The FBI Cannot Be Trusted With an IPhone Back Door: New at Reason

iPhoneRepresenting Apple in its ongoing battle with the FBI, former George W. Bush administration Solicitor General Ted Olson warned that if the tech company was forced to write a new operating system to ease law enforcement’s efforts to break into an iPhone, it “would lead to a police state.”

Too late, some of us would respond. The components of a police state have arguably been in place at least since the aftermath of 9/11. Cheerleaders in both major political parties thinks that’s just a swell development—and would like to see more of the same.

And truthfully, Apple’s battle isn’t against a one-off court order to crack an encrypted phone. As J.D. Tuccille explains, it’s the latest skirmish in the government’s ongoing war against privacy protections—as well as an act of resistance against federal efforts to conscript the private sector into its crusade.

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What Cell Phones Reveal About the Failures of Government: New at Reason

Until recently almost all African countries had state-owned and state-run telecommunications monopolies. Some, including Kenya and Zambia, still retain a monopoly on the provision of landline services. No wonder, therefore, that the number of fixed telephone lines in Africa peaked in 2009 at 4 lines per 100 people. In Tanzania, there is just one landline per 100 people. The vast majority of Africans, in other words, never had reliable means of calling a doctor or a loved one. The rise of the cell phone, however, observes Marian Tupy, changed all that.

View this article.

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Ask The Expert – Grant Williams

 

 

Hold your real assets outside of the banking system in a private international facility  –>  http://ift.tt/1M1FiG5 

 

 

Ask The Expert – Grant Williams

(CLICK FOR ORIGINAL)

 

 

Grant Williams began his career in the Japanese equity market in the mid-1980s and a three-year posting to Tokyo in early 1989 ensured he had a ringside seat for the madness that occurred in the Land of the Rising Sun as the twin bubbles in equities and real estate burst simultaneously and spectacularly at the end of 1989.

After a short stint back in London trading Asian convertible bonds upon returning home to the UK from Tokyo, Grant relocated once again, this time to New York – in time to witness the bursting of the NASDAQ bubble from another front row seat.

Subsequent postings have taken him to Hong Kong (where his arrival coincided with the SARS outbreak), Australia (from where he watched the Global Financial Crisis play out) and his current home, Singapore (where nothing untoward has happened – yet).

A keen student of history, markets, politics and, above all, human nature, Grant casts a sardonic but insightful eye over the world of finance and attempts to make sense of an ever-crazier landscape.

After the events of 2008 caught so many people off guard, Grant felt a need to put finger to keyboard in an attempt to try and ensure the misunderstandings and lack of awareness about just how bad things were becoming in the lead-up to the crisis didn’t happen again and to try and help people understand that, despite mainstream media coverage to the contrary, nothing had actually been fixed – the can had simply been kicked down the road.

From humble beginnings as a daily note to a few friends and colleagues, Grant’s readership has exploded over the last two years and now, Things That Make You Go Hmmm… is among the most widely-read financial publications in the world.

A regular speaker at investment conferences across the globe, Grant’s entertaining, yet penetrating presentation style has made him a firm favourite of delegates wherever he travels.

Your view of finance will never be the same again.

 

ORIGINAL LINK

 

 

 

 

 

Please email with any questions about this article or precious metals HERE


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Financial Market Regulation – Market Transactions Tax (Video)

By EconMatters

We discuss the Financial Transactions Tax in this video. Bernie Sanders has made this issue part of his campaign in order to appeal to redistribution voters, a common liberal ideal in the Democratic Party.

 

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Japan Sells 10Y Bond At Negative Yield For First Time Ever

As we detailed earlier, for the first time in the history of crazy, Japan ‘sold’ 10-year government bonds today at a negative yield. Translated into English, this means “investors” agreed to pay the Japanese government 2.4bps per year for the privilege of lending it money for 10 years

Down from a 7.8bps positive yield at the last auction, the 10Y auction’s average yield was -2.4bps…

 

Peter Pan(ic) continues as the rest of the JGB curve collapses to fresh record low yields.

