Month: September 2018

The Commodity Futures Trading Commission (CFTC), tasked with monitoring the complex derivatives that catalyzed the 2008 financial crisis, is now being forced to shrink its headcount due to lack of funding. The CFTC is reportedly offering some of its employees buyouts and early retirements after it has been refused years of requests for increased funding. The agency reportedly has over 700 employees.

The CFTC started to inform some workers last month that it would be giving them as much as $25,000 to leave. These email communications were reported by Bloomberg. The agency is also trying to encourage some employees to consider an early retirement which would, in some cases, allow employees to keep their benefits.

Prior to the 2008 collapse, the CFTC was widely held to be somewhat of an afterthought. Back then, it was only primarily in charge of regulating agricultural futures. This changed after Congress bestowed upon the agency the responsibility of overseeing the swaps market after a global economic near-meltdown made it clear how dangerous these derivatives could be. The government likely felt like it had to do – well, something – to help justify almost $1 trillion in bailouts.

The CFTC’s $249 million budget, however, hasn’t grown in size proportion what what the agency is responsible for today. For instance, the agency is now also tasked with regulating cryptocurrency derivatives after CME and CBOE both started to offer bitcoin futures last December. The head of the agency, Chairman J. Christopher Giancarlo, who was put into his position by President Trump, hasn’t been able to successfully lobby for more money since he started last year.

Erica Elliott Richardson, the CFTC’s director of public affairs, told Reuters back in May:

“We are absolutely astounded by the decrease in the CFTC’s budget. Chairman Giancarlo takes this budget decrease incredibly personally, and is currently meeting with our finance team to figure out a path forward for the agency.”

That path forward seems to now be forcing employees out the door. According to Bloomberg, agency buyouts are only eligible for those who have had three years of continuous service in the federal government. Early retirement can be qualified for by having at least 20 years of government experience and being at least 50 years old. Additionally, any worker with 25 years of government service is eligible, regardless of age.

Back in July of this year, we reported on the CFTC’s award of $30 million to a J.P. Morgan whistleblower who pointed out information proving that the bank neglected to inform its wealthy asset-management clients about conflicts of interest involving the bank’s investment recommendations.

Once again, the Achilles heel of over-regulation rears its head: everything costs money. Theoretically, the more the government chooses to police the markets, the less effective and less cost efficient they may become. The CFTC making staff cuts with arguably the most responsibility its ever had is just another soon-to-be-forgotten brick in the wall of examples. 

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Submitted by Priceonomics

Every year, it seems it’s harder to get in to the top colleges in the United States. Perfect grades and SATs were barely enough a decade ago to get admission into the Ivy League and now competition is even more fierce.

But just how hard is it to get into a top college today and how does that compare to the past? If you got into a top school a decade ago, would you have a chance today? Are some schools even more difficult to get into than others?

We analyzed data from Priceonomics customer BusinessStudent.com who assembled admissions rates from top schools in 2006 and compare them to twelve years later in 2018. We restricted our analysis to just the top schools in the United States a decade ago (the top 51according to US News back then) to see how their admissions rates changed.

Yes, it’s much harder to get into a top school today than it was in 2006 and admissions rates have plummeted across the board. The school that’s had the sharpest drop in acceptance rates is the University of Chicago, followed by Northwestern and Duke. Of the 51 schools we looked at, 49 schools were more difficult to get into, but 2 actually had higher admissions rates.

***

A common refrain among alumni from a top school after seeing current admissions rates is “Wow, I don’t think I could get in if I applied today.”

The data confirms there is some true to this notion.

Not only that, but the more competitive the school, the harder it is to get into.

The chart below shows the schools ranking in 2006 (grouped by 10s) and their past versus current admissions rates.

A top ten school in 2006 had a 16% admissions rate. Today, that rate is just 6.4%, a decline of almost 60%. Each tranche of school is harder to get into, but “hypercompetition” is increasing the fastest at the most elite universities.

So, which schools are seeing their acceptance rates fall the most over the last twelve years?

By a large margin, the University of Chicago takes the number one spot in terms of declining admissions rates. Candidates saw rates drop from 38% in 2006 to just 7.2% in 2018. Northwestern and Duke also saw their admissions rates plummet by over 70%.

Did any schools get easier to get in during this time period? Just two:

William & Mary and Syracuse saw their admissions rates actually increase slightly during the this time period. The rest of the schools that make the above list saw admissions rates drop, though not as fast as at other top schools.

