End Of An Era: The Rise And Fall Of The Petrodollar System

Submitted by Claudio Grass via Acting-Man.com,

The Transition

“The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or euros. The sooner the better.”

Ron Paul


oil pipeline to ghawar

A new oil pipeline is built in the Saudi desert… this one is apparently destined for the Ghawar oil field, one of the oldest fields in Saudi Arabia and still the largest in the world


The intricate relationship between energy markets and our global financial system, can be traced back to the emergence of the petrodollar system in the 1970s, which was mainly driven by the rise of the United States as an economic and political superpower.

For almost twenty years, the U.S. was the world’s only exporter of petroleum. Its relative energy independence helped support its economy and its currency. Until around 1970, the U.S. enjoyed a positive trade balance.

Oil expert and author of the book “The Trace of Oil”, Bertram Brökelmann, explains a dramatic change took place in the U.S. economy, as it experienced several transitions: First, it transitioned from being an oil exporter to an oil importer, then a goods importer and finally a money importer. This disastrous downward spiral began gradually, but it ultimately affected the global economy.

A petrodollar is defined as a US dollar that is received by an oil producing country in exchange for selling oil. As is shown in the chart below, the gap between US oil consumption and production began to expand in the late 1960s, making the U.S. dependent on oil imports.


Village in the desert: this compound in the Sahara houses people working at Saudi Arabia’s Shaybah oil field.


And while it led to the U.S. Dollar being established as the world’s premier reserve currency, it also contributed to the country’s increase in debt. The oil embargo of 1973-74 was a major hit that exposed the vulnerability of the U.S. economy.

Nevertheless, under the banner of “national security” the future policy course was firmly set: in a 1973 National Security Council (NSC) paper, it was stated that “U.S. leverage in energy matters resulted from its economic and political influence with Saudi Arabia and Iran, the two leading oil exporters”.



US petroleum production, consumption and net imports – after surging dramatically from 1950 to the early 21st century, US energy imports have declined dramatically since the mid 2000ds as a result of the fracking boom. This is inter alia beginning to affect global dollar liquidity.


From a Gold-Based Monetary System to the Petrodollar System

Former U.S. Senator Ron Paul explains that “understanding the Petrodollar system and the forces affecting it, is the best way to predict when the U.S. Dollar will collapse. The origins of the petrodollar system go back to the Bretton Woods system, the 1944 post-war agreement, which made the U.S. Dollar the sole reserve currency.



Bretton Woods monetary conference at the Mt. Washington Hotel in July 1944


From then on, only the U.S. Dollar would be convertible into gold at a fixed rate of USD 35 per ounce. This also meant that only the U.S. was able to change the price of gold and, in turn, it committed to maintaining the value of the Dollar by buying and selling unlimited quantities of gold, at the agreed upon rate of USD 35 per ounce.

In 1945, the U.S. Treasury held 17,848 metric tons of fine gold, which at the time represented around 63% of official global gold reserves. The gold-backed Dollar offered the world a reliable and stable reserve currency. However, cracks in the Bretton Woods system began to emerge, as US export surpluses began to drop after 1960.

The Kennedy and Johnson administrations were rather big on money printing, be it to finance the space race, or to spend on domestic social programs. A significant burden on the U.S. budget were also the wars fought in Korea and Vietnam, which had to be paid for by resorting to the usual war funding mechanisms, i.e. by borrowing money.

Thus, the country began to live on credit and banks worldwide were  flooded with US dollars. These dollars represented gold claims on the United States though. In 1971, the US “temporarily” suspended convertibility of the Dollar into gold, and announced that the dollar would be devalued to USD 38.00 per ounce.



Richard Milhouse Nixon. Here is a link to a video of his announcement of the US gold default in 1971. It is a classical example of how governments are routinely telling bald-faced lies when imposing steps to combat “economic emergencies” they themselves have caused. These steps invariably mean that someone’s wealth is stolen or diminished in favor of the State.


A run on gold ensued, as European states, particularly France and Germany, were skeptical and wary of another devaluation. As a result, US gold reserves eventually shrunk to about 286 million ounces. Richard Nixon then “closed the gold window” in August 1971 and the dollar was devalued for a second time by 10%.