Charts: Bloomberg


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The Two-Party Illusion

Submitted by Jeff Thomas via InternationalMan.com,

“There is nothing which I dread so much as a division of the republic into two great parties, each arranged under its leader, and concerting measures in opposition to each other. This, in my humble apprehension, is to be dreaded as the greatest political evil.”  –   John Adams

The Great Illusion of the two-party system is that it allows the voter a choice – usually between a liberal and a conservative government. The reality is that, whichever party wins the election, the government is, in truth, a totalitarian one. The “choice” is a mere distraction from the true objective.

 

Recently, an American college student, Justin Snyder, commented on his choice for his country’s next president and his reasons for it. Mister Snyder said, in part,

"I support Hillary Clinton for president … When you add up her knowhow, leadership, and experience, it's clear that Hillary Clinton is a perfect fit to be the commander-in-chief of the largest military the world has ever seen … The thing is, we've been trying the free market thing for centuries. All we have to show for it is a super wealthy class of people who run the country. What we need is someone to represent the common man, and that someone is Hillary Rodham Clinton.”

Mister Snyder has done quite well in absorbing the modern liberal party line, one that both advances itself on the concept of collectivism, yet reverses itself on its position just two generations ago that war is an evil concept, promoted by conservatives in an effort to control the world.

His comments are not unusual, and that’s what makes them significant. He’s a modern, educated, effectively indoctrinated liberal. His political counterpart is a modern, educated, effectively indoctrinated conservative. Together, they comprise the backbone of governmental dominance over a people: different party, same blind acceptance of political party dogma.

John Adams had it right in his 1780 letter to Jonathan Jackson, as quoted above. He understood that the old method of thought control – that of kings ordering their vassals what to believe – had had its day. It had never been fully effective, as the vassal was free to decide whether he believed the king. But, as early as 1780, the future would belong to those politicians who were skilled in giving the public “A” and “B” choices.

People need to believe that they have a choice. Interestingly, though, they seem to be content with only two choices. A skilled politician therefore limits the number of choices to two and, today, this is the way it’s done in most “advanced” countries. Whether it’s Democrat vs. Republican, or Tory vs. Labour, there are two dominant parties. Each is represented by a group of individuals seeking to gain or maintain public office.

Initially, in order to sell the two-party concept to voters, it’s important for each party to have a philosophical identity. These two identities would seem to need to be based on opposing primary principles or ideologies, such as a free market system vs. collectivism, or empire-building warfare vs. a commitment to peace.

The US did, indeed, follow this route in developing its own primary sports teams, the Democrats and the Republicans. And, along the way, it learned that the public can be best manipulated if they are blindly devoted to either one team or the other. (Those in the red T-shirts detest those in the blue, and vice versa.)

Once this blind devotion has been achieved, it becomes possible to dispense with the extreme polarity of principles and ideology. As stated above, only two generations ago, there was a “collectivism and peace” party and a “free market and empire” party in the US. What they had in common, however, was that both required an increasingly larger government to support its objectives.

Today, the US political system has evolved to the point that the principles and ideology are disappearing. Today, Democrats fully accept and even encourage overseas aggression. This has been achieved through the illusion of “terrorism.” Similarly, the Republicans have watered down their commitment to a free market system through the soma of ever-widening entitlements.

No longer is it necessary that the two dogmas are polar opposites. They can only be five degrees apart from each other, yet each team of supporters fully believes his team is morally right and the other team is morally wrong. Meanwhile, they’re both headed toward the same warfare/welfare end. And of course, both teams fully accept the concept that an ever-expanding government role is necessary in achieving these ends.

But how is it possible that the principles and ideologies have been virtually erased? After all, the very idea of principles is that they are not based on popularity, but on inner conviction. Well, truth be told, the great majority of people have no real moral compass at all; no real inner sense of convictions. Their convictions can be manipulated in such a way that the portion of the brain that wishes to deal with convictions can be redirected into areas that are of little consequence.

