If Libs Were Smart They Would Push For Mueller Firing Himself Now

Authored by Tom Luongo,

The desperation of U.S. liberals to find some truth in the claims that Donald Trump’s campaign staff colluded with Russian state actors is approaching infinity. 

FBI Deputy Director Andrew McCabe’s testimony to the House Intelligence Committee all but confirms that the only ‘proof’ the FBI and Special Counsel Robert Mueller have of collusion is the discredited “Trump Dossier.”

This dossier was compiled by Christopher Steele and sold to the Clinton Campaign as opposition research by Fusion GPS.  McCabe stonewalled the HIC on this matter but couldn’t point to anything in the dossier that the FBI verified to be true other than publicly-known knowledge of Carter Page visiting Moscow in 2016.

And the last time I checked (as least for now) visiting Moscow is not a crime.

Neither is what Michael Flynn did a crime either, but let’s not bring facts in to dash the hope of the terminally insane.

McCabe has to stonewall on this issue otherwise he and the rest of the FBI are guilty of acting on behalf of Hillary Clinton to assist in spying on her political opponent.  Because that’s where all of this leads if people would take their ideological blinders off for five seconds and look at what we actually know as opposed to what we ‘just know to be true.’

Everyone involved in this sordid affair should be tried for espionage and treason.

Those prominent liberals running around protesting the mere thought of Donald Trump shutting down the Mueller investigation to ‘protect the sanctity of our elections’ are a bunch of simpering morons.

And I’m sick to death of the blatant and rank hypocrisy when it comes to election fraud in this country.

For this reason alone, the Mueller investigation should be shut down.

The Stupid Show

Look, anyone taking the rumor seriously that Donald Trump was close to shutting Mueller’s investigation down should have their head examined.  This was a blatant plant by the Washington  Post (and the CIA, let’s get real) to create exactly the kind of response from the Wil Wheatons of our world.

These people are simply ab-reacting noradrenaline junkies living in their amygdalas 24/7 while the world moves on without them.

If this isn’t the picture of someone in serious need of psychotherapy then …

In the same week we also get this little ditty by Newsweek. You don’t think these things aren’t coordinated to evoke this kind of response in ‘soy-boy’ Wheaton?

Painter, who worked under former president George W. Bush, appeared on MSNBC to discuss the widely criticized Fox News segment that suggested the FBI’s investigation into the Trump campaign could be considered a coup.

 

“The commander in chief is Donald Trump,” Painter said. “There is a risk of him using that power to destroy our democracy, whether you call it a coup or anything else. It’s not from the critics of Donald Trump that the danger is posed, it’s the fact that the man who is commander in chief of our military is engaged in obstruction of justice.”

 

The salient point here is why would Trump shut down Mueller?

Mueller has nothing on him. The longer this goes on the worse it looks for everyone involved and Trump comes out looking like the victim of a political witch-hunt.

Trump knows and has known from the beginning that there was nothing to investigate.

The only question has been whether Mueller could invent something through nigh-onto-illegal pressuring of people like Flynn, caught in the usual FBI web of procedural dishonesty, to turn on Trump and perjure themselves to avoid a prison sentence.

Trump v. Mueller

In fact, the more I think about the sequence of events, the more I think the meeting between Trump and Mueller the evening before Mueller was appointed as Special Counsel involved Trump telling Mueller, “Good luck finding anything, Bob, I’ll hang you by your own rope when this is all over.”

If I were in Trump’s position I would have done exactly that. I would have goaded Mueller into this, knowing full well that Uranium One was out there. This would have lit a fire under Mueller to cast a wide net, turn over every rock looking for any kind of dirt. Doing so would expose the whole rotten mess and Mueller looks like a guy running around investigating himself in the end.

Remember, Trump is the one that brought up Uranium One in the first place on the campaign trail.

In response, Hillary, as she always does, then accused Trump of that which she was actually guilty of – colluding with the Russians and using her position for personal gain.

The people who want to believe in Russia-Gate are missing this in their zeal to rid the world of Trump to validate their own failing world-view.

The longer this investigation goes on the more it will uncover the truth about what happened. In my mind, all the Mueller is doing now is compiling the actual case to exonerate himself over Uranium One and throw the rest of the FBI under the bus.

Given what we already know, I’d say Bob’s done a good job of this and it’s time for him to step aside and let this play out.

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Silicon Valley Obscenity – 1 In 4 People Are “Food Insecure”

In the years since the first dot-com bubble burst, Silicon Valley has become emblematic of the intensifying wealth inequality that’s making life increasingly unaffordable for millions of working- and middle-class Americans.

And while the unprecedented wealth creation in the region has helped enrich hundreds of thousands of tech workers and entrepreneurs, virtually everybody else in the region – from college students to the cafeteria workers and janitors who service the headquarters of storied tech firms like Google and Facebook – has suffered from rising rents and a cost of living that’s far outstripped wage inflation.

Now, a study has found that more than one in four Silicon Valley residents is food insecure – meaning they go without at least one meal or rely on food pantries due to lack of financial resources, according to researchers at the Second Harvest food bank.

Using hundreds of community interviews and data modeling, a new study suggests that 26.8% of the population – almost 720,000 people – meet this ignominious designation. Furthermore, nearly a quarter are families with children.

“We call it the Silicon Valley paradox,” says Steve Brennan, the food bank’s marketing director. “As the economy gets better we seem to be serving more people.” Since the recession, Second Harvest has seen demand spike by 46%.

The Guardian interviewed local residents who qualify as food insecure for a story about the worsening wealth gap in one of the wealthiest regions in the US.

Karla Peralta is surrounded by food. As a line cook in Facebook’s cafeteria, she spends her days preparing free meals for the tech firm’s staff. She’s worked in kitchens for most of her 30 years in the US, building a life in Silicon Valley as a single mother raising two daughters.

 

But at home, food is a different story. The region’s soaring rents and high cost-of-living means that even with a full-time job, putting food on the table hasn’t been simple. Over the years she has struggled to afford groceries – at one point feeding her family of three with food stamps that amounted to $75 a week, about half what the government describes as a “thrifty” food budget. “I was thinking, when am I going to get through this?” she said.

 

In a region famed for its foodie culture, where the well-heeled can dine on gold-flecked steaks, $500 tasting menus and $29 loaves of bread, hunger is alarmingly widespread, according to a new study shared exclusively with the Guardian.

According to the Guardian, the food bank is literally at the center of the Silicon Valley boom – both literally and figuratively. It sits just half a mile from Cisco’s headquarters and counts Facebook’s Sheryl Sandberg among its major donors. But the need it serves is exacerbated by this industry’s wealth; as high-paying tech firms move in, the cost of living rises for everyone else.

As we’ve pointed out, faced with some of the most expensive rental housing in the nation, some Bay Area residents are feeling priced out and are seeking low-cost alternatives like living in their cars, or commuting nearly two hours to work each way.

All of this is happening as the Nasdaq – which includes many of the tech behemoths like Facebook, Google and Apple that are based in the region – reached an all-time high above 7,000 on Monday.

Food insecurity often accompanies other poverty indicators, such as homelessness. San Jose, Silicon Valley’s largest city, had a homeless population of more than 4,000 people during a recent count.

