Month: January 2018

While America’s nationwide economy is reportedly firing on all cylinders, the picture is very different from 10s of 1000s of Alaskans dealing with a state-wide recession forced to turn to the government for healthcare and food prompting questions from state lawmakers about the sustainability of those ‘safety-net’ programs.

Some states are more equal than others…

As The Anchorage Daily News reports, Gov. Bill Walker’s administration projects 240,000 people to be enrolled in the Medicaid health-care program next year, up from 163,000 in 2015.

And 101,000 Alaskans were receiving food stamps in September, up from 72,000 a year earlier, according to preliminary federal data.

In total, the program covers nearly one-third of the state’s population.

“It’s going to eat us alive if we don’t manage it,” said Soldotna Republican Sen. Peter Micciche, who oversees the state health department’s budget for the Senate.

Walker’s administration has acknowledged the spike in numbers and says it’s working to keep costs in check.

But it also points to a remarkable fact: The state’s annual costs for Medicaid have barely budged even as it covers nearly 50 percent more people.

“75,000 more people have had access to health care, and we’re spending the same state dollars,” said Pat Pitney, Walker’s budget director, at a Senate committee hearing earlier this month.

As for food stamps, formally known as the Supplemental Nutrition Assistance Program or SNAP, the federal government covers the full cost of Alaskans’ benefits, which was $190 million last year.

The state pitches in $10 million to administer the program.

Anti-hunger advocates want to see adequate budgets for their government programs rather than rely on the free market. They also oppose making it more difficult for people to qualify for assistance programs given how many Alaskans are struggling, said Sarra Khlifi, program manager at the Alaska Food Coalition.

Khlifi said her members — social service organizations focused on fighting hunger and its causes — have been noticing more consistent demand, instead of in the past when clients arrived at the end of the month after using up their food stamps.

But, As SHTFplan’s Mac Slavo notes, higher taxes to fund government programs only force those living paycheck to paycheck to also enter into these very programs, which were supposed to be designed to eliminate hunger. It’s the vicious cycle of a government attempt to fix a problem they started.

 

*  *  *

Once again the headlines of an ‘aggregated’ nation’s ‘wealth’ hide the ugly realities for so many real Americans at home.

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Authored by Irina Slav via OilPrice.com,

Texas is set for another oil boom, with production this year expected to hit a record high. That’s according to Karr Ingham, the oil economist who created the Texas Petro Index — a composite based on several upstream indicators.

 

The December 2017 reading of the index was 188.8, up from 151.2 in December 2016. This is still far below the peak of 314.2, which was reached in November 2014, a few months after the price slide began, but it’s much better than 2016 readings. In fact, the TPI has been rising for 13 months in a row.

[As a reminder, The Dallas Fed’s Manufacturing Survey spiked this month]

Now, that’s obviously thanks to higher prices and more efficient production, and Ingham noted both, adding, however, that oil price predictions are “all over the map”. Still, he forecast that oil production in both Texas and the United States as a whole will break the previous records. For the Lone Star State, Ingham predicted total production of 1.423 billion barrels this year, or around 3.9 million bpd, beating its previous record of 1.263 billion barrels (3.46 million bpd), set in 1972.

If prices stay above $60 a barrel, this would spur a strong rebound in oil and gas drilling in Texas and in the other southern states, as forecast by the Dallas Fed in a survey among oil executives conducted at the end of last year. At the time of the survey, WTI traded below the $60 threshold, but yesterday it hit $66.66, so there’s a very good chance that it will remain above $60 for a while, unless something unforeseeable happens.

The Energy Information Administration’s (EIA) latest weekly petroleum status report pegged daily production at 9.88 million bpd, of which 9.37 million bpd was from the Lower 48. The authority’s drilling productivity report said that in January the average daily production in Texas’s two largest shale plays, the Eagle Ford and the Permian stood at 1.242 million bpd and 2.794 million bpd, respectively. These are set to rise to 1.57 million bpd in the Eagle Ford and 2.87 million bpd in the Permian.

