Local Police Let Florida Shooter Off The Hook When He Said He Was “Going To Get His Gun”

CNN’s FOIA of Broward County 911 records has produced a steady stream of scoops about Parkland, Fla. school shooter Nikolas Cruz fleshing out much of what is publicly known about Cruz’s background and the various reports made warning the FBI and other authorities about his threatening behavior.

The report draws on one specific incident that unfolded in the immediate aftermath of Cruz’s mother’s death, when Cruz and his brother Zachary Cruz were living in Palm Beach County with Rocxanne Deschamps, a former neighbor who had been close to the family.

After one particularly violent outburst, Cruz said he was going to Dick’s to pick up the AR-15 he had recently paid for, and that he would come back to attack her.

Cruz

The police were warned by Deschamps, who told them about Cruz’s violent past – that he’d “used a gun against people before” and had “put the gun to others’ heads in the past” – but still they did nothing.

Cruz and his brother only lived with Deschamps for a few weeks before Nikolas was taken in by the Sneads, but Zachary – who reportedly suffered a breakdown following the shooting – stayed with Deschamps. Cruz had been staying with  the Sneads, the parents of a friend, at the time of the massacre, deceiving them by claiming he didn’t have a key to the gun safe where his AR-15 was kept in accordance with house rules.

Cruz

As CNN reported earlier this week, Cruz had purchased 10 rifles in the year before his killing spree.

On the day after Thanksgiving, Cruz was at work at a Dollar Tree store. Rocxanne Deschamps’ son, Rock, 22, called 911 to report that an “adopted 19-year-old son” had possibly hidden a “gun in the backyard,” according to a dispatcher’s notes. Rock Deschamps told law enforcement “there were no weapons allowed in the household,” the report said. It’s unclear from the record whether sheriff’s deputies conducted a search. The incident was classified as “domestic unfounded,” which means a deputy didn’t find proof to back up the claims.

The Palm Beach County Sheriff’s Office was called again to the home four days later, when Rock said Cruz lashed out against the family that took him in, according to the Palm Beach deputy’s report and dispatcher notes. The deputy went to a local park and found Cruz, who explained that he had misplaced a photo of his recently deceased mother and, emotionally distraught, began punching the wall. Cruz lost control the same way he had several times in the past at his mother’s home in Parkland, Florida, when he had not taken his prescribed mood-altering medication, as CNN has previously reported based on Broward police documents.

Rock interrupted Cruz and a fight broke out between them, according to the documents. Cruz left the home, and Rocxanne Deschamps called 911. She warned the police dispatcher that Cruz said “he was going to get his gun and come back,” records show. She said Cruz had “bought a gun from Dick’s last week and is now going to pick it up.”

Rocxanne Deschamps told the dispatcher that Cruz had “bought tons of ammo” and “has used a gun against ppl before,” the notes said. “He has put the gun to others heads in the past.”

The Palm Beach sheriff’s deputy who responded to the scene of the assault spoke to both young men, who “hugged and reconcile(d) their differences.” Cruz “said he was sorry for losing his temper,” the deputy wrote in his report. Rock Deschamps told the deputy that Cruz had been suffering significantly from the loss of his mother and that he didn’t want him to go to jail, only to leave the house until he calmed down. He signed a form saying he refused to prosecute.

But perhaps the most chilling details of the report come at the very end, when a friend of the Cruz brothers describes Nikolas’s anger at the fact that almost nobody had shown up for his adopted mother’s funeral.

Cruz left Rocxanne Deschamps’ home for good a short time later, according to her ex-fiancé Paul Gold, who was also a longtime former neighbor. While his younger brother Zachary remained at that home, Nik Cruz returned to Broward County to live with a friend, and stayed at the Pompano Beach home of James and Kimberly Snead. He took his guns with him, the Sneads said.

Gold, who lived next door to the Cruz family in Parkland for years, told CNN that he drove Nik Cruz to his mother’s funeral. The only people in attendance were the two sons, Gold, and Rocxanne Deschamps, he said.

