Month: January 2014

We have extensively documented that the U.S. government is trampling virtually every single Constitutional right set forth in the Bill of Rights.

One of the few rights which we thought the government still respects is the the 3rd Amendment, which prohibits the government forcing people to house troops:

No Soldier shall, in time of peace be quartered in any house, without the consent of the Owner, nor in time of war, but in a manner to be prescribed by law.

But security expert Jacob Appelbaum notes that the NSA may be digitally violating the 3rd Amendment.

By way of background, this week Appelbaum was the main force behind an expose in Spiegel – and gave a must-watch talk – on the NSA’s systemic offensive programs to commandeer computers and computer systems, phone connections and phone systems, and communications networks of all types.

Appelbaum shows that the NSA has literally taken over our computer and our phones, physically intercepting laptop shipments and installing bugware before themselves shipping the laptop on to the consumer, installing special hardware that overcomes all privacy attempts, including “air gaps” (i.e. keep a computer unplugged from the Internet). Appelbaum also notes that spyware can suck up a lot of system resources on a computer or smartphone.

And he says this is the digital equivalent of soldiers being stationed in our houses against our will:

The parallel might not be as far-fetched as it may seem at first …

The NSA itself says that it’s in the middle of a massive cyber war. As such, malware, physical spying devices and offensive internet workarounds are literally the main troops in the NSA’s offensive cyber army.

Quartering meant that Colonial Americans had:

• No control over when the British troops came and went

• No say in what resources they consumed

• And no privacy even in their own castles

Similarly, mass NSA spying means that modern day Americans have:

• No control over when military presence comes or goes from our computer and phones (NSA is part of the Department of Defense)

• No say in what resources the spies suck up (remember, Applebaum says that spying can use a lot of resources and harm performance)

• And no privacy even in the deepest inner sanctuary of our electronic home base

Colonial Americans lost the quiet use and enjoyment of their homes. Modern Americans are losing the quiet use and enjoyment of our digital homes because the NSA is stationing digital “troops” inside our computers and phones.

Just as the Colonists’ homes were no longer theirs … our computers and phones are no longer ours.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/agLwcVU0IQE/story01.htm George Washington

Submitted by Michael Snyder of The Economic Collapse blog,

Is the U.S. consumer tapped out?  If so, how in the world will the U.S. economy possibly improve in 2014?  Most Americans know that the U.S. economy is heavily dependent on consumer spending.  If average Americans are not out there spending money, the economy tends not to do very well.  Unfortunately, retail sales during the holiday season appear to be quite disappointing and the middle class continues to deeply struggle.  And for a whole bunch of reasons things are likely going to be even tougher in 2014.  Families are going to have less money in their pockets to spend thanks to much higher health insurance premiums under Obamacare, a wide variety of tax increases, higher interest rates on debt, and cuts in government welfare programs.  The short-lived bubble of false prosperity that we have been enjoying for the last couple of years is rapidly coming to an end, and 2014 certainly promises to be a very "interesting year".

Obamacare Rate Shock

Most middle class families are just scraping by from month to month these days.

Unfortunately for them, millions of those families are now being hit with massive health insurance rate increases.

In a previous article, I discussed how one study found that health insurance premiums for men are going to go up by an average of 99 percent under Obamacare and health insurance premiums for women are going to go up by an average of 62 percent under Obamacare.

Most middle class families simply cannot afford that.

Earlier today, I got an email from a reader that was paying $478 a month for health insurance for his family but has now received a letter informing him that his rate is going up to $1,150 a month.

Millions of families are receiving letters just like that.  And to say that these rate increases are a "surprise" to most people would be a massive understatement.  Even people that work in the financial industry are shocked at how high these premiums are turning out to be…

"The real big surprise was how much out-of-pocket would be required for our family," said David Winebrenner, 46, a financial adviser in Lebanon, Ky., whose deductible topped $12,000 for a family of six for a silver plan he was considering. The monthly premium: $1,400.

Since Americans are going to have to pay much more for health insurance, that is going to remove a huge amount of discretionary spending from the economy, and that will not be good news for retailers.

Get Ready For Higher Taxes

When you raise taxes, you reduce the amount of money that people have in their pockets to spend.

Sadly, that is exactly what is happening.