The gold price shot up to USD 42.22 in one go. This essentially meant that the U.S. Treasury defaulted on its promise to back the dollar with gold and thus, the financial system as it was constituted at the time was no longer sustainable.


Chart-2-Gold, 67-73

Gold price from 1967 to 1973. In the late 1960s there was an attempt by governments to keep the gold price under control through the “London Gold Pool” – they lost gold so fast in this market manipulation effort that they soon gave up again. It foreshadowed the eventual default. Monetarist economists like Milton Friedman told Nixon that the gold price would fall to $6 if the US were to “demonetize” gold – once again proving that the forecasts of most economists aren’t worth much – click to enlarge.


1973 was an important year for oil: the oil embargo was imposed as a reaction to the Yom Kippur war, but it also related to the closure of the gold window. The Dollar became nothing more than a fiat currency and the Fed was free to pursue monetary expansion completely unhindered. The main problem the US faced was how to motivate other countries to hold and use US dollars. Saudi Arabia became the lynchpin of this effort.

According to leaked documents, there were other interested parties that helped to “orchestrate” these developments in 1973-74. Henry Kissinger held a meeting in Bilderberg in the Netherlands with an influential group of men: Lord Greenhill of BP, David Rockefeller of Chase Manhattan Bank, George Ball of Lehman Brothers and Zbigniew Brzezinski.

The came to the conclusion that OPEC “could completely disorganize and undermine the world monetary system” and so they decided to target the commodity it controlled. Oil was to save their banks and financial interests from the collapse of the dollar.


Kisser and Faisal

Kissinger meets with King Faisal of Saudi Arabia. At this point, the latter seemed not quite convinced yet. In the end, the Saudi royals realized what a great deal this would be for them.


Shortly thereafter, Kissinger negotiated with the Saudi monarchy,  and helped steer events in the direction that would eventually lead to an agreement between Saudi Arabia and the United States. It has only recently been disclosed that there was another covert meeting between the Saudis and newly appointed U.S. Treasury secretary, William Simon.

The objective was to find a way to convert the then hostile Saudis to US allies and by doing so create the petrodollar so as to reanimate the ailing US economy. Nixon would not take no for an answer – not only was it a matter of economic security, but he also wanted to block the Soviet Union from getting a toehold in the region.


William Simon

Former US treasury secretary William Simon – it has only recently emerged that he actually went on a secret mission to Saudi Arabia to persuade the Saudis to take dollars for oil and recycle them into treasury debt


Simon knew how to sell the idea: America was the safest place for the Saudis to invest their petrodollars and no one would know about it (Saudi investments were not disclosed separately, instead they were grouped with other oil exporting countries). As shown in the chart below, today Saudi Arabia is the largest US creditor among oil exporting countries, holding about USD117 billion in treasury securities.


Chart-3-treasury bonds held by oil exporters

US treasuries held by oil-exporting countries. In this group, Saudi Arabia is the largest creditor of the US – click to enlarge.


And so, a partnership and a strategic alliance were formed: The US agreed it would guarantee the survival of the House of Saud, provide military security for the Saudi oil fields, as well as sell arms weapons to the Saudi government.

In return, Saudi Arabia would use its leverage in OPEC to ensure all oil transactions would be in USD, invest its own Dollars generated from oil sales in US investment vehicles, maintain influence over price levels and prevent another oil embargo.

This alliance marked a paradigm shift, the transition to the “petrodollar system”. It enabled the US to fill the vacuum that was left by the closure of the gold window. The oil conglomerates and financial oligarchs secured the flow of funds by creating a new wave of demand for US dollars.

Though artificial and baseless, it was backed by the increasing demand for oil worldwide. And this, also artificial, demand has successfully supported the continuation of expansionary US monetary policy for decades – at least until the beginning of the global financial crisis and the point where we find ourselves now.


Is Another Paradigm Shift Underway?

Similar to the paradigm shift that followed with the collapse of the Bretton Woods system, there is another major shift underway today. According to Ron Paul, we will know its consequences in full, the day oil-producing countries demand gold for their oil rather than dollars.



Rosneft facility in Siberia

We have already seen changes in oil sale agreements made in recent years. In 2013, Russia’s Rosneft agreed to supply China with oil worth USD 270 billion, the largest agreement to date. Additionally several OPEC nations are allowing oil transactions to be carried out in a currencies other than the dollar.