For workers like Karla Peralta – the Facebook cafeteria worker who shared the story of her daily struggles with the Guardian – there’s a stark division between well-heeled salaried tech workers at Facebook, and others like herself who work under contract.

What’s worse, many workers like Peralta are finding themselves mired in an uncomfortable gray area: they make too much to qualify for government assistance, but not enough to get by.

These days Peralta earns too much to qualify for food stamps, but not enough not to worry. She pays $2,000 a month – or three-quarters of her paycheck – to rent the small apartment she shares with her youngest daughter. “Even just the two of us, it’s still a struggle.” So once a month, she picks up supplies at the food bank to supplement what she buys at the store.

 

She isn’t one to complain, but acknowledges the vast gulf between the needs of Facebook employees and contract workers such as herself. “The first thing they do [for Facebook employees] is buy you an iPhone and an Apple computer, and all these other benefits,” she laughs. “It’s like, wow."

Second Harvest is the only food bank serving Silicon Valley. It’s also one of the largest in the country. In any given month, it provides meals for 257,000 people. It served 66 million pounds of food last year. When the Guardian visited its cavernous, 75,000 square foot main warehouse space, boxes of produce stretched to the ceiling. Strip lights illuminated crates of cucumbers and pallets of sweet potatoes with a chilly glow. Volunteers in PayPal T-shirts packed cabbages and apples that arrived in boxes as big as paddling pools, while in the walk-in freezer turkeys waited to defrost.

To Silicon Valley’s wealthy tech workers, the struggles of the hundreds of thousands of working poor in the region are often invisible.

“Often we think of somebody visibly hungry, the traditional homeless person,” Brennan said. “But this study is putting light on the non-traditional homeless: people living in their car or a garage, working people who have to choose between rent and food, people without access to a kitchen."

He added, “you’re not thinking when you pick up your shirts from dry cleaning, or getting your landscaping done, or going to a restaurant, or getting your child cared for, ‘is that person hungry?’ It’s very easy to assume they are fine."

The cost of housing is one of the biggest contributor to inequality – and the main reason many workers in the region are forced to go hungry. In Santa Clara County, the median price of a family home has reached a new high of $1.125 million, while the supply of homes continues to shrink. A family of four earning less than $85,000 is now considered low income. Meanwhile, the median income in the US is less than $60,000.

These realities mean food insecurity cuts across lines of race, age and employment status.

Minority communities in the Bay Area have been hit the hardest.

The Latino community is “passing through a hard time”, says Vicky Avila-Medrano, a food connection specialist. She runs a program that sends current and former food bank users out into the community, which has been disproportionately affected by the cost-of-living crisis.

 

“Here in Silicon Valley, we have a big problem. This is a beautiful place to live for people in the tech industry, but we are not working in that industry."

Of course, the problems posed by rising rents aren’t unique to the San Francisco Bay Area. As we noted back in October, rental costs growing faster than disposable income for 22 consecutive months. In September, rent ate up more disposable income than at any prior time in history.

All of this underscores the hypocrisy of the ultra-liberal Bay Area. While well-heeled tech workers spurn anybody who disagrees with their narrow-minded worldview in the name of progress, many of these same workers drift through their daily routines largely ignorant of the dire circumstances of the people who handle their dry cleaning and prepare their food.

Google famously fired former engineer James Damore for publishing an open letter pointing out flaws in the company’s diversity hiring program.

Meanwhile, the more than 10,000 employees who work at the Googleplex in Mountain View, Calif. are some of the biggest contributors to wealth inequality in the region.

While we're sure the Bay Area's insistence on social equality in the workplace is well intentioned, progress won't feed the working poor.

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Mexico Suffers Deadliest Year Ever: Violence Hits Cabo, Tourist Havens

Local authorities near the beautiful tourist town of Los Cabos on the Baja California peninsula found six bodies suspended from three different bridges this week.

Authorities did not want to comment on the details surrounding how the men got onto the bridges, but Reuters suspects “drug gangs”, who often hang the bodies of their murdered rivals in public for intimidation purposes.

According to official data in November, there were more murders in October in Mexico than any other month over the past 20-years.

Mexico is on track to have the deadliest year ever since modern records began. In the first 10-months of 2017, there were more than 20,878 murders nationwide, as many in the war-torn country have blamed President Enrique Pena Nieto’s failure to tackle drug violence.

One local prosecutor said in a statement to Reuters,

Two bodies were found on a bridge in Las Veredas, near Los Cabos International Airport, and two on a different bridge on the highway between Cabo San Lucas and San Jose del Cabo, local prosecutors said in a statement.

 

In a separate statement, the prosecutors said two further bodies were found on a third bridge near the airport.

The latest spree of violent crime has surged in Baja California, especially around the multi-national resorts of Los Cabos, with yearly visits attracting more than one million foreigners. To make matters worse, Los Cabos police chief Juan Manuel Mayorga was assassinated last week, as the once calm resort town descends into chaos.

Hotel Prices in Los Cabos (as of 12-21-17) have collapsed amid the violence spiraling out of control in the area.

In August, a hail of automatic gunfire killed three and wounded two others at a popular Mexican beach resort in Los Cabos.

Earlier this week, authorities in the northern state of Chihuahua reported a massacre of 12 killed in armed clashes between two rival drug gangs.

Carlos Mendoza Davis, the governor state of Baja California, said the authorities are investigating the recent surge in violence around the Los Cabos area.

Reuters further elaborates on Baja California and Los Cabos’s deadly year.

Homicides have more than doubled in Baja California Sur this year, with 409 people killed through October, from 192 in all of 2016. In June authorities said they had found a mass grave with the bodies of 11 men and three women near Los Cabos.

Assuming that Mexico descends further into chaos, broke Americans who are looking for an all inclusive vacation might want to checkout Los Cabos. Hotels rooms are being heavily discounted as drug violence penetrates the popular resort town. As for Mexico as a whole, it’s a complete mess, and this is the reason why President Trump wants to build the wall.

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Bombshell Report Reveals Up To 30% Of Federal Inmates Are Illegal Immigrants

The Department of Homeland Security (DHS) has released its findings on the immigration status of federal prison inmates, as mandated in a controversial Executive Order signed during the President Trump’s first week in the White House.  The report reveals that of the 37,557 confirmed immigrants in the federal prison system, 35,334 (94%) of them are in the United States illegally – which means out of a total of 185,507, federally incarcerated individuals, over 19% are confirmed illegal immigrants – which, in 2014, cost U.S. taxpayers $1.87 billion to house.

It should be noted that the 19% figure is based on known illegals in federal prison – while 58,766 individuals are “known or suspected” to be illegal. If we apply the 94% confirmed illegal rate to the “known or suspected” population, it brings the total number of potential incarcerated illegal immigrants to 55,240 – or 30% of federal incarcerations. 


(DHS Alien Incarceration Report , Q4 2017)

The report also points out that the federal prison population is roughly 10%, with state and local facilities containing the vast majority of incarcerated individuals in the U.S. 

“The American people deserve a lawful system of immigration that serves the national interest,” said Attorney General Jeff Sessions, adding “But at the border and in communities across America, our citizens are being victimized by illegal aliens who commit crimes. Nearly 95 percent of confirmed aliens in our federal prisons are here illegally.  We know based on sentencing data that non-citizens commit a substantially disproportionate number of drug-related offenses, which contributes to our national drug abuse crisis. The simple fact is that any offense committed by a criminal alien is ultimately preventable.”

