Tag: news

Authored by Sven Henrich via NorthmanTrader.com,

Replay

Are markets setting up for a replay of last fall or we just drifting higher on hopium and coming successful central bank intervention?

I remember last September very well.  All our technical charts were screaming sell, yet markets kept levitating higher. Everybody was screaming bullish, GDP growth was rising, companies were showering buybacks on the market and analysts were shouting over each other calling for ever higher price targets. Index price targets, stock price targets. $DJIA went on to make a new all time high on October 2nd following the $SPX highs in September of 2018:

Positioning for the fade was difficult, volatility was non existent and people voicing bearish opinions were viewed as absolute morons. I had written Lying Highs on September 2nd and my analysis looked dead wrong.

Yet it turned out to be the best selling opportunity since 2011. We all know what happened after that:

Why am I mentioning all this? Because here we go again in September and markets are drifting higher ironically from  the same base as last year. 2900. We haven’t gone anywhere in a year, yet things are objectively worse than last year.

Growth is worse, earnings growth is worse, buyback growth is shrinking, as is capex and employment growth. What is different? Central banks of course and that is again the curveball that makes any bear feel stupid as nothing matters when central banks are in charge and to me it remains the biggest risk to the bear case.

Intellectually I can rage against the insanity of it all, but that won’t change market direction. Yes I can argue the ECB cutting rates this week and relaunching QE only 9 months after ending is pathetic, but nevertheless they are going to do it anyways no matter the consequences or the efficacy of it all.

And then the Fed doing the same rate cutting gig no matter how wrong they were last year forecasting 2019. And bulls totally wrong about 2018 on equities and totally wrong on yields and growth for 2019 get to get bailed out again and look right.

And so yes, I get it, there is a building sense that bears are running out of time here. After all they’ve had every excuse to make something happen in August beyond a 4% pullback.

That’s how weak bears are, or rather that’s how the strong the pull toward central bank meetings is. Central banks remain in full control despite all their mistakes. They keep being wrong yet face no consequences by markets, after all bad news doesn’t matter all, we’re back to within 1.5% of all time highs. One more magic headline and we’re at new highs. Who cares about earnings or growth or valuations. None of it matters is the impression one is left with.

And I get the argument that bears may be running out of time.

For one, the 2019 market keeps running on that pre-election year seasonal chart we discussed in The Bull Case:

Ironically that chart also says to sell strength in September/October for another larger pullback into October/November and then buy that for that big year end rally.

And be clear most years are like this. Last December was a rare fluke. Only happened once before in 2000. All other years have seasonal strength into year end. The question is from where and when.

And so here we are again signals and warning signs are being ignored and markets levitate higher, indeed you can get a glimpse of this debate in my discussion on CNBC this morning:

My crooked tie aside (we were fiddling with mic placement just before I got on air is my excuse and I’m sticking with it 😉 I found the discussion insightful as it’s perhaps reflective of sentiment.

A couple of points I couldn’t make on air: “if you’ve been short for the past 300 handles how much more convincing do you need”? The segment ended there so I couldn’t respond but my response is that this is a bit of red herring, sorry Jeff. I don’t know anybody that’s been short for 300 handles, not sure that’s even possible, but I would point out that’s not an analytical point predictive of future market direction. It’s a hypothetical at best.

Perhaps there is a running myth that people critical of markets are always holding short from much lower and hence they are made to look wrong. We view positioning as a flexible exercise long or short depending on the set-up, but let’s face it, these markets haven’t gone anywhere on a broader basis since January 2018:

So I could make the corollary argument (also not predictive of future direction) and say that if you’ve held long small caps, banks and transports since January 2018 how much more convincing do you need as you’re down significantly on these? Which of course is the point I tried to highlight in the segment with $XVG:

The broader market is not participating and rallies keep being drive by flows going into large cap stops via buybacks and passive allocations.

But Jeff is right, the ECB going full Super Mario this week could certainly be a trigger that pushes $SPX above 3,000 and that’s also reflective of the Measured Move we discussed. All possible.