In January 2016, India and Iran agreed to settle their oil sales in Indian rupees. In 2014, Qatar agreed with China to be the first hub for clearing transactions in the Chinese yuan. In December 2015, the United Arab Emirates (UAE) and China created a new currency swap agreement for the yuan. Both steps strongly indicate that the Gulf states are taking measures to reduce their dependence and exposure to the US dollar.

It is therefore clear why all eyes are set on the geopolitical turmoil in the Middle East. Concerns have intensified after a failed military intervention by the US, the slowly weakening strategic position of Saudi Arabia in the region and the increasing strength of Iran after the removal of economic sanctions.



President Obama and Saudi Arabia’s new King Salman find something to laugh about. In reality, relations between the US and Saudi Arabia have steadily deteriorated in recent years, official proclamations to the contrary notwithstanding.


In addition, U.S.-Saudi relations are currently on shaky ground. In April Saudi Arabia warned it could proceed to sell off billions worth of US treasury bonds if Congress passed a bill that would allow the kingdom to be held liable in U.S. courts for the Sept. 11 terrorist attacks.

That bill indeed passed the Senate in May and is now in the hands of the House of Representatives, but a vote is yet to be scheduled. The Saudi threat has not yet materialized, but if it did, it would pull billions of dollars out of the US treasury bond market – it would be a move of great moment, symbolically ending more than 40 years of cooperation in the petrodollar system.

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What One Million Recently Fired Chinese Coal And Steel Workers Are Doing Now

Having followed China’s biggest risk with great interest for the past year,  which incidentally is not its $36 trillion in debt, nor its defaults, its zombie companies, its ponzi “wealth products”, its currency, its capital outflows, its crony capitalism and corruption, nor its gargantuan capital misallocation, but the threat of a social revolution as a result of a surge in unemployment as entire zombie industries fail, that has always been true biggest risk for Beijing (something the Politburo knows very well),  we found it less than surprising when last September a Chinese coal company announced it would fires 100,000.

That was just the tip of the iceberg for China’s insolvent commodity sector, which just happens to employs tens of millions of no longer needed workers.

Things then rapidly escalated, and as we reported in March, China’s mass layoff wave was only just starting when it was revealed that China aims to lay off 5-6 million state workers over the next two to three years as part of efforts to curb industrial overcapacity and pollution.

We expect that tens of millions more will or already have been fired as China struggles to resolve it gargantuan “overcapacity” problem.

But if indeed millions of workers have already been fired, then what are these recently laid off workers doing, and why have they not rioted as Beijing, is so terrified they will?

We now have an answer: according to South China Morning Post, Didi Chuxing, the ride-hailing company which is China’s equivalent of Uber, is
claiming to have given more than a million jobs to former heavy industry
workers across China,
according to new research from the firm.

Its study shows there are now 3.89 million
full-time and part-time drivers from 17 heavy-industry provinces
including Heilongjiang, Shanxi and Sichuan who work for the firm’s
private car and chauffeur services

Out of the drivers it employs who used to work
in heavy industry, 530,000 came from those that are undergoing massive
restructure, including the coal and steel sectors, the report said. It claims the number represents 60.2 per cent of
the Chinese government’s one-year re-employment target for heavy
industry workers who have been made redundant, and 29.4 per cent of the
five-year target.

Cheng Wei, Didi Chuxing’s chief executive, said in a statement that 15 million rides take place on Didi every day.

“As China undergoes sweeping economic restructuring, Didi is in a unique position to help drivers find flexible work opportunities and better livelihoods with the power of technology as we work together to create more sustainable cities,” he said.

In other words, Didi is now a systemically important company, which provides part-time jobs to millions of recently laid off workers who would otherwise be very, very angry (and with to lose they may as well riot) as there are simply are no industries with enough vacant spots to absorb the influx of newly laid of workers. Such is the magic of the “sharing” economy, where anyone who has a car can become a part-time taxe driver, pardon Didi employee.