Immigrant rights groups predictably had a major problem with the report, claiming racism and manipulated data. 

“The report proves one thing only: The administration will take any opportunity possible to twist facts to demonize immigrants,” said Tom Jawetz, VP for immigration policy at the very liberal Center for American Progress, adding “The vast majority of immigrants in federal prison are there for crimes that only immigrants can be charged with – illegal entry and illegal entry after removal. When you cook the books you shouldn’t pretend to be surprised by the results.” 


The January 25th Executive Order, 13768; “Enhancing Public Safety in the Interior of the United States,” was designed to use all available resources to deport incarcerated illegals and enforce existing immigration laws. The order states “We cannot faithfully execute the immigration laws of the United States if we exempt classes or categories of removable aliens from potential enforcement. The purpose of this order is to direct executive departments and agencies (agencies) to employ all lawful means to enforce the immigration laws of the United States.”

The order calls for the hire of 10,000 additional immigration officers, allows for issuing fines and penalties to unlawful aliens, allows State and local law enforcement agencies to act as immigration officers, and yanks Federal grant money from sanctuary cities – which was later reversed nationwide by a Chicago judge and ruled unconstitutional by Santa Clara County, CA  judge William Orrick III. 

What wasn’t killed by activist judges, however, was the Executive Order’s mandate to provide quarterly reports on incarcerated immigrants. The EO reads: 

To promote the transparency and situational awareness of criminal aliens in the United States, the Secretary and the Attorney General are hereby directed to collect relevant data and provide quarterly reports on the following:

 

(a) the immigration status of all aliens incarcerated under the supervision of the Federal Bureau of Prisons;

 

(b) the immigration status of all aliens incarcerated as Federal pretrial detainees under the supervision of the United States Marshals Service; and

 

(c) the immigration status of all convicted aliens incarcerated in State prisons and local detention centers throughout the United States.

The Order also sets out enforcement actions, which “shall prioritize for removal those aliens described by the Congress… …removable aliens who: 

(a) Have been convicted of any criminal offense;

 

(b) Have been charged with any criminal offense, where such charge has not been resolved;

 

(c) Have committed acts that constitute a chargeable criminal offense;

 

(d) Have engaged in fraud or willful misrepresentation in connection with any official matter or application before a governmental agency;

 

(e) Have abused any program related to receipt of public benefits;

 

(f) Are subject to a final order of removal, but who have not complied with their legal obligation to depart the United States; or

 

(g) In the judgment of an immigration officer, otherwise pose a risk to public safety or national security.

One oustanding question now is what will a seemingly sleepwalking Jeff Sessions do about it?

In May, Sessions announced the expansion and modernization of the Justice Department’s Institutional Hearing Program, which is responsible for deportation hearings of incarcerated individuals. The measures are intended to fast-track the deportation of illegal immigrants convicted of crimes, which according to Sessions, will speed up the process by removing the criminal immigrant as soon as their sentence is complete – as opposed to sending them to another facility to await deportation. 

“We owe it to the American people to ensure that illegal aliens who have been convicted of crimes and are serving time in our federal prisons are expeditiously removed from our country as the law requires,” Sessions said in a statement.

Sessions’ May proposal established 14 federal prisons and six contract facilities for deportation proceedings, which the Attorney General says is a top priority going forward.

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Facebook Handing Over More Info To US Government: “This Is What Facebook Was Designed To Do”

Authored by Mac Slavo via SHTFplan.com,

Every year, Facebook gets tens of thousands of requests for data from governments worldwide, including search warrants, subpoenas, or calls to restrict certain kinds of content. And, according to a new report, those requests are increasing at an alarming rate.

According to QZ.com, in the United States, the requests rose by 26% from the last six months of 2016 to the first six months of 2017, while globally, requests increased by about 21%. Since 2013, when the company first started providing data on government requests, the US number has been steadily rising – it has roughly tripled in a period of four years.

This is alarming many and causing a concern about privacy.  Joe Joseph, from the Daily Sheeple, isn’t sugarcoating the reality of Facebook either.  “Duh. This is exactly what Facebook was designed to do,” says Joseph.

“You have to remember that Zuckerberg had “seed money” and that seed money came from CIA front companies that put a lot of resources into this and…basically think about it as like, sowing seeds; if you will. They knew that Facebook was gonna bear fruit.

 

I don’t think they realized just how big it would become. But I can tell you that they get so much information and intel from social media:  I don’t think that it would go away even if we wanted it to.”

The government keeps requesting the information, and Facebook continues to comply with the government’s demands. 

In the first six months of 2013, it granted the government – which includes the police – 79% of requests (“some data was produced” in these cases, the company says); in the first six months of 2017, that share rose to 85%. “We continue to carefully scrutinize each request we receive for account data — whether from an authority in the U.S., Europe, or elsewhere — to make sure it is legally sufficient,” Chris Sonderby, the company’s general counsel, wrote in a post. “If a request appears to be deficient or overly broad, we push back, and will fight in court, if necessary.”

But Joseph thinks Facebook is just trying to pacify the easily manipulated sheeple of society.

“This is pretty troubling when you think about what you put out there, what they collect, and Facebook only being one of the many avenues that they have,” Joseph says.

 

“The United States is collecting your data. Whether you like it or not. They are scooping up everything. And they’re taking it and they’re storing it in their facility at Bluffdale, Utah which has the capacity at this time to store every communication on the face of this earth for the next one hundred years.”

 

“It’s unbelievable,” Joseph continues.  “This is stuff that is unacceptable to me, but I’m sure, to a lot of you. And these companies have really gone too far…they can reconstruct your life and make anyone they want a patsy.”

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WORLD SILVER PRODUCTION: 3 Charts You Won’t See Anywhere Else

SRSrocco

By the SRSrocco Report,

The rate at which global silver production increased over the past century is quite astonishing.  When Columbus arrived in America (1492), the world was only producing 7 million oz of silver a year.  Today, the world’s largest primary silver mine, Fresnillo’s Sauicto Mine, produced three times that amount in just one year (22 million oz, 2016).  Yes, we have come along way in 500 years.

Just think about that for a minute.  One silver mine last year produced three times the global amount in 1493.  According to the U.S. Bureau of Mines 1930 Report on Summarized Data of Silver Production, the average annual silver production in the world from 1493 to 1600 was 6.9 million oz (Moz).  If we look at the following chart, we can see how world silver production increased over the past 500+ years:

As we can see, average annual world silver production increased from 6.9 Moz during 1493-1600, to 13 Moz from 1600-1700, 18 Moz from 1700-1800, 51 Moz from 1800-1900, 274 Moz from 1900-2000 and a stunning 722 Moz from 2000-2017.  Again, these figures represent the average annual silver production for each time period.

In the current period, 2000-2017, the world has produced 103 times more silver per year than from 1493-1600.  However, the next chart shows the total silver production for each period.  From 1493-1600, the world produced a total of 747 Moz of silver, compared to 13,000 Moz (13 billion oz) in just 18 years from 2000-2017:

Now, the reason the last silver bar on the right of the chart is lower than the previous one has to do with comparing 18 years worth of silver production (2000-2017) versus 50 years (1950-2000).  It took 50 years to produce 17,061 Moz during 1950-2000 versus 13,000 Moz in the 18 years from 2000-2017.