On the surface of it, this seems like a bold and even radical statement, yet, as we can readily see, as long as never-ending debates are maintained over the less vital issues, such as abortion rights, gay rights, etc., a people can be distracted away from primary principles. Therefore, the government has the ability to create the illusion that a two-party system exists when, in truth, as the caption below states,

“VOTING: It’s deciding which criminal gets to steal everything you have.”

The Two-Party Illusion

The concept of a government as a body of individuals that are chosen by election to represent the voters is a good one, but it’s not a concept that’s shared by those who are elected. Those who are elected almost unanimously see the concept as one in which the rulers are determined. They have no illusion about representation, although they do understand that they must give the impression to voters that they see themselves as representatives. Rulers seek to rule. All other concerns are secondary.

Over time, those elected will look for every opportunity to increase their own power (both politically and economically). Consequently, the longer a governmental system exists in a given country, the more it will deteriorate toward tyranny.

At some point, there is, in almost every country, a rebellion of some sort that causes a reset – a return to a more democratic structure where a greater level of representation once again takes place. Then the deterioration, inexorably, begins anew. This is why Thomas Jefferson was so fervent that, every so often, a revolution is essential.

It should be pointed out that the US is not alone in this deterioration. In all fairness, many other countries are in a similar state. Increasingly, people in these countries recognise that conditions are becoming tyrannical. Yet, most hold out the hope that the next election will somehow magically result in a return to basic freedoms. This will not be the case. Deterioration is baked in the cake. Regardless of the candidate, regardless of the party, regardless of the country, the outcome will be the same.

But, as stated previously, the deterioration process is a very long one and, at any given time in history, there are countries that are not so far along in the process. A bright future does indeed exist, but it lies not in the hope of a reversal by political leaders. It lies in choosing one’s domicile – one where basic freedoms remain.
 

 


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China Faces 15 Trillion Bombshell As Shadow Banking Sector Collapses

We’ve spent more time than most documenting China’s wealth management product problem.

WMPs are part and parcel of Beijing’s sprawling shadow banking complex which, until 2014 that is, helped pump trillions of yuan into China’s economy and shouldered the burden when it came to propping up the most important economy on the planet.

But WMPs are dangerous. In fact, we flagged them as an 8 trillion black swan back in August on the way to asking what would happen if China’s shadow banking sector were to collapse altogether.

This is space that’s running what amounts to an enormous maturity mismatched fraud. Of course the describes the entire fractional reserve banking system, but in the case of China’s WMPs, it’s all on the verge of implosion. Don’t believe us? Just ask anyone who bought into products sold by Fanya Metals’ Shan Jiuliang.

This is a very real threat to the Chinese banking sector. The multifarious nature of the space’s liabilities makes it virtually impossible for anyone to assess what the embedded risks are. As we first documented last summer, some 40% of credit risk is carried off balance sheet and that figure might well have grown recently, especially considering mid-tier bank’s propensity to extend new credit through new cateogries of channel loans that are classified as “investments” and “receivables”

In any event, China is desperate to revive the credit impulse and that means keeping the shadow banking space alive. Here’s BofA with more on China’s ticking WMP time bomb:

  • Growth rate accelerated. By the end of 2015, WMP balance reached Rmb23.5tr, up 56.46% YoY. Astonishingly, growth rate accelerated last year compared to the year before despite a high base – in 2014, the balance grew from Rmb10.2tr to Rmb15.0tr, up 47.25% YoY. The key drivers of this accelerated growth are joint stock banks whose WMP balance rose from Rmb5.67tr to Rmb9.91tr, up 74.8% YoY; city commercial banks, Rmb1.7tr to Rmb3.07tr, up 80.6% YoY. On the other hand, the big four state-owned enterprise (SOE) banks’ balance rose by a more moderate 53.2% YoY (from Rmb6.47tr to Rmb8.67tr) while foreign banks’ balance declined by 25.6% (from Rmb0.39tr to Rmb0.29tr).

