Tag: news

Authored by Robert Weissberg via The Unz Review,

Americans generally take a dim view of lying and liars. We venerate George-“I cannot tell a lie—Washington and those giving testimony in court must swear to tell the truth and nothing but the truth and those lying under oath risk being be found guilty of perjury, a felony punishable by up to five years in prison in federal cases. Particularly relevant is how universities punish those falsifying research. All in all, while deceitfulness may be ubiquitous in today’s morally challenged environment, mendacity has yet to become a valued cultural norm.

Why, then, do so many university administrators, including presidents at elite schools, tell bold-faced lies regarding race-related issues? (We assume that campus administrators know that reality differs from what they assert and this, technically, makes them liars)

On the advice of counsel, I’ll prudently skip naming names but these lies are all too familiar: we don’t discriminate on race, affirmative action admittees are academically equal to non-AA admits, there are no racial quotas, African Americans are not disproportionately found at the bottom of class rankings, diversity enriches campus intellectual life, students of color struggle academically due to invisible white privilege, unconscious faculty bias, retention will work if we just supply adequate remediation, and on, and on.

These falsehoods are remarkable insofar as they often emanate from administrators who as faculty spent decades pursuing truth and nothing but the truth knowing that exposure as a cheat would be career-ending. Indeed, if federal research funds are used in bogus research, the culprit might face criminal changes and be forced to return the funds. Do professors receive an official lying license when moving from the Physics Department to the Provost’s Office? Does the administrative job description include a talent for knowing how to keep a straight face when telling former colleagues that standards are not being lowered in the latest drive to increase faculty diversity? Might the new big salaries of administrators be compensation for the awaiting humiliation that comes with public dishonesty, a sort of combat pay in today’s contentious universities?

Such lying cannot be a psychological pathology – over a decades-long career chronic dissemblers would never move up the academic greasy pole. Nor can this mendacity be dismissed as socially essential “little white lies,” for example, attributing a colleague’s death to heart failure, not alcoholism in an obituary.

Let me suggest that high-level mendacity can be best be explained by today’s academic incentive structure and, conversely, truth-telling is a liability save among very private conversations with trusted colleagues. Now for the Great Principle of PC Academic Advancement: only would-be administrators who boldly lie in public can be trusted since their future utterances are totally predictable; on the other hand, who knows what a truth-teller might say? Lie-flavored PC Kool-Aid is the “energy drink” that helps ambitious academics advance their careers when they opt for administrative positions. The truth-telling Dean is a loose cannon, and nobody wants a loose cannon making important decisions.

What search committee for Yale’s next president would invite a candidate whose letters of reference celebrate his uncompromising honesty regarding hot-button taboo topics, particularly those that might be deemed offensive to thin-skinned minority groups? Could this “Honest Abe” defeat a rival notable for his skill at deceiving agitated social justice warriors while misleading the press about a campus cheating scandal? Clearly a no brainer—chose the liar. When was the last time a campus had to call in the police because an administrator had lied about illegally admitting unqualified blacks?

Understanding this incentive structure begin with the pressures for social uniformity in any social groups including the university’s apparatchiki. Whether it is a fraternity or a university’s administrative elite, if 2+2=5 evolves into the dominating the orthodoxy, announcing 2+2=5 is the rite de passage for admission. There are worse humiliations–outlaw motorcycle gangs have initiation rituals where prospective members lie on the floor in full regalia while members urinate on them.

Keep in mind that private heresies are irrelevant; nobody cares about private options provided the PC gods are honored in public. The public profession of the PC faith is so easy and so gratifying on today’s campus that only a fool could resist, and who would hire a fool as school President?

And speaking of committee search requirements, what committee would list “courage” as a job pre-requisite? Hard to imagine the sentence, “Successful candidates must be willing to face hostile groups and forcefully defend the university’s core intellectual mission even if physically threatened.” A military background is bad enough in today’s wussy climate, but for a candidate to have personally led his troops into battle is, ironically. the kiss of death. Cowardice – draft dodging, for example – would be, to use admission-speak, a plus factor in assessing a resume.

Moreover, climbing up today’s administrative ladder entails serial lying with winning job candidates telling the most outrageous lies in the shortest time. Makes perfect sense since recruitment committees typically include representatives of campus grievance groups whose support is non-negotiable (grievance groups exercise a so-called “Polish Veto”). So many aggrieved constituencies, so little time and only a second-raters would just allude to the Queer Studies Department and stop at that; the winner in this mendacity derby would insist that Queer Studies is vital to the university’s historic mission and as President he/she would increase its funding. The upshot is, of course, that schools will hire only the best serial liars—no amateurs need apply.

The University of Chicago’s Robert Maynard Hutchins once opined that his job was to provide football for the alums, parking for the faculty and sex for the undergraduates. Today, perhaps second only to fund-raising, the university’s president’s paramount job is to keep the peace, and this often entails lying with great sincerity and this is especially true if grievances are inconsequential. Woe to the administrator who fails to give an Oscar-winning performance when campus Hispanics riot when served enchiladas prepared by white hillbillies in the school’s cafeteria.

Nor are there disincentives for lying on today’s “post-truth” academic environment. It would be professional suicide for a professor to call out the school’s president on the claim that affirmative action admittees are just as qualified as other students. Everybody has to “get with the program” and “mere” professors who object will pay the price. Sad to say, provided the mendacious administrator remains in the administrative world where dishonesty is socially sanctioned, he/she enjoys diplomatic immunity. In fact, a would-be top administrator can probably misrepresent past accomplishments but need not worry that former colleagues will tell tales. Colleagues who have drunk gallons of the PC Kool-Aid late into the night will not rat on each other.

