A Heatmap Of Global CapEx In An Ex-CapEx World

Back in 2012 we accurately predicted that in the Brave New Normal World, where zero cost debt-issuance is used to immediately fund stock buybacks instead of being reinvested in growth and expansion, in the process boosting management pay through equity-performance linked option payout structures, that with every passing year CapEx spending would decline first in relative then in absolute terms, even as free cash flow use of funds is spent on other “here-and-now” shareholder-friendly activities such as buybacks and dividends would grow exponentially (which also explains the unprecedented emergence of shareholder “activists” who demand that in an Ex-CapEx world they get paid right here, right now).

That much has been proven and now, year after year, strategists keep telling us that the long overdue CapEx spending boom is just around the corner (as is the so-called recovery), because as of this moment in the all important industrial and construction segments, CapEx is running a whopping 30% below trend…

… and yet, the “boom” never comes.

And here is why it never will, because while waiting for CapEx is reminiscent of waiting for the proverbial Godot, nowhere is it more evident that CapEx is not coming back, in any terms, than in the following chart from Goldman showing both historical and forecast CapEx, created on a bottoms-up basis and showing that global CapEx will decline sequentially both next year and the year after that.

 

And yet companies which have no choice but to continue their existence, even if they are forced to pay out all incremental cash to their loud-mouthed shareholders simply because there really is no global economic growth which can soak up the incremental growth spending, they still spend money on (mostly) maintenance and (to a tiny extent) growth capital spending.

So for those curious where this spending ends up (because everyone knows where dividends and buybacks go), here is a global heatmap of all capex spending broken down by region and segment:




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Jacob Sullum: Don’t Put Meth Moms in Jail

Given the link between alcohol consumption during
pregnancy and birth defects, should expectant mothers who drink be
arrested for assault? If not, it is hard to see why Mallory Loyola
was.

Loyola, who was arrested in July after giving birth to a baby
girl who tested positive for amphetamine, is the first person to be
charged under a new Tennessee law that criminalizes drug
consumption by pregnant women. The law, ostensibly aimed at
protecting children, is really about punishing what a chief sponsor
described as “the worst of the worst”: women who not only consume
arbitrarily proscribed intoxicants but do so at a time when they
are supposed to be thinking only of their babies.

But as Reason Senior Editor Jacob Sullum explains, there is no
clear link between the drug Loyola consumed and birth defects in
humans. The nonsensical rhetoric about addicted babies is aimed at
concealing the fact that the law, like drug prohibition generally,
seeks to punish people for actions that violate no one’s
rights.

View this article.

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Miss America 2015 Kira Kazantsev: One Girl, One Cup

If like most of the country, you skipped last night’s Miss
America pageant, you missed the routine above, which is widely
credited with giving Miss New York, Kira Kazantsev, the crown.

She plays with a red cup and sings Pharrel’s “Happy.”


More here.

Reason on past
Miss America contests
(really).

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Rand Paul: Thin-Skinned, Flip-Flopping, Question-Dodging Candidate?

Rand PaulThe Weekly Standard
makes the case
—implicitly, at least—that Sen. Rand Paul might
not be ready for a presidential campaign in which his every word,
choice, and past statement will be picked apart.

TWK’s John McCormack asked Paul at an event in New Hampshire to
square his previous resistance to attacking ISIS—he didn’t want to
help Iran fight its battles, he said at the time—with his recent
support for aspects of President Obama’s plan. According to
McCormack, Paul responded by ending the Q and A session:

This was the second press conference that Paul had abruptly
ended on Friday. …

So when did the senator decide that he supported bombing
ISIS? “I don’t know if there is an exact time,” Paul told me
Friday.

I asked Paul twice if he was no longer concerned, as he wrote in
June, that bombing ISIS may simply turn the United States into
Iran’s air force.” He didn’t respond to the
questions and indicated he wasn’t happy with this reporter as well
as a local reporter who repeatedly suggested Paul is an
isolationist.

“All right, thanks guys. Work on that objectivity,” Paul said,
as he walked away.