  • Liquidity risk is rising. The outstanding balance of open WMPs, of which buyers can subscribe or redeem largely at will, reached Rmb10.32tr, up 96.95% YoY. They accounted for 44% of bank-run WMPs balance as of Dec 2015, up from 35% a year earlier. The increased share of open WMPs adds to the duration mismatch in the shadow banking sector and makes the system more prone to liquidity shock in our view. In 2015, banks issued Rmb158.41tr worth of WMPs, i.e., Rmb13.2tr a month on average. If WMP buyers decide to ‘go on strike’ for whatever reason, a liquidity crunch in the shadow banking sector could quickly develop in our view.

  • Implicit guarantee still largely in place. Only Rmb1.37tr worth of open WMPs, representing 13% of the total, are priced based on NAV. Also, the portion of closed WMPs that are priced similarly is tiny. This means that the vast majority of WMPs are still sold with the so-called “expected return”, which is largely viewed as promised return by WMP buyers by our assessment. In 2015, only 44 WMP products, or 0.03% of matured products during the year, caused investors to lose money. This loss ratio appears unusually low in our view. It is interesting to note that most of the 44 products were sold by foreign banks.

  • Individual buyers still dominant. As of Dec 2015, individual investors, including high net-worth individual investors, accounted for Rmb13.34tr WMP balance, or 56.6% of the total (institutional investors, 30.6%; inter-banks, 12.8%). They subscribed to Rmb101.49tr of the newly issued WMPs during the year, representing 64.1% of the total. Mood of individual investors are more volatile than institutions in general.

The bottom line is this: if this implodes, it will not only tank the entire Chinese banking system but the global economy as well, as the amount of liabilities here is quite frankly enormous. 

 


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China’s Crowd-Sourced Housing Bubble Goes “Crazy” – $585,000 For A 65 Square Foot ‘Apartment’

Via PandaHedge.com,

The price of home price in China’s tier one cities (Beijing, Shanghai, Guangzhou and Shenzhen) started another around of rally in the last couple months, and became “crazy” in Feb as described by the Chinese who form lines to buy the apartments everywhere.

When I saw this online commercial as below, I cannot help asking myself: Really?  This place can be sold as a “home” (I thought it’s just a kitchen), and at this price ($9k per sqf)?

lian jia

The ads is posted on the web site of China’s biggest online real estate agent Lianjia, showing a 6 square meters (65 sft) property which asks for RMB 3.8milion ($585k in total or $9k per sft).  Frankly speaking, this place has its good selling points: sitting at a good school zone, close to the subway and not subject to the real estate restriction policy. But really, $9k per sqf? 

Maybe you think the tiny kitchen is an isolated case, but let’s look at the following general price data.

Chart 1: Tier 1 cities ended the YoY price decline since June 2015 and enjoyed a strong rally as it did in 2010 and 2013. 

Price YoY

Chart 2:  Absolute price level of tier 1 cities (Shenzhen, Beijing and Shanghai (RMB/sqm))

3 cities absolute price

Source: Wind, blue line: Shenzhen, red line: Beijing, and blue dot line: Shanghai

The median home price in China’s top 3 tier 1 cities ranges between $0.5k to 0.6k per sqf (RMB 33k to 43k per sqm).  Based on Trulia’s data in 2015, the median home sales in NY is $1.5k per sqf and that in San Francisco is $0.95k per sqf.  However, the median household income in Shanghai is only $15,400 per year while that in NY/SF is around $59,000/$84160, so the home price to income ratio in China’s tier 1 cities is higher than those in US tier 1 cities.

Chart 3:  Price change % of tier 1 cities in the last five years

Price range YoY

Source: Wind, from left to right, Shenzhen, Beijing and Shanghai

So will investing in the tier one properties bring you stable income?  Let’s take a look at the rent yield.

Chart 4: Tier 1 cities’ rent yield in the last eight years (%)

Rent yield

Source: Wind; Red: Shanghai, Blue: Beijing and Pink: Shenzhen

 The trend of rent yield has been declining and now the yield stands at only around 2%.  But if we take a look at real yield, it’s another picture

Chart 5: Tier 1 cities’ rent yield minus China 10 yr treasury yield (%)

Rent real yield

Source: Wind; Red: Shanghai, Blue: Beijing and Pink: Shenzhen

Apparently, you will have negative real income if you investing in China properties.  Your investment return comes from the next buyer/speculator or the people who are stupid enough to pay 20 to 25 times home price to house income (if they really can afford).