Clearly, ridding the campus of the PC Pox will require hiring administrators who relish honesty but how do we measure this trait and convince others that telling the naked truth is vital to a university, even if this brings raucous discord? Should prospective administrators be required to take a test to assess their commitment to truth? Encourage military veterans who’ve earned at least a bronze star to apply? What about hiring only those close to retirement since they no longer care about being harassed for being blunt?

Assuming that current universities are worth rescuing from the PC plague, it is essential that truth-telling and courage be made integral to the administrator’s job description. Alas, given all the obstacles, particularly today’s robust market for clever liars, we must start modestly. To use administrative-speak, fans of truth and the courage to speak it might list these virtues as “two of many factors in a holistic assessment” alongside the usual criteria such as sexual preference and commitment to diversity. Indeed, with a little luck, a demonstrated passion for the truth and nothing but the truth and a willingness to express it might be considered a “tie breaker” or even a “plus factor” in recruiting university administrators.

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Earlier today we wrote how legacy retailers were struggling to adopt to Black Friday increasingly moving to a primarily e-commerce platform: we noted that not only did several “legacy” website by major retailers like Lululemon, Lowe’s and Wal-Mart suffer various revenue-sapping glitches, but also that Black Friday was likely to set new spending records even as mall traffic – at least for now – appeared roughly the same as last year. Incidentally, total spending for Black Friday is now expected to be $6.22 billion, a gain of 23.6% from last year, according to analyst estimates.

And with Thanksgiving weekend all but behind us, the focus now turns to Cyber Monday, the “official” e-commerce holiday that takes place the Monday after Thanksgiving. Cyber Monday is a horrifying excuse to spend even money you don’t have a “holiday” that’s “celebrated” as everybody returns to work after Thanksgiving break and logs online to begin their holiday shopping.

According to Bloomberg, shoppers are estimated to spend $7.8 billion this Cyber Monday, starting off holiday spending on the right track and setting fresh records. But the question of whether or not the Cyber Monday numbers will have an effect on retail names and the stock market in general still lingers. In the midst of a rising interest rate environment where discretionary spending is all but guaranteed to fall as the economy cools – amid an ongoing trade war – some believe that even record Cyber Monday numbers simply won’t be enough to move the needle.

DA Davidson analyst Tom Forte believes that the lingering consumer spending slowdown in 2019 is throwing a damp rag on any positive signs that will come with a strong holiday spending season: “many of the tariffs will likely be borne by consumers in the second half of 2019 in the form of higher prices on products. Higher interest rates may dampen spending on big-ticket items.”

Overall, US shoppers are estimated to spend $124.1 billion online in November and December this year, up an impressive 14.8% from last year, based on figures from Adobe Analytics. The growth rate is simply astounding, especially so many years after the first adoption of e-commerce. But the stock of legacy retailers like Walmart and Target, for instance, already appear to be priced to perfection and have inadvertently set expectations for themselves extremely high into both this year’s holiday season and into 2019. This makes it less likely that their market values are going to be profoundly affected by whatever the final retail holiday numbers end up printing.

The expectation is for total holiday sales to rise over 5% for the second year in a row – the first time this has happened since the housing crisis. Given that much of this spending is a result of cheap credit and macroeconomic numbers that have peaked, some investors are nervous that this clip can’t and won’t be sustained into the new year.

Of course, the Street still has its obligatory bulls, oblivious of the mess created over the past decade. For instance, Craig Johnson, president of Customer Growth Partners, told Bloomberg: “the strong consumer and retail spending we are seeing now is coming off of this healthy foundation, which is much more sustainable than the credit bubble we saw 12 years ago.” 

Maybe someone should inform Craig that our “healthy” foundation is actually the result of cheap capital and inflating asset prices (and thus, the “wealth effect”) and the money supply, and – in the process – also inform him that it wasn’t just a “credit bubble” that caused the last crisis, which has been merely papered over – with a few trillion papers – and has been hardly resolved.

One doesn’t need to be a Wall Street analyst or award-winning economist to realize that US consumers simply can’t keep sustain the rate of spending observed over the last 10 years. Furthermore, the US economy has yet to feel the last couple of aftershocks from recent rate hikes, while the cost of the ungodly amount of outstanding US debt continues to rise not only for consumers, but for corporations and municipalities, the economic machine is only going to grind slower in the years to come.

So enjoy the positive holiday spending headlines as they hit over the next few weeks; it is unlikely that they will be repeated this time next year.

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Via Greg Hunter’s USAWatchdog.com,

Financial expert Catherine Austin Fitts has said for years that the economy was not going to crash, but be on a “slow burn.” 

How long can they make this heavily indebted game last? Fitts says, “Our problem as investors is we don’t know…”

“If you look at all the information we need to make an intelligent assessment, we don’t have access to that information. I have said many times this is a military question. Who has the biggest weapons and who has the ability to deliver force and control? So, we are living with maximum uncertainty…

Clearly, we are headed into a new currency world that’s part of a new control system, but the answer is we don’t know when. My fear with many, many commentators is they are underestimating the power and endurance of the system. I am always getting yelled at because people think I am pro-empire. I am not saying I am pro-empire or I am for the things they are doing to keep it going.”

Fits adds that things are so uncertain that “the old system could go five years or five months.”

On introducing a new dollar, Fitts says:

“Even if they do introduce a dollar backed by gold, it’s going to start off with a small market share. They are very unlikely to do a big bang thing. These guys are prototypers.”

There is no doubt wealthy people around the world are buying gold. Why? Fitts says, “The reality is…in the worst case scenario, gold is a store of value because it is respected globally as a currency or money without the backing of a sovereign government.”