***

Across the board, it’s become much more challenging to gain admission to a top school. What could be driving these changes?

First, there is some indication that the average applicant applies to more schools today than in the past. An article in The Atlantic relates that while a handful of school applications per student might have been the norm in the past, now 10 or 15 applications is more normal. More applications per person to the same number of slots at top schools means admissions rates go down.

Next, there is increased global demand for spots at top American schools. With the rapid development of Indian and China, there are more parents in these countries who want to send their kids to the best schools in the world, most of which are located in the United States.

Lastly, the financial returns from attending to top schools in the country continue to increase, even while college on the whole may not be as good a deal as it once was. Put differently, in a highly competitive global economy, having a degree from Harvard is extremely valuable, even if it cost you a lot money. On the other hand, a degree from an equally expense school without the prestige of Harvard may not be worth the mountain of debt. The result? More applications for schools like Harvard.

As evidenced by this analysis, in fact, the higher ranked the school, the more difficult admission is becoming. The highest tiered schools are now increasingly harder to get into, with the exclusive club of Harvard, Princeton, Yale and Stanford becoming even more exclusive. Schools like University of Chicago, Northwestern and Duke have seen their admissions rates plummet during this time period as well. Of the top schools we looked at, only William and Mary and Syracuse have gotten less competitive.

Think you could still get into a top school in 2018?

The final chart here shows the admissions rates at the top schools a decade ago and their changing admissions rates.

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Canadian housing construction starts slowed in August, coming in at a seasonally adjusted annual rate of 200,986 vs. 205,751 in July – missing expectations of 210,300, according to CBC. 

The decrease came as the annual pace of urban starts fell 2.5 per cent to 184,925 units. Starts of urban multiple-unit projects such as condos, apartments and townhouses fell 2.4 per cent to 132,700 units in August while single-detached urban starts fell 2.6 per cent to 52,225 units. –CBC

“The national trend in housing starts continued to decline in August from the historical peak that was recorded in March 2018,” said Bob Dugan, CMHC chief economist. “This moderation brings total starts closer to historical averages, largely reflecting recent declines in the trend of multi-unit starts from historically elevated levels earlier in the year.”

Of note, housing starts are in Metro Vancouver are slowing to a greater extent, falling 4% from its March 2018 peak, according to Steve Saretsky of the VanCity Condo Guide.

A slowdown in housing starts suggests homebuilders perceive risks ahead or simply can’t make new projects feasible due to elevated land prices and construction costs, which is typical at this stage of the cycle. This does not bode well for future economic growth considering housing and the consumption that goes along with it (renovations, furniture, etc) are a big driver of the economy. In Canada, household consumption and residential investment as a percentage of real GDP is nearly 65%. –VanCity Condo Guide

 

Saretsky notes that a rebound in housing starts seems unlikely “given how extended this current expansion is,” while the labor market is at capacity and rising interest rates should cause investors to reduce exposure considering that Vancouver home sales are at a 17-year low. 

Instead, the construction industry is working at a frantic pace to complete existing units. Housing under construction in Metro Vancouver ticked upwards to a new record high in August- hitting a staggering 43,684 units. well above annual population growth of 30,000. –VanCity Condo Guide

Recently completed units, meanwhile, are hovering at all time highs…

And as Saretsky notes, “this will be an important sector to watch moving forward as construction as a share of total employment in the province of BC is nearly 10%.” 

For more detailed Vancouver housing information, check out Saretsky’s August newsletter below: 

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To many it was clear from the beginning: “It’s an easy case,” said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “He said in the tweet he had financing, and apparently he didn’t. … It’s about as straightforward as you can get.“

And on Thursday afternoon, the SEC confirmed that indeed just those two words blasted to the entire world and contained in Elon Musk’s infamous “funding secured” tweet – it would emerge just days later that funding was not, in fact, secured- would serve as the basis for a securities fraud litigation against Elon Musk; and while Tesla wasn’t named in the suit as a defendant, the SEC is seeking to bar Musk, Tesla’s largest shareholder and its top executive, from serving as an officer or director of any U.S. public company.

It almost didn’t happen that way: according to the WSJ, the SEC complaint only came after a last-minute decision by Musk and his lawyers to fight the case rather than settle the charges.

The SEC had crafted a settlement with Mr. Musk—approved by the agency’s commissioners—that it was preparing to file Thursday morning when Mr. Musk’s lawyers called to tell the SEC lawyers in San Francisco that they were no longer interested in proceeding with the agreement, according to people familiar with the matter. After the phone call, the SEC rushed to pull together the complaint that it subsequently filed, the people said.