But I don’t know where Jeff sees ‘booming’ growth, I get that this may be the impression he has from meetings, but the data shows differently for now.  This is not booming growth:

So I get it and I agree with Brian Sullivan, you can moan about central banks all you want, but that doesn’t make you money and hence flexibility remains the name of the game.

From my perch nothing is proven, either from the bear or bull side. Yes you may point to this year’s year to date gain, but know of course it was mainly driven by the vast oversold readings in December of 2018 and has been a free money carrot since then, not a growth expansion story.

These next 2 weeks will be of great interest. Can markets break out in earnest based on central bank intervention or will they get disappointed or again move toward new highs that won’t be sustained?

We keep analyzing structures and technical patterns and, for now, these suggest that bears still have sizable potential room to play in 2019 as signals are once again ignored and hopium is the primary price discovery mechanism of this market. I can’t say that this will not be enough, it may well be, but watch out if it isn’t.

For there to be confidence in new highs we would need to see the market to broaden out. Otherwise, new highs remain selling opportunities as they have been for the past 18 months. Note also the recent 2019 trend break on $SPX. Bulls need to repair that technical break and start showing rallies based on fundamental improvement as opposed to intervention hopium alone.

Bottomline: Investors are reliant on hope that central bank efficacy remains control over the market construct and that a trade deal will reflate investment growth and at risk that disappointment on these fronts can lead to larger sell-offs.

And as long as markets are reliant on hopium versus fundamental driven growth markets are at risk of a replay of last year as technical signals currently do not confirm or support the sustainability of any new highs should they come about as a result of central bank intervention.

*  *  *

For the latest public analysis please visit NorthmanTrader. To subscribe to our market products please visit Services.

Former National Security adviser Michael Flynn is refusing to cooperate with the Democrat-controlled House Intelligence Committee’s demand for testimony and documents, according to Politico, citing a Monday letter by Chairman Adam Schiff (D-CA). 

Moreover, Flynn’s new legal counsel, Sidney Powell, has been giving House Democrats the business. 

“Notwithstanding repeated efforts by committee staff to engage with your counsel and accommodate your adjournment requests, you have, to date, failed to comply with the committee’s subpoena or cooperate with the committee’s efforts to secure your compliance,” Schiff wrote to Flynn – demanding an appearance for testimony on September 25. 

Of Powell, Schiff wrote that she “exhibit[ed] a troubling degree of unprofessionalism” during communications with committee staffers, which were outlined in the letter. 

According to Schiff, Powell “refused to accept service” of the subpoena issued by the panel in June. Schiff indicated that Powell repeatedly sought deadline extensions for Flynn’s cooperation before ultimately ignoring phone calls attempting to arrange Flynn’s testimony for late July, just ahead of Congress’ six-week summer recess.

Schiff also said Powell told the committee that Flynn would invoke his Fifth Amendment rights and would not answer any questions other than confirming his name. –Politico

“The Fifth Amendment privilege must be invoked in response to specific questions or topics that might tend to incriminate you if answered truthfully,” wrote Schiff. “Your counsel’s blanket invocation of the Fifth Amendment … is, therefore, inadequate.”

Flynn pleaded guilty in December 2017 to laying about his interactions with Russia’s ambassador prior to Trump taking office – denying a discussion of sanctions imposed by the Obama administration in retaliation for alleged election meddling in 2016. 

Interestingly, Powell urged Flynn to withdraw his guilty plea – writing in a Daily Caller Op-Ed; “Extraordinary manipulation by powerful people led to the creation of Robert Mueller’s continuing investigation and prosecution of General Michael Flynn,” adding “Notably, the recent postponement of General Flynn’s sentencing provides an opportunity for more evidence to be revealed that will provide massive ammunition for a motion to withdraw Flynn’s guilty plea and dismiss the charges against him.”

Powell also claimed that Flynn’s Constitutional rights were violated by his former legal team, arguing in March 2018: “[General] Flynn should be fully exonerated,” adding “All charges against him should be dismissed for [egregious government misconduct] that infected the setup and prosecution of him from the beginning.”

“There are also serious 4th Amendment violations,” said Powell. “Did his legal team pursue a vigorous defense?”

