levels of performance.

 

… While performance for the 2016 vintage is still very good from relative to the last two decades, it is beginning to worsen. Historically, when the mortgage credit cycle begins to deteriorate it continues to do so until the economy bottoms and the credit cycle begins to improve again.

… and it is becoming clear that the US consumer, responsible for 70% of US economic growth, has finally rolled over.

via http://ift.tt/2pAToh0 Tyler Durden

Doug Casey On Why It’s OK To Discriminate

Via CaseyResearch.com,

It was the worst article I’ve ever read. The piece was titled “Could It Be Time To Deny White Men The Franchise?” In it, the author argued why white men should no longer be allowed to vote.

(The Huffington Post has since pulled the original article down claiming that the author “cannot be traced and appears not to exist.” Luckily, we were able to track down the original article. You can read it here.)

As soon as I finished reading the article, I sent it to Casey Research founder Doug Casey. He replied:

“Fascinating. At first, it seemed like a comedy piece. But it's clear she's serious.”

A few days later, Doug and I chatted about the article.

Below is a transcript of our conversation. We hope you enjoy it.

*  *  *

Justin: Doug what did you think of that Huffington Post article I sent you?

Doug: I read the article when it was still up, and it was absolutely incredible. That’s not just a figure of speech. I mean it beggared belief. I urge everyone reading this to hit the link. These people don’t seem to realize that they’re actually parodies of themselves. I mean, they’re always talking about racism and xenophobia and sexism and ageism and the like. They don’t look at people as individuals, they look at people as members of classes. That’s why it’s called “identity politics”—you don’t identify as an individual, but as a member of a group or a class. And, of course, their philosophical background is cultural Marxism. Because, you know, one of the central points of Marxism is that people are all members of classes.

But it’s actually gone beyond that. It’s become fashionable now to hate white males in particular. They say that women, blacks, Muslims—pick a group, any group except for white males—are all discriminated against.

I would say, in the first place, there’s absolutely nothing wrong with discrimination in itself. Discrimination can be rational. Discrimination can be intelligent. It’s often necessary. It’s a matter of what you’re basing your discrimination on.

You have to discriminate between things that will help you and things that will hurt you. And that can include other groups or even other people. It’s a genetic trait to be more favorably inclined towards people like yourself. Tribes usually identify themselves as “the people”, and everybody else is “other”, a potential enemy. It makes sense to recognize facts of reality. Different ethnic and religious groups have different beliefs, customs, and ethics. Until you can get to know them as individuals it makes sense to generalize.

But it goes deeper than that with this insane article. What these people really hate is Western Civilization and everything it represents. The question is: Why do these people think it’s virtuous to discriminate against white males? White males are largely responsible for Western Civilization. Which is shorthand for things like individualism, free markets, free thought, science, literature, industry, and about everything that’s allowed mankind to rise out of the muck and look to conquer the planets.

That’s what this article really hates.

So, it’s fascinating not so much that somebody wrote an article as stupid as that. But that a large outlet like Huffington would actually publish it. It’s a sign of how degraded things are. I’d say the author suffers from a serious psychological aberration. The editor who posted it is clearly a graduate of some PC US university, probably a major in Gender Studies.

It’s too bad that they took it down because it should be put on display, as a warning. Unless they repost it in The Onion.

Justin: I totally agree, Doug. I’ve also noticed that these people don’t really want equality for all. They want equality for some. It’s incredibly hypocritical.

Doug: It’s actually all about envy. Envy is a vice—it’s different from jealousy, another vice. Jealousy is a vice that says, “You have something, I want it, I’ll take it away from you.” Envy is even worse. It says, “You have something that I want, I can’t get it, so I’ll destroy it, so you can’t have it either.” These people aren’t just misguided. They’re mentally ill. They’re actually evil. But they’re not just taken seriously, they’re treated with respect. And they’re endemic to society at this point. This is cause for great pessimism.

Justin: It’s certainly not the only reason to be pessimistic, either. But that’s it for today. Thank you for taking the time to speak with me.