Agree or disagree that these sorts of questions are fair, Paul
is certainly going to get more of them as his presumed quest for
the Republican presidential nomination continues. Most journalists
he deals with certainly won’t be working on their objectivity
anytime soon.

Additionally, I’m a bit surprised that Paul—who prides himself
on ideological consistency—has been caught so off guard by this
line of questioning. Of course people want to know the specifics of
why and when Paul’s principled opposition to ISIS intervention
morphed into outright support for airstrikes. And of course hostile
reporters want to jump on the
Rand-is-a-thin-skinned-flip-flopping-sell-out narrative. It
certainly looks like Paul is merely hedging earlier
stances (absent any mitigating or clarifying information), and
that’s
why
the
media
is
writing
so many stories about it.

Perhaps most people—and
even some libertarians
—will find nothing objectionable about
Paul’s latest opinions. But from a political-imaging standpoint, he
clearly needs to explain his thinking more clearly when
contradictions arise, if only to safeguard against the
proliferation of stories like McCormack’s.

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UK Hints At Next Reserve Currency, To Issue Chinese Yuan-Denominated Bond

Yuanification continues around the world. As The USA attempts to corral its allies in a ‘broad coalition’, an increasing number of people – including domestic economic policy advisors – are shifting away from the USD as primary reserve currency. However, the move by British Chancellor of the Exchequer George Osborne, announced Friday, is likely the most notable yet in the world’s de-dollarization. As Xinhua reports, the British government intend to be the first nation (ex-China) to issue Renminbi denominated bond and to use the proceeds to finance the government’s reserves of foreign currency. Osborne described this dialogue outcome as “a historic moment” and a statement of British confidence in the potential of the RMB to become “the main global reserves currency”.

 

As Xinhua reports,

British Chancellor of the Exchequer George Osborne announced Friday that the British government intend to issue a Renminbi denominated bond and to use the proceeds to finance the government’s reserves of foreign currency.

 

“I can now announce that the UK government intend to be the first national government outside of China to issue a bond in China’s currency. We issued bonds in U.S. dollar before, now we will be issuing a bond in RMB,” said Osborne in the press release of the Sixth China-UK Economic and Financial Dialogue (EFD).

 

Chinese Vice Premier Ma Kai and Osborne concluded the meeting of the Sixth China-UK Economic and Financial Dialogue in London.

 

Osborne described this dialogue outcome as “a historic moment” and a statement of British confidence in the potential of the RMB to become “the main global reserves currency”.

 

“And let me be clear, as China becomes a bigger and bigger part of the world economy, their currency is going to be used around the world. We here in Britain understand that, and we want us to be the first country in the west to seize the opportunities that it will bring,” declared Osborne.

 

Meanwhile, the issuance of Chinese currency bond means jobs and investment in Britain, which the government’s long-term economic plan is all about, noted Osborne.

*  *  *

With friends like that, does the USA need more enemies? Time for some Uk sanctions…




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A most bizarre holiday today… it’s really a sign of the times

respect grandparents day A most bizarre holiday today… it’s really a sign of the times

September 15, 2014
Santiago, Chile

Today is a rather peculiar public holiday in Japan: “Respect Old People Day”.

And judging by the official demographics, an increasing proportion of the population should be revered today.

One in eight Japanese is aged 75 or older. People over 65 will reach 33 million, the largest ever, roughly 25.9% of the population.

The thing about demographic trends is that they’re like a huge oil tanker—once they’re on their course it’s very hard to steer them around in another direction.

These are monumental, generational changes that are very hard and slow to reverse.

By today’s trend, Japan’s population will dwindle from 127 million today to around 100 million by 2050. It’s the worst possible demographic nightmare.

People stopped having as many babies decades ago. It was too damned expensive.

Then the big collapse came in the late 80s, and the economy has been dragging it heels ever since.

When prosperity is low, people consequently delay having children. They have fewer children. Or they don’t have them at all.

This has enormous long-term implications for the country and its fundamentals. Fewer people of working age means fewer jobs, less productivity, less consumption and less government tax revenue.