As Politico notes, Powell has also been “intensely critical of Schiff and Mueller,” while filing a brief last week with the court that spelled out a “litany of allegations of prosecutorial misconduct — much of which aligned with Trump’s unsupported allegations against Mueller and his team — and suggested that the government had withheld evidence from Flynn.”

Prosecutors are aiming to sentence Flynn this fall. 

Authored by James Howard Kunstler via Kunstler.com,

Turning On The Light

“For years, lawmakers in deeply blue, proudly progressive New York City have grappled with a seemingly intractable problem: Its schools are among the most segregated in the nation.”

– The New York Times

And so Bill de Blasio, New York’s Mayor, who has been busy running for president, proposes to end the sorting-out system for the “gifted and talented” (G & T) that is theoretically responsible for that segregation. 75 percent of the G & T kids are Asian and white and, according to the school system’s Diversity Task Force, are not equitably distributed among the schools that end up being mostly black and Hispanic.

The proposal stoked a furor among those very “deeply blue and proudly progressive” parents whose G & T kids have been safely sequestered away from the “normals” who grind out their days in schools that only go through the motions of education and who come out years later unable to read or do math.

I’m a product of the New York City school system, so I know a little about it up close and personal, and many of its current features were well underway in the 1960s, when I was there.

My primary school, PS 6, on 82nd and Madison Avenue, was almost entirely white because the Upper East Side was entirely white. However, New York was a middle-class city in those days. The hedge fund had not yet been invented. PS 6 released us little inmates to the streets at noon every day — hard to believe now — and I spent many lunch hours in the Metropolitan Museum of Art, which was a block away, and free in those days, and pretty empty on weekdays because all those middle-class adults were at work. Even stock-brokers were middle-class back then, though it might be hard to believe.

My parents had split up rancorously and liked to bludgeon each other over money, so private school was out of the question for me. They were also absolutely not interested in my school career, being preoccupied with their own affairs. So, I was consigned to Intermediate School 167 on 76th and Third. It was now the heyday of desegregation, so the district comprised a thin ribbon through the Upper East Side exploding into a big mushroom cloud in Spanish Harlem. Thus, the school was about 80 percent black and Puerto Rican (as Hispanics in NYC were denoted then). Every day there was like Riot in Cellblock D. The G & T classes were then called “Special Progress” (SP), and I was in them, but between classes we-who-could-write-and-do-math circulated through the anarchic halls where shakedowns and beat-downs were a daily ritual.

I got through it somehow without running away to join the circus and got into one of New York’s so-called “specialized” high schools of which there were four (Brooklyn Tech, Stuyvesant, Bronx Science, and the High School of Music & Art). I went to the last one, M & A. It was perhaps 75 percent white, and quite civilized. The teachers were all various versions of Bernie Sanders. Shakedowns and beat-downs were unknown among kids who had to lug cellos and painted canvases through the halls. I disliked it moderately, though, because it was so far away it might as well have been in Czechoslovakia and the journey back and forth took hours. After that, I fled to college upstate and never came back.

Enough about me.

Obviously, the racial shuffle has been going on for decades in the New York City school system, but in these times of white privilege and intersectionality, the escape routes of G & T and SP must be plugged. No extra gruel for you!

But I have a remedy for the persistent problem of underperformance, one that has not really been tried: intense concentration, starting in preschool and going forward as long as necessary, in spoken English.

Language is the foundation of learning, certainly of reading skill, and too many children just can’t speak English. Without it, they’ll be unable to learn anything else, including math. The reasons for their poor language skills are beside the point. Whether they are newcomers from foreign lands or the descendants of slaves, they need to learn how to speak English and to do it correctly, with all the tenses and correct verbs.

They need to be intelligible to others and to themselves to make sense of the world.

The resistance to this idea would be mighty and furious, I’m sure. Some people will always be smarter than others, but the disparities at issue are badly aggravated by poverty in language. We don’t even pretend to want to take the obvious steps to correct this, even though it is obviously correctable. Learning anything puts people out of their comfort zone, so that can’t be used as an excuse. Diversity in language is a handicap, and it does not make you specially abled.