Considering that this is an open and shut case, one wonders if Musk was once again on drugs when he decided that instead of settling, he would fight the charges instead. Or he simply saw the “playbook” and decided to roll the dice…

In any case, a fighting Elon is just what the SEC – its reputation in tatters after years of not pursuing “big name” stock manipulators – needs to restore its image.

The case ranks as one of the highest-profile civil securities-fraud cases in years. Its filing less than two months after the Aug. 7 tweets by Mr. Musk also marks an unusually rapid turnaround by an agency that has been under fire for its perceived failure to promptly bring significant cases in the financial crisis and other episodes. “It means there was not that much investigation they needed to do to get comfortable that it was a case they should bring, but also a case they can win,” said Michael Liftik, a former SEC enforcement lawyer now at Quinn, Emanuel, Urquhart & Sullivan LLP.

And the reason why the SEC is confident it will win is simple: Musk lied with the clear intent to not only boost the stock price but – and this is the truly criminal part – to “punish” the shorts. The SEC said that contrary to the statements he made in several Twitter messages on Aug. 7, Musk “knew that he had never discussed a going-private transaction at $420 per share with any potential funding source.” The agency said the statements and omissions of fact caused disruption to the market for Tesla shares—which rose more than 10% the day of the tweets—and harm to investors especially the bears. After all, Musk has been fighting a war against short sellers for years.

Stormy weather in Shortville …

— Elon Musk (@elonmusk) April 3, 2017

In fact, it would be very easy to make this into a criminal case if the DOJ decides that it would like to piggyback on what is a slam dunk.

A far bigger problem is now facing Tesla longs: should they express their fanatical support of Musk and stay on board, or admit that there is a problem, and sell. After all, a Tesla without Musk at the top would not only lose the visionary, but would have a tougher time raising funds, according to David Whiston, an analyst for Morningstar Research Services.

“Without Musk, Tesla is just an auto maker burning too much cash and holding too much debt,” Mr. Whiston said.

And with all that in mind, the question is: what was Musk thinking, not only on Aug. 7 with his now infamous tweet, but today, when he decided to tear up the settlement agreement. Actually, we have an idea:

The SEC said in its complaint that “Musk stated that he rounded up the price to $420 because he had recently learned about the number’s significance in marijuana culture and thought his girlfriend ‘would find it funny, which admittedly is not a great reason to pick a price’.“

That would explain a lot.

* * *

After the SEC lawsuit was filed, Musk said that:

“this unjustified action by the SEC leaves me deeply saddened and disappointed. I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way.”

Of course he will say that. What is far more bizarre, is that the Tesla board – which already failed the company’s shareholders and its own fiduciary duty by giving Musk free reign to do virtually anything and everything, even tweet just two words which have not cost the company billions in market cap – doubled down, and in a statement from the BOD suggested it was willing to fight. And, the cherry on top, is that the Board called Tesla, which has never turned an annual profit, “the most successful US auto company in over a century.”

Here is the short statement issued by the board – where one can find two of Elon’s cousins and one brother – late on Thursday evening:

Tesla and the board of directors are fully confident in Elon, his integrity, and his leadership of the company, which has resulted in the most successful US auto company in over a century. Our focus remains on the continued ramp of Model 3 production and delivering for our customers, shareholders and employees.

Based on the above, one can be confident that the board is far more familiar with “marijuana culture” than Elon.

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Authored by Alan Macleod via Fairness & Accuracy In Reporting,

Media giant Facebook recently announced (Reuters, 9/19/18) it would combat “fake news” by partnering with two propaganda organizations founded and funded by the US government: the National Democratic Institute (NDI) and the International Republican Institute (IRI). The social media platform was already working closely with the NATO-sponsored Atlantic Council think tank (FAIR.org, 5/21/18).

In a previous FAIR article (8/22/18), I noted that the “fake news” issue was being used as a pretext to attack the left and progressive news sites. Changes to Facebook’s algorithm have reduced traffic significantly for progressive outlets like Common Dreams (5/3/18), while the pages of Venezuelan government–backed TeleSur Englishand the independent Venezuelanalysis were shut down without warning, and only reinstated after a public outcry.

The Washington, DC–based NDI and IRI are staffed with senior Democratic and Republican politicians; the NDI is chaired by former Secretary of State Madeleine Albright, while the late Sen. John McCain was the longtime IRI chair. Both groups were created in 1983 as arms of the National Endowment for Democracy (NED), a Cold War enterprise backed by then–CIA director William Casey (Jacobin, 3/7/18). That these two US government creations, along with a NATO offshoot like the Atlantic Council, are used by Facebook to distinguish real from fake news is effectively state censorship.