If we compare world silver production from the different periods, here is the result:

Percentage Of World Silver Production (1493-2017)

2000-2017 = 26.4%

1950-2017 = 61%

1900-2017 = 82%

While a little more than a quarter of all world silver production (1493-2017) was produced in the past 18 years, 82% were produced since 1900.  That is a lot of silver.  It turns out that 40.4 billion oz was produced from 1900-2017 out of the total 49.3 billion oz produced since 1493.  Interestingly, more than half of that silver was consumed in industrial silver applications.  I will be writing more about that in future articles.

The last chart I find quite interesting.  If we go back a little more than a century, the United States was the largest silver producer in the world.  In 1915, the U.S. produced 75 Moz of silver out of the total 189 Moz mined in the world that year:

Thus, in 1915, the U.S. produced 40% of all world silver production.  Mexico came in second in 1915 by producing 39.3 Moz.  However, U.S. silver production in 2017 will only be 34 Moz versus the estimated 870 Moz globally.  Thus, U.S. silver production only accounts for 4% of world mine supply versus 40% back in 1915.  What a change in 100 years.

Lastly, the U.S. imports approximately 22% of world mine production each year.  That is 193 Moz of the total 870 Moz in 2017.  While domestic mine supply is only 34 Moz, the United States has to import more than a fifth of global mine production to meet its silver market demand.

If you haven’t checked out our new PRECIOUS METALS INVESTING section or our new LOWEST COST PRECIOUS METALS STORAGE page, I highly recommend you do.

Check back for new articles and updates at the SRSrocco Report.

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Saudi Government Wants $6 Billion For al-Waleed’s Freedom

In case you were wondering what the going-rate was for one of the world's richest men's freedom… it's $6 billion… in unencumbered cash (not Bitcoin).

That is the price that Saudi authorities are demanding from Saudi Prince al-Waleed bin Talal to free him from detention.

The 62-year-old prince was one of the dozens of royals, government officials and businesspeople rounded up early last month in a wave of arrests the Saudi government billed as the first volley in Crown Prince Mohammed bin Salman’s campaign against widespread graft.

According to the Mail, al-Waleed, who is (or was, until recently) one of the richest men in the world, has also been hung upside down and beaten.

The Saudi government has disclosed few details of its allegations against the accused, but as The Wall Street Journal reports, people familiar with the matter said the $6 billion Saudi officials are demanding from Prince al-Waleed, a large stakeholder in Western businesses like Twitter, is among the highest figures they have sought from those arrested.

While the prince's fortune is estimated at $18.7 billion by Forbes – which would make him the Middle East’s wealthiest individual – he has indicated that he believes raising and handing over that much cash as an admission of guilt and would require him to dismantle the financial empire he has built over 25 years.

Prince al-Waleed is talking with the government about instead accepting as payment for his release a large piece of his conglomerate, Kingdom Holding Co., people familiar with the matter said. The Riyadh-listed company’s market value is $8.7 billion, down about 14% since the prince’s arrest. Kingdom Holding said in November that it retained the support of the Saudi government and that its strategy “remains intact.”

According to a senior Saudi official, Prince al-Waleed faces accusations that include money laundering, bribery and extortion. The official didn’t elaborate, but said the Saudi government is merely "having an amicable exchange to reach a settlement."

The prince has indicated to people close to him that he is determined to prove his innocence and would fight the corruption allegations in court if he had to.

“He wants a proper investigation. It is expected that al-Waleed will give MBS a hard time,” said a person close to Prince al-Waleed, referring to the crown prince by his initials, as many do.

Some people close to Prince al-Waleed say they believe his high profile helped turn Prince Mohammed against the tycoon. Kingdom Holding has long acted like an arm of the Saudi state, striking deals that could have also been done by the crown prince or the kingdom’s own sovereign-wealth vehicle, the Public Investment Fund.

*  *  *

We suspect al-Waleed will not get his day in court, and will instead be forced to live on "diet food" since, as a reminder, the WSJ previously confirmed that fundamentally, the purge may be nothing more than a forced extortion scheme, as the Saudi government – already suffering from soaring budget deficits, sliding oil revenues and plunging reserves – was "aiming to confiscate cash and other assets worth as much as $800 billion in its broadening crackdown on alleged corruption among the kingdom’s elite."

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Treason: Presidential Candidates Successfully Conspired with Foreign Leaders to Thwart Official American Policy and Drag Out War

Long-time rumors about presidential candidate Nixon conspiring to delay the Vietnam War were recently confirmed.

A year ago, historian and journalist John A Farrell wrote in the New York Times:

fA newfound cache of notes left by H. R. Haldeman, [Nixon’s] closest aide, shows that Nixon directed his campaign’s efforts to scuttle the peace talks [President Johnson’s 1968 peace initiative to bring the war in Vietnam to an early conclusion], which he feared could give his opponent, Vice President Hubert H. Humphrey, an edge in the 1968 election. On Oct. 22, 1968, he ordered Haldeman to “monkey wrench” the initiative.

 

 

***

 

We must now weigh apparently criminal behavior that, given the human lives at stake and the decade of carnage that followed in Southeast Asia, may be more reprehensible than anything Nixon did in Watergate.

 

Nixon had entered the fall campaign with a lead over Humphrey, but the gap was closing that October. Henry A. Kissinger, then an outside Republican adviser, had called, alerting Nixon that a deal was in the works: If Johnson would halt all bombing of North Vietnam, the Soviets pledged to have Hanoi engage in constructive talks to end a war that had already claimed 30,000 American lives.

 

But Nixon had a pipeline to Saigon, where the South Vietnamese president, Nguyen Van Thieu, feared that Johnson would sell him out. If Thieu would stall the talks, Nixon could portray Johnson’s actions as a cheap political trick. The conduit was Anna Chennault, a Republican doyenne and Nixon fund-raiser, and a member of the pro-nationalist China lobby, with connections across Asia.

 

“! Keep Anna Chennault working on” South Vietnam, Haldeman scrawled, recording Nixon’s orders. “Any other way to monkey wrench it? Anything RN can do.”

 

Nixon told Haldeman to have Rose Mary Woods, the candidate’s personal secretary, contact another nationalist Chinese figure — the businessman Louis Kung — and have him press Thieu as well. “Tell him hold firm,” Nixon said.

Here are some screenshots from Haldeman’s notes in Nixon’s presidential library:

DeleteDelete0
Delete2

Nixon also sought help from Chiang Kai-shek, the president of Taiwan. [An enemy of the United States.] And he ordered Haldeman to have his vice-presidential candidate, Spiro T. Agnew, threaten the C.I.A. director, Richard Helms. Helms’s hopes of keeping his job under Nixon depended on his pliancy, Agnew was to say. “Tell him we want the truth — or he hasn’t got the job,” Nixon said.

 

***

 

Nixon had cause to lie. His actions appear to violate federal law, which prohibits private citizens from trying to “defeat the measures of the United States.” His lawyers fought throughout Nixon’s life to keep the records of the 1968 campaign private. The broad outline of “the Chennault affair” would dribble out over the years. But the lack of evidence of Nixon’s direct involvement gave pause to historians and afforded his loyalists a defense.

Time has yielded Nixon’s secrets. Haldeman’s notes were opened quietly at the presidential library in 2007, where I came upon them in my research for a biography of the former president.