Having squeezed higher overnight and accelerated after the US open, it appears the catalyst for the sudden dump in US equity markets is the European market close…

Nasdaq futures illustrate the technical nature of the move best as the drop erases the sudden spike at the US open on Friday (after payrolls missed)…

“I think it’s clear to everyone now” exclaimed Russian President Vladimir Putin, (and French President Macron recently said so publicly), “that the leading role of the West is ending. I cannot imagine an effective international organization without [Russia], India and China.”

And while most politicians are all talk, in the case of both Russia and China, their actions speak louder than their words.

China‘s foreign exchange reserves jumped to $3.1072 trillion despite the falling yuan and escalating trade war with the US, while raising its gold holdings by nearly 2.89 million troy ounces (99 tons) in nine months. That’s nearly five percent more since the end of last year.

Source: Bloomberg

As Bloomberg reports, that buying spree likely to persist in the coming years, according to Australia & New Zealand Banking Group Ltd.

Trade war restrictions, in the case of China, or sanctions, as with Russia, give “an incentive for these central banks to diversify,” John Sharma, an economist at National Australia Bank Ltd., said in an email.

“Also, with increasing political and economic uncertainty prevailing, gold provides an ideal hedge, and will therefore be sought after by central banks globally.”

But China is not alone. Figures released by the Central Bank of Russia (CBR) on Friday show Russia’s gold bullion holdings have reached $109.5 billion as the nation continues to shift its growing international reserves away from the US dollar.

As Bloomberg reports, Russia’s central bank has been the largest buyer of gold in the past few years…

Source: Bloomberg

“Russia prefers to cushion its macroeconomic stability through politically neutral tools,” said Vladimir Miklashevsky, a strategist at Danske Bank A/S in Helsinki.

“There is a massive substitution of U.S. dollar assets by gold – a strategy which has earned billions of dollars for the Bank of Russia just within several months.”

In fact, globally, the trend is clear…

Source: Bloomberg

Remember, nothing lasts forever…

Submitted by Adventures in Capitalism

Over the past few months, we’ve learned a lot about the psyche of the typical Ponzi Sector investor.

You see, Ponzi sector investors will ignore most red flags, even at a company like WeWork, with more red flags than a Soviet May Day parade;

• Super-voting stock – Zuck did that and it worked out in the end

• Accelerating losses – Look at all that revenue growth

• Zero possibility of profits – Hasn’t mattered for years

• Convoluted insider dealings on property leases – Property GPs always double dip somehow

• Sold the pronoun “WE” to the company – That man is a crook!!

Look, the average bagholder is braindead. However, it doesn’t matter how “woke” you pretend to be while promoting your stock scam, you cannot do something as egregious as sell 2 letters to a company you control 30% of. That is just blatant theft.

Ever since this transaction was disclosed, I’ve seen people attack the absurdity of it all. In fact, I saw so much coverage that I felt that I’d let this one pass—what else did I have to add? Then they failed to find buyers for the IPO. The valuation started a few months ago at $65b, then $50b, then $40b (…still no one?), $30b (…uhh guys, think of the kegerators?), $25b (does anyone care at roughly half of what SoftBank paid?), now $20b is looking like a long-shot.

It’s like one of those charity date-auctions in college where no one wants the fat chick. The price keeps dropping and everyone is looking at each other, seeing who’ll step up. “At least it’s for a good cause, right?” Well, the WeWork IPO does nothing other than prop up a Masayoshi Scheme (which is just a sophisticated Ponzi Scheme). Letting WeWork fail would actually be the “good cause.” It would stop innocent retail investors from getting hosed—while the scam artists take the beating for a change.

I’m not going to opine on the continued busting of the Ponzi Sector bubble, as I’ve done enough of that already and hopefully made my point (look at charts of TSLA, UBER, LYFT, etc. if you don’t know what I’m talking about). Instead, I want to talk about corporate governance. In today’s world where shares are increasingly owned through ETF mandate, investors often forget that behind the ticker symbol is an actual business and the guy in charge is king—particularly at a company like WeWork with super-voting stock. This king has incredible power over a pool of someone else’s money. There is literally no one to stop him from misbehaving and hardly anyone even watching closely. Abusing a key funding partner like SoftBank, really is something “special,” even in today’s era of corporate excess. Fortunately, CEOs leave paper trails which speak volumes as to how a particular CEO will treat minority shareholders going forward.