“The boy was stoic. Not a tear. Not an emotion. I asked him if he was upset. He said: ‘I’m upset because nobody came, and nobody cares about my mother,'” Gold recalled.

“I told him that his mother was loved by many, many people and they just couldn’t make it, timing and whatnot. It was a complete lie. But I felt horrible. Here’s this poor kid, and his mother dies, and not a soul shows up,” Gold said.

Gold told CNN he knew nothing of Cruz’s guns. He now describes the teen as “a monster.”

The next time Palm Beach deputies visited the Deschamps home was on February 14, in the frantic hours after the school shooting. A deputy rushed Rock and his family out of the home, clearing the way for a bomb squad to arrive, according to a report.

The FBI have taken a lot of criticism, and many have demanded the resignation of FBI Director Christopher Wray, after it emerged that the bureau had received tips warning them about Cruz, but protocol wasn’t followed and Cruz was never investigated.

 

 

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Bubbles Everywhere…

Via AdventuresInCapitalism.com,

About a year ago, I read The Great Beanie Baby Bubble by Zac Bissonnette.

It details how basic human greed, an artificial sense of scarcity and newly created technology like eBay, were used to artificially inflate re-sale prices and convince otherwise intelligent humans to sink their life savings into plush toys that were being created by the millions at a price-point measured in the pennies.

In fact, it isn’t all that dissimilar to the current bubble in crypto-currencies—another asset class with; thin trading volume setting the market price and new technology that enraptures investors, that is likely to prove entirely worthless at some point in the not too distant future.

It would seem that every time the Federal Reserve reduces interest rates for too long in order to bail out some past bubble they created, it leads to some new and bigger bubble that also needs bailing out (tech stocks in 2000, real estate in 2007, everything this cycle) along with some hilariously silly collateral bubbles along the way.

With that in mind, last week, I was at a flea market (yeah, I’m a value guy who likes bargains) when I noticed multiple tables with Beanie Babies. I thought to myself; that’s strange—I haven’t seen one of these things in years. Why are all these adults paying so much attention to stuffed toys that were popular 20 years ago?

Naturally, I turned to my wife, who happened to be buying a few Beanie Babies for some cousin of ours.

Me: Why are you wasting money on those? Wait, …did you just buy like 10 of them?

Wife: Yeah, our cousin collects them. He says he has one that’s gone up 5 times in value, in just the past 3 months?

Me: Whaaahh??!!!

Vendor: Yeah. They’ve been out of print for two decades, even some of the real common ones are quite rare now.

Me: Whaaahh!!??? (practically with smoke shooting from my ears)

Vendor: Yeah, a few have gone from $5 to over $1500 in just the past 2 years.

Me: Holy Shit!!! That’s INCREEEEDIBLE!!! The Fed printed so much, they even managed to re-inflate the great Beanie Baby bubble of 1998 (at this point I’ve gone from abject shock to bemused laughter)

Wife: Maybe I should buy some more for our cousin. Sounds like they’re going up fast.

Me: …I’m going to get a beer. My head hurts

 

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“What Might The Market Do Next?” A Bullish Marko Kolanovic Answers

The past month has been mixed for JPM’s head quant, Marko Kolanovic.

On one hand, just days before the Feb 5 quant puke, he published a report,  predicting that the late January selloff would not lead to widespread systematic liquidations. A few days later, on “Volocaust Monday”, that’s precisely what happened and to a never before seen extent.

Then, in keeping up with his recent cheerful outlook, shortly after the selloff, Kolanovic doubled down, and said that after the initial deleveraging of quants, vol-sellers, CTA and risk parities, the forced selling is now over and it was safe to buy the dip. Here, his call has been far more accurate, as almost nothing is left of the early February 10% correction following a barrage of BTFDers.

In fact, the speed of the rebound appears to have surprised Kolanovic himself, and in his latest note, published moments ago, he writes that the subsequent one-week rally was very fast (~99th percentile one-week up move vs. S&P 500 trading history).

As such, “the question is: What might the market do next?

To answer this question, Kolanovic first looks at his favorite indicator, capital flows, and specifically “the positioning of investors and expected flows”, especially among the systematic, vol-targeting funds.