“What is the global currency that has backing without a sovereign government, and gold and silver are one of the few. I think it is one of the reasons I think wealthy people need to have a store of value for the worst case. It is central bank insurance. A core position in gold is not an investment, it is central bank insurance…We continue to see people have a core position in precious metals for the worst case.”

What is the worst case scenario? Fitts says, “The worst case scenario is we are dealing with very serious geophysical risk…”

“Throughout history, we have had things like Noah and the flood where civilization has almost gotten wiped out… There have been radical changes in policy to coalesce huge amounts of money under central control and do secret projects. Why? What is that about?…

I don’t know how the governance system on planet earth works. I don’t know why the government is shifting massive amounts of money out of the U.S. government and out of the U.S. economy and taking it dark.”

Fitts says, “Right now, we are choking on secrecy as a society…”

“If you look at all the people who got it wrong about the collapse, the reason they got it wrong is because all the information they needed to determine whether or not it was going to collapse was being kept secret even though they, as taxpayers, were financing it…

If we had transparency and we stopped with the secrecy, we could turn the red button green. . . .

The cost of secrecy is enormous …The cost of tyranny, the cost of oppression, the cost of Americans having lousy education and all this control, it destroys so much wealth…

You cannot have a successful civilization with this kind of secrecy.”

Join Greg Hunter as he goes One-on-One with Catherine Austin Fitts, Publisher of “The Solari Report.”

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Catherine Austin Fitts says some of her favorite investments right now are land, precious metals and income producing real estate. There is free information and articles on Solari.com. There is much more information for subscribers. To subscribe to “The Solari Report” click here.

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In one of the more whimsical notes published by Goldman in recent months, chief economist Jan Hatzius writes that he has received numerous questions about various “rules of thumb” for analyzing the US economy, and lays out a selection of these rules, covering Fed policy, financial conditions, growth, unemployment, inflation, bond yields, and recession risk.

While the note covers everything from monetary policy (in the context of rising rates) and the impact on financial conditions, to the labor market and the relationship between GDP and the unemployment rate, to the link between the unemployment rate and rising wages and overall PCE inflation, eventually closing the loop with the Taylor rule and how a mechanistic take on the economy translates to monetary policy, perhaps the most interesting aspect of the note is Goldman’s take on what a 150bp “unexpected increase” in the Fed Funds rate would do to both financial conditions and GDP.

To be sure, unlike 2 months ago when discussions about the “overheating” of the US economy were all the rage, and some were even hinting that the Fed may engage in one or more surprise rate hikes, in recent weeks the US economy has shown troubling signs of a slowdown and as a result the conversation has shifted away from unexpected tightening to whether Powell may in fact terminate the Fed’s tightening prematurely, the Goldman analysis is still interesting, if more as a thought experiment; it would certainly be relevant once more from a practical standpoint should high frequency economic indicators suddenly surprise to the upside in the coming weeks.

In any case, according to Hatzius, who notes that “the funds rate alone is no longer a reliable predictor of financial conditions”, Goldman observes that monetary policymakers now affect GDP by influencing financial conditions. Specifically, according to Goldman calculations “a 150bp hawkish funds rate shock typically tightens the FCI by 100bp. By component, a 150bp hawkish funds rate shock tends to increase the 10-year yield by 45bp, lower equity prices by 9%, and raise the value of the dollar by 4%” as shown in the chart below.

While hardly a surprise that substantially tighter financial conditions – as a reminder 150bps is 6 rate hikes – would have an adverse impact on the economy and markets, Hatzius notes there are two important caveats to his analysis.

• The first has to do with whether the rate hike is truly an unexpected surprise “since anticipated funds rate hikes are typically already priced in bond, stock, and currency markets, they have much smaller effects on financial conditions and growth than unexpected shocks.”
• The second has to do with what other factors are at play as “Fed policy accounts for only a relatively small part of the ups and downs of financial conditions, since other factors such as risk premium shocks are a major source of FCI fluctuations. Therefore, the relationship between Fed policy shocks and the overall movements in financial conditions is far from stable.”

Furthermore, as a direct result of the rate shock – by way of tighter financial conditions as a transmission mechanism – GDP growth would also be affected.

As shown in the left panel of Exhibit 3, we estimate that a 100bp FCI tightening shock gradually leads to a peak GDP hit of just under 1pp after 4 quarters, before leveling off in the second year.

Goldman notes that its statistical estimate of the FCI impulse on GDP growth “is well approximated with a rule of thumb. As the right panel of Exhibit 3 shows, the FCI impulse on sequential GDP growth is typically roughly equal to -2/3 times the actual year-over-year change in the FCI.”

That said, the bank’s economists caution that relationships between the different factors change over time and aren’t always linear, and that financial conditions are affected by many things other than Fed policy such as risk premium shocks.

Among some of the other “rule of thumb” observations discussed by Goldman are the followingL

• A 1pp fall in the unemployment rate raises wage growth by 0.35pp, but tends to lead to a more modest 0.1pp rise in core PCE inflation and a 0.15pp rise in core CPI inflation.
• A 10pp tariff hike on $100bn of imports tends to raise core PCE inflation by 0.02pp.
• A 1pp fall in the unemployment rate gap—the difference between the unemployment rate and the rate of unemployment consistent with 2% inflation—raises the prescribed funds rate by 100bp and 200bp, respectively.
• A 10bp increase in core inflation leads to a 8bp increase in the 10-year yield with a 3bp contribution from a higher term premium and a 5bp contribution from a higher expected nominal funds rate.
• A 1pp increase in the budget deficit raises 10-year interest rates by about 20bp.
• A 1% of GDP purchase of assets by the Fed tends to depress long-term bond yields by around 4bp (with the effect on US rates from purchases by central banks abroad being roughly half as large).