And that’s not all. New well production is also increasing in the two Texas plays: for the Eagle Ford this averaged 1,200 bpd this month, but next month it will rise to 1,281 bpd, according to the EIA. Average new well production in the Permian was lower than this, at 628 bpd this month but expected to rise to 632 bpd in February.

So, for now Texas’ oil and gas prospects look very bright. But how long it will shine is anyone’s guess.

The near term seems clear, unless OPEC and Russia decide to put an early end to their production cut deal. While drillers expand their production, the state could pocket 27 percent more from severance taxes, land rates, and royalties from the industry than previously calculated if WTI stays above $60. That’s about $3.3 billion in oil revenue, from the earlier estimate of $2.6 billion

But the production expansion in the Eagle Ford and the Permian will have to be measured. Today, Brent and WTI prices reacted negatively to doubts that U.S. shale oil production is growing too fast. Of course, they also reacted to a stronger greenback, so the doubts about the shale patch weren’t the single reason for the slight decline, but the fact remains that too fast a growth rate wouldn’t do Eagle Ford and Permian drillers any favors — but slow and easy could do the trick.

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Donald Trump 1 – Deep State 0

In a highly anticipated decision, on Monday evening the House Intelligence Committee voted to make public the memo alleging what some Republicans say are “shocking” surveillance abuses at the Department of Justice (DOJ).

In immediate response to the vote, the Committee’s top democrat Adam Schiff said that “we’ve crossed a deeply regrettable line”, adding that the “committee voted to put the president’s interest above the interest of the country.”

Today this committee voted to put the president’s interest above the interest of the country, @RepAdamSchiff says of R vote to release memo https://t.co/jHLS2Jkt45

— lesley clark (@lesleyclark) January 29, 2018

The decision weeks of speculation over whether the memo, which was drafted by staff for committee chairman Devin Nunes (R- Calif) would be made public. At the same time, it intensifies the dispute over what Democrats say is an all-out assault by Republicans to undermine special counsel Robert Mueller’s probe into Russian interference in the 2016 election.

Now the fate of the 4-page FISA memo is in the hands of Donald Trump: as we discussed earlier, the document will not be immediately released as under the House rule Republicans used to override the classification of the four-page memo, President Trump now has five days to review and reject its publication.

But, as per Bloomberg’s reporting earlier, the White House has signaled support for the document’s release and is widely expected to defy the DOJ in allowing the publication to go forward. The DOJ has opposed the release of the document, reportedly infuriating President Trump.

While Nunes has described the memo as “facts,” Democrats have slammed it as a collection of misleading talking points they are unable to correct without exposing the highly classified information underpinning the document.

As Bloomberg disclosed earlier on Monday, releasing the memo without allowing them to review it on those grounds, Assistant Attorney General Stephen Boyd wrote to Nunes, would be “extraordinarily reckless.”

The reason for the DOJ – and the Democrats’ fury – is well-known: Republicans who have read the memo have hinted heavily that it contains information that could unravel the entire Mueller investigation, long described by the president as a “witch hunt.”

* * *

While the precise contents of the memo remain unknown, it’s believed to contain allegations that the FBI did not adequately explain to a clandestine court that some of the information it used in a surveillance warrant application for Trump adviser Carter Page came from opposition research funded by the Clinton campaign, now known as the “Steele dossier.”

As Bloomberg reported earlier, citing three House lawmakers who have read the memo, the memo claims FBI officials didn’t provide a complete set of facts in requests made to a Foreign Intelligence Surveillance Act court to obtain a warrant or warrants on Carter Page, a Trump campaign associate.

Furthermore, the memo claims important details were left out that might have kept a judge from issuing a surveillance warrant, or possibly two, targeting Page. Those include its claims that investigators were relying partly on an unverified dossier put together by an opposition research firm that hired a former British spy, Christopher Steele — work that was funded by Trump’s opponent, Hillary Clinton, and Democrats.

The memo also spotlights Deputy AG Rod Rosenstein’s role in approving the warrant application, according to the New York Times. Rosenstein appointed Mueller and has become a recent target on the right — as well as reportedly garnering the frustration of the president.