Congress is allowing a whopping 55 tax breaks to expire at the end of this year, and when you add that to the 13 major tax increases that hit American families in 2013, it isn't a pretty picture.

This tax season, millions of families are going to find out that they have much higher tax bills than they had anticipated.

And all of this comes at a time when incomes in America have been steadily declining.  In fact, real median household income has declined by a total of 8 percent since 2008.

If you are a worker, you might want to check out the chart that I have posted below to see where you stack up.  In America today, most workers are low income workers.  These numbers come from a recent Huffington Post article…

-If you make more than $10,000, you earn more than 24.2% of Americans, or 37 million people.

-If you make more than $15,000 (roughly the annual salary of a minimum-wage employee working 40 hours per week), you earn more than 32.2% of Americans.

-If you make more than $30,000, you earn more than 53.2% of Americans.

-If you make more than $50,000, you earn more than 73.4% of Americans.

-If you make more than $100,000, you earn more than 92.6% of Americans.

-You are officially in the top 1% of American wage earners if you earn more than $250,000.

-The 894 people that earn more than $20 million make more than 99.99989% of Americans, and are compensated a cumulative $37,009,979,568 per year.

It is important to keep in mind that those numbers are for the employment income of individuals not households.  Most households have more than one member working, so overall household incomes are significantly higher than these numbers.

Higher Interest Rates Mean Larger Debt Payments

On Tuesday, the yield on 10 year U.S. Treasuries rose to 3.03 percent.  I warned that this would happen once the taper started, and this is just the beginning.  Interest rates are likely to steadily rise throughout 2014.

The reason why the yield on 10 year U.S. Treasuries is such a critical number is because mortgage rates and thousands of other interest rates throughout our economy are heavily influenced by that number.

So big changes are on the way.  As a recent CNBC article declared, the era of low mortgage rates is officially over…

The days of the 3.5% 30-year fixed are over. Rates are already up well over a full percentage point from a year ago, and as the Federal Reserve begins its much anticipated exit from the bond-buying business, I believe rates will inevitably go higher.

Needless to say, this is going to deeply affect the real estate market.  As Mac Slavo recently noted, numbers are already starting to drop precipitously…

The National Association of Realtors reported that the month of September saw its single largest drop in signed home sales in 40 months. And that wasn’t just a one-off event. This month mortgage applications collapsed a shocking 66%, hitting a 13-year low.

And U.S. consumers can expect interest rates on all kinds of loans to start rising.  That is going to mean higher debt payments, and therefore less money for consumers to spend into the economy.

Government Benefit Cuts

Well, if the middle class is going to have less money to spend, perhaps other Americans can pick up the slack.

Or maybe not.

You certainly can't expect the poor to stimulate the economy.  As I mentioned yesterday, it is being projected that up to 5 million unemployed Americans could lose their unemployment benefits by the end of 2014, and 47 million Americans recently had their food stamp benefits reduced.

So the poor will also have less money to spend in 2014.

The Wealthy Save The Day?

Perhaps the stock market will continue to soar in 2014 and the wealthy will spend so much that it will make up for all the rest of us.

You can believe that if you want, but the truth is that there are a whole host of signs that the days of this irrational stock market bubble are numbered.  The following is an excerpt from one of my recent articles entitled "The Stock Market Has Officially Entered Crazytown Territory"…

The median price-to-earnings ratio on the S&P 500 has reached an all-time record high, and margin debt at the New York Stock Exchange has reached a level that we have never seen before.  In other words, stocks are massively overpriced and people have been borrowing huge amounts of money to buy stocks.  These are behaviors that we also saw just before the last two stock market bubbles burst.

If the stock market bubble does burst, the wealthy will also have less money to spend into the economy in 2014.

For the moment, the stock market has been rallying.  This is typical for the month of December.  You see, the truth is that investors generally don't want to sell stocks in December because they want to put off paying taxes on the profits.

If stocks are sold before the end of the year, the profits go on the 2013 tax return.

If stocks are sold a few days from now, the profits go on the 2014 tax return.

It is only human nature to want to delay pain for as long as possible.