 

***

 

When Johnson got word of Nixon’s meddling, he ordered the F.B.I. to track Chennault’s movements. She “contacted Vietnam Ambassador Bui Diem,” one report from the surveillance noted, “and advised him that she had received a message from her boss … to give personally to the ambassador. She said the message was … ‘Hold on. We are gonna win. … Please tell your boss to hold on.’ ”

 

In a conversation with the Republican senator Everett Dirksen, the minority leader, Johnson lashed out at Nixon. “I’m reading their hand, Everett,” Johnson told his old friend. “This is treason.”

 

I know,” Dirksen said mournfully.

 

Johnson’s closest aides urged him to unmask Nixon’s actions. But on a Nov. 4 conference call, they concluded that they could not go public because, among other factors, they lacked the “absolute proof,” as Defense Secretary Clark Clifford put it, of Nixon’s direct involvement.

 

Nixon was elected president the next day.

The BBC’s 2013 report adds details:

Declassified tapes of President Lyndon Johnson’s telephone calls provide a fresh insight ….

 

***

 

By the time of the election in November 1968, LBJ had evidence Nixon had sabotaged the Vietnam war peace talks – or, as he put it, that Nixon was guilty of treason and had “blood on his hands”.

 

***

 

In late October 1968 there were major concessions from Hanoi which promised to allow meaningful talks to get underway in Paris – concessions that would justify Johnson calling for a complete bombing halt of North Vietnam. This was exactly what Nixon feared.

 

Chennault was despatched to the South Vietnamese embassy with a clear message: the South Vietnamese government should withdraw from the talks, refuse to deal with Johnson, and if Nixon was elected, they would get a much better deal.

 

So on the eve of his planned announcement of a halt to the bombing, Johnson learned the South Vietnamese were pulling out.

 

He was also told why. The FBI had bugged the ambassador’s phone and a transcripts of Anna Chennault’s calls were sent to the White House. In one conversation she tells the ambassador to “just hang on through election”.

 

Johnson was told by Defence Secretary Clifford that the interference was illegal and threatened the chance for peace.

This is treason: contacting foreign leaders, including enemies of the United States, in order to thwart official U.S. policies and prolong war.

(There is also some rather intriguing circumstantial evidence that presidential candidate Ronald Reagan convinced the Iranians not to release American hostages until after the election … to make rival candidate Jimmy Carter look weak.)

That is in sharp distinction to the common practice of presidential candidates contacting foreign leaders for normal diplomatic purposes.

On the other hand, what type of foreign contacts did candidate Trump have with Russia?

The only thing which has proven so far is that Trump’s National Security Adviser Michael “Flynn asked Russia’s ambassador to refrain from escalating the situation regarding the U.S. sanctions on Russia” and “Flynn asked Russia’s ambassador to delay a vote on pending UN Security Council resolution on Israel”.

The first request would promote peace between two nuclear superpowers by delaying an escalating round of sanctions from spiraling out of control.

The second didn’t succeed … Russia ignored the Trump administration’s request, and voted to condemn Israeli settlements.

Such actions pale in comparison to what Nixon (and perhaps Reagan) did.

via http://ift.tt/2DAPV5O George Washington

This Is The Core Problem Facing Every Investor Today

Authored by Ben Hunt via Epsilon Theory blog,

The Three-Body Problem

As much as I dislike the chickens on our farm, I love my bees. Do they sting? Of course they sting. The swarm is a wild animal. But after a few painful years I’m no longer a ham-handed goofball with my hives, and a morning spent in sync with this amazing animal is never a bad morning. Not only are bees low maintenance, not only do they pay a wonderful rent, but they demonstrate a genius and an optimism — there’s just no other word for it — that makes me feel more creative and alive.

The Connecticut winters are tough, though. I do what I can to support the bees, which is mostly just building a wind break with bales of straw, making sure that the hive stays ventilated enough to prevent water vapor condensation, and preventing mice from taking up residence. That and avoiding original sins like poor hive placement or collecting too much rent. But ultimately it’s a battle between the animal and Mother Nature. It’s up to them to survive. Or not.

Honeybees don’t hibernate (bumblebees do, but hive colony bees don’t), and they can’t fly south for the winter. To survive a Northern winter, bees change the composition of the swarm by shrinking the overall population, caulking the hive, getting rid of the deadweight males (i.e., ALL of the males), and laying just enough eggs to preserve a minimal survivable population through the winter and into spring. They cluster together in the center of the hive, keeping the queen in the center, shivering their wings to create kinetic energy, occasionally sending out suicide squads to retrieve honey stores from the outer combs. They lower their metabolism by creating a cloud of carbon dioxide in the hive. Yes, a carbon dioxide cloud.

All of this preparation takes time. To survive winter, the swarm starts to change its behaviors — from brood patterns to pollen collection to comb creation — not when the weather starts getting cold, but in the middle of summer when the dog days of August are still in front of us. And not just on some random date, but on a completely predictable day.

In 2018 my bees will begin to prepare for winter on Friday, June 22nd.

Why? Because bees can measure the angle of the sun’s rays. They can remember this from one day to the next. When today’s midday sun is ever so slightly lower in the sky than yesterday’s midday sun, a bee will know it. And the entire colony will begin to change.

Bees recognize the freakin’ summer solstice with as much accuracy as any human civilization ever did.

See? Genius. But we’re just getting started.

When bees act on their awareness of the summer solstice, they are trading a derivative. And they expertly manage the basis risk of that trade.

Huh? Time out, Ben. What are you talking about?

A derivative, in the broadest sense of the word, is something that’s related to something else you care about (the “underlying”), but for whatever reason you choose to interact with the derivative-something rather than the underlying-something. For humans, you might care about the stock price of company XYZ, so that’s the underlying, but you think something momentous is going to happen to the company three months from now, so you interact with a derivative on the stock, in this case a three-month option contract. For bees, the thing they truly care about is how cold it gets, so from their perspective the temperature is the underlying and the sunlight angles are the derivative thing that they analyze and interact with. In truth, of course, it’s the tilt of the Earth’s axis and the resultant sunlight angles that cause seasonality and temperature changes, so a curmudgeonly reader might accurately say that actually, it’s the temperature that’s the derivative here, but I trust we’re all open-minded enough to take a bee’s eye view of the world for the duration of this note.

Why do bees take their behavioral cues from sunlight angles rather than temperature change directly? Because the algorithm for predicting seasonality — IF (maximum incident angle of sunlight today < maximum incident angle of sunlight yesterday), THEN (prepare for winter) — is enormously simpler, more predictive, more timely, and less volatile than any sort of temperature time-series analysis, or at least any temperature time-series analysis available to bees and pre-weather satellite humans. The genius (and fatal flaw) of bees and humans is their ability to create complex social systems on the basis of simple algorithms like this. Modern computing systems of the Big Data sort have a very different type of genius.

Hold that thought.

But first let’s make sure we understand what basis risk means, and why it’s The Most Important Thing to understand when you’re dealing with derivatives. “Basis” is the relationship between the derivative and the underlying, and so basis risk is how bad things could get if the relationship between derivative and underlying isn’t as tight as you thought it was. For bees, basis risk takes the form of cold weather coming sooner or later than normal. Shrinking the colony like clockwork based on the summer solstice works great if the first big freeze comes in November, not so well if you get a big snow in mid-October.