* * *

According to The Hill, it’s unclear how much input the DOJ will have prior to the publication of the memo. Typically, when sensitive documents are declassified, the agencies with equities in the intelligence weigh in to assess whether its release would damage national security. But the committee initially stonewalled the DOJ from viewing the document because, as one committee member put it last week, “They’re the ones that have the problem.”

On Monday morning, deputy press secretary Raj Shah hinted on CNN that the DOJ would also not have an opportunity to review the document during the White House pre-release review. “The Department of Justice doesn’t have a role in this process,” he told CNN.

FBI Director Christopher Wray was reportedly allowed to view the document in the committee’s secure spaces over the weekend. A committee spokesperson declined to comment on Monday, as did the FBI.

Another unanswered question revolves around the highly-classified intelligence that underpins the memo, which came from documents provided to the committee by the DOJ as part of an agreement brokered by House Speaker Paul Ryan (R-Wis.). The DOJ has said that the release of the memo would be an abrogation of the terms of that agreement, an assertion that spokesmen for both Ryan and Nunes reject.

Lawmakers say the underlying intelligence justifying the memo’s allegations is so sensitive that only eight members of Congress are able to view it. Nunes and ranking member Adam Schiff (D-Calif.) are two of the eight figures, but the other members of the Intelligence Committee are not. The top two lawmakers on the Senate Intelligence Committee are also part of the so-called Gang of Eight, but while they have access to the underlying intelligence, Nunes has denied committee requests to see the memo.

“Seeking Committee approval of public release would require [House Permanent Select Committee on Intelligence] committee members to vote on a staff-drafted memorandum that purports to be based on classified source materials that neither you nor most of them have seen,” Boyd told Nunes.

Nunes has brushed aside the notion that the memo wouldn’t be persuasive without the underlying intelligence to substantiate its claims, calling the argument Democratic obstruction of his investigation into DOJ misconduct.  The memo is a committee work product and the responsibility for releasing it, or not releasing it, rests with Congress.

The underlying intelligence, however, belongs to the executive branch, and Trump could unilaterally make it public if he wished.

For now, however, the decision whether the FISA memo will be made public – an event which is supposed to help Trump greatly in ongoing crusade against Special Counsel Mueller – is entirely in Trump’s hands.

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In an ugly echo of the GE debacle from two weeks ago, MetLife stock tumbled 10% after hours on Monday after the company announced that it would revise prior financial reports because of overdue monthly pension benefits that it had failed to pay to possibly tens of thousands of workers in past years.

Specifically, MetLife had uncovered a “material weakness” in internal control over financial reporting of its annuity business and expects to increase reserves in total between $525m and $575m pre-tax. It also disclosed that the Securities and Exchange Commission ​enforcement staff ​“has made an inquiry” about the matter. MetLife said it also is responding to questions from its lead state regulator, the New York Department of Financial Services, and other state regulators.

Shares tumbled as much as 10% on the news.

From the press release:

Management of the company has determined the prior release of group annuity reserves resulted from a material weakness in internal control over financial reporting. MetLife expects to increase reserves in total between $525 million and $575 million pre-tax, to adjust for reserves previously released, as well as accrued interest and other related liabilities. The amount of the reserve increase is based in substantial part on actuarial, legal, statistical, and other assumptions. If actual facts and factors differ from those the company has assumed, the reserve the company has established could be adversely or positively affected.

Full-year net income for 2017 was cut by $165 million to $195 million, the New York-based insurer said Monday and added that it intends to make prior period revisions to reflect the balance of these adjustments in the appropriate historical periods. The company also expects to correct historical periods for unrelated errors in those periods, as required by accounting standards. Those errors were previously recorded in the periods in which the company identified them.

The company said it is responding to inquiries from the U.S. Securities and Exchange Commission, as well as state regulators from New York and other locations.

What does this mean? As auditor Francine McKenna noted, the part about “currently reviewing its processes and procedures for identifying unresponsive and missing international group annuity annuitants and pension beneficiaries” simply means that Metlife had no idea how many people they owed.

“Like property escheatment. Unclaimed potentially dead people.”