These and other “rules of thumb” are summarized in the table below:

Finally, addressing the question on everyone’s mind, what is the risk of a recession, and implicitly, whether the Fed will “tighten” into one, Hatzius writes that since recessions are notoriously difficult to forecast, the bank “monitors recession risk with multiple tools, including a bottom-up dashboard, economy-wide and sector-specific private sector financial balances, a cycle classifier, and a top-down model.”

Her’s what the bank’s models reveals: over the course of 2018, the estimate of recession risk has nudged up across horizons. Specifically, for the two-year horizon it has increased by roughly 5pp to 26% (with a 3pp contribution from the 1.1pt FCI tightening and a 1-2pp contribution from a 0.7pp bigger output gap). Meanwhile, two-year recession odds are still below the unconditional average, while “the three-year probability has risen by 7pp to 43% and now sits just above the historical average.”

According to this analysis, Goldman is not concerned that a recession is a credible risk any time before 2021, which may also explain the bank’s surprisingly optimistic outlook on the economy in 2019 when the bank still expects the Fed to hike rates 4 times even as the market is on the fence whether Powell can pull off more than even one rate hikes as of this moment.

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The novelty of the internet platform boom has mostly worn off, and as Visual Capitalist’s Jeff Desjardins notes, now that companies like Facebook, Amazon, and Alphabet are among the world’s most valued companies, people are starting to hold them more accountable for the impact of their actions on the real world.

From the Cambridge Analytica scandal to the transparency of Apple’s supply chain, it’s clear that big tech companies are under higher scrutiny. Unsurprisingly, much of this concern stems around one key currency that tech companies leverage for their own profitability: personal data.

WHAT BIG TECH KNOWS

Today’s infographic comes to us from Security Baron, and it compares and contrasts the data that big tech companies admit to collecting in their privacy policies.

Courtesy of: Visual Capitalist

While the list of data collected by big tech is extensive in both length and breadth, it does take two to tango.

For many of these categories, users have to willingly supply their data in order for it to be collected. For example, you don’t have to fill out your relationship status on Facebook, but millions of users choose to do so.

DID I OPT INTO THIS?

The majority of the data categories on the list make sense – it’s a no-brainer that Amazon has your credit card information, or that Google knows what websites you visit. Even the least tech-savvy person would likely understand this.

However, there are definitely some categories of data that get collected and stored that may sound unnerving to some people:

• Facebook knows your political views, religious views, and even your ethnicity

• Xbox users will have their skeletal tracking data collected through the Kinect device

• Facebook also knows your income level, which it finds out through partnerships with personal data brokers

• Platforms collect your documents, email, and message data – though some of this is just metadata

• Facebook and Microsoft store facial recognition data, based on the pictures you upload

Remember, this is just what companies admit to collecting in their privacy policies – what else do you think they know?

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Back on November 1, we reported  a “fascinating statistic” by Deutsche Bank – as of the end of October, 89% (a number that has since risen to at least 90%) of most major global assets had a negative total return year to date in dollar terms. This was the highest percentage on record based on data back to 1901, eclipsing the 84% hit in 1920. Putting this in context, in 2017 just 1% of asset classes delivered negative returns. The final straw was when the S&P 500 index, which had valiantly resisted a negative return for the year, finally succumbed to the gravitational pull of most other markets and turned red last week when it also suffered its second correction of 2018.

And while this statistic was quietly ignored for much of November, it eventually made its way to the front page of the WSJ today – just days after the S&P turned negative for 2018 and slumped into its second correction of the year – which reported what most traders had known already: “stocks, bonds and commodities from copper to crude oil to burlap are staging a rare simultaneous retreat, putting global markets on track for one of their worst years on record and deepening a sense of unease on Wall Street.”

For those investors who have somehow slept through the past two months, it has been a painful market ever since the S&P hit its all time high on September 20: major stock benchmarks in the U.S., Europe, China and South Korea have all slid 10% or more from recent highs. Crude oil lost a third of its value and slumped deep into bear market territory, emerging-market currencies have broadly fallen against the U.S. dollar, while bitcoin’s price crashed below $4,000 over the weekend amid what a broad risk capitulation.

While havens such as Treasury bonds and gold rallied this fall as riskier assets swooned, both are still down on a price basis for the year, reflecting trader concerns with solid economic growth and tighter Federal Reserve policy that have begun to push interest rates out of their post-financial crisis doldrums.

And, as we first discussed last week in why “Nothing is working“, the market’s sharp and broad pullback has left fund managers scrambling to find places to park their money. But with global growth showing signs of slowing even as monetary policy is expected to tighten further, few are eager to place large wagers and risk compounding earlier failures to generate expected gains.

The reason: as the WSJ notes, “the simultaneous failure of so many investment strategies is being by viewed by some as a warning of what could come following years of above-average returns.”

For professional asset managers there is a silver lining: virtually everyone else is also hurting.

“It’s been a difficult year,” said QMA chief investment strategist Ed Keon. “All investors have goals, and none of those can be fulfilled with negative returns.”

Paradoxically, while virtually nobody believes that a recession is imminent – with consensus expecting the US economy to shrink in 2020 at the earliest – the strength of the U.S. economy in the face of a global slowdown has prompted the Fed to keep rising rates, much to the chagrin of Donald Trump, and shifting ever further away from the regime of rock-bottom interest rates and bond-buying put in place after the financial crisis. As a result, rising short term rates, and the highest real 10Y rates since 2010, have diminished the premium investors get for taking on risky assets, pressuring virtually all markets.