The key to managing basis risk is to keep your risk antennae (literally antennae when it comes to bees) focused on how well the derivative thing is tracking with the underlying thing. You need to watch the correlation. So to manage their basis risk, bees are also sensitive to temperature (the underlying) and all of the other derivative things related to changing temperature, like flower bloom patterns or prevailing winds. Nothing will totally override the summer solstice trade (even tropical bees make some small colony adjustments based on seasonality), but bees are adaptive investors, able to accelerate their winter preparation if cold weather comes early or delay it if cold weather comes late. Efficient management of basis risk is a balancing act between sticking with the original trade and adapting your behavior to changing correlations (you don’t want to mistake an Indian Summer for spring!), but that’s the beauty of evolution — billions of bee colonies over millions of years have lived and died and reproduced to naturally select the combination of hard-wired nervous system algorithms that allows honeybee species to thrive across a wide range of ecosystems and a wide range of seasonal weather variations.

But it’s only a range. Bees can’t live in as wide a range of ecosystems and weather variations as, say, ants. I doubt there’s a bee colony on Earth that can survive six months straight of sub-50 degree weather. If you’re a bee colony and you’ve moved that far north and that’s the magnitude of your downside basis risk, it really doesn’t matter how amazing you are in your solar declination calculations … you’re not going to make it. Maybe you get lucky for a couple of years, but if it’s possible that you could have four or five months of harshly cold weather, then sooner or later that severe basis risk catches up with you. This is a basis risk that you can’t insure against, that you can’t hedge against with extra preparation or precaution. It’s an unmanageable basis risk. For most of North America, though, even pretty far up into Canada, cold weather is a manageable basis risk, particularly if you’ve got a beekeeper able to lend a helping hand. Sometimes the bees will get a bad roll of the weather dice and you’ll lose a hive to basis risk, but it doesn’t threaten the species.

Species risk comes into play when you get a major climactic event that lasts for a long time in terms of a colony’s lifespan but not long at all in terms of evolution, genetic mutation, and natural selection. Like, say, what if spring no longer followed winter? What if it snowed in August and flowers bloomed in January? What if winter disappeared for a decade? What if it lasted that long? What if your weather basis risk was unknowable, as in Game of Thrones? Even a short Westerosi winter of a couple of years would kill every bee colony on the continent, which is why I don’t think I’ve ever seen a bee hive on Game of Thrones. [Hmm … I’ve just been informed by Grand Maester Guinn that “one of the Baratheon vassal houses of the Reach is House Beesbury, with a family seat of Honeyholt and a family motto of Beware Our Sting.” Sigh. You see what I have to put up with? Okay, we’ll stipulate that Dornish latitudes are safe. But The North is no place for bees when winter comes!]

This is basis uncertainty, where you’re not even sure that any basis exists at all, as opposed to mere basis risk. Basis uncertainty is an unknowable basis risk, which is much more damaging to species development than the occasional bout of severe basis risk.

[Long parenthetical: understanding the distinction between risk and uncertainty is crucial in every aspect of life. A risky decision is when you have a pretty good sense of the odds and the pay-offs. It lends itself to statistical analysis and econometrics, particularly if it’s a decision you will have the opportunity to make multiple times. An uncertain decision is when you don’t have a good sense of odds and pay-offs. Here, statistical analysis may very well kill you, particularly if you’re not going to get many cracks at the game, or if you don’t know how many times you’ll get to make a choice. You need game theory to make sense of decisions made under uncertainty.]

Basis uncertainty is the core problem facing every investor today.

It’s not just that we endure large basis risks here in the Hollow Market, unmanageable for many. It’s not just that all of our old signposts and moorings for navigating markets aren’t working very well. It’s not just difficult to identify predictive/derivative patterns in today’s markets. There is a non-trivial chance that structural changes in our social worlds of politics and markets have made it impossible to identify predictive/derivative patterns. THIS is basis uncertainty, and it’s as problematic for humans facing markets that don’t make sense as it is for bees facing weather patterns that don’t make sense.

Well, that’s just crazy talk, Ben. What do you mean that it might be impossible to identify predictive/derivative patterns? What do you mean that basis might not exist at all? Of course there’s a pattern to markets and everything else. Of course spring follows winter.

Nope. This is the Three-Body Problem.

Or rather, the Three-Body Problem is a famous example of a system which has no derivative pattern with any predictive power, no applicable algorithm that a human (or a bee) could discover to adapt successfully and turn basis uncertainty into basis risk. In the lingo, there is no “general closed-form solution” to the Three-Body Problem. (It’s also the title of the best science fiction book I’ve read in the past 20 years, by Cixin Liu. Truly a masterpiece. Life and perspective-changing, in fact, both in its depiction of China and its depiction of the game theory of civilization.)

What is the “problem”? Imagine three massive objects in space … stars, planets, something like that. They’re in the same system, meaning that they can’t entirely escape each other’s gravitational pull. You know the position, mass, speed, and direction of travel for each of the objects. You know how gravity works, so you know precisely how each object is acting on the other two objects. Now predict for me, using a formula, where the objects will be at some point in the future.

Answer: you can’t. In 1887, Henri Poincaré proved that the motion of the three objects, with the exception of a few special starting cases, is non-repeating. This is a chaotic system, meaning that the historical pattern of object positions has ZERO predictive power in figuring out where these objects will be in the future. There is no algorithm that a human can possibly discover to solve this problem. It does not exist.

To visualize the Three-Body Problem, here’s a simulation of the orbits of green, blue, and red objects with random starting conditions, each exerting a gravitational pull on the others. What Poincaré proved is that there is no formula where you can plug in the initial information and get the right answer for where any of the objects will be at any future point in time. No human can predict the future of this system.

But a computer can. Not by using an algorithm, which is how biological brains — human and bee alike — evolved to make sense of the world, but by brute force calculations. Remember, you know everything about these three objects … none of the physics here is a mystery. If you can do the calculation quickly enough, you can compute where all three objects will be one second from now. And one second from then. And one second from then. And so on and so on. With enough processing power (and this can require a LOT of processing power) you can calculate where the three objects will be 100 years from now, even though it is impossible to solve for this outcome.

It’s a hard concept to wrap your head around, this difference between calculating the future and predicting the future, but it will change the way you see the world. And your place in it.  

Now here’s an observation that I can’t emphasize strongly enough, although I’ll try:

THIS IS NOT HOW WE USE COMPUTERS IN OUR INVESTING STRATEGIES TODAY

The way that computers can calculate an answer to the Three-Body Problem is straightforward — they can be programmed with the physics rules for how one object influences another object, so they can simulate where each object will go next. There is ZERO examination of where the objects have been in the past. This is entirely forward looking.

The way that computers can NOT calculate an answer to the Three-Body Problem is by examining the historical data of where the objects have been. In a chaotic system, it doesn’t matter how hard or how fast or how deeply you look at the historical data. There is NO predictive pattern, NO secret algorithm hiding in the data. And yet this is exactly what we all have our computers doing … examining historical data to look for patterns that will give us the magic algorithm for predicting what’s next! The only thing that the past gives you in a chaotic system is inertia, which can look like a pattern or an algorithm for some period of time, depending on how all the objects are aligned. But it’s a mirage. It will not last. Examining the past of a chaotic system can give you lots of little answers, like sparks off a bonfire, none lasting more than a few seconds. And certainly if you’re efficient with your inertia-identifying spark-capturing effort, you can make some money using computers this way. But this examination of the past through naïve induction will never give you The Answer. Because The Answer does not exist in the past. The Answer — which is another word for algorithm, which is another word for “general closed-end solution” — doesn’t exist at all in a chaotic Three-Body System.