On the other hand, a bulging group of older people means more spending for medical care and pensions.

In the recently proposed budget for fiscal year 2015, the Japanese government earmarked 31.7 trillion yen for social security, welfare and health spending.

This is the largest item in the budget, consuming 31.2% of all planned government spending.

And it’s only getting larger.

It doesn’t help that Japan is essentially already bankrupt.

The second largest item in Japanese government’s budget is interest.

While social security, welfare and health spending has increased by 3% from the current budget, debt servicing is up by 11% and now amounts to 25.8 trillion yen, or an incredible 25% of Japan’s budget.

So just between pensions and interest, they’re spending 57.5 trillion yen. Last year they only collected 50 trillion in tax revenue.

So before they spend a single yen on anything else in government… anything at all… they’re already 7 trillion yen (about $70 billion) in the hole. They have to borrow the rest.

Bear in mind, this is coming at a time when interest rates for 10-year Japanese bonds are 0.5%, and even closer to zero on shorter notes.

If interest rates rise to just 1%, which is historically still very low, Japan will spend almost all of its tax revenue just to service the debt!

You can’t make this stuff up. It’s a screaming indicator that this system can’t possibly last.

Europe, the US and Japan, three of the biggest economies in the world, are all on a similar inevitable trend—they’re in debt up to their eyeballs, with absolutely no arithmetic possibility of ever getting out of the hole unscathed.

Japan is just worst of them all.

And history is so full of examples of what governments do when countries get into this position: as reality beckons, they become even more careless and destructive.

The question of when will it happen is irrelevant. What difference does it make if Japan collapses tomorrow or two years from now?

This is not a credible and sustainable system that is worth tying up all your livelihood and life savings with.

Nobody is going to send you an advanced notice that the banks will remain closed tomorrow and all deposits will be frozen.

That’s why we always say to buckle up and put your seatbelt on ahead of time.

Just like William Shakespeare said in The Merry Wives of Windsor: “Better three hours too soon, than a minute too late.”

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Americans Trust the Government Less and Less

Americans trust their
government less and less, according to
new polling
from Gallup.

Overall, “trust in the three branches of the federal government
is collectively lower than at any point in the last two decades,”
with those who place a fair amount or great deal of trust in
Congress down to 28 percent. At 43 percent, trust in the
executive branch has dropped to its lowest point since Watergate.
Only the court system fares relatively well, with 61 percent saying
they trust the legislative branch.

Overall, trust has been dropping for years. Yes, there have been
a handful of spikes—around September 11th, the war in
Iraq, and the election of Barack Obama. But each of those hopeful
moments was followed by a rapid slide. Here’s Gallup’s
graph: 

What, exactly, trust represents in a survey like this is
somewhat hard to pin down. To some extent it’s just a measure of
approval or disapproval, which is why you see a clear partisan
split on trust in the executive branch, with 83 percent of
Democrats saying they trust the executive, compared to 37 percent
of independents and 13 percent of Republicans.

But it’s also a measure of expectation. Will this institution
and its members deliver on promises made? Will they act in
accordance with the values they claim to hold? Will they make good
judgments, and will they act in ways that allow for transparency
and accountability?

Which is another way of saying it’s a measure of faith. And on
the evidence, Americans have lost a lot of faith in their
government—the elected branches in particular.

It’s easy to imagine politicians trying to address this by
promising to do everything better, to finally make it all work as
promised. That’s sort of what Barack Obama promised back in 2008,
when his big idea wasn’t any program or policy so much as a promise
to change the way Washington works. Another way of putting this is
that he was going to restore trust in the government.

But of course, despite initial hopes, that didn’t really work
out, and, in the end, that notion, and its failure, probably
contributed overall to the decline in trust: Obama promised big,
sweeping cultural changes that were never likely to pay off, and
then when they didn’t, trust fell even further. No one likes having
their hopes dashed, their expectations shattered.

Which suggests an opening for any politician who is both bold
and humble enough to try—acknowledging that there are real limits
to what government can accomplish, and promising to do fewer
things, but to do them well. 