Explaining this further, MetLife is one of numerous large and highly rated life insurers that agree to take responsibility for some or all of the payments due participants in private-sector plans from employers such as Sears Holdings and PPG Industries. These deals are called “pension risk transfer.” Many employers with old-fashioned pension plans, under which they pay monthly benefits to retired workers, are eager to reduce their exposure to investment and interest risk in running pensions by striking risk-transfer agreements with insurers.

Those deals provide assets for investment, while helping the employer cut the risk of volatility in results. But they also require insurers and the employers to clean up and transfer data for many workers, including some that have left the company long ago.

And here lies the rub:

The New York insurer disclosed the unpaid pensions in mid-December and has been working with a firm that specializes in finding addresses to get in touch with the retirees who are owed money. It had set a goal to determine by Feb. 1 how much money it owed people. A law firm hired by MetLife has been investigating how its retirement business erred in allowed the pensions to go unpaid, according to the WSJ.

The New York insurer disclosed the unpaid pensions in mid-December and has been working with a firm that specializes in finding addresses to get in touch with the retirees who are owed money. It had set a goal to determine by Feb. 1 how much money it owed people. A law firm hired by MetLife has been investigating how its retirement business erred in allowed the pensions to go unpaid.

As Bloomberg adds, the charges add to a expenses MetLife incurred last year, many of them spurred by the separation of a U.S. retail business called Brighthouse Financial Inc.

Chief Executive Officer Steve Kandarian spun off that unit in August to help it remove some volatility in results and focus on other businesses including ones selling insurance through employers and international markets.

As a result of the uncovered weakness, MetLife pushed back its earnings release for the fourth quarter, which was originally scheduled for this week, to Feb. 13 and said it will hold a call the next day. MetLife still expects to file its 10-K by March 1

Following the MetLife news, the big question on many investors minds is whether GE and MET are ‘lone wolves’ or this type of unreported “material weakness” is a pervasive issue across the entire industry?

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An unknown hacker or group of hackers perpetrated the “biggest theft in crypto history” Friday morning when they stole what at the time were $500 million worth of NEM tokens – formerly one of the ten most popular digital currencies.

The hack was only the latest in a series of security breaches at digital currency exchanges that have resulted in hundreds of millions – if not billions – of dollars in customer funds’ being taken.

But how exactly do hackers continue to get away with these hacks?

Bloomberg has published a handy guide explaining how hackers are able to pull off these digital heists, and then launder the money

1. How did the hackers pull it off?

Coincheck hasn’t disclosed how their system was breached beyond saying that it wasn’t an inside job. The company did own up to a security lapse that allowed the thief to seize such a large sum: It kept customer assets in what’s known as a hot wallet, which is connected to external networks. Exchanges generally try to keep a majority of customer deposits in cold wallets, which aren’t connected to the outside world and thus are less vulnerable to hacks. Coincheck also lacked multi-signature security, a measure requiring multiple sign-offs before funds can be moved.

2. Where did the stolen coins go?

That’s one of the stranger aspects of these heists. Because transactions for Bitcoin and the like are all public, it’s easy to see where the NEM coins are — even though they’re stolen. Coincheck has identified and published 11 addresses where all 523 million of the stolen coins ended up. You can see for yourself online. Trouble is, no one knows who owns the accounts. Each one has been labeled with a tag that reads “coincheck_stolen_funds_do_not_accept_trades : owner_of_this_account_is_hacker.” NEM developers created a tracking tool that would allow exchanges to automatically reject stolen funds.

3. Does that mean the hackers won’t be able to cash in?

Not necessarily. The thief may be able to shake off surveillance by going through a “tumbler,” a service like ShapeShift that offers cryptocurrency trading without collecting personal data. Converting NEM coins into a more anonymized currency, like Monero, could conceivably launder them. But the huge total amount of money stolen presents a challenge. NEM trading was disabled on ShapeShift as of Monday.

4. What else can NEM developers do to fix this?

They could change the NEM blockchain by rolling back the record to a point before the attack. The so-called hard fork would create two versions of NEM, one that has never been hacked and another containing the stolen funds. While this approach worked for Ethereum in 2015, NEM Foundation Vice President Jeff McDonald said a fork is not an option.

