The very first, very incomplete section of track for the California high-speed rail boondoggle is running nearly $2 billion over budget and is now projected to cost $8 billion, 27 percent more than original estimates.
Ralph Vartabedian of the Los Angeles Timeshas been documenting the skyrocketing costs of the program, warning it’s going to be wildly over its $64 billion budget. This comes as not surprise to the project’s critics, who have been warning all along that costs were underestimated and benefits exaggerated. He reports:
Officials have disputed outside estimates that indicate the project’s price tag is growing — including one in December by the Federal Railroad Administration that cited a cost of $9.5 billion to $10 billion. In 2015, the authority’s main consultant, WSP, also had said in an internal assessment that costs were rising.
The overruns raise a serious possibility: If the reasons for the Central Valley increase also affect other parts of the Los Angeles-to-San Francisco project, then it could drive up the price for the entire $64-billion system by billions of dollars.
Critics long have forecast that the final tab could top $100 billion. But supporters of the bullet train — the nation’s largest infrastructure project — reject those assertions, saying the rail line will become a cornerstone of the state’s transportation system and that such cost increases should be taken in stride.
No, a high-speed train will not become a cornerstone of transportation in California unless it bans cars (heaven knows, Gov. Jerry Brown would eventually try if his term weren’t ending in a year). It will instead require heavy state subsidies in order to operate, unless they massively jack up the price of tickets (currently estimated at $86 to travel the completed length, from San Francisco to Los Angeles).
The ballot initiative authorizing the building of the train does not permit subsidies, so that might be a bit of a challenge.
But nobody can say they were not warned. The man behind the initial ballot initiative to authorize the rail’s construction, Quentin Kopp, realized the project had turned into a massive scam and financial boondoggle. He’s been suing to try to halt its construction. Watch ReasonTV’s recent interview with him below:
On Wednesday, the President announced his plan to cut taxes for Americans, return jobs to America and return the country to economic prosperity.
It’s a tall order to fill, and the proposed tax reform is a “Christmas Wish List” that will have to checked twice to determine which parts are “naughty” and “nice.”
“The belief that tax cuts will eventually become revenue neutral due to expanded economic growth is a fallacy. As the CRFB noted:
‘Given today’s record-high levels of national debt, the country cannot afford a deficit-financed tax cut. Tax reform that adds to the debt is likely to slow, rather than improve, long-term economic growth.’
The problem with the claims that tax cuts reduce the deficit is that there is NO evidence to support the claim. The increases in deficit spending to supplant weaker economic growth has been apparent with larger deficits leading to further weakness in economic growth. In fact, ever since Reagan first lowered taxes in the ’80’s both GDP growth and the deficit have only headed in one direction – lower.’
That little green bump in the deficit was when President Clinton “borrowed” $2 trillion from Social Security to balance the budget, and since there were no cuts to spending, led a surplus that lasted about 20-minutes.
The problem is that the tax plan may not provide the benefits as hoped. While President Trump suggests the plan will return “trillions” of dollars locked up overseas to create jobs, the reality, according to Goldman Sachs, is likely closer to $250 billionthat will primarily go to share buybacks, dividends, and executive compensation.
Of course, such actions do not boost economic growth but are a boon to Wall Street and the 10% of the economy that invest in the market.
But here is the key point with respect to tax cuts. History is replete with evidence that shows tax cuts DO NOT lead to a rapid growth in the economy. As shown below, the slope of economic growth has been trending lower since the “Reagan tax cuts” were implemented.
Lastly, tax cuts have relatively low economic multipliers particularly when they primarily only benefit those at the top of the income spectrum. With the average household heavily indebted, credit is being used to sustain the standard of living, there is likely to be little transfer of “tax savings” back into the economy.
“It is a simple function of math. But the following chart shows why this has likely come to the inevitable conclusion, and why tax cuts and reforms are unlikely to spur higher rates of economic growth.”
As is always the case…“it’s the debt, stupid.”
However, here are plenty of discussions both for and against the tax plan so you can decide for yourself.