Doug: You’re welcome.

*  *  *

Doug and his team just released a new video presentation that explains a unique way to get paid every month on autopilot. Thanks to a brand-new initiative started by the US government, you can potentially earn an extra $10,000 to $40,000 over the next three years. If you're interested, you can watch it right here.

via http://ift.tt/2q9A6z1 Tyler Durden

The New America: Rich Get Richer, Poor Get Replaced By Robots

Trump has spent a lot of time during his first couple of months in the White House ramping up the rhetoric over all the jobs that are flowing out of the country into lower-cost labor markets like Mexico, China and elsewhere.  And while that may be true, as we’ve pointed out multiple times in the past, part of the issue is also related to good old-fashioned capital allocation decisions whereby the combination of rising labor costs in the U.S. and declining technology costs makes capital investments in automation much more attractive.

The problem, of course, is that low-skilled labor (e.g. making a Big Mac or taking an order at McDonald’s) is much more susceptible to automation than higher-skilled positions which results in expanding income disparity. 

In fact, as Bloomberg points out in a series of charts today, the growing income divide, just since 2010, is fairly staggering.  The rich-poor gap – the difference in annual income between households in the top 20% and those in the bottom 20% – ballooned by just over $29,000 between 2010 and 2015. 

High-tech hubs were among the five metropolitan statistical areas where the gap between the highest- and lowest-income households expanded the most: two in California, San Francisco and San Jose, as well as Austin and Seattle.

 

The gap between the super rich (top 5%) and the middle class (the middle 20%) is also surging.

 

Meanwhile, as a new study from PWC points out, this trend is unlikely to reverse anytime in the near future as they estimate that 38% of U.S. jobs could be at risk of automation just over the next 15 years.

“Technological developments have increasingly replaced low- and mid-skilled jobs while complementing higher-skilled jobs,” said Chad Sparber, an associate professor and chair of the economic department at Colgate University.

 

This shift is predicted to continue. About 38 percent of U.S. jobs could be at high risk of automation by the early 2030s, according to a study by PricewaterhouseCoopers LLP. The “most-exposed” industries include retail and wholesale trade, transportation and storage, and manufacturing, with less-educated workers facing the biggest challenges.

 

“Companies are doubling down on costs cuts and streamlining their operations,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York. Workers “at the bottom have not seen as much improvement as those at the very top of society.”

Of course, when demand for a product, low-skilled labor in this case, is declining, the worst thing you can do is raise the price for that product.  Unfortunately, as we pointed out a couple of days ago, that is exactly what Bernie Sanders and other liberals are doing with their recently released legislation calling for a $15 federal minimum wage.

via http://ift.tt/2qgdr0v Tyler Durden

Forget Reagan: Trump’s Tax Plan Is More Like George W. Bush

Still at it. ||| ReasonIn the run-up to today’s big White House tax-reform announcement, the question among many analysts was: Would President Donald Trump’s ideas look more like Ronald Reagan in 1981 (when he and a bipartisan congressional majority cut rates) or 1986, when they simplified the code? While Treasury Secretary Steven Mnuchin, flanked by National Economic Director Gary Cohn, bragged that the administration’s plan was both “the biggest tax cut” and the “largest tax reform” in U.S. history—1981 and 1986 at the same time, only more!—the more apt and less comforting historical precedent might be the guy who Trump never tires of bashing: George W. Bush.

The second President Bush pushed through tax cuts in 2001 and 2003, each of which passed with fewer than the 60 Senate votes required by an amendment to the 1974 Congressional Budget Act that demanding a supermajority for any piece of legislation seen as worsening the federal deficit 10-plus years down the road. How did the Bush cuts pass with only 58 and 51 votes, respectively? By including sunset provisions right at that 10-year mark. You can’t be accused of affecting the year-11 deficit if you die at age 10!