First, we note that the Hedge Fund beta to equities experienced an unprecedented drop over the market sell-off (Figure 1).  This de-risking (and in some cases shorting) happened largely via buying of downside options (and selling of index products) and might not be entirely captured by prime brokerage data. For instance, open interest on index put options rose by ~$500bn shortly after the sell-off. Hedge funds went from a near-record-high equity beta, to a near-record-low equity beta.

This move started to revert last week, but has plenty of room to increase (table in Figure 1). In terms of systematic selling, this is largely over. In fact our models show that volatility targeting strategies may now start very slowly rebuilding their equity positions.

Then there is the potential bid from pension funds, whose rebalancing at the end of the month could make for a rare buying imbalance, something we discussed two weeks ago in “An Unexpected Consequence Of Last Week’s Selloff

One should also keep in mind that most pension funds rebalanced at the end of January, and global markets are now ~5% lower from that point (~90th percentile by size of the drop). Next week is month-end, and buying from fixed weight allocators could be substantial. These flows will be a headwind for any near-term bearish thesis.

In other words, from a client positioning and flows standpoint, it’s smooth sailing ahead according to the JPM quant. What about any near-term bearish thesis? Kolanovic is quick to dispense with these too:

We have, for instance, heard theories that the market ‘needs to re-test’ the bottom quickly. This seems to be a somewhat arbitrary argument with no significant structural or statistical evidence to support it.

The JPM quant then goes on to point to the record bearish positioning in the rates complex, warning that if anything, we could have a vicious squeeze, which would send yields much lower, unleashing even more buying:

A second thesis is based on fear of rapidly rising yields and inflation. While we think that inflation and yield fears are overblown near term, this is more difficult to disprove. We would like to point to the record speculative bond futures shorts from both fundamental and systematic investors. Figure 2 shows that speculators have amassed the largest short position in the history of bond futures trading. When there is such a large short position, there is always risk of profit taking, or worse a proper short-squeeze.

Looking at the longer-turn, Kolanovic points out that the biggest threat remains one of deflation, not inflation, based on the three D: demographics, debt and disruption.

We also note extreme sentiment swings and the media playing into fears of inflation, while largely ignoring important points such as those most recently voiced by the Fed’s Harker and Bullard. Inflation discussions have recently centered around ‘linear extrapolation’ of inherently noisy data points, and focus on ‘old news’ (e.g., the nearly month-old Fed minutes yesterday). There is no mention of structural deflation via demographics or technology/AI.

Having dispatched with the bearish bogeyman – assuming of course that yesterday’s market reaction to the non-Goldilocks Fed was wrong and the selling won’t return later today – Kolanovic goes on a tangential to comment on short volatility strategies which have been all over the news lately:

Selling of equity index risk premia (via implied correlation, volatility, skew, etc.) is a strategy that underwrites insurance on an inherently risky asset. These strategies are well documented (over 3 decades) and have strong theoretical justification. The risk-reward profile of these strategies is highly ‘non-Gaussian,’ and there is a trade-off between the typically high Sharpe ratio but also high downside tail risk. Over time, and when properly risk-managed, these strategies work well (equally well as underwriting insurance, e.g., for natural disasters). Fires, hurricanes, and market sell-offs do happen, and this is a normal part of an insurance strategy cycle.

Of course one needs to understand the risk/reward, and manage exposure and tail risk. This is where some investors or products might have miscalculated and suffered large losses. If one is collecting a 20% or 30% premium (return) per month, one should suspect that there is a significant risk for the loss of entire principal (e.g., similar as with credit – which is another form of insurance). We pointed to this in our previous reports and it was covered in press extensively before the recent events.

However, history shows that insurance strategies tend to work better in the aftermath of ‘disasters,’ when the level of premia is elevated, there is less market participation and leverage, and the probability of another tail event might be lower.