2Y Yield's biggest spike since Nov (to its highest since Nov 2008)
Yield Curve (5s30s) flattened most since June (to flattest since Nov 2007)
USD Index had best month since Dec 2016 (ending 6 month losing streak)
Gold's worst month since Nov 2016
Industrial Metals worst month since Dec 2016
Oil's best month since Apr 2016
Bonds & Bullion were the month's laggard as stocks and the dollar surged…
Trannies & Small Caps ripped…
As Energy, Retailers, and Financials were best (year's laggards)…
AAPL was a notable laggard in September as FANGs managed small gains…
Equity market gains were also driven by hopes about taxes…
September was an ugly month for Treasuries…(worst month since Nov 2016 for bonds)
The Dollar Index reversed its medium-term downtrend in early September after Draghi's comments…
It appeared to also coincide with the lagged upturn in President Trump's approval rating…
Notably EURUSD suffered its first monthly loss since February breaking the longest run of monthly gains versus the dollar since January 2013… as 1.20 seemed like the line in the sand for Draghi…
Oil had a big month as PMs and Copper dropped…
* * *
Finally we focus down on this week…
The Dow was the laggard on the week, barely scratching out a gain as Small Caps surged – Russell 2000's best week since Dec 2016
Dow was rammed above 22,400 into the close…
But while Small Caps have ripped, high-tax names appear unimpressed by Trump's plan…
FANG Stocks manage to recoup all of Monday's losses…
Banks continue to decouple from the yield curve…
Notably XIV – the inverse VIX ETF – hit a new record high today…
As VIX closed at a weekly closing record low, monthly closing record low, and quarterly closing record low…
Treasury yields all rose together this week by 6-8bps…
The Dollar Index rose 1% on the week – its biggest weekly gains since Dec 2016, led by Aussie and Euro weakness…(NOTE last two days have seen some give back)
Crude rallied on the week as PMs slipped lower…
And finally, a quick reminder – stocks have never… ever… been more expensive than this…
On September 21, 25% of Trump supporters said they had a very favorable view of the NFL and 11% had a very unfavorable view.
As of Sept 28, those numbers have dramatically changed with 33% of Trump supporters say they have a very unfavorable view of the NFL and 16% report having a very favorable view.
Simply put, change or Trump will be proved correct…
Notably, as Townhall reports, during Thursday night's NFL games, players stood and locked arms during the Anthem rather than kneeling as more than 200 players did over the weekend.
A new report from The Armstrong and Getty Radio Show has sent shockwaves throughout the sports world after it was claimed that members of the NFL’s Oakland Raiders may have purposefully allowed their star quarterback to get sacked multiple times after he refused to kneel during the National Anthem.
If true, this would essentially mean that an NFL football game was illegally thrown over anger that one of the teams star white players did not believe that kneeling during the nation’s anthem was the correct way to protest supposed racial injustice in America.
In other words, an epic level scandal.
During the anthem, virtually the entire team was seen kneeling other than the teams coaches and star quarterback Derek Carr. Unfortunately, this may have not set well with the team’s offensive line as they were apparently the players who spearheaded the entire idea to kneel as a team in the first.
“This is one hell of a scandal with the NFL, could ruin the whole league,” claimed the show before detailing the fact that Carr was sacked two times in a row on the teams second drive and that the team’s usually dependable center snapped the ball at the wrong time in three different instances. Extremely capable receivers also made multiple “weird” drops of passes thrown by Carr that T.V. announcers even noted at the time.
The radio show then revealed bombshell “insider information” from an “extremely reliable” source who claimed that members of the Oakland Raiders did indeed throw the game as a sort of punishment for Carr choosing to not use the countries anthem to make a political statement.
“He wants to stand alone, he can stand alone on the field,” one of the teams offensive lineman said, according to the shows source. Keep in mind, the offensive line are literally the guys whose job it is to protect the quarterback, in this case the star player who didn’t kneel.
Amazingly, the circumstantial (and possible direct) proof didn’t end there as the show then claimed that this same source also revealed that a local team reporter got wind of the story and asked a team official for comment. What he was apparently told in response has all the hallmarks of a team trying to cover up a major scandal.
“If you report on this, you will be blackballed, you will not get access to the Raiders period,” the reporter was supposedly told. “Your career covering the team will be over”.
While there are obviously major legal and ethical issues if this is true, it also paints a sad picture of a football league divided by a political and media establishment all too happy to cause as much racial divide in the country as possible. For as long as Americans focus on differences between each other, the global elites power remains completely unthreatened.
FULL REPORT:
Authors Note: Its also important to consider that there is almost no chance that any member of the Raiders organization, whether coaches, the front office, or players (especially Carr himself) will publicly admit that this happened if it is indeed true. The sheer amount of mayhem it would cause is enough to keep almost anyone quiet. Anonymous player quotes and sources may be all we will ever have to go on.