Let’s pivot to the smaller companies that I focus on. Corporate governance is everything to me. At a small growing company, your cost of capital or even access to capital (at any price), determines your ability to succeed. We all accept that a CEO needs to earn a salary so he can pay his mortgage and buy groceries for his family. Anything beyond a certain threshold seems egregious—particularly when the same CEO is tossing his hat around asking investors to buy shares so that the business can grow. You have no idea how many times I’ve avoided an attractive investment over excessive executive compensation. Why does a CEO need to earn 20% of EBITDA? This isn’t a hedge fund. That EBITDA has a multiple on it. The higher the valuation, the lower the cost of capital going forward. If a CEO with a pile of equity doesn’t understand this—I want nothing to do with that company.

Don’t CEOs need to profit too? Sure. Give them stock options. If you give stock options to a rapidly growing company, at worst, it’s a deferred capital raise when those options get exercised. More importantly, it retains cash inside of the company instead of giving it away as salary. Besides, the CEO is only making money on his options if I’m making money on my shares. I can accept a bit of dilution—especially if the cash salary component is on the lower side.

Of course, there’s a level of option compensation that is also egregious. Board members will agree to damn near anything for the CEO of a company that’s succeeding. It’s up to the CEO to recognize where the grey line is, then take 2 giant steps backwards and be shareholder friendly. It’s all about cost of capital. Over the past few years, where plenty of dubious companies have been able to raise capital, people seem to have forgotten this rule. Suddenly, a non-sensical $5.9 million payment (less than 2 days of losses at WeWork) has cut at least $20 billion off the company’s valuation. It may even prove fatal if they cannot list. Previously, WeWork was a loss-making real estate company masquerading as a tech business—now it’s simply WeFraud to everyone I know. Those were 2 expensive letters.

Watch your CEOs. Read the proxy statements. See who earns what. You’d be surprised at the dispersion of compensation levels, even at similarly sized companies. If cash compensation is egregious—run!! All businesses have a certain level of related party dealings—look closely at them—do they make sense? Does the company get a fair deal? Look for anything beyond the norm—look for transactions designed to take advantage of the company. The markets are rife with abuse. There’s a reason that owner-operator businesses tend to out-perform those with hired gun CEOs. Then there’s the exception to the rule; Adam Neumann owns roughly 30% of WeWork. Why is he destroying their cost of capital?

Last week, the Big Short’s Michael Burry sparked a fresh wave of outrage among the Gen-Z and algo traders (if not so much the handful of humans who have actually witnessed a bear market) on Wall Street, by calling the darling of modern capital markets – passive, or index/ETF, investing – the next CDO bubble. Echoing what many skeptics before him have said, Burry argued that record passive inflows, coupled with active fund outflows which suggest passive equity funds will surpass active by 2022 according to BofA…

… are distorting prices for stocks and bonds in much the same way that CDOs did for subprime mortgages. Eventually, the flows will reverse at some point, and when they do, “it will be ugly.”

“Like most bubbles, the longer it goes on, the worse the crash will be,” Burry told Bloomberg.

This nascent passive bubble is also why Burry had avoided large caps and was focusing entirely on small-cap value stocks: to Burry, they tend to be underrepresented in index funds, or left out entirely, which is why they are i) cheap and also why ii) when the passive bubble bursts, they will be the few names left standing.

To be sure, Burry’s strategy is hardly new: we first profiled that exact threat in April 2017, when we quoted One River’s Eric Peters who warned to “expect enormous losses in the next correction”… as “there is no such thing as price discovery in index investing”… either on the upside, or on the downside, and as a result “the stocks that have been blindly bought on the way up will be blindly sold.” He continued:

“When these markets do finally have a correction there will be no bid for many of these stocks…. “The people who are indexing now are the same ones who were selling in 2009,”

“I just spoke at a conference filled for wealth advisors from all the major players. They say the same thing – today’s buyers are not long-term investors.” They’re guys who put $1mm into index ETFs.