Expect to see some selling in January.  Many investors are very eager to start taking profits, but they wanted to wait until the holidays were over to do so.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/vhkCszawQ7Y/story01.htm Tyler Durden

Despite his various “nanny-state” failings (all of which have been prominently featured on these pages in the past) outgoing New York City mayor Mike Bloomberg has had an impressive track record: New York crime rates are at historic lows, the $72.7 billion budget is balanced, jobs are at an all-time high and a record 54 million tourists pumped money into the economy this year. Homicides have declined by almost 50 percent since Bloomberg became mayor in 2002, and this year’s total of 333 through Dec. 29 is 20 percent below last year’s record low. Of course, how much of this is due to Bloomberg’s own actions and how much due to the “rising tide” wealth effect resulting from the Fed’s actions that gentrified New York over the past 20 years thanks to Fed wealth-effect boosting policies and which have led to a perilously unstable financial system, is a different question. Regardless, as of midnight the billionaire mayor is no more. His replecament, Bill de Blasio, 52, is the first democrat to run City Hall in 20 years.

Bill de Blasio was sworn in as the 109th mayor of New York City on Wednesday, a few minutes after midnight, but his formal inauguration ceremony on the steps of City Hall is scheduled to begin at noon.

With the arrival of de Blasio to the city’s top post, it means that Democratic mayors will preside over Los Angeles; Chicago; Houston; Philadelphia; Phoenix; San Antonio; Dallas; San Jose, California; Austin, Texas; and Jacksonville, Florida.

And while de Blasio may have gained prominence in recent days following his proposal to ban horse carriages in Central Park with comments that “we are going to get rid of horse carriages, period,” adding that the practice is inhumane, this decision will hardly impact the country’s most populous city, his other choices will. Chief among them, pledging to reduce income inequality and restrain aggressive police tactics.

Who is de Blasio? Ironically, here is Bloomberg‘s take on the new mayor.

In de Blasio, New York voters chose a Cambridge, Massachusetts-bred Boston Red Sox fan who arrived in the city as a New York University undergraduate. He received a master’s degree in international relations from Columbia University. He then worked for a Catholic relief organization, for which he distributed food and medicine on a 10-day trip to Nicaragua.

 

De Blasio’s career in city politics began as an aide to former Mayor David Dinkins in 1990. He first won election as a Brooklyn school board member in 1999, and served two terms as City Councilman from 2002 to 2009, where he focused on child abuse and the homeless as chairman of its general welfare committee, before getting elected to the citywide watchdog post of public advocate in 2009.

The new mayor’s top priority: redistributing wealth.

De Blasio’s task, as he describes it, will be to focus on improving the lives of the 46 percent of New Yorkers with incomes at or below 150 percent of the city’s poverty level, or $46,000 for a four-person household in 2011. He seeks more income distribution in a city where the richest 1 percent took home 39 percent of all earnings in 2012, up from 12 percent in 1980, according to the Fiscal Policy Institute, a New York-based research group.

 

In a City Council with 48 Democrats among its 51 members, the overwhelming majority has expressed support for de Blasio’s agenda, including a resolution asking the state legislature to enact the tax increase. De Blasio defeated Republican Joseph Lhota in the mayoral race by 49 percentage points, the widest victory margin by a non-incumbent in city history.

 

Under de Blasio’s plan, the tax rate on incomes above $500,000 would rise to 4.4 percent from almost 3.9 percent. For the 27,300 city taxpayers earning $500,000 to $1 million, the average increase would be $973 a year, according to the Independent Budget Office, a municipal agency.

 

“We must first admit that the affordability crisis exists, and then resolve, together, to do something about it,” he said in an October speech to the Association for a Better New York, a group of corporate executives.

 

He’s also vowed to create 200,000 units of below-market “affordable housing” in the next 10 years, partly by using a $1 billion investment from city pension funds. On Dec. 23, he appointed Alicia Glen, the head of urban investment for Goldman Sachs Group Inc., as deputy mayor for housing and economic development to work out low-cost financing for the construction.

 

…

 

“Instead of pouring billions of dollars into unnecessary and overly generous tax incentives for big corporations, we need to invest in small businesses, in workforce training, and in the City University of New York — the most reliable pathways for those seeking a shot at entering the middle class,” de Blasio said in the speech to the business group.

Whether de Blasio will succeed where so many other wealth redistributors before him have failed remains to be seen. But first, here is his inauguration.  At noon, a ceremony on the steps of City Hall will feature former President Bill Clinton. Hillary Rodham Clinton, the former U.S. Secretary of State and a possible 2016 presidential candidate, also will attend. De Blasio worked in the Clinton administration as a regional director of Housing and Urban Development and managed Hillary Clinton’s successful 2000 campaign for U.S. senator from New York. Consistent with the themes de Blasio pushed during his campaign, he set aside 1,000 free tickets for the public for the ceremonial swearing-in.