In other words, assuming stocks will keep rising, just don’t sell vol to hedge. Which, of course, is precisely what investors are doing…

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WTI/RBOB Jump After DOE Confirms Surprise Crude Draw, Production Slows

Following last night’s surprise crude draw (from API), and USD weakness, WTI/RBOB rallied overnight, but faded into the DOE data. However, as DOE confirmed API’s reported surprise crude draw (-1.616mm) and production slipped very modestly, prices jumped.

API

  • Crude -907k (+2.9mm exp)

  • Cushing -2.644mm

  • Gasoline +1.644mm

  • Distillates -3.563mm

 

DOE

  • Crude -1.616mm (+2.35mm exp)

  • Cushing -2.664mm

  • Gasoline +261k (+742k exp)

  • Distillates -2.422mm (-1.1mm exp)

In quite a shocking moment – it seems API was right for once – DOE reports a 1.6mm crude draw – and RBOB prices are up as Gasoline saw a smaller than expected build.

As Bloomberg notes, Cushing is being emptied at a very, very, very fast pace. It’s the 9th consecutive week of crude draws, bringing the total to its lowest since December 2014.

Bloomberg’s Javier Blas notes that U.S. oil exports surged last week above the key 2 million barrels a day mark for the second time ever, contributing hugely to the draw in crude stocks.

Once again all eyes are on US crude production (after yet another week of rig count increases) as it tops Saudi Arabia and closes in on Russia’s output, spoiling the OPEC-Deal party. But, US crude production slowed last week… if you squint, you can see it dropped 1k b/d…

NOTE – Lower 48 production rose 10k b/day to a new record…

 

WTI/RBOB bounced notably higher overnight (weak USD and API-reported draw) but faded into the DOE data. However, the confirmation of a crude draw (and smaller than expected gasoline build) sent both WTI/RBOB back to the highs…

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Why the most-recent selloff was just the beginning

On October 19, 1987, the Dow experienced its biggest one-day percentage loss in history – plunging 22.6%.

It was “Black Monday.” The selloff was so fast and so severe, nothing else even comes close.

The second worst percentage loss for the Dow was October 28, 1929 (also Black Monday) when the exchange fell 12.82%. It fell another 11.73% the next day (you guessed it… “Black Tuesday”). Then the Great Depression hit.

A lot of people blame portfolio insurance for the market drop in 1987.

Portfolio insurance was a popular product for large, institutional investors. It would “hedge” portfolios by selling short S&P 500 futures (which profit when the market falls) when stocks fall… the idea was, gains from selling the S&P futures would offset losses from falling stock prices.

If stocks fell more, the big investors would sell more futures.

The problem with portfolio insurance is it was programmatic. And when the losses inevitably came, it created a feedback loop. Selling begot selling.

But what initially ignited that selling back in 1987?

Matt Maley is a former Salomon Brothers executive who was on the trading floor for Black Monday. He shared his thoughts with CNBC last year to mark the 30th anniversary of the event.

Maley reminded us of the popularity of another strategy in those days – merger arbitrage. This was the time of Gordon Gekko, when corporate raiders would borrow tons of money – typically via high-yield bonds – to buy other firms.

Merger arbitrage is simply buying shares of the takeover candidate and shorting shares of the acquiring firm. It’s a speculative strategy that tries to capture the spread between the time the deal is announced and when it (hopefully) closes.

The merger arb guys were already on edge because interest rates had been rising, making risky takeover deals even harder to complete.

Then, out of nowhere, the House Ways and Means Committee introduced a takeover-tax bill on the evening of October 13 that, simply put, would repeal lots of tax breaks related to M&A activity.

The next day, Wednesday, shares of the takeover stocks plummeted and caught the already edgy traders off guard. The selling continued through Friday. Margin calls were triggered, forcing investors to sell even more.

Then came Black Monday.

After a turbulent week, mutual funds were facing massive redemptions. They were forced to start selling stock along with the merger arb guys… only in much larger size.

The plummeting stock market triggered portfolio insurance to step in and start selling tons of futures short, which only worsened the selloff.

That scared individual investors, who redeemed even more mutual fund shares.

It was the feedback loop from hell.

The point is… an unexpected bill from congress helped to push an already nervous market over the edge.