The recent plunge in asset prices has been especially crushing to those who expected the upward momentum and asset levitation for much of the year to continue and doubled down on the recent swoon. One such example is commodity hedge-fund icon Pierre Andurand, who earlier in the year bet oil could soon hit $100 a barrel (and even said $300 oil is “not impossible“), but has since watched as his $1 billion Andurand Commodities Fund suffered its largest monthly loss ever in October, and November isn’t looking much better with the oil plunge accelerating.

Meanwhile, believers in “growth narratives” have been trampled by a furious rotation out of growth and into value as funds that had built up massive stakes in fast-growing technology companies were crushed by sharp reversals. Twenty-six funds dumped their entire stakes in Facebook Inc. in the third quarter, according to a Goldman Sachs Group analysis of 13F filings, including billionaire Daniel Loeb’s Third Point LLC, which offloaded 4 million shares, citing “a very disappointing quarter” for Facebook.

Adding insult to injury, the most shorted names across the hedge fund space have seen periodic squeezes that have forced dramatic short covering and led to even more losses.

The result has been one of the worst years for hedge funds since the financial crisis: the Goldman equity hedge fund index is down 4% YTD, underperforming the S&P by 6%, even as the basket of most shorted names – a testament to just how painful the short squeezes have been – has outperforming the broader market.

Underscoring the dreary environment for hedge fund managers, the Goldman Hedge Fund VIP basket of most popular hedge fund positions, has been in freefall ever since hitting a high earlier in the summer.

Still, some investors refuse to accept the creeping fear that the bull market is over (last week Morgan Stanley was quite clear on the matter, declaring that “We are in a bear market“) and contend the market’s 2018 stumbles are a good sign, and that the declines across across all asset classes that had finished last year in the green reflect a “healthy” correction if a painful readjustment of expectations.

“A year like this—it shakes out some of the situations that were out of kilter with the rest of the economy,” said Jason Pride, chief investment officer for private clients at The Glenmede Trust Co. After markets around the world soared to records last year, buoyed in part by synchronized global economic growth but also by a surge in investor optimism, “we actually needed to take some air out of the system,” Mr. Pride said.

Pride is unwilling to throw in the towel and like others, is betting the bull market in U.S. stocks still has longer to run before the economic expansion morphs into a downturn. While U.S. economic data have been bumpier as of late, with the housing and auto sectors in particular showing signs of strain, the overall picture still looks solid, Pride told the WSJ.

Even so, Glenmede concedes it had to turn down its recent euphoria, and last year the fund began paring its exposure to some of the fast-growing technology stocks that had run up sharply, betting their outperformance would fade. The decision was widely criticized at first, but has since seen the approval of investors:

“The feedback loop felt horrible—absolutely horrible,” Pride said, recalling presentations he gave where some clients questioned why the firm had pulled out of stocks that had rallied more than 50% in the past year. That decision has seemed easier to justify more recently, with many former big hitters such as Facebook, Apple Inc. and Netflix Inc. tumbling, he said.

Other advisors have similarly urged their clients to stay invested but add to downside hedges. UBS Group’s wealth-management arm has urged its wealthy clients to keep their S&P 500 long, but to start using puts to protect against further pullbacks.

“We’re cautiously optimistic,” said Jerry Lucas, a senior strategist at UBS Global Wealth Management’s chief investment office. “It’s worthwhile to be a little more conservative and have some hedges on to reduce your risk.”

Whether this cautious optimism is justified will depend on just one person: Fed chair Powell, who is increasingly expected to relent in his hawkish pursuit of higher rates. If not, and there are few indications to suggest the Fed will concede and appear to fold to pressure from the US president who has been urging the Fed to end its tightening ways, what has been a dismal 2018 may mutate into a disastrous 2019.

Minneapolis Fed President Neel Kashkari, one of the Fed’s biggest doves who has frequently called for a stop to raising interest rates, repeated his warning and said further tightening could trigger a recession: “One of my concerns is that if we preemptively raise interest rates, and it’s not in fact necessary, we might be the cause of ending the expansion” and triggering the next recession, Kashkari said in a National Public Radio interview posted online last week.

Which, of course, will not come as a surprise to regular readers who know very well that every single Fed tightening – like the one right now – has resulted in a crisis.

Thomas Poullaouec, head of Asia Pac at T. Rowe Price in Hong Kong, summarizes the above perfectly with the following brief assessment: “It hasn’t felt like a bad year, but retrospectively, it’s been a pretty miserable year. 2019 isn’t looking to be any better either.”

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Authored by Matt Taibbi via RollingStone.com,

Forget Jim Acosta. If you’re worried about Trump’s assault on the press, news of a Wikileaks indictment is the real scare story…

Wikileaks founder Julian Assange, who has been inside the Ecuadorian embassy in London since the summer of 2012, is back in the news. Last week, word of a sealed federal indictment involving him leaked out.

The news came out in a strange way, via an unrelated case in Virginia. In arguing to seal a federal child endangerment charge (against someone with no connection to Wikileaks), the government, ironically, mentioned Assange as an example of why sealing is the only surefire way to keep an indictment under wraps.

“Due to the sophistication of the defendant and the publicity surrounding the case,” prosecutors wrote, “no other procedure is likely to keep confidential the fact that Assange has been charged.”

Assange’s lawyer Barry Pollack told Rolling Stone he had “not been informed that Mr. Assange has been charged, or the nature of any charges.”

Pollock and other sources could not be sure, but within the Wikileaks camp it’s believed that this charge, if it exists, is not connected to the last election.

“I would think it is not related to the 2016 election since that would seem to fall within the purview of the Office of Special Counsel,” Pollack said.