As noted above, millions more in layoffs are coming. Xu Shaoshi, chairman of the National Development and Reform Commission, said in June that China aims to reduce steel production capacity by 45 million tonnes this year and cut coal output capacity by 280 million tonnes. Chinese premier Li Keqiang said at the Summer Davos in Tianjin last month that governments and enterprises will take steps to help laid-off steel and coal workers find employment, with the central government allocating 100 billion yuan to such efforts.

And this is where “new industries” come in play.

Kitty Fok, managing director for research firm IDC China, said: “Internet platforms like Didi are able to provide job opportunities for blue-collar workers, which also helps to fulfil the government’s Internet Plus initiative.” China’s Internet Plus initiative calls for traditional industries to better integrate big data, mobile internet, cloud computing and the internet of things into their operations.

“Private car drivers with Didi are given clear guidelines on the type of service they should provide, such as a bottle of water to passengers in every ride,” Fok said.

“This is also a type of training programme that gives heavy-industry workers new job opportunities in the service industry.

Neil Wang, president for Frost & Sullivan in Greater China, said that internet companies and the online-to-offline industry are changing the employment landscape in China.

“The rapid development of internet companies has changed the business model in many industries, providing higher-income job opportunities for people who previously earned minimum wage,” Wang said, adding that in some cases jobs created by internet companies could pay better than in heavy industries.

All of the above is good news: after all the more China’s growth decelerates and the more workers lose their existing jobs, they can find temporary employment as part-time cab drivers.

However, the only problem is when everone else is also a cab driver: who will spend money on fares? We expect China to reach that particular threshold in another 3 to 6 months.

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Baton Rouge Rapper Slams Hypocrisy Of ‘Black Lives Matter’, Don’t Care When “We Kill Each Other!”

Just days after Milwaukee Sheriff David Clarke denounced their "hatfeul ideology," and following Brooklyn cop Jay Stalien exposing their "false narrative," the 'Black Lives Matter' group faces more abuse from African-Americans in the nation's communities. Calling out "the bullshit" of the 'Black Lives Matter' movement Baton Rouge-based rapper Kevin Gates has posted a video raging "we kill each other, but as soon as a white boy kills one of us, everybody go to hoopin’ and hollerin’."

“When you stand for something, you’ve got the stand for it all the way, not half way,” he said, before describing the lengths some black people go to kill each other:


“We kill each other. I’m talking about we lay up under each other’s cars, lay behind each other’s houses then whip by — BOOM BOOM — kill everybody in the car.”


“That’s bullsh*t,” Gates added, blasting the anti-police movement for its lack of similar outrage about black-on-black crime.

 As Breitbart reports, Gates also criticized Black Lives Matter for its hypocrisy this past February.

During an interview on Shay Diddy TV, Gates said he agreed with actress Stacy Dash’s contention that there shouldn’t be a Black Entertainment Television (BET), and that we are all Americans at the end of the day.

“If she said that, then I feel like I agree with that,” Gates said of comments Dash made last January about the “Oscars so White” controversy. “They got these people out here talking about ‘Black Lives Matter!’ Man, all lives matter.”

Gates, himself a two-time convicted felon, also holds himself accountable for his own violent altercations with law enforcement.

“I got my ass whooped by the police,” Gates said.


“But you know why?” he asked Diddy. “I was belligerent and I was conducting myself like a ‘n***er.’ And when I say ‘n***er’ I mean I was conducting myself in an ignorant manner.”


“I had no respect for myself,” he continued “I had no respect for authority that was talking to me. So I deserved what I got. I’m a felon. I get pulled over all the time.”

Gates said he has learned that if he treats police officers with “respect,” then he too is treated with respect.

“When I speak to these individuals with respect, I’ve never had a problem since I’ve changed my ways,” he said.


“So I don’t feel like ‘Black Lives Matter,’ I’m talking about ‘All Lives Matter.'”

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Weekend Reading: The End Of ‘Choppiness’

Submitted by Lance Roberts via RealInvestmentAdvice.com,

While the markets have indeed broken out to new highs, as I addressed earlier this week, it has done so without a significant improvement in the fundamentals. However, the breakout, such as it is, should not be dismissed or ignored. The technical underpinnings have improved enough to warrant an increase in equity related exposure given a proper entry point in the days or weeks ahead. Such an entry point would require a relaxation of the extreme short-term overbought conditions that currently exist. But a violation of critical support would negate the breakout and return the market back to a more bearish posture.