5. Aren’t these exchanges being hacked a lot?

Yes, there’s a long history of thefts at cryptocurrency exchanges and wallets, dating back to the infamous robbery of Tokyo-based Mt. Gox in 2014. As prices of digital assets have soared, the platforms have become increasingly juicy targets for hackers. North Korean leader Kim Jong Un has allegedly sent his hackers out to swipe digital coins as his country faces tightening trade sanctions. One researcher estimates that more than 14 percent of Bitcoin and rival currency Ether has been stolen.

6. So what can you do to keep crypto-assets safe?

The lesson for crypto-enthusiasts is that exchanges are prime targets for hackers and no place to store your coins. One alternative is to keep the assets in software wallets, which come in online, mobile and desktop varieties. Hardware wallets are dedicated devices that offer an additional layer of security. For the extra paranoid, there is always the analog option: printing out the private keys for your coins on paper.

* * *

It’s worth noting that at least one person – Russian-born Alexander Vinnick – has been charged for helping hackers launder bitcoin stolen during the infamous Mt. Gox heist through BTC-e – a shadowy cryptocurrency exchange that was purportedly launched by Vinnick to be a haven for digital criminals.

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As a follow up to our Saturday post  on the record number of negative equity or “underwater” used car trade-ins, (see: “It Just Gets Worse And Worse”: A Record 32% Of Used Car Trade-Ins Are Underwater”), we present an article submitted by auto industry strategist Daniel Ruiz, who explains what the current state of used car prices, and stretched loan terms, tell us about the real state of the economy.

From Blinders Off, LLC

Time to Equity

My approach to analysis consists of starting with a specific sector of the auto industry then peeling back one layer at a time until I truly understand how it works. More often than not, I find used vehicle values staring back at me by the time I get to the core of various sectors. This is why I’ve said many times that used vehicle values are the foundation for the entire auto industry. I’ve devoted a lot of time and effort in the search for data to support this theory.

I knew that if successful, I could use that data to better understand the cyclical nature of the industry and to more accurately predict future performance. I now feel very confident that I’ve found what I was searching for. I’ll start with a quick recap for those that are unfamiliar with my work.

Why Used Vehicle Values?

I believe that only jobs and credit are more important than used vehicle to the health of the automotive industry. I say this because 86% of new-vehicle sales are financed, and under normal conditions, those vehicles are traded within three years.

Knowing that most car loans have a 60-72 month duration, we can assume that the majority of vehicles traded at the 3-year mark are not paid off. The level of equity in these loans directly affects consumer behavior and in large part determines when the vehicle will be traded for another new vehicle. The frequency, with which this very large group of consumers replaces their vehicles has a direct impact on new-vehicle sales velocity.

The Search For Evidence

I thought to myself, the theory sounds good, it makes sense, I’ve seen it in action many times throughout my career in retail automotive sales, but is there any evidence out there to support it? To find this evidence, I knew that I would have to figure out a way to measure equity on new vehicle loans at the 3-year mark. So how do I do that? Well, I started by constructing loans using average new vehicle transaction prices, average interest rates and average loan terms for each year going far back as I could. I then took that information and plugged it into an amortization calculator. But there was one still one missing piece, the average value of 3-year-old used vehicles (Luckily I know someone who’s a bit of an expert on that subject). After many hours of research and brainstorming, I developed a formula that very accurately measures the historical value of 3-year-old vehicles. I then went back to the amortization chart, compared the principal balance owed at 36 months to the average value of a 3-year-old vehicle for each calendar year and PRESTO! I had my answer to the equity question. From that point, a little further analysis was necessary to find the month in which the value of the vehicle exceeded the principal balance owed on the loans. The end result is what I will refer to from now on as time to equity.

Does Time To Equity Impact The Performance Of Auto Loans?

While discussing my theory about used vehicle values and how they affect the health of the auto industry, I couldn’t help but notice the growing concerns about subprime auto loan delinquencies. I began to wonder if the value of the asset which backs the loans might have some thing to do with it. So I decided to compare subprime delinquencies at  auto finance companies to my time to equity calculations. The results were encouraging to say the least.