Facebook’s collaboration with the NED organizations is particularly troubling, as both have aggressively pursued regime change against leftist governments overseas. The NDI undermined the Sandinista government of Nicaragua in the 1980s, and continues to do so to this day, while the IRI claimed a key role in the 2002 coup against leftist President Hugo Chávez of Venezuela, announcing that it had

served as a bridge between the nation’s political parties and all civil society groups to help Venezuelans forge a new democratic future…. We stand ready to continue our partnership with the courageous Venezuelan people.

The Reuters report (9/19/18) mentioned that Facebook was anxious to better curate what Brazilians saw on their feeds in the run-up to their presidential elections, which pits far-right Jair Bolsonaro against leftist Fernando Haddad. The US government has a long history of undermining democracy in Brazil, fromsupporting a coup in 1964 against the progressive Goulart administration to continually spying on leftist President Dilma Rousseff (BBC, 7/4/15) in the run-up to the parliamentary coup against her in 2016 (CounterSpin, 6/2/17).

Glenn Greenwald (Intercept, 12/30/17) reported that “Facebook has been on a censorship rampage against Palestinian activists who protest the decades-long, illegal Israeli occupation, all directed and determined by Israeli officials.”

Soon after it partnered with the Atlantic Council, Facebook moved to delete accounts and pages connected with Iranian broadcasting channels (CNBC, 8/23/18), while The Intercept (12/30/17) reported that in 2017 the social media platform met with Israeli government officials to discuss which Palestinian voices it should censor. Ninety-five percent of Israeli government requests for deletion were granted. Thus the US government and its allies are effectively using the platform to silence dissenting opinion, both at home and on the world stage, controlling what Facebook‘s 2 billion users see and do not see.

Progressives should be deeply skeptical that these moves have anything to do with their stated objective of promoting democracy. Bloomberg Businessweek (9/29/17) reported that the far-right Alternative fur Deutschland (AfD) party went to Facebookheadquarters for discussions with US companies about how it could use the platform for recruitment and micro-targeting in the 2017 elections. AfD tripled its previous vote share, becoming the third-largest party in Germany, the far right’s best showing since World War II.

Public trust in government is at 18 percent—an all-time low (Pew, 12/14/17). There is similar mistrust of Facebook, with only 20 percent of Americans agreeing social media sites do a good job separating fact from fiction. And yet, worldwide, Facebook is a crucial news source. Fifty-two percent of Brazilians, 61 percent of Mexicans, and 51 percent of Italians and Turks use the platform for news; 39 percent of the US gets their news from the site.

This means that, despite the fact that even its own public mistrusts it, the US government has effectively become the arbiter of what the world sees and hears, with the ability to marginalize or simply delete news from organizations or countries that do not share its opinions. This power could be used at sensitive times, like elections. This is not an idle threat. The US created an entire fake social network for Cubans that aimed to stir unrest and overthrow the Cuban government, according to the Guardian (4/3/14).

That a single corporation has such a monopoly over the flow of worldwide news is already problematic, but the increasing meshing of corporate and US government control over the means of communication is particularly worrying. All those who believe in free and open exchange of information should oppose Facebook becoming a tool of US foreign policy.

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Millennials in New York are known for living in a state of perpetual brokeness – between student loans, $20 nightclub drinks and $15 avocado toast, it’s easy to understand why 70% of millennials have less than $1,000 in savings. 

Now we can add expensive, glorified closets to the mix, as the Wall Street Journal reports. 

30-year-old marketing manager Scott Levine lives in an $1,800 per month, 98-square-foot room in a postage-stamp of an apartment – “basically, a kitchen” – with two roomates. Every week, someone from Ollie – his property manager, stops by to drop off towels and toiletries. 

A “community-engagement team” at Ollie helps plan Mr. Levine’s social calendar. A live-in “community manager”—sort of like a residential adviser for a college dorm—gets to know Mr. Levine and everyone else living on the 14 Ollie-managed floors of the Alta LIC building, known as Alta+, and finds creative ways to get them engaged in shared activities, like behind-the-scenes tours of Broadway shows or trips to organic farms. –WSJ

“Life in general can be a bit of a headache,” says Mr. Levine. Thanks to Ollie, he adds, “Everything is done for you, which is convenient.”