And that brings us to today…

Earlier this month, the market dropped a very speedy 10% from its all-time high.

The selloff occurred because higher-than-expected wage growth stoked inflation fears. Higher inflation means the Fed may have to raise interest rates sooner than expected. All else equal, higher interest rates mean lower stock prices.

And this panicked selling was based only on the fear of higher interest rates.

To be fair, this market has gone nowhere but up since 2010. And volatility has scraped along the bottom that entire time. People have been lulled into this false sense of security that the stock market is a safe place that guarantees healthy returns.

In short, the market doesn’t know what to do with negative inputs today… much less some really bad news.

And, just like in 1987, there is a massive amount of programmatic trading taking place. Only today, brokers don’t have to pick up the phone to place a sell order when a certain price level is breached.

Instead, we have supercomputers that trade at lightning fast speeds and process market information almost instantaneously. The automatic selling – or buying, for that matter – happens quickly. The feedback loop has sped up exponentially.

That’s paired with more and more money that has flowed into backward-looking strategies that only work during times of low to no volatility. But, as we saw earlier this month, these strategies are utterly useless when the environment changes.

Take volatility targeting for example… it’s when portfolio managers change allocations based on volatility. Coming into the recent shock, with volatility near record lows, these funds were as long as they could possibly be.

That strategy had worked great for years as the market steadily rose higher.

But when the selloff started on February 5, the VIX jumped 116% in one day (the largest move ever). And the volatility targeting crowd ran for cover, selling potentially hundreds of billions of dollars in equities.

People have also been betting outright against volatility, which again, has been a profitable strategy for years. The VelocityShares Daily Inverse VIX Short-Term ETN (XIV), which moves inversely to the VIX, was one of the most popular tools for this.

But, when the VIX jumped 116% in a day, that fund lost about 95% of its value. Then XIV announced it would liquidate (the fund had $1.8 billion at its peak). Investors were wiped out.

And it wasn’t just individual investors using this strategy… Even pension funds and sovereign wealth funds were getting in on the action as a way to generate income, which is totally absurd. These are supposed to be the safest and most conservative investors around.

In addition to all of this money chasing volatility-linked strategies, we’ve also seen a massive amount of money flow into passive strategies (which buy indexes regardless of price or value)… a lot of that money has been in the form of exchange-traded funds (ETFs).

But trillions of dollars are now deployed in this value-agnostic strategy, which means people are allocating capital simply because the trend is up. More than that, it’s in the form of highly liquid ETFs… so these investors, who don’t have high conviction in the first place, can quickly dump their position when the tides turn.

Finally, there’s more than $300 billion managed by trend-following hedge funds. And their computers sell furiously on the way down.

So all of this money has been invested on the premise that volatility won’t return to the market. The Volatility Index (VIX) had its biggest one-day move ever this month and investors panicked.

But that’s just a taste of what’s to come. Imagine the selling we’ll see when there’s actually bad news.

Source

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Florida Teachers Demand State Pension Funds Sell Gunmaker Shares

Two days ago, while going through the holdings of the Florida teachers pension fund which amount to over $37 billion, Bloomberg found a surprising entry: 41,129 shares in American Outdoor Brands (valued at a meager $528,000, including $306,000 in unrealized profits) according to a Dec. 31 securities filing  listing the plan’s holdings. The company, formerly known as Smith & Wesson, is the market of the semiautomatic AR-15 assault rifle that was used in the Valentine’s Day shooting on the Marjory Stoneman Douglas High School in Parkland, Florida.

In addition to American Outdoors, the filing also showed that the Florida Retirement System Pension Plan also invested in gun company stock issued by Sturm & Ruger, Vista Outdoor and Olin Corp. All of these companies manufacture firearms or ammunition, including assault rifles.

Following the Tuesday news, we said that “we expect that these holdings will be liquidated promptly in the aftermath of the highly politicized shooting, and that the anticipation of said liquidation is why AOBC tumbled 5% today.”

The case study for this was already present:

“after the 2012 Sandy Hook Elementary School shooting in Connecticut, in which 26 elementary school students and teachers were gunned down, CalSTRS and the California Public Employees’ Retirement System sold off their stakes in both Sturm Ruger and Smith & Wesson.”