As a general rule, the longer the loan, the higher the risk of default, since the ability of the borrower to repay the is more likely to change. However, when one takes into consideration that few auto loans are held till maturity, I think it’s fair to say that time to equity is more relevant to risk than than the length of the loan. So what’s most capable of changing how long a loan reaches equity? You guessed it, used vehicle values.

Aside from credit worthiness and employment status, auto lenders rely mostly on LTV ratios and maturity variations to measure risk. However, little attention is given to the performance of the asset that backs the loans. In my opinion, this leads to reactive lending behavior with a tendency to tighten credit standards when risk is at its lowest and to loosen when risk is at its highest.

Perhaps some good used vehicle value analysis could be of value…

Higher Prices Come With Consequences

Time to Equity is affected by more than used vehicle values. The ever-increasing price of new and used vehicles has forced consumers to extend their loan terms to all-time highs in order to afford their monthly payments. Extending the length of a loan slows down the rate at which the principal balance is payed down and therefore increases the time to equity. Here’s a look at what’s to come:

Could Credit Scores Provide Further Clues And Tie It All Together?

I want to be very clear that what I say next is an observation of behavior and not an attack on people with poor credit scores. I am well aware that bad things happen to good people (job loss, illness, etc) and a bad credit score can be the unexpected result. With that said, the data clearly shows that borrowers with credit scores <620 tend to be less responsible than those with higher credit scores.

The longer it takes borrowers with credit scores <620 to reach an equitable position on their auto loans, the higher the risk of default. On the other hand, the borrowers with higher credit scores don’t tend to default on their loans when it takes longer to reach an equitable position; they keep their vehicles longer which slows new-vehicle sales velocity.

 

In simple terms:

• Less Time to Equity = Lower Credit Risk and a Faster Velocity of New-Vehicle Sales.
• More Time to Equity = Higher Credit Risk and a Slower Velocity of New-Vehicle Sales.

I hope this article was helpful. As always, thank you for your time and consideration.

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During a Sunday exchange between House Judiciary Committee Chairman Bob Goodlatte and Fox News’s Maria Bartiromo over recently released FBI text messages, Bartiromo asked if there were any unreleased texts between two anti-Trump FBI agents referring to destruction of evidence.

Goodlatte gave a guarded response to Bartiromo’s question, however he did mention an “earlier investigation led by former director Comey” in which evidence was destroyed – including by people working for former presidential candidate Hillary Clinton: 

Bartiromo: After the election, they talked about this “secret society,” did they also talk about destroying evidence? I’m told there are some texts that haven’t been released yet about “we gotta get our hands on the hard drive” or “we gotta get our hands on the thumb drive.” 

Goodlatte: Well there’s certainly a lot of questions about things we do know about with regard to the earlier investigation led by former director Comey where evidence was destroyed before anybody outside of the FBI could get a look at it. Including evidence destroyed by people working for the Democratic presidential candidate.

Goodlatte’s comment about “evidence destroyed by people working for the Democratic presidential candidate” was likely in reference to Clinton aide Justin Cooper – who was involved in setting up Hillary Clinton’s personal server, and told the FBI that he smashed Hillary Clinton’s cell phones with a hammer at least twice: 

Longtime Bill Clinton aide Justin Cooper, who helped set up the private email account that Hillary Clinton used as secretary of state, was the person usually responsible for setting up her new devices and syncing them to the server. Top aides Huma Abedin and Monica Hanley, as well as another person whose name is redacted, also helped Clinton set up her BlackBerry.

According to Abedin and Hanley, Clintons old devices would often disappear to parts unknown once she transitioned to a new device.

Cooper, according to the report, did recall two instances where he destroyed Clintons old mobile devices by breaking them in half or hitting them with a hammer. –Politico

 

Meanwhile, as we reported on Sunday, the DOJ is withholding over 85% of the text messages between Peter Strzok and Lisa Page, having submitted just 7,000 of the 50,000 recovered by the department. This does not include emails on personal devices, which the two anti-Trump investigators referred to over their FBI issued mobile phones. 