Ollie’s business model is all about convenience and roommates – usually single people in their 20s and 30s who have all amenities provided for them, while sharing a kitchen and common area. 

For city-dwellers accustomed to living cheek-by-jowl with people whose names they’ll never bother to learn, this might seem strange. But for young people still forming their postcollege friend groups—in an era when participation in civic life is down and going to a bar can mean huddling in a corner swiping on Tinder—it makes sense. So much sense that people put up with apartments so small they’re called “micro.” But hey, free shampoo. –WSJ

Meanwhile, startups such as Ollie and Common are competing with big-city real-estate developers. Common manages 20 co-living properties in six cities where roommate situations are more common, such as New York, Los Angeles and Washington DC. They have approximately 650 renters according to CEO Brad Hargreaves. 

“Our audience is people who make $40,000 to $80,000 a year, who we believe are underserved in most markets today,” Mr. Hargreaves says.

Other startups are managing existing homes and apartments, “Airbnb-style” as the WSJ puts it. 

Bungalow, which just announced $64 million in funding, wants property owners to offer space to “early-career professionals” looking for a low-maintenance place to stay. It charges rent that’s “slightly higher” than what it pays those owners, a company spokeswoman says. It currently maintains over 200 properties—housing nearly 800 residents—across seven big cities, says co-founder and CEO Andrew Collins.

As with Common and Ollie, Bungalow advertises that it furnishes the common areas in its homes, installs fast free Wi-Fi, and cleans them regularly. The company also organizes events and outings to help you “build a community with… your new friends.” –WSJ

One of the underlying aspects of the co-living startup models is a technology platform that both advertises to prospective tenants and takes care of their needs once they’re living on-site. Ollie’s “Bedvetter” system, for example, shows apartments to potential tenants – and shows who’s already signed up to live there with links to their personal profiles in order to match roommates. Bedvetter also matches people into “pods” of “potential roommates” before they begin an apartment hunt. 

“It’s like online dating,” says Levine – while his roommate, Joseph Watson, 29, compares it to eHarmony or Match.com vs. Tinder, as it’s designed for long term pairings. 

“Micro Economics” 

While millennials in New York and other urban areas scramble to make ends meet, developers are making hand over fist on the co-living movement – even though the renters themselves are paying less than they would for a private studio. 

The Alta LIC building also has conventional apartments, but the co-living units are filling up faster, says Matthew Baron, one of the Alta LIC building’s developers. What’s more, he adds, he can get more than $80 a square foot for Ollie units compared with around $60 a square foot for the others, even though the Ollie ones are on the lower, less-desirable floors. –WSJ

Another complication with co-living arrangements is tricky community management. L.A.’s PodShare, for example, vets potential tenants beforehand – however issues with problem tenants are unavoidable. “We’ve hosted 25,000 people at this point, so there’s bound to be some problems,” says founder Elvina Beck. 

Common building tenant Teiko Yakobson said that the “community vibe broke down after Common eliminated the paid “house leader,” complaining that “We all just became strangers, and it was no better than living in any other apartment.” Common instead replaced the program with “centralized” community managers at the corporate level – which Hargreaves says is “more coherent” for them. 

It’s not all bad, however…

When it does work, co-living can re-create the kind of communities tenants seek online—ones grounded in common interests and shared socioeconomic status.

Mr. Levine, who not only lives in a co-living building but also works in a co-working space—and in whose social circle most people do either one of those or the other—is aware that, while this isn’t for everyone, he is hardly a standout. “One thing I’ve heard before is that I’m a stereotype of a New York millennial,” he says.

Just make sure you have earplugs in case your roommate is able to get laid in their respectively expensive, tiny room. 

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Authored by Daisy Luther via The Organic Prepper blog,

Have you heard about China’s dystopian new “social credit” program? If you haven’t, there’s a terrifying infographic from Bored Panda that I’ll be referencing throughout this article.

The good news is that this is happening in China, where we all know a Communist government has long been crushing freedom for the residents of the nation. You may think this doesn’t affect you because you’re in America, gosh-dang-it, but we’ve seen over and over again how a “great idea” in another country, no matter how dystopian, can spread like a viral contagion.

The bad news is that it is incredibly close to happening here. Heck, it is happening here.

Don’t believe it’s already happening? Let’s take a look.

Here’s some information about data collection in the United States.