His dire conclusion preceded Burry’s by more than 2 years:

“I don’t know when the next major crisis will hit, no one does,” admitted VICE. “But I do know that even in the next normal correction, the market’s losses will be amplified enormously by this move away from active management.”

At roughly the same time, we also reported that “the world’s most bearish hedge fund”, Russell Clark’s Horseman Capital had revealed a new “investing” strategy using ETF flows as a catalyst for positioning and bets.

Citing the transition from active to passive as a catalyst that makes markets increasingly more inefficient, Clark lamented that there “are complaints from some quarters about it being harder to short sell as flows of money push up stocks.” So what is his new shorting philosophy? This is how he explained it, using his biggest short at the moment, retail REITs:

The biggest short sector in the fund are REITs. In the US, they are mainly retail REITs, and there are two reasons for this. One is that we have guaranteed sellers in the Japanese US Reit fund. The other reason is the appalling performance of the major tenants. However, as an aside, I like them as a short area as they have the highest exposure to ETFs of any sector.

Bloomberg allows you to find the biggest ETFs and open ended funds which are invested in US Real Estate Sector. The top 28 funds have total assets of 187bn USD, of which 13.3bn USD invested in Simon Property Group, that is 24% of Simon’s market cap. However, Real Estate passive funds are not the only passive fund invested in Simon. When all passive funds weights are added together I get over 50% of Simon Property Group shareholders are passive. I wonder who will become the buyer if all these funds start to see redemptions if there are some problems in US commercial real estate?

His conclusion:

The long bull market in passive investment has made them wilfully blind to the liquidity risk that they are running. Passive investments are concentrated in the US market…

And if Eric Peters is right, “when these markets do finally have a correction there will be no bid for many of these stocks”, so all Clark has done is tighten the universe of ETF unwinds from the entire market to a market sector or subset of stocks, in this case the retail REIT space.

Fast forward to today, when this idea of selectively trading ETFs received a much needed refurbishment courtesy of SocGen’s Andrew Lapthorne, who writes that the French bank’s ETF Research team – which monitors ETF stock ownership and the potential for overcrowding – looked at overcrowding in Bond ETFs and more recently updated their analysis of overcrowding in equity ETFs.

According to the SocGen observations, the greatest risk of crowding in ETFs is with non-market cap weighting schemes (i.e. Nikkei 225) and where there is significant liquidity in the ETF relative to the underlying (US Smallcaps and Gold ETF are two areas they highlight). However “despite getting the usual pushback from ETF providers on this topic” on the whole the bank does not see significant overcrowding risk, although we will let readers look at the chart below and make their own conclusions.

Meanwhile, as Lapthorne adds, the more interesting point of Michael Burry’s comments related to cheapness in smaller, less liquid stocks that were less likely to be included in a passive index. The SocGen strategist reminds readers that he highlighted in July “that there is an ever increasing cohort of cheap but small global stocks, but we also know from experience that whenever we create systematic equity strategies we leave significant “alpha” on the table through an inability to easily trade these names.” Of course, to Burry this misplaced alpha – the result of a liquidity mirage – is precisely the reason why one should be buying these stocks, if perhaps not so much for the upside, as much as the lack of downside once the next correction hits and all ETF constituents are liquidated at the same time as the bath water.

The result is visualized in the chart below which creates portfolios of roughly 500 names, based on a decile ranking of their average daily traded volume over the prior 6 months. As Lapthorne concludes, “the liquid portfolio performance has been easily outstripping the illiquid over the last couple of years and there is a clear valuation discrepancy.” The bottom line: “for those with genuinely patient capital, globally illiquid small caps are increasingly an interesting fishing ground.”

As a reminder, the reason why the world remembers the name of Burry is not so much his insight into the last financial crisis – many others had also warned about the coming Global Financial Crisis – it was his ability to remain patient in the face of client redemption demands as his thesis was bleeding to death, only to be validated overnight.