In word and deed, President Trump appears poised to follow down Bush’s path of temporary tax reform through budget reconciliation; i.e., passing it on a party-line, simple-majority vote. “I hope [Democrats] don’t stand in the way,” Mnuchin said at the press conference. “And I hope we see many Democrats who cross the aisle and support this. Having said that, if they don’t, we are prepared to look at the reconciliation process.” House Speaker Paul Ryan (R-Wisc.) echoed the sentiment: “We want to look at every avenue, but we think reconciliation is the preferred process, we think that’s the most logical process to bring tax reform through,” Ryan told reporters Wednesday.

There are exactly two ways you can sidestep the 60-vote rule. The first is to make sure the tax changes project to being deficit-neutral a decade from now. Given that Trump’s campaign tax-reform framework, upon which today’s announcement was largely based, had previously produced revenue estimates from conservative outfits showing a decrease of around $3.5 trillion over 10 years, it’s damn near impossible to imagine the Congressional Budget Office or the Joint Committee on Taxation (Congress’s go-to economic projection shops) torturing those 13-figure numbers out of existence, no matter how “dynamic” their scoring.

Worsening those prospects—though arguably making the policy world a better place—the Mnuchin/Cohn duo swatted away one of the main proposed revenue-generators of 2017 tax reform: Paul Ryan’s treasured and troublesome “border adjustment tax,” a tariff by any other name that the speaker was counting on to offset the revenue hits by $1 trillion.

Americans for Tax Reform President Grover Norquist, no fan of either taxes or tariffs, told me last week that he was in favor of the Border Adjustment Tax as the price for getting a $2.5 trillion tax cut. Without it? “There are two options to that,” Norquist said. “You could have a smaller tax cut, not get rid of the death tax, not take the individual rates down or the corporate rates down as much. But you have to find a trillion dollars in less tax-cutting. Or you could have a tax that replaced it, some tax somewhere else. I’m not sure there’s one that’s an improvement.”

Well, Mnuchin and Cohn did include a big revenue generator in today’s press conference, in the form of eliminating the federal tax deductions that Americans can take on their state and local taxes, a change that the Washington Post says “could save more than $1 trillion over 10 years.” This idea, which makes intuitive sense, would nonetheless be heavily disruptive to those of us who live in high-tax states. And not just in thos Democratic-bubble strongholds like New York, California, and Illinois—according to this WalletHub analysis, vying for worst American state/local tax burden are the deep red states of Nebraska and Iowa (ranked 50th and 43rd out of 51, respectively), plus the Trump swing states of Michigan (44th) and Ohio (45th). That’s five Republican senators right there, at a time when the GOP advantage in the Senate is just 52-48. If this provision passes, I’ll eat my baseball glove. (And then move to Nevada.)

Steve Mnuchin can say that the tax cut “will pay for itself,” but it is extraordinarily unlikely that any reputable governmental economic-projection outfit will agree. So what was that Option #2, Mr. Norquist?

“I’d have to give up on permanence, and make it temporary,” he said. The problem with that: “Going to temporary means that people can’t plan. And you won’t get the economic benefit of reforms if people think they disappear in a few years.”

It is true that some of Bush’s tax cuts were eventually made permanent, and that Trump’s people are clearly hoping to press whatever advantage they have now to maybe achieve that or other tax-code goals later. But it’s also true that, coupled with his other commitments, Trump is setting himself up to mimic one of the signature aspects of a presidency he disdains. Taxcut-and-spend is back, baby, and with it any last claim that the Republican Party is serious about confronting the national debt.

There is plenty to like about the tax-reform bullet points distributed by the White House. A 15 percent corporate tax rate is one helluva lot better than 35, and could conceivably spur the kind of growth America has not seen this whole grim century. The Alternative Minimum Tax, among other intended hatchet victims, does not deserve our sympathy. And though it’s getting much less play, the switch to a “territorial” tax system—meaning, you pay taxes on what you earn here, not what you earn abroad—is a welcome and long-overdue change in a global outlier of a tax policy. (“We want any American company that makes money in Germany to be able to bring it back easily and not be punished for bringing it back,” Norquist said. “That’s the way the rest of the world operates, it’s not how we operate.”)