If you hate Assange because of his role in the 2016 race, please take a deep breath and consider what a criminal charge that does not involve the 2016 election might mean. An Assange prosecution could give the Trump presidency broad new powers to put Trump’s media “enemies” in jail, instead of just yanking a credential or two. The Jim Acosta business is a minor flap in comparison.

Although Assange may not be a traditional journalist in terms of motive, what he does is essentially indistinguishable from what news agencies do, and what happens to him will profoundly impact journalism.

Reporters regularly publish stolen, hacked and illegally-obtained material. A case that defined such behavior as criminal conspiracy would be devastating. It would have every reporter in the country ripping national security sources out of their rolodexes and tossing them in the trash.

A lot of anti-Trump reporting has involved high-level leaks. Investigation of such leaks has reportedly tripled under Trump even compared to the administration of Barack Obama, who himself prosecuted a record number of leakers. Although this may seem light years from the behavior of Wikileaks, the legal issues are similar.

Although it’s technically true that an Assange indictment could be about anything, we do have some hints about its likely direction. Back in 2014, search warrants were served to Google in connection with Wikileaks that listed causes of criminal action then being considered. Google informed Wikileaks of the warrants. You can see all of this correspondence here.

The government back then – again, this pre-dated 2016, Roger Stone, Guccifer 2.0, etc. – was looking at espionage, conspiracy to commit espionage, theft or conversion of property belonging to the United States government, violation of the Computer Fraud and Abuse Act and conspiracy.

The investigation probably goes as far back as 2010, in connection with the release of ex-army private Chelsea Manning’s “Collateral Murder” video. That footage showed American forces in Iraq firing on a Reuters journalist and laughing about civilian casualties.

While much of the progressive media world applauded this exposure of George W. Bush’s Iraq war, the government immediately began looking for ways to prosecute. The Sydney Herald reported that the FBI opened its investigation of Assange “after Private Manning’s arrest in May of 2010.”

Ironically, one of the first public figures to call for Assange to be punished was Donald Trump, who in 2010 suggested the “death penalty” on Fox Radio’s Kilmeade and Friends.

While Trump complained, Wikileaks became an international sensation and a darling of the progressive set. It won a host of journalism prizes, including the Amnesty International New Media Award for 2009.

But a lot of press people seemed to approve of Wikileaks only insofar as its “radical transparency” ideas coincided with traditional standards of newsworthiness.

The “Collateral Murder” video, for instance, was celebrated as a modern take on Sy Hersh’s My Lai Massacre revelations, or the Pentagon Papers.

From there, the relationship between Assange and the press deteriorated quickly. A lot of this clearly had to do with Assange’s personality. Repeat attempts by (ostensibly sympathetic) reporters to work with Assange ended in fiascoes, with the infamous “Unauthorized Autobiography” — in which Assange abandoned the anticipated Canongate books project mid-stream, saying “all memoir is prostitution” — being one of many projects to gain him a reputation for egomania and grandiosity.

Partners like the Committee to Protect Journalists, who had been sifting through Wikileaks material to prevent truly harmful information from getting out, began to be frustrated by what they described as a frantic pace of releases.

In one episode, an Ethiopian journalist was questioned by authorities after a Wikileaks cable revealed he had a source in government; the CPJ wanted to redact the name. “We’ve been struggling to get through” the material, the CPJ wrote.

Eventually, for a variety of reasons, the partnerships with media organizations like the New York Times and The Guardian collapsed. Add to this the strange and ugly affair involving now-dismissed rape inquiry in Sweden, and Assange’s name almost overnight became radioactive with the same people who had feted him initially.

It seemed to me from the start the “reputable” press misunderstood Wikileaks. Newspapers always seemed to want the site’s scoops, without having to deal with the larger implications of its leaks.

It’s easy to forget that Wikileaks arrived in the post-9/11 era, just as vast areas of public policy were being nudged under the umbrella of classification and secrecy, often pointlessly so.

Ronald Reagan’s executive secretary for the National Security Council, Rodney McDaniel, estimated that 90 percent of what was classified didn’t need to be. The head of the 9/11 commission put the number at 75 percent.

This created a huge amount of tension between so-called “real secrets” — things that really should never be made public, like military positions and the designs of mass-destruction weapons — and things that are merely extremely embarrassing to people in power and should come out. The bombing of civilian targets in Iraq was one example. The mistreatment of prisoners in Guantanamo Bay was another.

A lack of any kind of real oversight system on this score is what led to situations like the Edward Snowden case. In 2013, Americans learned the NSA launched a vast extralegal data-collection program not just targeting its own people, but foreign leaders like Angela Merkel.

Snowden ended up in exile for exposing this program. Meanwhile, the government official who under oath denied its existence to congress, former Director Of National Intelligence James Clapper, remains free and is a regular TV contributor, despite numerous Senators having called for his prosecution. This says a lot about the deep-seated, institutional nature of secrecy in this country.

It always seemed that Assange viewed his primary role as being a pain in the ass to this increasingly illegitimate system of secrets, a pure iconoclast who took satisfaction in sticking it to the very powerful. I didn’t always agree with its decisions, but Wikileaks was an understandable human response to an increasingly arbitrary, intractable, bureaucratic political system.

That it even had to exist spoke to a fundamental flaw in modern Western democracies — i.e. that our world is now so complex and choked with secrets that even releasing hundreds of thousands of documents at a time, we can never be truly informed about the nature of our own societies.

Moreover, as the Snowden episode showed, it isn’t clear that knowing unpleasant secrets is the same as being able to change them.

In any case, the institutions Wikileaks perhaps naively took on once upon a time are getting ready to hit back. Frankly it’s surprising it’s taken this long. I’m surprised Assange is still alive, to be honest.