And, we predicted, “the same will take place over the coming days as the political scandal over the Parkland shooting peaks, and numerous pension systems seek to put pressure on gunmakers by dumping their stock.”

It didn’t take long to get validation, because according to Bloomberg, the Florida Education Association is urging the state body that manages pension funds for its members to sell its holdings in companies that make a semi-automatic rifle used in the recent massacre at a high school in Parkland, Florida.

“Surely there are better places for the state to invest its public employee retirement money than in companies that make products that harm our children,” said Joanne McCall, president of the association.

And now that one teachers retirement fund has officially demanded the liquidation of AOBC shares, we fully anticipated they all will, especially since the rest of the portfolio has generated such outsized gains in recent years.

Meanwhile, the impact on American Outdoors stock was immediate, and after spiking at the open by 9%, AOBC is almost back to unchanged.

via Zero Hedge http://ift.tt/2sNwhBV Tyler Durden

After Releasing Oil-Backed Petro, Venezuelan President Hints At Gold-Backed ‘Petro Oro’

Authored by Molly Jane Zuckerman via CoinTelegraph.com,

After the ‘successful’ launch of the Venezuelan government-backed cryptocurrency the Petro on Feb. 20, President Nicolas Maduro has already hinted at second government cryptocurrency soon to be released, according to government-sponsored news outlet TelSsur.

image courtesy of CoinTelegraph

This time, the government-backed cryptocurrency will be backed not by oil, but by gold.

image courtesy of CoinTelegraph

During a Patria Para Todos [Fatherland For All] party event at the National Theater in Caracas, Maduro announced,

“The petro is a cryptocurrency unique in the world that is supported by oil, and I have a surprise that I will launch next week, the Petro Oro [gold], backed by gold, even more powerful.”

Since the petro’s Initial Coin Offering (ICO) opened on Feb. 20, $735 mln has allegedly been raised, according to Maduro’s Twitter. No official numbers for the ICO had been released by press time.

Some Venezuelans on Twitter have used the hashtag, “#AlFuturoConElPetro,” [the future with the petro], to support the release of the coin. User José David Cabello R wrote,

“#AlFuturoConElPetro against any meddling, against the economic war, against the blockade. For the peace and Venezuela.”

Before the launch, foreign investors from Brazil, Poland, Denmark, Honduras, and Norway had reportedly said they were open to receiving the petro, which is backed by one barrel of oil per coin, for goods and services.

Venezuela is currently facing hyperinflation of more than 4,000 percent in the last year, with the national currency, the Bolivar, having lost around 96 percent of its value.

The president’s decision to launch a cryptocurrency was at odds with the views of the country’s opposition-backed parliament on crypto, which declared the petro an illegal currency on Jan. 9.

Critics in parliament see the petro as a way for Maduro to avoid the financial sanctions imposed by the West on Venezuela.

via Zero Hedge http://ift.tt/2EUXjMP Tyler Durden

Ivanka Trump Will Be “Face To Face” With North Korean General During Winter Games Closing Ceremony

North Korea reportedly canceled a meeting with Vice President Mike Pence set for Saturday Feb. 10, the day after the opening ceremony of the PyeongChang Winter Games, but, now that tensions have had some time to ease, is the US planning a clandestine meeting at Sunday’s closing ceremonies?

It’s certainly beginning to look that way.

As the Wall Street Journal reports, senior Trump adviser (and America’s surrogate first lady) Ivanka Trump will attend the closing ceremonies, raising the possibility that she might “accidentally bump into” a high-level North Korean delegation led by Kim Yong Chol, a vice chairman of the Central Committee of North Korea’s ruling Workers’ Party and one of the country’s most powerful generals.

Kim Yong Chol, vice chairman of the Central Committee of North Korea’s ruling Workers’ Party, will arrive in the South on Sunday for a three-day stay, South Korea’s Ministry of Unification said Thursday. The Seoul government said that it approved the visit to further its goals of improving inter-Korean relations and pursuing denuclearization.