I predict...pain. ||| AEI/ReasonBut even if the economy responds to temporary tax cuts and aggressive regulatory rollbacks with a historic growth spurt (looming trade war be damned), that will not make up for the fact that President Trump has no demonstrated interest in cutting back the biggest drivers of federal spending: Social Security, Medicare, defense, and interest on the debt. His first proposed budget, a political nonstarter, only manages to keep spending flat by proposing agency cuts that Congress will never agree to. His infrastructure plan, as an opening bid, promised Democrats they could spend around $200 million of federal money (still not nearly enough for the Chuck Schumers of the world). He is so far operating a more interventionist foreign policy than he campaigned on. At a time of unprecedentedly worrisome debt overhangs and entitlement bubbles, Trump has steered an all-too-willing GOP into fiscal fantasyland.

Few politicians win elections by bumming out voters with the realities of trade-offs. As the late, great economist James Buchanan wrote midway through the Reagan presidency:

“The attractiveness of financing spending by debt issue to the elected politicians should be obvious. Borrowing allows spending to be made that will yield immediate political payoffs without the incurring of any immediate political cost.”

What’s more, Buchanan warned, “the replacement of current tax financing by government borrowing has the effect of reducing the ‘perceived price’ of government goods and services,” with the result that taxpayers “increase their demands for such goods and services.”

It was for this reason that Buchanan favored balanced budget amendments rather than an endless series of tax cuts. If voters knew how much their government actually cost, he reasoned, they might finally get serious about restraining it. As his former colleague Tyler Cowen put it in The New York Times in March 2011, Buchanan “argued that deficit spending would evolve into a permanent disconnect between spending and revenue, precisely because it brings short-term gains. We end up institutionalizing irresponsibility in the federal government.”

There are a handful of politicians on Capitol Hill, many from the Tea Party wave beginning in 2010, who are aware of Buchanan’s work, and even campaigned on openly confronting fiscal illusions and realistic tradeoffs. Some of those politicians, such as Rand Paul and Mike Lee, are among the razor-thin GOP majority in the Senate. It will be interesting to see how they react to the near-term scrums over government shutdowns, border-wall financing, emergency supplemental requests, and massive tax cuts.

As for Trump, he was already going into his presidency with a chance of topping even the flagrantly irresponsible Barack Obama in creating new debt. The economy, and American pocketbooks (outside of New York and California, anyway), might get a temporary sugar high, and here’s hoping they do. But the long-term fiscal picture is arguably bleaker today than it was yesterday. Trump, whatever his many flaws, was supposed to at least provide a sharp break from politics as usual. With his Bush-style tax cuts and Obama-like spending, however, he is instead giving us more of what has made the 21st century so disappointing in the first place.

from Hit & Run http://ift.tt/2pAQ59x
via IFTTT

Obama Explains Why He Accepted $400,000 For A Paid Speech On Wall Street

There was some snickering two days ago when it emerged that as his first paid speech appearance, former president Barack Obama who – at least on paper was a determined crusader against the big banks – will receive $400,000 for roughly an hour of his time from, well, a bank or rather Cantor Fitzgerald.

Moments ago, Obama seemingly concerned by the public response the news has generated, decided to respond via his spokesman Eric Schultz, and explain why it is perfectly ok for the former president to collect a $400,000 from a bank. We won’t comment suffice to note that in trying to explain why it is now ok for him to collect nearly half a million dollars from the hate banks, it is probably not a good idea to say the following: “I’d just point out that in 2008, Barack Obama raised more money from Wall Street than any candidate in history.“

Full statement from Obama spokesman Greg Sargent

As we announced months ago, President Obama will deliver speeches from time to time. Some of those speeches will be paid, some will be unpaid, and regardless of venue or sponsor, President Obama will be true to his values, his vision, and his record.