The potential for such a pullback is extremely high. As Tom McClellan noted recently, the “14-day Choppiness Index,” which tracks the path of a short-term trend, suggests Wall Street’s “uptrend is getting tired.” As McClellan notes, the very linear path for the index implies that the trend is likely to come to an end soon, while more volatile, or choppy, action suggests the opposite. A low reading in McClellan’s index signals a fairly straight-line, or linear, move. And presently, his choppiness index is at its lowest level in two decades.


“The reading on Monday was the lowest since Feb. 12, 1996 (yes I scrolled all the way back that far to find a lower one). And in case you are interested, that 1996 instance marked a price top which was not exceeded until 3 months afterward. Linear trends either upward or downward are very exhausting, requiring a lot of energy from either the bulls or the bears to keep everyone in formation and marching together. The market tends toward entropy, so excursions like this toward extreme organization cannot last for very long.”

Furthermore, with volatility levels at extremely low levels the probability of a further advance, without a pullback first, is extremely limited. My friend, Salil Mehta made a great comment on this recently noting that at current levels of volatility there is only about a 20% probability of further declines.

“At 11 [in the VIX] you are really close to the floor. chances are higher that you won’t go lower on VIX and will instead pop up on some risk-off day,”


As I stated in last week’s missive, the safest course of action for those more “bullishly” inclined is to wait for a pullback in prices to further increase equity allocations in portfolios. However, as I also noted, the current setup is extremely weak and the potential for a sharp pullback in August/September could quickly extinguish the bullish exuberance.

Caution remains highly advised.

Here is what I will be reading on the way back home.

Interesting Stuff


Always Good To Read

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Violence in Munich, Tim Kaine VP Speculation Grows, Jon Stewart Takes on Trump: P.M. Links

  • KaineSeveral people were killed in a shooting at a McDonald’s in Munich, Germany. The attackers are still at large.
  • Some progressives aren’t happy about Hillary Clinton’s likely VP pick, Sen. Tim Kaine.
  • DNC delegates who support Bernie Sanders are adopting a “wait and see” attitude regarding the upcoming convention.
  • Jon Stewart let loose on Donald Trump in an interview with Stephen Colbert.
  • Pokemon Go launches in Japan.
  • Donald Trump has left Ezra Klein “truly afraid” about about American politics for the first time in his life.

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After “Pause That Refreshes” ‘Investors’ Panic-Buy Stocks Back To Record Highs

After yesterday's 'stumble' everything is once again epic today…


Let's start with Turkey… Borsa Istanbul 100 plunged over 13% this week, the most since Lehman…


We're gonna need another coup this weekend (failed or otherwise) to keep this going into FOMC.

But that never worried stocks which just kept on keeping on to record-er highs… (Trannies were worst with airlines crushed but even they saw a panic dip-buying effort)…


The Dip… Was Bought… on weak volume all week…


As VIX was crushed back to an 11 handle to ensure the S&P hit new record highs…


Post-Brexit, gold still leads and bonds are slight winners over stocks…


Treasury yields ended the week very modestly higher (though below pre-coup levels) with the long-end outperforming the short-end…NOTE every day saw TSY selling into the US open…


The USD Index surged to 4-month highs this week (up 5 weeks in a row – biggest surge since November) with JPY and GBP most in play though EUR saw some post-Draghi swings…



Ugly week for oil (worst 3-week slump since Feb) but only copper managed a small gain on the week as USD strength pressured PMs…


While WTI bounced into the NYMEX close, Sept 2016 contracts hit 3-month lows intraday after a surprising surge in the rig count and reminder of the gasoline glut worldwide…


"It's probably nothing"…


more nothing…


One final nothing…


Charts: Bloomberg

Bonus Chart: Nothing


Bonus Bonus Chart: The Trump Bounce

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Former Fed Governor Admits “Fed Is Not Data Dependent; It Is Propping Up Asset Markets”

Submitted by Samuel Bryan via SchiffGold.com,

Earlier this year, Peter Schiff picked up on something few reported on when a former Federal Reserve president admitted the central bank created a phony wealth effect by pumping up stocks and other asset markets through its monetary policy. Several months later, analysis proved this was true, showing that 93% of the entire stock market move since 2008 was caused by Federal Reserve policy.