You must wonder how the average Chinese people can afford a living place as the home price to income ratio is so high.  Yes, you are right, the average Chinese people or even the white collar/professionals are not able to afford the home price in tier 1 cities, but they can “invest” in the property market just like they did in the A share equity market through leverage.  For the A share equity market, we can estimate the leverage through the level of “margin debt”.  However, there’s no such a metric to estimate the size of the leverage used in the property market.  But we can get a remote sense from another perspective.  We all know January new RMB loans hit a record high RMB 2.51 trillion, while the deposit of industrial corporate only increased RMB 800 billion.  It means that a decent part of the loans did not go into industrial corporate’s bank accounts to support the real economy.  Where did it go?  Apparently the margin debt in equity market was dropping in Jan, then you know the answer.

In addition to the leverage part, there’re more concerns in the equity part: down payment.  For speculator, they like to buy as many as home in the same area so they can “manage” the price through volume control.  Right now China’s real estate policy still mandates 25% to 30% down payment when you buy a property, so the equity part itself demands significant cash flows (tier 1 cities’ average home price is around $1.2 million to $1.5 million per unit, so 25% to 30% down payment for 100 units is still a big number in China.  Yes, it’s not wrong number, 100 units is a normal case for a group of speculators who will buy the whole apartment complex).  Here are two ways how the speculators get around this entry barrier?

  • The real estate agents provide margin for the down payment. To boost the transactions and earn the commission, the agents provide 50% to 70% lending of the down payment part and make sure the buyers have enough money to finish the transaction. In reality, the buyer may only pay 10% down payment (agents lend him 70% of the 30% down payment requirement) to buy a home.  The speculator’s leverage is loosened from 1:3 to 1:10 through this down payment leverage.  Right now, the buyer not only owns money to the banks but also the agents.  But it does not matter in a quick and steep upward market, as the speculators will turn over their inventory quickly and make a fortune of it.  All they need is big enough equity to leverage the bubble.  How big is the size of down payment leverage?  From the public information of three top agents (Lianjia, 5i5j, and Fang), we know that they provided this kind of down payment leverage for transactions with the value of around RMB 500 billion.
  • Some small individual speculators use “crowdfunding” to make the down payment. Per Wiki, crowdfundingis the practice of funding a project or venture by raising monetary contributions from a large number of people, today often performed via internet-mediated registries.  Crowdfunding is popular in the tech space, but in China, speculators use it to fund their bets in the property market.  Ironically, they use Wechat as the internet platform to organize the crowdfunding.  In these days, as long as you walk into any Starbucks in Shanghai, you will hear people discussing crowdfunding their “real estate investments”.  The problem is, it’s difficult to define ownership in a crowdfunding support down payment, because it’s impossible to put 100 or 200 people’s names under a property’s ownership.

Anyway, the current crazy bubble in China’s tier 1 cities smells the same as the A share bubble which was boosted by the margin debt in the last two years.

We know it will end badly when the margin debt bubble is pierced.

*  *  *

Shortly after completing this note, Bloomberg runs the following headline:

China State Media Warns of Home Price Surge in Top Cities

 

Some developers and real estate agents created illusion of massive demand for homes that led to purchases by panic buyers, according to a commentary from Xinhua written by reporter Zheng Juntian on Monday.

 

More than 30% buyers of homes in Shenzhen city made purchases as investment, Xinhua cites data from unidentified researcher

 

Local govts should prevent home prices from rising overly fast and avoid speculative demand buying homes with financial leverage

So having herded people into the stock market and blown them up; and then back into housing (easing mortgage restrictions etc.), the authorities will now proceed to yell "bubble" in a crowded (and over-levered) 'theater' of real estate. We sense the social unrest building as we speak.


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