The notification by the North came hours after the White House announced a high-level delegation that includes Ms. Trump, the daughter of President Donald Trump, and Sarah Sanders, the White House press secretary.

Pence was famously caught on camera steadfastly ignoring the North Korean delegation seated right behind him at the Opening Ceremonies – but was planning the whole while to meet up behind the scenes, reportedly to “deliver the administration’s tough stance in person.”

As WSJ explains, Kim Yong Chol, who isn’t related to the North Korean leader, is widely believed to be the leader of Pyongyang’s military-intelligence apparatus. The Seoul government said Kim will be accompanied by Ri Son Gwon, who’s responsible for managing relations with the South, and represented the North when the two Koreas met last month at the demilitarized zone dividing the Korean Peninsula. The two men will be accompanied by a six-man support staff.

Ivanka

Ivanka Trump will be accompanied by James Risch, R-Idaho, and also by White House press secretary Sarah Huckabee Sanders, who will give particular support to the female athletes competing at the Games, according to RT. US Army National Guard soldier and Olympic medal-winning bobsledder Shauna Rohbock will also join the delegation.

“Sarah’s going as a female to help cheer on all of the female athletes and highlight the women’s sports and success our female athletes have had at this year’s Olympic Games,” a White House official said.

“I am honored to lead the US delegation to the closing ceremonies of the PyeongChang 2018 Winter Olympics,” Ivanka Trump said.

“We look forward to congratulating Team USA and celebrating all that our athletes have achieved. Their talent, drive, grit and spirit embodies American excellence, and inspire us all.”

The delegation’s primary goal is to reaffirm America’s cooperation with South Korea over denuclearizing the peninsula, while highlighting American athletes’ achievements at the 2018 Games.

* * *
In a separate report that, in our opinion, raises the likelihood of a North Korea meeting, Ivanka Trump will reportedly meet with South Korean leader Moon Jae-in on Friday.

According to Reuters, a senior administration official, speaking to reporters on condition of anonymity, said Trump will dine with Moon at the Blue House in Seoul on Friday night.

The White House insisted Trump has no plans to meet with the North Koreans – but we’ve heard that excuse before. In an amusing twist, Trump will fly commercial to South Korea, a gesture of good faith after no fewer than five administration officials have already been investigated for travel-related abuses.

There are no plans for Trump to engage in “substantive discussions”  about the dispute with North Korea.

“The purpose of the trip is to cheer on American athletes, reaffirm the U.S.-South Korea alliance and celebrate the successful Games,” a White House official said.

 

 

 

 

via Zero Hedge http://ift.tt/2sIqMEG Tyler Durden

Spot The Sentence That Dooms Pension Funds (Don’t Worry, We Highlighted It)

Authored by John Rubino via DollarCollapse.com,

The “pension crisis” is one of those things – like electric cars and nuclear fusion – that’s definitely coming but never seems to actually arrive.

However, for pension funds the reason a crisis hasn’t yet happened is also the reason that it will happen, and soon:
 

The Risk Pension Funds Can’t Escape

(Wall Street Journal) – Public pension funds that lost hundreds of billions during the last financial crisis still face significant risk from one basic investment: stocks.

That vulnerability came into focus earlier this month as markets descended into correction territory for the first time since February 2016. The California Public Employees’ Retirement System, the largest public pension fund in the U.S., lost $18.5 billion in value over a 10-day trading period ended Feb. 9, according to figures provided by the system.

The sudden drop represented 5% of total assets held by the pension fund, which had roughly half of its portfolio in equities as of late 2017. It gained back $8.1 billion through last Friday as markets recovered.

“It looks like 2018 is likely to be more turbulent than what we have experienced the last couple of years,” the fund’s chief investment officer, Ted Eliopoulos, told his board last Monday at a public meeting.

Retirement systems that manage money for firefighters, police officers, teachers and other public workers are increasingly reliant on stocks for returns as the bull market nears its ninth year. By the end of 2017, equities had surged to an average 53.6% of public pension portfolios from 50.3% one year earlier, according to figures released earlier this month by the Wilshire Trust Universe Comparison Service.