Today, the Fed continues to focus on propping up asset markets. Even a former Federal Reserve governor admits this is the case. Kevin Warsh appeared CNBC’s Squawk Box on Thursday and said the Fed isn’t really “data dependent” in the sense that it is looking at the overall economy. It is really market dependent.

"They look to me asset price dependent more than they look data dependent. When the stock market falls like it did in the beginning of this year, they say, ‘Oh, we better not do anything.’ Stock markets are now at career highs. I suspect when they meet over the course of the next 10 days they will suggest, ‘Oh, now they look like they can be somewhat more responsible.’ I don’t like changing policy meeting to meeting based on data, or even with what the S&P 500 is doing. I like making it based on what’s happening on the real side of the economy, and that has not been very convenient over the last six to nine months.”

Which is exactly what the market is pricing too…

Warsh went on to make another point that Peter has been harping on for months – the US economy isn’t in very good shape, and the Fed simply can’t raise rates.

The bad news is the real side of the economy in the US has deteriorated since September; quarterly earnings will now be down six quarters in a row. That’s the first time that’s happened outside of a recession. The Fed had a long window to tighten policy, to raise rates – 2013, 2014, 2015, and it strikes me they missed that wide-open window.”

Warsh’s comments lend credibility to a prediction Peter made on CNBC last month: the Fed will ultimately sacrifice the dollar on the altar of the stock market leading to a full-blown currency crisis.

Highlights from the interview:

“I must say I find their decision making in the last six or seven months puzzling…It is not obvious what their strategy is. I know…they say they’re data-dependent. I don’t know exactly what that means.”


They look to me asset price dependent more than they look data dependent. When the stock market falls like it did in the beginning of this year they say, ‘Oh, we better not do anything.’ Stock markets are now at career highs. I suspect when they meet over the course of the next 10 days they will suggest, ‘Oh now they look like they can be somewhat more responsible.’ I don’t like changing policy meeting to meeting based on data, or even with what the S&P 500 is doing. I like making it based on what’s happening on the real side of the economy, and that has not been very convenient over the last six to nine months.”


“In the darkest days of the crisis, when markets were falling, I have to admit getting asset prices up, trying to get markets up…nothing wrong with that. We’re supposed to respond to financial crises. That was seven and eight years ago. This preoccupation with your show, and with the Bloomberg screen, and with stock prices…that is not the right worldview for central bankers at a time like this.


“The bad news is the real side of the economy in the US has deteriorated since September; quarterly earnings will now be down six quarters in a row. That’s the first time that’s happened outside of a recession. The Fed had a long window to tighten policy, to raise rates – 2013, 2014, 2015, and it strikes me they missed that wide-open window.”


“I wouldn’t have raised rates in December. I find it odd that you had a window of two-and-a-half, three years with the supply side of the economy doing better, corporate revenues increasing, profits increasing, an economy that wasn’t great, but at least going in the right direction. I would have been much more worried in December than they.”


“Why is it that they [the Fed] are so worried about touching the balance sheet? Because they think that is what’s keeping asset prices up.”


“I would say the Fed’s policies have been running against capital investment, discouraging real investment in property, plant, and equipment, and software for several years.”

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The Best Investment Ever?

When it comes to prevailing manias, there is everything else, and then there is Pokemon Go.


And when it comes to those who stand to profit from said Pokemon mania, nobody is a bigger winner than Nintendo which less than two years ago became a part-owner of Niantic creator Pokemon Go.

The relationship is as follows.

Niantic was created as a spinoff from Google’s (now Alphabet) Google Maps team. Google Vice President John Hanke, who was heading up Google Maps at the time, formed Niantic Labs in 2010 as an internal venture startup, staffed mainly by members of the Google Maps team. With a vision of “getting the people of the world outside”, Niantic Labs’ first projects were location-based information app Field Trip and simulated war game app Ingress. Ingress, which gained popularity particularly among users with high IT literacy, reached 10m total downloads (worldwide) in February 2015 and significantly boosted Niantic Labs’ name recognition. Ingress has a science fiction back story and is a team-based simulated war game that utilizes GPS location data and map data. Niantic used system data from Ingress to create Pokémon GO.