If Assange ends up on trial, he’ll be villainized by most of the press, which stopped seeing the “lulz” in his behavior for good once Donald Trump was elected. The perception that Assange worked with Vladimir Putin to achieve his ends has further hardened responses among his former media allies.

As to the latter, Assange denies cooperating with the Russians, insisting his source for the DNC leak was not a “state actor.” It doesn’t matter. That PR battle has already been decided.

Frankly, none of that entire story matters, in terms of what an Assange prosecution would mean for journalism in general. Hate him or not, the potential legal consequences are the same.

Courts have held reporters cannot be held liable for illegal behavior of sources. The 2001 Supreme Court case Bartnicki v. Vopper involved an illegal wiretap of Pennsylvania teachers’ union officials, who were having an unsavory conversation about collective bargaining tactics. The tape was passed to a local radio jock, Frederick Vopper, who put it on the air.

The Court ruled Vopper couldn’t be liable for the behavior of the wiretapper.

It’s always been the source’s responsibility to deal with that civil or criminal risk. The press traditionally had to decide whether or not leaked material was newsworthy, and make sure it was true.

The government has been searching for a way to change that equation. The Holy Grail would be a precedent that forces reporters to share risk of jail with sources.

Separate from Assange, prosecutions of leakers have sharply escalated in the last decade. The government has steadily tiptoed toward describing publishers as criminal conspirators.

Through the end of the Obama years, presidents had only prosecuted leakers twelve times. Nine of those came under Obama’s tenure. Many of those cases involved the Espionage Act.

In one case, a Fox reporter was an unindicted co-conspirator in a leak case involving a story about North Korea planning a nuclear test in response to sanctions.

In another incident, then-New York Times reporter James Risen spent seven years fighting an attempt by the Obama government to force him to compel his sources in a story about Iran’s nuke program.

A more recent case, from the Trump years, involved NSA leaker Reality Winner, who was given a draconian five-year prison sentence for leaking to The Intercept.

Despite Trump’s more recent cheery campaign-year comments about Wikileaks, and his son’s now-infamous email correspondence with Assange, Trump’s career-government appointees have not deviated much from the old party line on Wikileaks.

Trump’s security chiefs repeatedly called for a prosecution of Assange, with then-Justice head Jeff Sessions saying it was a “priority.”

Current Secretary of State and then-CIA director Mike Pompeo called Wikileaks a “non-state hostile intelligence service” and added, “Julian Assange has no First Amendment freedoms… He is not a U.S. citizen.”

It’s impossible to know exactly what recent news about an indictment means until we see it (the Reporters’ Committee for the Freedom of the Press has already filed a motion to unseal the charges). If there is a case, it could be anything in the federal criminal code, perhaps even unrelated to leaks. Who knows?

But the more likely eventuality is a prosecution that uses the unpopularity of Assange to shut one of the last loopholes in our expanding secrecy bureaucracy. Americans seem not to grasp what might be at stake. Wikileaks briefly opened a window into the uglier side of our society, and if publication of such leaks is criminalized, it probably won’t open again.

There’s already a lot we don’t know about our government’s unsavory clandestine activities on fronts like surveillance and assassination, and such a case would guarantee we’d know even less going forward. Long-term questions are hard to focus on in the age of Trump. But we may look back years from now and realize what a crucial moment this was.

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A new report from Ernst & Young LLP., Research Now surveyed 1,202 adults aged 20 to 36 shows that millennials are fleeing big cities for suburban life.

When determining where to live, many millennials are now following the footsteps of their parents. In total, rent or own, 38% of millennials live in the suburbs, compared to 37% in the city.

Cathy Koch, EY’s Americas Tax Policy Leader, told CNBC that millennials are choosing suburbs over cities.

“It’s not just that they’re settling down as they get older, either,” Koch said.

“When looking at the very same age group today compared to two years ago, there’s an increase in the share of millennials living in the suburbs.”

“It was a surprise to me to see this generation increasingly choosing suburban locations to buy homes,” Koch said, but the trend at play makes sense: “The ‘suburbs’ may very well be smaller cities close to larger urban areas – these still afford the richness of city living (including employment opportunities) at maybe lower home prices.”

According to a recent report from Zillow, millennial home buyers can expect to pay 26.5% of their income to purchase a median-value home in a city, but only 20.2% of their income for a similar home in the suburbs.

Personal finances and student debt is likely the factor driving millennials out of big cities for regions that have a much lower cost of living.

More than 50% of millennials are currently paying off student debt (on average, Americans have $30,000 of student loan debt).

Millennials who majored in business have the least amount of student loans, but a large share of them have worthless humanities majors with low-paying gig-economy jobs.

Ernst & Young finds more millennials are buying homes in the last several years, but shows how student debt has delayed homebuying for many. This fragile generation is buying homes at a much lower rate than Gen Xers and Baby Boomers.

Student debt has not just delayed home buying, but also marriage and children for many.

Koch said the housing affordability crisis and rising interest rates would continue the trend of millennials exiting large cities into suburbs because of housing prices and the cost of living is just too expensive.

Into 2020, the acceleration of millennials leaving cities could jump, due to existing home sales topping out and inventory across the country coming online, forcing home prices much lower, which would entice 20 to 36-year-olds to gravitate to regions that housing prices are at bargain prices.  

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Authored by John Rubino via DollarCollapse.com,

A recent MarketWatch article notes that:

GE was one of Wall Street’s major share buyback operators between 2015 and 2017; it repurchased $40 billion of shares at prices between $20 and $32. The share price is now $8.60, so the company has liquidated between $23 billion and $29 billion of its shareholders’ money on this utterly futile activity alone. Since the highest net income recorded by the company during those years was $8.8 billion in 2016, with 2015 and 2017 recording a loss, it has managed to lose more on its share repurchases during those three years than it made in operations, by a substantial margin.