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Record Beheadings and the Mass Arrest of Christians – Is it ISIS? No it’s Saudi Arabia

Screen Shot 2014-09-15 at 10.36.07 AMIn the past month, a group of radical Islamic extremists based in the Middle East beheaded at least 23 people and enforced a ban on Christianity by arresting a group of people for practicing the faith in a private home.

No, I’m not talking about ISIS. The real culprit is the Kingdom of Saudi Arabia, one of the America’s closest global allies.

I have highlighted the inhumanity of the Saudi regime frequently recently in order to demonstrate the incredible hypocrisy of U.S. foreign policy. While America’s phony politicians and useless mainstream media will often hype anti-Chrtistian bigotry and humanitarian issues when it suits the status quo message, the true driver of U.S. foreign policy can be summarized with two words: CORPORATE PROFITS.


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Student Suspended for Selling Illict Full-Sugar Pepsi Out of His Locker

Alberta high school student
Keenan Shaw was suspended for two days after he got caught selling
an illicit substance from his locker at Winston Churchill his
school. Weed? Nope. Booze? Nope. Acid? Nope. 

Shaw
says
all those treats (and more) are on offer in the school’s
corridors:

“I’m not going to name any names, but I know a couple of
people selling marijuana, there’s kids selling smokes, there was a
kid last year selling meth, as well as a kid selling acid,”
said Shaw. 

But his drug of choice is full-sugar Pepsi. Commerce in the
sweet, sweet drink is banned at his school, which allows only diet
sodas to be sold on premises. 

This case of capitalism gone awry
started small
 in Grade 9:

The Grade 12 student, who realized only diet pop was being sold
in the cafeteria, made the short trek to a local grocery store to
pick up a case of Pepsi.

“I decided if I wanted a pop, maybe others do, too,” he
said.

Shaw brought it back to Churchill, and within 20 minutes, sold
every can of pop.

“From an entrepreneurial perspective, he said, ‘Wait a second, I
just paid $5 for a case of pop and got $12 back,’” said his mother,
Alyssa Shaw-Letourneau, whose son sold the pop for $1 a can. “From
a business perspective, it’s smart.”

Shaw says he’ll abandon his soda sales rather than risk
expulsion.

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How Much Pot Does It Take to Turn Teenagers Into Suicidal Dropouts?

Many people, including the president of the
United States, smoked pot in high school but nevertheless managed
to graduate, earn college degrees, and lead reasonably happy and
successful lives. If you are one of those people, or if you know
some of them, you may be skeptical of a new study linking even
occasional adolescent marijuana consumption to academic failure,
addiction, and attempted suicide. Maybe you and your friends were
just lucky, or maybe these results are misleading. More the latter,
it turns out.

The study,
reported last week in The Lancet Psychiatry, found
that people who smoke pot as teenagers are more likely than people
who don’t to drop out of high school, become dependent on cannabis,
use other illegal drugs, and attempt suicide. The associations were
strongest for those who smoked pot the most.

The researchers, led by Edmund Silins of the National Drug and
Alcohol Research Centre in Sydney, Australia, found that subjects
who smoked pot daily before age 17 (a pattern of use that
is far from
common
) were 63 percent less likely to finish high school than
subjects who abstained, 62 percent less likely to earn a college
degree, 18 times as likely to be dependent on cannabis as adults,
eight times as likely to use other drugs, and seven times as likely
to attempt suicide. By comparison, subjects who smoked pot less
often than monthly before 17 were 22 percent less likely than
nontokers to finish high school, 22 percent less likely to earn a
college degree, twice as likely to be dependent on cannabis as
adults, 67 percent more likely to use other drugs, and 62 percent
more likely to attempt suicide.

Silins et al. call these outcomes “psychosocial sequelae of
adolescent cannabis use,” and some press
coverage
 of the study likewise has portrayed them as
consequences of marijuana consumption. But the causal role of
cannabis is not nearly as clear as these accounts imply.