In a January 19 letter from Assistant Attorney General Stephen Boyd to Congressional investigators, the DOJ said that they would not be providing “purely personal” text messages.

“The department is not providing text messages that were purely personal in nature,” Boyd wrote. “Furthermore, the department has redacted from some work-related text messages portions that were purely personal. The department’s aim in withholding purely personal text messages and redacting personal portions of work-related text messages was primarily to facilitate the committee’s access to potentially relevant text messages without having to cull through large quantities of material unrelated to either the investigation of former Secretary of State Hillary Clinton’s use of a personal email server or the investigation into Russian efforts to interfere with the 2016 presidential election.”

Furthermore, special counsel Robert Mueller was allowed to review the batch of texts and make redactions as he saw fit.  Between the 85% of text messages Congressional Investigators don’t get to see, Mueller’s redactions, and now – an alleged scramble within the FBI to destroy evidence, one has to marvel at how hard the swamp is resisting being drained. 

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Authored by Simon Black via SovereignMan.com,

After having traveled to more than 120 countries in my life, the only person I know who’s been to more places than I have is Jim Rogers.

Jim is a legend– a phenomenal investor, author, and all-around great guy.

(His book Adventure Capitalist is a must-read, chronicling his multi-year driving voyage across the world.)

Some time ago while we were having drinks, Jim remarked that he occasionally tells people, “If you can only travel to one foreign country in your life, go to India.”

In Jim’s view, India presents the greatest diversity of experiences– mega-cities, Himalayan villages, coastal paradises, and a deeply rich culture.

My answer is different: Japan.

 

To me, Japan isn’t even a country. Japan is its own planet… completely different than anywhere else in ways that are incomprehensible to most westerners.

(Watch my friend Derek Sivers explain it to a TED audience here.)

On one hand, this is a culture that strives to attain beauty and mastery in even mundane tasks like raking the yard or pouring tea.

Everything they do is expected to be conducted to the highest possible standard and precision.

They start the indoctrination from birth; Japanese schools typically do not employ janitors and instead train children to clean up after themselves.

Later in life, the Japanese salaryman is expected to practically work himself to death (or suicide) for his company.

Obedience and collectivism are core cultural values, and the tenets of Bushido are still prevalent to this day.

One of the most remarkable examples of Japanese culture was the aftermath of the devastating 2011 earthquake (and subsequent tsunami) in the Fukushima prefecture.

It was the worst natural disaster in Japanese history, causing nearly as much damage as the atomic bombs over Hiroshima and Nagasaki in 1945.

Yet rather than panic and pillage, the Japanese sat patiently outside of their ravaged homes waiting for direction from the local authorities.

Then again, this is also the place that brought us ‘Hello Kitty,’ and where men have to be admonished to not grope young girls on the subway.

The Japanese paradox also applies to its economy, which has effectively been in stagnation for nearly 30 years.

Japan’s government debt is more than 1 QUADRILLION yen (over $10 trillion) and more than twice the size of the entire economy.

This debt is so large that in the 2018 budget that was just released last month, the government reported that it will take more than 40% of tax revenue to make debt payments this year.

Despite such gruesome figures, however, there is no panic here on Planet Japan.

The government has told everyone to not worry, and that seems to be good enough.

Banks and investment funds continue to plow their depositors savings into government bonds– which, by the way, carry NEGATIVE interest rates.

In other words, investors are loaning money at rates which are less than zero to a government that’s so heavily indebted it has to spend 40% of its tax revenue just to make debt payments.

This is pure insanity. But on Planet Japan, it’s perfectly normal behavior to engage in ritualistic financial suicide.

It wasn’t always this way.

After being demolished by the Allies in World War II, Japan set out to rebuild itself.

And the growth that came out of the next several decades was so astonishing that it became known as the economic miracle.

Japan ultimately became the world’s second largest economy after the United States.

And there certainly was cutting edge technology and productivity that contributed to that success.

Back then, some of the most popular consumer products in the world like Nintendo’s original game console, or the Sony Walkman, were Japanese.

And Japan’s production efficiency was the envy of the world.

But underpinning all that growth, especially during the later part of the boom in the 1980s, was a tidal wave of paper money.