For now, the real question is which contrarian will have a similar patience this time around? While our money is on Horseman, the fund’s AUM is starting to drop to existentially dangerous levels as we observed just two weeks ago. It will be painfully ironic if when the market finally does crash there are no shorts left to finally profit.

Authored by Charles Hugh Smith via OfTwoMinds blog,

Either we root out every last source of rot by investigating, indicting and jailing every wrong-doer and everyone who conspired to protect the guilty in the Epstein case, or America will have sealed its final fall.

When you discover rot in an apparently sound structure, the first question is: how far has the rot penetrated? If the rot has reached the foundation and turned it to mush, the structure is one wind-storm from collapse.

How deep has the rot of corruption, fraud, abuse of power, betrayal of the public trust, blatant criminality and insiders protecting the guilty penetrated America’s key public and private institutions? It’s difficult to tell, as the law-enforcement and security agencies are themselves hopelessly compromised.

If you doubt this, then please explain how 1) the NSA, CIA and FBI didn’t know what Jeffrey Epstein was up to, and with whom; 2) Epstein was free to pursue his sexual exploitation of minors for years prior to his wrist-slap conviction and for years afterward; 3) Epstein, the highest profile and most at-risk prisoner in the nation, was left alone and the security cameras recording his cell and surroundings were “broken.”

If this all strikes you as evidence that America’s security and law-enforcement institutions are functioning at a level that’s above reproach, then 1) you’re a well-paid shill who’s protecting the guilty lest your own misdeeds come to light or 2) your consumption of mind-bending meds is off the charts.

How deep has the rot gone in America’s ruling elite? One way to measure the depth of the rot is to ask how whistleblowers who’ve exposed the ugly realities of insider dealing, malfeasance, tax evasion, cover-ups, etc. have fared.

America’s ruling class has crucified whistleblowers, especially those uncovering fraud in the defense (military-industrial-security) and financial (tax evasion) sectors and blatant violations of public trust, civil liberties and privacy.

Needless to say, a factual accounting of corruption, cronyism, incompetence, self-serving exploitation of the many by the few, etc. is not welcome in America. Look at the dearth of investigative resources America’s corporate media is devoting to digging down to the deepest levels of rot in the Epstein case.

The closer wrong-doing and wrong-doers are to protected power-elites, the less attention the mass media devotes to them.

As for Corporate America’s fraud and corruption: No Wrongdoing Here, Just 6,300 Corporate Fines and Settlements (May 2015). Prosecutors no longer indict bankers, CEOs or top executives. Wrist-slap fines are deemed adequate punishment, even when corporate managers have reaped billions of dollars in profits selling highly addictive and dangerous drugs while claiming they’re safe and non-addictive.

The tens of thousands of Americans who’ve died from these drugs suggest this was never true.

All this rot–corruption, fraud, abuse of power, betrayal of the public trust, tax evasion, blatant criminality and insiders protecting the guilty–has consequences. As I explained in Crony Capitalism Is Kryptonite to Democracy and the Real Economy (October 6, 2014), When the machinery of governance is ruled by the highest bidders, democracy is dead. (Hmm, why is Facebook suddenly spending $100 million on lobbying?)

Or as correspondent Simons C. recently put it: “The ethical dimension underpinning the whole system is this: what’s moral is what’s legal and what’s legal is for sale.”

Here are America’s media, law enforcement/security agencies and “leadership” class: they speak no evil, see no evil and hear no evil, in the misguided belief that their misdirection, self-service and protection of the guilty will make us buy the narrative that America’s ruling elite and all the core institutions they manage aren’t rotten to the foundations.

Either we root out every last source of rot by investigating, indicting and jailing every wrong-doer and everyone who conspired to protect the guilty in the Epstein case, or America will have sealed its final fall.

*  *  *

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 ebook, $12 print, $13.08 audiobook): Read the first section for free in PDF format. My new mystery The Adventures of the Consulting Philosopher: The Disappearance of Drake is a ridiculously affordable $1.29 (Kindle) or $8.95 (print); read the first chapters for free (PDF). My book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition. Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com. New benefit for subscribers/patrons: a monthly Q&A where I respond to your questions/topics.