Television critic Glenn Garvin reviews three shows that will be begging for your attention on Monday. Perhaps give Wisdom of the Crowd a miss:
For unintentional laughs, mixed with gasps of horror, give CBS’ Wisdom of the Crowd a look. It’s the latest of the network’s manifestos cheerleading the use of information technology for totalitarian purposes. In Person of Interest, a tech zillionaire hijacks a government computer to identify (and deal unpleasantly with) people likely to commit crimes. In Bull, a hired-gun shrink uses information culled from social media to manipulate courtroom juries. Now we’ve got Wisdom of the Crowd, a reverse Ox-Bow Incident in which a cell-phone app helps craft more efficient lynch mobs.
Who has 10 weirdly long fingers and wants to argue with Kmele Foster about the propriety of using race as a way to talk about criminal injustice? Not this guy, but rather that gal: Reason‘s own beloved Editor in Chief, Katherine Mangu-Ward.
While 'hope'-strewn survey data (see today's Chicago PMI) are staging a self-reinforcing resurgence in the last week or two, 'hard' economic data (that doesn't rely on the emotional responses of humans) has collapsed to its weakest since Feb 2009.
This is the 6th monthly drop in 'hard' economic data in a row, something that has never happened before, pushing the spread between 'hope' and 'reality' to a record high.
Of course, for now, stocks and 'soft' survey data remain locked in a tight mutually reinforcing uptrend of hope – ignoring reality…
The divergence of official inflation as measured by the government versus inflation realized by the consumer and businesses has never been greater, in our opinion. Go ask anybody on the street in America and Europe if think “doing life or business” is getting more expensive.
We have some thoughts on what is the matter with the inflation data:
1. Defining inflation
What is your definition of inflation? What are we trying to measure? The prices in a consumer basket of goods and services? Wages? Asset prices?
2. Measurement problems
The official measurement procedures seem archaic given the advent of big data in the past few years. Even Bloomberg is out with a recent piece warning the Fed about low-balling inflation due to measurement errors.
Low-Balling Inflation Puts the Fed at Risk
Beware of any metric that doesn’t fully reflect housing prices.
The U.S. has an inflation problem. It has nothing to do with inflation being too high or too low. Unlike the raging inflation of the 1970s, it doesn’t need to be solved with a lengthy and painful recession. Instead, it is a problem of measurement because the cost of housing — the single biggest expense for many Americans — isn’t explicitly included in the inflation data.
…Recent research from the Bank for International Settlements finds that the transmission mechanism for monetary policy has shifted. In their paper “Monetary Policy Transmission and Trade-Offs in the United States: Old and New,” Boris Hofmann and Gert Peersman concluded that changes in monetary policy — rate hikes or rate cuts — are being filtered into the economy increasingly through housing prices and less so via businesses raising prices as in years past. So even though the Federal Reserve’s policies are causing those prices to rise, they aren’t registering in the form of higher overall inflation.
..This creates a troublesome landscape for executing monetary policy. The Fed is wedded to a 2 percent annual inflation target without being able to get a reliable read on whether it is accomplishing that goal. – Bloomberg, September 28
Companies are finding ways to raise prices without raising pricing. Paying the same price for, say, a bag of M&Ms with now only 20 candies versus last year’s 32 candies is inflation price per unit. This should be adjusted for in the government stats, but we doubt they capture all of it. Even if they try, it is unlikely they can keep up with the reality of the gazillion prices in the economy.
4. Over massaging the data
Hedonic price adjustments by the BLS is total B.S.. The government economists make quality adjustments to prices. Alan Greenspan used to use the analogy of eye surgery when explaining hedonics. Let us paraphrase Greenie to make our point: Historically, eye surgery would cost you $100 in current dollars but was done with a hacksaw. Today, eye surgery is done with laser technology and costs $10,000. Adjusting for the quality of today’s surgery, the price has not increased. Seasonal adjustments? We would love to buy at some of those seasonally adjusted prices. We call bullshit.
We could go on and on and on about the many problems with how inflation is defined and measured.
In The Government’s Interest To Keep Inflation Data Low
Keep it in perspective, comrades, the government has an interest in keeping the inflation data low. The U.S. policymakers changed how housing is calculated in the CPI after the big inflation of the 1970’s. Remember, social security payments have cost of living adjustments (COLAs) linked to inflation. Imagine if inflation breaks out with all the boomers joining the SS ranks? Big problem.