But we can approximate The Answer. We can calculate the future in small computational chunks even if we can’t predict the future in one big algorithmic swoop, but only if we can program the computer with the “physics” of how “gravity” works in social systems like markets. What’s our financial world equivalent of a theory of gravity? I think it’s a theory of narrative. This, to me, is a more interesting research program than identifying small inertias or capturing brief sparks. But it’s not where our computing resources are being allocated, because there’s no money in it. Yet.

Exploring a theory of narrative, what I’ve called the Narrative Machine, is basic research. Like all basic research, it’s not immediately remunerative and thus is difficult to fund. But that’s not the biggest obstacle. No, the biggest obstacle to basic research in computational finance is that humans are hard-wired to look for algorithms and have a really hard time imagining that it’s even possible to pursue a non-anthropomorphic (how about that for a $10 word) research design that doesn’t pore through historical data looking for predictive algorithms at every turn. We can’t help ourselves!

What if I told you that algorithms and derivatives are as much at the heart of how humans prepare for their financial future as they are for bees preparing for their seasonal future? What if I told you that the dominant strategies for human discretionary investing are, without exception, algorithms and derivatives? And what if I told you that these algorithms and derivatives were perhaps “evolved” under a “benign” configuration of the Three-Body Problem that not only might never repeat, but in fact is certain to never repeat because it is a chaotic system?

I’ll give you two examples of influential investment algorithms/derivatives. There are many more.

GOOD COMPANIES => GOOD STOCKS

GOOD COUNTRIES => GOOD GOVERNMENT BONDS

These are the central tenets of stock-picking and sovereign bond-picking, respectively. In both cases, goodness (like beauty) is in the eye of the beholder, so I’m not saying that there is some single standard for what makes a “good” company or what makes a “good” set of macroeconomic policies. What I’m saying is that everyone reading this note (including me!) believes that there is a direct relationship between the quality of a company or an economy (however you define quality) and the future price of whatever stocks or bonds are connected to that company or economy. What I’m saying is that everyone reading this note believes that tracking the measurable quality of a company or an economy (the derivative) according to some standardized and repeatable process (the algorithm) will, over time, have a predictive correlation with the future price of the related stock and bond securities (the underlying).

What stocks do we want to own? Why, the stocks of high quality companies, of course … companies with stellar management teams, fortress balance sheets, and wonderful products or services that everyone wants to buy. Ditto for government bonds and currencies and broad market indices and the like. Maybe it will take some time for this faith in Quality to pay off, but we all believe that it WILL pay off. It’s only natural, right? As natural as spring following winter. As natural as flowers blooming in May and snow falling in December. Maybe the flowers will bloom a few weeks late and maybe the snows will fall a few weeks early, but that’s just basis risk, and we can manage for that.

But what if spring doesn’t follow winter anymore?

Look, I’m not asking us to abandon our faith in Quality. One of the key corrolaries of the Three-Body Problem is that we don’t have to reject our belief that Objects 1 and 2 exist. We don’t have to deny our faith that the Quality-of-Companies is an actual thing and that it has a big gravitational pull on the price of stocks. We don’t have to deny our faith that the Quality-of-Governments is an actual thing and that it has a big gravitational pull on the price of government bonds.

What we have to accept is that there is an Object 3 that has moved into a position such that its gravity absolutely swamps the impact of Objects 1 and 2. This Object 3, of course, is extraordinary monetary policy, specifically the purchase of $20 TRILLION worth of financial assets by the Big 4 central banks — the Fed, the ECB, the BOJ, and the PBOC.

$20 trillion is a lot of mass. $20 trillion is a lot of gravity.

Here’s the impact of all that gravity on the Quality-of-Companies derivative investment strategy.

The green line below is the S&P 500 index. The white line below is a Quality Index sponsored by Deutsche Bank. They look at 1,000 global large cap companies and evaluate them for return on equity, return on invested capital, and accounting accruals … quantifiable proxies for the most common ways that investors think about quality. Because the goal is to isolate the Quality factor, the index is long in equal amounts the top 20% of measured  companies and short the bottom 20% (so market neutral), and has equal amounts invested long and short in the component sectors of the market (so sector neutral). The chart begins on March 9, 2009, when the Fed launched its first QE program.

Over the past eight and a half years, Quality has been absolutely useless as an investment derivative. You’ve made a grand total of not quite 3% on your investment, while the S&P 500 is up almost 300%.

This is not a typo.

Have the Quality stocks in your portfolio gone up over the past eight and a half years? Sure, but it’s not because of the Quality-ness of the companies. It’s because ALL stocks have gone up ever since Object 3, the balance sheets of central banks, started exerting its massive gravity on everything BUT Quality. That’s not an accident, by the way. Central banks don’t care about rewarding “good” companies. In fact, if they care about anything on this dimension, they care about keeping “bad” companies from going under.

This is what it looks like when spring does not follow winter.

And here’s the impact of all that gravity on the Quality-of-Countries derivative investment strategy.

The gold line below is the spread (difference) between Portugal’s 10-year bond yield and the U.S. 10-year bond yield, and the blue line is the spread between Italy’s 10-year note yield and the U.S. equivalent. In “normal” times, a country with a weaker set of macroeconomic characteristics (high levels of national debt, say, or maybe low productivity) will have to offer investors a higher rate of interest to borrow their money than a country with a stronger set of macroeconomic characteristics. So in the summer of 2012, when Portugal and Italy were both looking like deadbeat countries, they had to pay investors a much higher rate of interest than the U.S. did to attract the investment … about 9% more (this is per year, mind you) for Portugal and 4% more for Italy. Those are enormous spreads in the world of sovereign debt!

This chart begins in the summer of 2012, when the ECB announced its intentions to prop up the European sovereign debt market directly. Since that announcement — even though both Portugal and Italy have higher debt-to-GDP ratios today than in 2012 — the spread versus U.S. interest rates has done nothing but decline. Driven by the commitment of the ECB to “do whatever it takes” and to be not only a last-resort buyer but also a first-in-line buyer of Portuguese and Italian debt, it now costs LESS for these countries to borrow money for 10 years than the U.S.

This is nuts. It’s an understandable nuts when you consider that the German 10-year bond yield is currently about 30 basis points, and was actually negative (meaning that you had to pay the German government for the privilege of lending them money for the next 10 years) for about six months in 2016. Meaning that at least with Italian and Portuguese debt you’re being paid something (a little less than 2% per year). It’s an understandable nuts when you consider that the Swiss 10-year bond still sports a negative interest rate and has been negative for the past two and a half years. There’s about $10 trillion worth of negative yielding sovereign bonds out there today, something that is IMPOSSIBLE under a [good country => good bond] derivative algorithm. No country is that good! But it’s entirely possible under the immense gravitational force of massive central bank asset purchases.