It surely is plausible that teenagers who get stoned every day,
like teenagers who get drunk every day, would have trouble doing
well in school because they are intoxicated when they are supposed
to be learning. But that observation leaves unanswered the question
of why some teenagers, but not others, choose to get stoned every
day. The propensity to engage in that sort of behavior may be a
marker for characteristics that independently undermine academic
performance.

The researchers tried to account for that possibility by
adjusting their results for various confounding variables—factors
other than marijuana use that may contribute to the observed
associations. They say they adjusted for 53 confounding variables,
which sounds impressively thorough. But their data—based on samples
ranging from 2,537 to 3,765 subjects, depending on the outcome
reported—are drawn from three different studies in Australia and
New Zealand, each of which measured a subset of those 53 variables.
The number of variables reported
in those studies
 actually ranged from 14 to 21.

More important, it is unlikely that these measures, which
include childhood behavior problems, grades in elementary school,
attention difficulties noted by parents, and self-reports of
depression and anti-social behavior, adequately account for the
combination of apathy, alienation, boredom, frustration, and
rebelliousness that might lead a teenager to get high instead of
paying attention in school and doing his homework. While
intoxication itself may be a barrier to learning, the psychological
factors that encourage intoxication probably play a role as well.
Likewise, the emotional issues that motivate frequent intoxication,
issues that may have gone undetected by the measures used in this
study, could make people more prone to suicide.

Such hard-to-measure variables may be especially important in
understanding the associations between relatively light cannabis
consumption and bad outcomes. While it’s quite plausible that a kid
who routinely comes to school stoned would have trouble learning
the skills and absorbing the information he needs to graduate, it
is hard to believe that smoking pot a few times a year would in
itself reduce a teenager’s odds of graduating by 22 percent, let
alone that it would make him 62 percent more likely to attempt
suicide as an adult.

Washington Post blogger Christopher
Ingraham notes some
other complications related to marijuana’s legal status and the way
pot smokers are treated:

If a teacher knows or even suspects that a certain kid is
using drugs, that may predispose the teacher against that student.
“Teachers are very likely to stigmatize drug users,” says Joseph
Palamar, co-author of another recent study comparing teen
marijuana and alcohol use. “That stereotype gives kids problems,
and that kid’s not gonna want to go to class.”

Palamar also says that because marijuana “is an illegal
drug, you have to buy it in an illegal manner, and then you’re
exposed to the black market. Marijuana use is affiliating you with
other kids, some of whom might be problematic—people more likely to
question authority. You become affiliated with things that might
have a negative impact on your education.”

Moreover, Palamar’s research shows that because of marijuana’s
legal status, teen cannabis users are much more likely to get
into trouble with the police than teen alcohol users. And in many
cases, if you have a drug conviction on your record, you become
ineligible for college aid. “If you get caught with drugs, you’re
not able to go to college,” he told me.

In short, while it is hard to dispute that early and frequent
marijuana use can cause problems, such behavior is part of a
complicated psychosocial web that is difficult to untangle with the
methods used in this study. And while prohibitionists are bound to
cite this study as an argument against legalization, the question
of whether teenagers should smoke pot is clearly distinct from the
question of whether adults who do so (or the people who help them)
should be arrested and punished.

As NORML Deputy Director Paul Armentano told HealthDay,
“There is little debate among experts that the use of cannabis by
young people, in particular daily use of cannabis, ought to be
discouraged, just as young people’s use of other potentially
problematic intoxicants, such as alcohol and tobacco, ought to
similarly be discouraged.” But that does not mean prohibition is a
good way to accomplish that goal. “The presumption that
criminalizing cannabis adequately prevents or limits young people
from gaining access to cannabis is demonstrably false,” Armentano
said. “Criminalizing cannabis for adults has little if any impact
on reducing teens’ access [to] or consumption of the plant.”

I am not completely convinced of that last point. Some
consequences of legalization—retailers who card, for instance—work
against underage consumption. But others, such as lower prices and
readier availability for adults who may be willing to share their
purchases with minors, could increase underage access. Whatever the
net effect, the special vulnerabilities of adolescents do not
justify treating adults like children.

[This post originally appeared at
Forbes.com
.]

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