Those average holdings were the highest on a percentage basis since 2010, according to the Wilshire Trust Universe Comparison Service data, and near the 54.6% average these funds held at the end of 2007.

One reason public pensions are so willing to bet on stocks is because of aggressive investment targets designed to fulfill mounting obligations to millions of government workers. The goal of most pension funds is to pay for those future benefits by earning 7% to 8% a year.

“Equities always take up a disproportionate share of the risk budget that any plan has,” said Wilshire Consulting President Andrew Junkin, who advises public pension funds. “You can never get away from it.”

That stance paid off during 2017’s market rally as public pensions had one of their best years of the past decade. They earned 12.4% in the 2017 fiscal year ended June 30, according to Wilshire Trust Universe Comparison Service.

But the risks are sizable losses during market downturns, which then can lead to deeper funding problems. The two largest public pensions in the U.S.—California Public Employees’ Retirement System, known by its abbreviation Calpers, and the California State Teachers’ Retirement System—lost nearly $100 billion in value during the fiscal year ended June 30, 2009. Nearly a decade later, neither fund has enough assets on hand to meet all future obligations to their workers and retirees.

Many funds burned by the 2008-2009 downturn tried to diversify their investment mix. They lowered their holdings of bonds as interest rates dropped and turned to real estate, commodities, hedge funds and private-equity holdings. These so-called alternative investments rose to 26% of holdings at about 150 of the biggest U.S. funds in 2016, according to the Public Plans Database, compared with 7% more than a decade earlier.

At the same time, the amount invested in stocks crept upward as markets roared back—and equities remain the single largest holding among all funds. The $209.1 billion New York State Common Retirement Fund increased its equity holdings to 58.1% as of Dec. 31 as compared with 56% as of June 30. That allocation is now higher than the 54% held as of March 31, 2008.

The $19.9 billion Teachers’ Retirement System of Kentucky now has 62% of its assets in equities, close to the 64% it had in 2007. It sold $303 million in stocks Jan. 19-20 to rebalance its portfolio following gains. From Feb. 6-8, as U.S. markets plunged, the fund bought another $103.5 million of stocks.

“We are definitely a long-term investor and look to volatility as an investing opportunity,” said Beau Barnes, the system’s deputy executive secretary and general counsel.

Calpers had a chance to pull back on stocks in December and decided against it. Directors considered a 34% allocation to equities, down from 50%. They also considered a higher allocation.

In the end, the fund opted to raise its equities target to 50% from 46% as of July 1 and its fixed-income target to 28% from 20%. It had 49.8% of its portfolio in equities as of Oct. 31, according to the fund’s website. That is close to the 51.6% it had in stocks for the fiscal year ended June 30, 2008.

To put the above in historical context:

Thirty or so years ago, state and local politicians and the leaders of their public employee unions had a shared epiphany: If they offered workers hyper-generous pensions they could buy labor peace without having to grant eye-popping and headline-grabbing wage increases. And if they made unrealistically high assumptions about the returns they could generate on pension plan assets they could keep required contributions nice and low, thus making both workers and taxpayers happy. The result: job security for politicians and union leaders and a false sense of affluence for workers and taxpayers.

This scam worked beautifully for as long as it needed to – which is to say until the architects of the over-generous benefits and unrealistic assumptions retired rich and happy.

But now the unworkable math is coming to light and pension funds are responding with two strategies:

1) Roll the dice by loading up on equities – the most volatile asset class available – along with “real estate, commodities, hedge funds and private-equity holdings.”

2) Buy the dips. As the above highlighted quote illustrates, stocks have been going up so steadily for so long that pension fund managers now see “volatility as an investing opportunity.” When the next downturn hits they’ll throw good money after bad, magnifying their losses.

Eventually a real bear market will shred the duct tape and chewing gum that’s holding the public pension machine together. And several trillion dollars of obligations will migrate from state and local governments to Washington, which is to say taxpayers in general, at a time when federal debts are already soaring.

via Zero Hedge http://ift.tt/2GDLKH5 Tyler Durden