 

He recently accepted an invitation to speak at a health care conference in September, because, as a President who successfully passed health insurance reform, it’s an issue of great importance to him. With regard to this or any speech great importance to him. With regard to this or any speech involving Wall Street sponsors, I’d just point out that in 2008, Barack Obama raised more money from Wall Street than any candidate in history – and still went on to successfully pass and implement the toughest reforms on Wall Street since FDR.

 

And while he’ll continue to give speeches from time to time, he’ll spend most of his time writing his book and, as he said in Chicago this week, focusing his post-presidency work on training and elevating a new generation of political leaders in America.

Source: Greg Sargent

via http://ift.tt/2oxNkWg Tyler Durden

Paul Brodsky: “Only The Court Jester Gets To Speak Truth To Power And Laugh About It”

By Paul Brodsky of Macro Allocation Inc.

“A stock is like a living organism. A sparrow, say. And we are able to create an emergent-based abstraction of that sparrow, which closely approximates the sparrow itself, accounting for migration patterns, wind, weather, and other variables. We can create a similar abstraction of a stock combining the information from the specific ETFs, which represent its underlying dependencies. And if we apply this to the stock we can predict its delta, following the path of its extracted self, because nature follows abstraction.”

      – Taylor from Billions

Surely, You Jest

The writers of Showtime’s Billions are nothing if not funny. The gibberish above captures perfectly the philosophical yearning of hedge fund men and women in their tortured quest for higher meaning. (As it turns out, the show does not limit its characters to men and women. Taylor is played by an actor that self-identifies sexually in real life as “non-binary” and in the show demands the pronouns “its” and “their” instead of he, she, his or her.)

To be sure, “its” description of stocks as create-able and manipulate-able abstractions rings true, especially today when factors exogenous to earnings and commercial prospects seem to influence market prices more than rational demand for equities. Don’t tell anyone but market manipulation is legal when parallel abstractions are created and executed by self-serving political and economic policy makers; not so when they are perpetrated by self-serving financiers. We suspect the show’s US Attorney for the Southern District of New York will eventually inform Taylor that hedge funds don’t get to create and manipulate their own abstractions (and if it wants to do so, then it should work at the Fed).

Another fun second-hand account of the markets was on offer this weekend in an established financial column that criticized how “financial philosopher kings” like to opine on “the meaning of life” and “the nature of happiness” instead of…providing graphs! We were to urged to believe, we suppose, that graphs are more scientific and allow anyone to more accurately extrapolate the future from the past.

The column’s current steward (it has been around for decades) then endorsed an analyst who noticed “booming” trends in US interior cities and millennial labor participation (for which he presumably had many graphs). Awkwardly, the analyst concluded there will be only modest moves in stocks and bonds, and so the column successfully expended a thousand words to inform readers that financial markets still exist. Some of those words were ironically spent informing readers that a picture is worth a thousand words, and so it may have been more efficient (and less ironic) to instead paste a pinup of Warren Buffett, the biggest supporter of buy-and-hold-no matter-what investing, on a graph of the S&P 500:

Buffet is still a forward-looking philosopher king but stays mute when valuations are high. We are more drawn when values are high to those like Paul Tudor Jones, who allegedly told a private meeting at Goldman Sachs that the Fed should be terrified to look at a chart, ironically cited often by Warren Buffet, that shows the stock market woefully out of balance with the broader economy.

Graphs themselves are funny things. Trying to gain insight by identifying trends without ratios, which provided context, is like trying to clap with one hand. Booming cities based on health care revenues is a signal to us how tenuous economic growth is, not how strong or sustainable it may be.

Alas, our personal fate is not to have billions, or to play an asexual financial automaton on the show of the same name, or to be a financial philosopher king. We will have to be satisfied with being invited to Court every now and then, even if it is as a jester. Who else can speak truth to power and laugh about it?

via http://ift.tt/2p5DpWt Tyler Durden

ESPN Will Get Better, or Fail Trying

ESPN, which has lost millions of subscribers in recent years, announced it would be laying off 100 employees, mostly on-air talent, as The Hollywood Reporter reports—they are not the first big layoffs at the sports network, but represent ESPN’s continuing efforts to respond to increased competitive pressure as fortress cable’s hold on Americans’ viewing habits continues to weaken.