Even more important, GE has now left itself with minus $48 billion in tangible net worth at Sept. 30, with actual genuine tangible debt of close to $100 billion. As the new CEO Larry Culp told CNBC last Monday: “We have no higher priority right now than bringing those leverage levels down.” The following day, GE announced the sale of 15% of its oil services arm Baker Hughes, for a round $4 billion.

Of course, since that sale values Baker Hughes at $26 billion, and GE paid $32 billion for 62% of Baker Hughes as recently as last year, which looks to me like a valuation for the whole company of $52 billion, GE shareholders appears to have lost half the value of their investment in Baker Hughes in about 18 months.

But GE is just one of several hundred big companies with CEOs who now have to justify a massive, in some cases catastrophic waste of shareholder cash.

This most recent share buyback binge was dumb money on steroids, with artificially low interest rates leading corporations to borrow big and buy back their stock on the twin assumptions that:

1) since the cost to borrow was less than their stock dividend, they were generating “free cash flow” and

2) buying their own stock forced up the price, which would make the CEO look smart.

Both assumptions were only valid while the market was rising. And since most of the buying took place late in a bull market, with share prices at or near record highs, it was only a matter of time before a correction or (more recently) an actual bear market turned that free cash flow into a monumental capital loss and made that smart CEO look not just dumb but criminally negligent.

The examples of corporate dumb money in action are many and varied, but a few are up there with GE in terms of egg-on-the CEO’s face, chaos at the annual shareholders meeting entertainment value. Big Tech icons Apple, Alphabet, Cisco, Microsoft and Oracle, for instance, repurchased $115 billion of stock in the first three quarters of 2018, while devoting only $42 billion to capital spending.

IBM is an even better story. It bought back $50 billion of its stock between 2011 and 2016, cutting its shares outstanding by, well, here’s the chart:

Then, with its stock up (because the falling share total turned declining earnings into growing earnings per share), it just kept on buying. Here’s how the company phrased it in its Q2 earnings press release:

IBM’s free cash flow was $1.9 billion. IBM returned $2.4 billion to shareholders through $1.4 billion in dividends and $1.0 billion in gross share repurchases. At the end of June 2018, IBM had $2.0 billion remaining in the current share repurchase authorization.

IBM ended the second quarter with $11.9 billion of cash on hand. Debt totaled $45.5 billion, including Global Financing debt of $31.1 billion. The balance sheet remains strong and is well positioned for the long term. [Emphasis added]

Then this happened (did I mention that this late in the cycle a bear market is inevitable?):

Now much of the cash that the company “returned” to shareholders has become money that the company lost for shareholders. And – here’s where the macro part of the dumb money story begins – the fact that corporate America has leveraged itself to the hilt to buy back stock leaves hundreds of companies in varying degrees of dire financial straits. In other words, with sales growth slowing and free cash flow evaporating, these over-leveraged companies will have to raise capital to shore up their balance sheets. But interest rates are up, which makes new borrowing a massively cash flow negative proposition. Asset sales, meanwhile, become “fire sales” in a downturn (note the above GE example), so that’s a painful and embarrassing option. What’s left? Why, equity sales, of course.

So – as usually happens at the end of long credit parties – the same companies that bought back their shares so aggressively at ever-higher prices now have to pull those same shares out of storage and sell them at ever-lower prices, creating a mini death spiral in which a rising share count pushes down the share price, necessitating more equity sales, and so on.

Each annual proxy vote becomes a referendum on the once-brilliant CEO’s intelligence, and numerous formerly “well-run” companies end up failing. General Motors, you might recall, declared bankruptcy in 2009. And there is actual speculation that GE might be heading that way this time.

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Despite lower prices for health insurance this year, a staggering 26% of Illinois residents have chosen not to enroll in plans through the Obamacare exchange so far this year, according to numbers released last week by the Trump administration.

The Chicago Tribune reports that three weeks into open enrollment, Illinois residents had only purchased 57,819 heal insurance plans on the exchange, vs. the 77,960 chosen this time last year, according to the Centers for Medicare & Medicaid services. 

It isn’t just Illinois either – as just 1.9 million people in the US have selected plans in the first three weeks vs. 2.3 million last year – a drop of 21%. 

It wasn’t immediately clear Wednesday why enrollments were down, though a number of factors have changed since last year.

For one, unlike in previous years, people who choose not to buy health insurance for next year won’t have to pay penalties for being uninsured. Also, Illinois got 78 percent less federal money to hire workers, known as navigators, to help people enroll in health insurance plans this year. –Chicago Tribune

“People could be choosing to sit out this year,” according to Stephani Becker – associate director of health care justice at the Chicago-based Sargent Shriver National Center on Poverty Law, adding, “We won’t really know the effect until the final numbers,” which will come in after December 15 when open enrollment ends. 

Meanwhile, Illinois’ uninsured rate has risen slightly from 6.5% to 6.8% the previous year, according to the US Census Bureau. 

The Tribune suggests that perhaps consumers are simply looking to take advantage of new insurance options, such as extended short-term plans. 

Short-term plans are generally cheaper than traditional plans but cover fewer services. The Trump administration recently decided to allow short-term plans to be used for a year — instead of just three months — and be renewed for as long as three years. –Chicago Tribune

Outgoing Governor Bruce Rauner used his veto power to strike down a bill that would limit the use of short-term plans to six months at a time, however Illinois lawmakers have already voted in the Senate to override those changes, while the House is expected to take up the issue shortly. 

Another thought Becker had was that the midterm elections distracted people from enrolling in healthcare. 

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