Here’s the kicker. Below is the spread between Greek 10-year sovereign bonds and U.S. 10-year notes. In 2012 you were paid 24% more to lend money to Greece. Per year! Today you are paid less than 2% more to lend money to Greece rather than the United States. For ten years. To Greece.

Again, I’m not saying that the Quality derivative doesn’t exist as a real thing or that it isn’t an important factor in the history of successful stock-picking or bond-picking. What I’m saying is that the Quality derivative hasn’t mattered for eight and a half years with stocks and five years with sovereign debt. What I’m saying is that it might not matter for another eighty years. Or it might matter again in eight months. A Three-Body System is a chaotic system. As the boilerplate says, past performance is not a guarantee of future results. In fact, the only thing I can promise you is that past performance will NEVER give you a predictive algorithm for future results in a chaotic system.

This is basis uncertainty. This is the biggest concern that every investor should have, that the signals (derivatives) and processes (algorithms) that we ALL use to make sense of the investing world are no longer connected to security prices.

… Okay, Ben, you’ve exhausted me. It’s a weird and strange way of looking at the world, but let’s go with it for a minute. What’s the pay-off here? What do we DO in a chaotic system? What does that even mean, to say that we are investors in a chaotic system?

Four suggestions.

First, I think we should adopt a philosophy of what I’ve called profound agnosticism when it comes to investing, where we don’t just embrace the notion that no one has a crystal ball in this system, but we actually get kinda annoyed with those who insist they do. I think that risk balancing strategies make a ton of sense in a chaotic system, so that we think first about budgeting our risk agnostically across geographies and asset classes and sectors, and secondarily think about budgeting our dollars.

Second, and relatedly, I think we should adopt a classic game theory strategy for dealing with uncertain systems — minimax regret. The idea is simple, but the implications profound: instead of seeking to maximize returns, we seek to minimize our maximum regret. Keep in mind that our maximum regret may not be ruinous loss! I know plenty of people whose maximum regret is not keeping up with the Joneses. In fact, from a business model perspective, that’s more common than not. Or if you’ve bought into Bitcoin north of $15,000 per coin, I think you know what I’m talking about, too. The point being that we need to be painfully honest with ourselves about our sources of regret and target our investments accordingly. If we can be this honest with ourselves, it’s a VERY powerful strategy.

Third, I think we should reconsider our approach to computer-directed investment strategies. Using computers in an anthropomorphic way, where we treat them like a smarter, faster human, set loose in a vast field of historical data to search for patterns and algorithms … it’s a snipe hunt. Or at least I think we’ve squeezed just about all the juice out of this inductive orange that we’re likely to get. With the massive processing power at our fingertips today, not to mention the orders-of-magnitude-greater processing power that quantum computing will bring to bear in the future, there’s much bigger game afoot with computational approaches that take a more deductive, forward-looking strategy.

Fourth, and perhaps most importantly, I think we need to accept that we’re never going to fully understand the reality of a chaotic system, but that it’s never been more important to try. The brains of both bees and humans are hard-wired for algorithms. Both species see patterns even when patterns don’t exist, and both species tend to do poorly in environments where derivative signals are plagued by basis uncertainty rather than mere basis risk. Every bee in the world will follow its hard-wired algorithms even unto death. And most humans will, too. But humans have the capacity to think beyond their biological and cultural programming … if they work at it.

Where do we lose good people? When they convince themselves that they’ve found The Answer — either in the form of a charismatic person or, more dangerously still, a charismatic idea — in a chaotic system where no Answer exists. A chaotic system like markets, yes, but also a chaotic system like politics.

The Answer is, by nature, totalitarian. Why? Because it’s a general closed-form solution. That’s the technical definition of The Answer, and that’s the practical definition of totalitarian thought. We’re hard-wired to want the all-encompassing algorithm, which is why it’s so difficult to resist. But if we care about liberty. If we care about justice. If we care about liberty and justice for all … we have to resist The Answer.

Because we’ve lost enough good people.

As wise as serpents, as harmless as doves …

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House Republicans Secretly Gathering Evidence To Launch Case Against DOJ and FBI: Report

According to Politico, a group of frustrated Republicans on the House Intelligence Committee led by Devin Nunes (R-CA) have been gathering in secret for several weeks to build a case against senior leaders of the Justice Department and the FBI for what they say is “improper” and perhaps criminal mishandling of the salacious and unproven 34-page Trump-Russia dossier, according to four sources familiar with their plans. 

Devin Nunes (R-CA)

A subset of the Republican members of the House intelligence committee, led by Chairman Devin Nunes of California, has been quietly working parallel to the committee’s high-profile inquiry into Russian meddling in the 2016 presidential election. […]

 

The people familiar with Nunes’ plans said the goal is to highlight what some committee Republicans see as corruption and conspiracy in the upper ranks of federal law enforcement. The group hopes to release a report early next year detailing their concerns about the DOJ and FBI, and they might seek congressional votes to declassify elements of their evidence. –Politico

When pressed for details, Reps Mike Conway (R-TX) and Peter King (R-NY) were mum, with Conway telling POLITICO, “I don’t want talk about what we do behind closed doors.” 

Nunes’ has gone on record several times to discuss his feelings over the government law enforcement, telling Fox News “I hate to use the word corrupt, but they’ve become at least so dirty that who’s watching the watchmen? Who’s investigating these people?” adding “There is no one.” 

House and Senate Republicans have joined countless voices, including President Trump’s outside counsel, Jay Sekulow, to launch a second Special Counsel to investigate the FBI and Justice Department to find out what role the salacious dossier played in the Trump-Russia investigation, as well as a trove of anti-Trump text messages sent between lead FBI investigator Peter Strzok to his FBI attorney mistress Lisa Page while the two of them were working together on both the Clinton email investigation and the Trump-Russia investigation.

Republicans in the Nunes-led group suspect the FBI and DOJ have worked either to hurt Trump or aid his former campaign rival Hillary Clinton, a sense that has pervaded parts of the president’s inner circle. Trump has long called the investigations into whether Russia meddled in the 2016 election a “witch hunt,” and on Tuesday, his son Donald Trump Jr. told a crowd in Florida the probes were part of a “rigged system” by “people at the highest levels of government” who were working to hurt the president.

House Intel Committee member Jim Jordan (R-OH) told Fox News yesterday that they are now considering contempt of the FBI and DOJ leadership and subpoenas over anti-Trump bias:

I think they were putting together a plan to stop Donald Trump from being the next president of the United States. I think it’s amazing in spite of the fact that the Democrats were against him, the Republican establishment was against him, the mainstream press was against him. and now I believe the FBI and the Justice Department were against him, the American people still said that’s the guy we want to be the next president.

I believe that fake dossier was used as the basis to get Warren to now what we learn about Peter Strzok and Bruce Ohr and the FBI and the Justice Department,” said Jordan, adding, “Everything points to the fact that there was an orchestrated plan to try to prevent Donald Trump from becoming the President of the United States.”

Meanwhile, Trey Gowdy – who notably chose not to call on key witness Peter Strzok or demoted DOJ official Bruce Ohr for testimony is apparently not included in the group seeking to build a case. As POLITICO reports, “A congressional aide with knowledge of the meetings said Rep. Trey Gowdy (R-S.C.) was not among the participants. ”While he does believe the FBI and DOJ have recently made decisions worth looking into, he is and will always be a defender of the FBI, DOJ and the special counsel,” the aide said.

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