ESPN makes the majority of its money—two thirds of its revenue in 2013—on carriage fees. If you have a cable or satellite package with ESPN on it, the network gets a cut of your monthly bill whether you watch or not. The rest comes from advertising.

In 2015, cable companies lost 1.1 million subscribers, four times the number they lost in 2014. Last year, 1.8 million people cut the cord. According to Disney, which owns ESPN, the network lost 3 million subscribers in 2015, and is down to 92 million from 99 million at the end of 2013. Competing cable networks don’t always benefit—in February Fox Sports 1 lost even more subscribers than ESPN, and from a smaller base.

Nevertheless, ESPN has the kind of long-term contracts for broadcasting rights other cable sports networks aren’t saddled with. It spends more on content a year, $7.3 billion, than Netflix, which spends $5 billion. It’s spending $166 million a year through 2036 on the ACC alone. According to Motley Fool, ESPN last year had $33.27 billion in long-term broadcast rights contract obligations for MLB, the NBA, the NFL, and the college football playoffs.

ESPN has been successful for a long time, and according to Disney revenue and operating income for its cable networks still rose three percent in the first three quarters of 2016, as Motley Fool reported, a slowdown from previous years. ESPN enjoyed the benefits of being the first network to do what it did—dedicate its broadcasts entirely* to sports—and the benefits of the cable monopolies.

Almost since its inception, the cable industry has been regulated at the local, state, and federal level. As a 1984 Cato report explained, federal regulations brought the cable industry to a near halt between 1966 and 1975. After courts and bureaucrats started rolling back these regulations, local governments stepped in with new regulations and controls. Clint Bolick noted in the 1984 report the danger posed by local regulation and franchising prompted by the fallacious idea that cable was a natural monopoly. Such predictions of natural monopoly formation, Bolick explained, tended to be self-fulfilling prophecies because of the government intervention they yield.

By 2005, the Federal Communication Commission (FCC) was concerned in the other direction, spending several years trying to combat the rising cable prices enabled by local government franchise regulations and the expansive bundles that came with them—George W. Bush’s FCC wanted to force cable companies to offer more a la carte choices, but in the end, as Peter Suderman noted in 2015, it was market forces, and the internet in particular, that yielded the “great cable unbundling.”

ESPN’s broadcasting rights binge may have been a response to those trends. Actual games are the currency of sports broadcasting. But ratings are down in many sports too. NFL ratings fell 9 percent last year (ESPN is paying $1.9 billion a year for the broadcasting rights to Monday Night Football through 2021). Major league has seen some ratings improvements after years of decline.

At the same time as going all-in on being the home of broadcast sports, ESPN has moved away from the idea of all-sports coverage. Its own public editor reported of regular complaints about the network’s foray into politics (generally of a specific left-wing variety). “Like it or not, ESPN isn’t sticking to sports,” Jim Brady wrote earlier this month. He repeated his assertion that disentangling sports and politics was a “fool’s errand” while acknowledging that looking back at the last twenty years of ESPN’s flagship news show Sports Center it was “noticeable how little politics and culture intruded into the tsunami of highlights and witty banter that once marked that show.”

Brady continued: “That was reflective of the overall newsier focus ESPN had in those days.” Perhaps there’s a connection between ESPN moving away from content that made it unique—high-energy sports news—in favor of political rehashed rehash available at all kinds of other outlets on the internet and other platforms and the problem of viewership loss. Nevertheless, such effects are on the margins compared to the broader structural problems.

In the end, ESPN is subject to competitive pressures, and as the internet breaks down various government-constructed barriers to entry, those pressures will increase. ESPN came on the air nearly 38 years ago. If it can continue to adapt, it can continue. If it refuses to, it won’t. A little bit of creative destruction could go a long way, an exciting prospect for an arguably stale network.

from Hit & Run http://ift.tt/2oxTgPe
via IFTTT