Everyone else can watch it live below.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/46P4lRCBsVo/story01.htm Tyler Durden

When it comes to political assassinations, 2014 is starting off with a bang, literally. Moments ago news broke that following an explosion in Prague, the Palestinian ambassador to the Czech Republic has just been killed.

Firefighters search an area after an explosion in Prague January 1, 2014. The Palestinian ambassador to Czech Republic Jamal al-Jamal has died after an explosion at his residence in Prague on Wednesday, according to Czech police.

From AP:

Ambassador Jamel al-Jamal was in his apartment with his family at the time of the explosion on Wednesday, according to Palestinian Embassy spokesman Nabil El-Fahel. Al-Jamal was seriously injured and rushed to a hospital, where he died, according to police spokeswoman Andrea Zoulova.

 

The Palestinian Foreign Ministry said the blast occurred when the 56-year-old diplomat was moving an old office safe box. It was not immediately clear how the explosives got there, and the ministry said the blast was being investigated.

 

Prague rescue service spokeswoman Jirina Ernestova said al-Jamal was placed in a medically induced coma when he arrived at Prague Military Hospital.

 

She said a 52-year old woman was taken to a different hospital in Prague after suffering from shock.

 

The ambassador’s apartment is in Prague’s Suchdol neighborhood.

Once we see any news on who the alleged perpertrators are, we will update this post.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/XcpX3x6suo0/story01.htm Tyler Durden

Below follows the latest from Nom de Plumber on the act of full display public idiocy known as the Volcker Rule.  The American Bankers Association and Community Bankers have apparently backed down regulators when it comes to small bank holdings of preferred CDOs.  But what is really needed is a loud “Foxtrot Oscar” to regulators on the entire enterprise. The Volcker Rule is artibrary and capricious.  As Nom de Plumber argues, you cannot enforce a legal standard that cannot be accurately measured.  One man’s hedge is another man’s principal exposure.  The Volcker Rule is public evidence of the irrational madness that passes for serious thought in US public policy circles.  — Chris

Volcker Rule implementation:  Mission Impossible?

A hedge at a bank will be deemed allowable risk mitigation, and not forbidden proprietary trading—–but only if no material new risk arises, unless the hedge simultaneously protects against that too.   Yet, in reality, every hedge does NOT eliminate risk, but merely exchanges one risk type for ideally more-palatable risk types.   For instance, a bank could hedge the market risk of its Treasury bond portfolio, by shorting Treasury futures.   The bank thereby assumes these substantive new risks, instead:

* basis risk (cash versus futures tracking error)

* liquidity risk (margin calls, without offsetting asset cashflows)

* counterparty and operational risks ( http://www.bu.edu/econ/files/2012/01/Bernanke-RFS.pdf )

* regulatory risk (topic here, ironically).

 

So, how can any hedge truly be Volcker Rule-compliant? 

To prove having only client market-making and no proprietary exposures, a bank must attribute its daily trading P&L to particular risk factors (yield curves, prepayments, defaults, credit spreads, equity indices, dividend streams, option-implied volatility, IRR, asset cashflows, currency rates, etc.) and buy-sell activity.  It must then report all un-attributable P&L to regulators, for flagging non-client, proprietary risk positions.   Yet, in reality, almost every asset (except non-callable, fixed-rate, high-quality sovereign debt) trades strictly by market price……not by observable or consensus settings of underlying risk factors.   Because infinite permutations of risk factor movements can cause a specific asset price movement, no definitive anchor points will arise to bootstrap that mandated P&L attribution. 

So, how can a bank or regulator attribute daily P&L, to flag proprietary trading versus client market-making?

Bottom line:  The Volcker Rule will be remarkably hard, at best, to implement.

Moreover, a bank complying with Dodd-Frank originator risk retention could simultaneously be charged as a disguised version of non-compliant proprietary trading.

http://mortgagenewsclips.com/2011/07/14/dodd-frank-conundrum-can-lender-…

Thank you. 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/FntNOzKQFRU/story01.htm rcwhalen