Japan’s central bank was growing the country’s money supply at a dangerously unsustainable rate.

And, as with most cases where central banks conjure too much money out of thin air, the Bank of Japan created a dangerous asset bubble.

With so much money in the system, the prices of nearly everything– stocks, real estate, etc. skyrocketed.

The asset boom made people feel very wealthy, and that the good times would last forever.

They didn’t. Japan’s Nikkei 225 stock index finally peaked at nearly 39,000 points on December 29, 1989.

And over the next few years, the giant economic bubble rapidly deflated as the central bank gradually ‘tightened’ the money supply and raised interest rates.

Within two years the Nikkei 225 had lost half of its value. Within a few years more it had fallen to as low as 8,000.

Even today, nearly THIRTY YEARS later, Japan’s stock market is still 40% below its all-time high.

During the boom, some Japanese investors and businesses were astute enough to trade some of their overvalued yen for undervalued foreign assets while they still had the chance.

They bought real estate in California, businesses in Europe, etc. These investments ensured their prosperity even after the Japanese market collapsed.

But most Japanese kept all of their eggs in one basket. And they still haven’t recovered their losses.

There are very interesting lessons here. Namely– the good times NEVER last forever.

Markets never simply go straight up. There are always inevitable corrections.

Problem is, most folks tend to believe that market corrections will be very short lived, as if asset prices will fall 20% or 30% and then be right back to where they were before after a year or two.

Few of us can imagine the value of their retirement accounts collapsing– and NEVER recovering.

But Planet Japan shows us that the market can crash– and stay in the gutter– for DECADES…

… and that, when asset prices are at all-time highs, a prudent person ought to consider taking some money off the table and seeking undervalued alternatives.

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And to continue learning how to safely grow your wealth, I encourage you to download our free Perfect Plan B Guide.

via RSS http://ift.tt/2nl6uLA Tyler Durden

In a conveniently-timed leak and narrative-shifting moment, NBC news reports ‘sources’ have confirmed that President Trump, referring to his wife’s Clinton-sponsored failure to win state office, asked former FBI acting director McCabe: “ask your wife how it feels to be a loser.”

As a reminder, in 2015 McCabe’s wife had run for state office in Virginia.

She accepted nearly $500,000 in donations to her campaign from the super PAC of Clinton ally and former Virginia governor Terry McAuliffe.

She lost her race by just over 2,000 votes.

In the past, Trump had also reportedly asked McCabe how he voted in the 2016 election and repeatedly made public references to campaign donations his wife had received from an ally of Hillary and Bill Clinton.

How can FBI Deputy Director Andrew McCabe, the man in charge, along with leakin’ James Comey, of the Phony Hillary Clinton investigation (including her 33,000 illegally deleted emails) be given $700,000 for wife’s campaign by Clinton Puppets during investigation?

— Donald J. Trump (@realDonaldTrump) December 23, 2017

According to NBC News, the day after President Donald Trump fired James Comey, he became so furious watching television footage of the ousted FBI director boarding a government-funded plane from Los Angeles back to Washington, D.C. that he called the bureau’s acting director, Andrew McCabe, to vent, according to multiple people familiar with the phone call.

Trump demanded to know why Comey was allowed to fly on an FBI plane after he had been fired, these people said. McCabe told the president he hadn’t been asked to authorize Comey’s flight, but if anyone had asked, he would have approved it, three people familiar with the call recounted to NBC News.

The president was silent for a moment and then turned on McCabe, suggesting he ask his wife how it feels to be a loser…

McCabe replied, “OK, Sir.”

Trump then hung up the phone.

Both the White House and the FBI declined to comment on the call.

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One wonders whether the ‘three sources’ aware of the call were in the room? (which seems odd that Trump would say those things in front of anti-Trump operatives remaining in The White House) or if these were ‘eavesdropped’ sources thanks to improperly-attained FISA warrants.

Of course, all of this comes after McCabe stepped down today (or was pushed) and ahead of expectations that the deep-state-exposing memo may be voted for release this evening.

via RSS http://ift.tt/2rSp1UY Tyler Durden