The government’s interest in keeping inflation low is even greater now given the high debt load that most developed countries are carrying.
Nasty Feedback Loop If “Inflation” Picks Up
Ponder the ugly feedback loop: “Inflation” increases, interest rates rise, which increases interest payments on the Yuuge national debt. The larger budget deficit alone is inflationary, but, in the future it is likely to be monetized. This will accelerate inflation as inflationary expectations increase. Nasty spiral.
Monetary policymakers know the downside of a nasty debt deflation and makes them understandably cautious about raising interest rates even though they are sowing the seeds of the deflation they fear as they blow asset bubbles, which will inevitably burst. Coming out of the Great Recession they suffer from “recency bias.”
It seems we now live in a type of Hegelian dialectic of deflation/inflation with the synthesis being asset bubbles, which immediately sow the seeds for another round of deflation/inflation. Comrades!
Furthermore, real wages decline if real-world prices are rising regardless of how inflation is being measured, correctly or incorrectly. It may explain, in part, the punk economic recovery and the rise of populism. That is real wages are lower than what is currently measured.
Fake News
So, when we see headline inflation defined as low, or the words lowflation, we think, and hate to say it, “Fake News!”
The markets should see through the inflation data but don’t care as they are having too much fun making money.
Euroflation
Nevertheless, our friends at Focus Economics are out with a great infographic on inflation in the ‘zone, which we thought you should see.
Yesterday a federal appeals court let stand a decision overturning the District of Columbia’s tight restrictions on carrying guns in public, reinforcing a circuit split that invites the Supreme Court to settle the issue of whether the constitutional right to keep and bear arms extends outside the home.
Last year a federal judge in D.C. said it does, and last July a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit agreed. Now that the full court has declined to rehear the case, only the Supreme Court can save the District’s highly discretionary carry permit policy, which requires applicants to provide a “good reason” why they want to be armed. An ordinary resident’s desire to defend himself does not count.
In its decision last May, the D.C. Circuit panel concluded, based on historical evidence and the Supreme Court’s reasoning in the landmark Second Amendment case District of Columbia v. Heller, that “the individual right to carry common firearms beyond the home for self-defense—even in densely populated areas, even for those lacking special self-defense needs—falls within the core of the Second Amendment’s protections.” Since “the law-abiding citizen’s right to bear common arms must enable the typical citizen to carry a gun,” the court said, the District’s law is clearly unconstitutional, amounting to “a total ban on most D.C. residents’ right to carry a gun in the face of ordinary self-defense needs, where these residents are no more dangerous with a gun than the next law-abiding citizen.”
The U.S. Court of Appeals for the 7th Circuit reached a similar conclusion in 2012, when it overturned an Illinois law that prohibited most people (aside from police officers, security guards, and a few other exceptions) from carrying ready-to-use guns. That same year, by contrast, the U.S. Court of Appeals for the 2nd Circuit upheld New York’s requirement that people seeking permission to carry handguns in public show “proper cause.” In 2013 the U.S. Court of Appeals for the 3rd Circuit upheld a similar New Jersey law, requiring a “justifiable need” for a carry permit, and the U.S. Court of Appeals for the 4th Circuit upheld a Maryland law demanding a “good and substantial reason.”
Last year the U.S. Court of Appeals for the 9th Circuit upheld a California law requiring “good cause” for carrying a concealed weapon. “The Second Amendment does not protect the right of a member of the general public to carry concealed firearms in public,” the court declared, noting that Heller mentions “prohibitions on carrying concealed weapons” as a kind of law that most 19th-century courts had deemed consistent with the Second Amendment. “There may or may not be a Second Amendment right for a member of the general public to carry a firearm openly in public. The Supreme Court has not answered that question, and we do not answer it here.”
In June the Supreme Court declined to hear an appeal of that decision, provoking strong objections from Justices Clarence Thomas and Neil Gorsuch. “I find it extremely improbable that the Framers understood the Second Amendment to protect little more than carrying a gun from the bedroom to the kitchen,” Thomas wrote in a dissent joined by Gorsuch. “I do not think we should stand by idly while a State denies its citizens that right, particularly when their very lives may depend on it….Even if other Members of the Court do not agree that the Second Amendment likely protects a right to public carry, the time has come for the Court to answer this important question definitively.” The D.C. Circuit has amplified that argument by confirming the stark disagreement among federal appeals courts about the scope of the right to bear arms.