The relationship among Niantic, Nintendo, and the Pokemon Company came about in April 2014 thanks to the April Fool’s Day project Pokemon Challenge, in which players captured Pokemon that appeared on Google Maps. The project was developed by the Google Maps team, including Niantic Labs, with the cooperation of Nintendo and the Pokemon Company. Niantic Labs was subsequently spun off from Google in August 2015. The company name was changed to Niantic, Inc., and in September it announced the development of Pokémon GO. In October, Niantic secured a total of $20 million in funding from Nintendo, the Pokemon Company, and Google.


That was the investment.

What about the return?

Well, we only have to look at the move in the stock price of Nintendo, which in just the past two weeks has more than doubled its market cap to over $42 billion, gaining some $22 billion in market cap.


To calculate the return, let’s generously assume that Nintendo was responsible for the entire $20mm initial investment (it was probably less). What a simple XIRR analysis reveals, is that the $22 billion boost in market cap relative to the $20 million initial investment is nothing short of a mindblowing 1,550,000% IRR, or a cash on cash return of 110,000% in less than one year.


Of course, this “analysis” is rather simplistic, as it assumes full monetization of the market cap increase, something which may prove problematic once the market moves beyond the mania phase.  That in turn will likely be accelerated with statements such as this one:

  • Nintendo says current forecasts include Pokemon Go Plus sales, according to statement.
  • Has no plans at the moment to adjust earnings forecasts, will update forecasts if it becomes necessary

But skepticism aside, let’s celebrate what – as of this moment – may have been the best investment of the year, if not ever… For now.

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David Duke Running for Senate in Louisiana

David DukeFormer Ku Klux Klan grand wizard David Duke announced today he was running for Senate to try to get back in office in his home state of Louisiana, where racial issues are currently touchy, to say the least.

Duke will be running as a Republican (he has belonged to both parties at different points of his life, as well as having previously been a member of the American Nazi Party and later a member of the Reform Party) and an open Donald Trump supporter. He has famously been praising Trump and Trump had previously been reluctant to disavow Duke. As Jacob Sullum previously noted, Duke is the only presidential candidate (he ran back in 1992) to have higher unfavorable ratings than Trump.

USA Today notes that the Republican Party is having nothing to do with Duke:

Roger Villere, chairman of the Republican Party of Louisiana, quickly condemned Duke.

“The Republican Party opposes, in the strongest possible terms, David Duke’s candidacy for any public office,” Villere said in a statement. “David Duke is a convicted felon and a hate-filled fraud who does not embody the values of the Republican Party.

“The party of Lincoln and Reagan is one that recognizes the inherent value of every human life, regardless of age, religion or race. David Duke’s history of hate marks a dark stain on Louisiana’s past and has no place in our current conversation. The Republican Party of Louisiana will play an active role in opposing David Duke’s candidacy.”

Representatives from the Republican Party nationally were equally unimpressed and said Duke would not have the support of the National Republican Senatorial Committee.

The details of the race suggest that Duke is just going to be a sideshow, probably to nobody’s surprise. This race is to replace Republican David Vitter, who is stepping down (he got his seat in the first place by defeating Duke). There are currently 23 candidates in the race including a retired colonel who joined the fight today. Col. Rob Maness, described as a “tea party favorite” by Louisiana newspaper The Advocate, blamed the Obama administration and Congress for terrorist attacks in the United States. According to USA Today, Maness said that the United States should have declared war on the Islamic State immediately after the Sept. 11 attacks, which makes utterly no sense.

In any event, it is increasingly clear that we’re going to be reliving the 1990s for the rest of the year. You’re encouraged to dress accordingly.

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‘Brutus’ Cruz & The Trump Takeover

Submitted by Patrick Buchanan via Buchanan.org,

The self-righteousness and smugness of Ted Cruz in refusing to endorse Donald Trump, then walking off stage in Cleveland, smirking amidst the boos, takes the mind back in time…

At the Cow Palace in San Francisco in July of 1964, Gov. Nelson Rockefeller, having been defeated by Barry Goldwater, took the podium to introduce a platform plank denouncing “extremism.”


Implication: Goldwater’s campaign is saturated with extremists.


Purpose: Advertise Rocky’s superior morality.


Smug and self-righteous, Rocky brayed at the curses and insults, “It’s a free country, ladies and gentlemen.”


Rocky was finished. He would never win the nomination.

Richard Nixon took another road, endorsed Goldwater, spoke for him in San Francisco, campaigned for him across America. And in 1968, with Goldwater’s backing, Nixon would rout Govs. George Romney and Rockefeller, and win the presidency, twice.

Sometimes, loyalty pays off.

About Cruz, a prediction: He will not be the nominee in 2020. He will never be the nominee. If Trump wins, Cruz is cooked. If Trump loses, his people will not forget the Brutus who stuck the knife in his back.

To any who read Allen Drury’s “Advise and Consent” or saw the movie, Ted Cruz is the Senator Fred Van Ackerman of his generation.

Yet, beyond the denunciations of Trump and disavowals of his candidacy, something larger is going on here.

The Goldwaterites were not only dethroning the East Coast liberal establishment of Rockefeller, but saying goodbye to the Republicanism of President Eisenhower and Vice President Nixon.

Something new was being born, and births are not a pretty sight.

What was being born was a new Republican Party. It would be dominated, after Nixon, by conservatives, who would seek to dump the Accidental President, Gerald R. Ford, in 1976. They would recapture the party in 1980, and help elect and re-elect Ronald Reagan.

Vice President George H. W. Bush won in 1988 through the exploitation of cultural and social issues. His Democratic rival, Gov. Michael Dukakis, opposed the death penalty, opposed public school kids taking the Pledge of Allegiance, and had a progressive program to give weekend passes to convicted killers and rapists like Willie Horton.

Once this became known, thanks to Bush campaign manager Lee Atwater, the Little Duke was done. The Dukakis tank ride in that helmet, to show his aptitude to be commander-in-chief, probably did not help.

The crisis of today’s Republican Party stems from a failure to recognize, after Reagan went home, and during the presidency of George H. W. Bush, that America now faced a new set of challenges.

By 1991, America’s border was bleeding. Thousands were walking in from Mexico every weekend. The hundreds of thousands arriving legally, the vast majority of them Third World poor, began putting downward pressure on working-class wages. Soon, these immigrants would begin voting for the welfare state on which their families depended, and support the Party of Government.

By 1991, free trade had begun to send our factories and jobs overseas and de-industrialize America.

By 1991, an epoch in world history had ended. With the collapse of the Soviet Empire, the Cold War was suddenly over. America had prevailed.

“As our case is new,” said Lincoln, “so we must think anew and act anew.” Bush Republicans did not think anew or act anew.

They were like football coaches who still swore by the single-wing offense, after George Halas’ Chicago Bears, the “Monsters of the Midway,” used the T-formation to score 11 touchdowns and beat the Washington Redskins in the 1940 NFL championship game, 73-0.

What paralyzed the Republicans of a generation ago? What blinded them from seeing and blocked them from acting on the new realities?

Ideology, political correctness, a reflexive recoil against new thinking, and an innate inability to adapt.

The ideology was a belief in free trade that borders on the cultic, though free trade had been rejected by America’s greatest leaders: Washington, Madison, Hamilton, Lincoln and Theodore Roosevelt.

The political correctness stemmed from a fear of being called racist and xenophobic so paralyzing, so overpowering, that some Republicans would ship the entire Third World over here, rather than have it thought they would ever consider the race, ethnicity or religion of those repopulating America.

The inability to adapt was seen when our Cold War adversary extended a hand in friendship, and the War Party slapped it away. Rather than shed Cold War alliances and rebuild our country, we looked around for new commitments, new allies, new wars to fight to “end tyranny in our world.”

These wars had less to do with threats to vital interests, than with providing now-obsolete Cold Warriors with arguments to maintain their claims on national resources and attention, not to mention their lifestyles and jobs.

With Trump’s triumph, the day of reckoning has arrived.

The new GOP is not going to be party of open borders, free trade globalism or reflexive interventionism.

The weeping and gnashing of teeth are justified.

For these self-righteous folks are all getting eviction notices. They are being dispossessed of their home.

via http://ift.tt/2aj5UHZ Tyler Durden