We all know that our data is being mined and sold to the highest bidder all over the internet. A while back, I was looking for a new rental for the time that our lease runs out. I got some emails from landlords from Craigslist, made an agreement with one of them, and then the very next day, a utility company that I had never contacted sent me a creepy email reminding me of the length of time ahead I needed to schedule relocating my service.

Everything you do online is scanned and sent to people who will profit.

photo credit: Bored Panda

So what if someone on Facebook, Twitter, G-Mail, Yahoo Mail, Outlook, and everyplace else on the internet was collecting every single thing you typed, everything you read, and everything you searched up?

What if all that stuff got combined to create a picture of you, your beliefs, your moral convictions, and the way you think?

photo credit: Bored Panda

Don’t delude yourself into thinking that this will only be limited to China. This is something that will spread based on its “effectiveness.” Effectiveness at what?” you ask. Effectiveness at predicting your every move, from likeliness to pay a bill or honor a contract, to who you will most likely vote for in the next election.

There’s a reason that Mark Zuckerberg had to go to Congress and sit on a stack of books and testify. It’s because the information he has harvested and sold is so incredibly, horribly detailed. When you read the following infographic, you’ll see where I’m going with this.

photo credit: Bored Panda

This information is already being collected in the United States. You are tracked everywhere you go when you are online.

There’s very little you can do about it, but here are some options.

• Use browsers that are not Google Chrome. These are said to be the most anonymous browsers. (Remember that “secure” browsers will still track you.)

• Use search engines like Duck Duck Go and Startpage. (Here’s a list of search engines that don’t track you.)

• Use encrypted email. Here’s a list of some of the most secure services. (Proton Mail is the ONLY system that the NSA can’t get into and I’m in the process of switching over as much as possible.)

Of course, a lack of available information can also make you look sketchy in the eyes of those who wish to snoop. You know the old adage, “You have nothing to worry about unless you have something to hide.” Well, that’s not really true anymore. Privacy is important.

photo credit: Bored Panda

Right now, in China, the program is optional. But as more and more service providers join in, it will become more difficult to avoid. We see the same thing happening here in the United States. I literally went for almost a decade with no phone whatsoever. No cell, no landline. When people would ask for a number and I said I didn’t have one, they all thought I was lying. Finally, my phone number or lack thereof became such a detriment that I was forced to get one to be able to participate in things that were important to me.

The same thing is true of bank accounts. Over the past 20 years or so, with the advent of direct deposit and direct withdrawal, you simply cannot function in this country without a bank account. Then, of course, the banks are able to help themselves to a hefty fee from everyone and all the money in and out can be tracked. Good times.

Apple, by the way, is already giving people “trust scores” based on their phone calls and emails. Just in case you think I’m being far-fetched.

Here’s how this will be “sold” to any country adopting the practice.

It will make life “easier.” It will make things “cheaper.”  After all, if you’re a “good” person, it won’t be a problem, right?

photo credit: Bored Panda

How nice. Well, maybe.

But what if you run into a rough spot? You like an unpopular candidate or political philosophy? You are the voice of dissent? You homeschool instead of sending your kids to public school? You have some money problems? You have “too many” children? You think your friends are being idiots about something and you try to help them see the error of their ways through discourse?

Oops. Not so good anymore.

photo credit: Bored Panda

And that’s just for starters. Things could really, really go downhill from there. Welcome to rationing registration, and restriction in every single facet of life.

It could easily turn into a situation in which you can no longer function, have money, or be employed unless you toe the digital line.

photo credit: Bored Panda

That social aspect in the photo above? We’re already seeing this in spades in America since the last election. How many people lost friendships over politics? How many families saw strained relationships over the candidates? How many people now think their former friends are complete morons? How many people actually lost jobs and promotions and work buddies over it?

Take that to the next level. What if your popular opinions could ruin your life? A lot of folks would be much less likely to speak out if this happened. And dissent is the American way. Our country was quite literally BORN from dissent.

Here’s an example of how this could go bad if you find yourself on the “wrong” side of the political fence. If you get Blacklisted, suddenly everything you’ve worked for and built all your life is GONE.

photo credit: Bored Panda

If you don’t think it could happen here, you need only to look at Alex Jones. I don’t like him much, but he’s lost everything because some companies got together to ban him. He’s lost all his social media accounts. He’s lost his email list. He’s lost his ability to accept PayPal. I assure you it’s only a matter of time until he can no longer accept credit cards. If he can’t finance his business and can’t reach people on social media, he is completely silenced. If my site costs a couple thousand a month to operate, his would cost exponentially more with his populous staff of writers and the server capacity he’d need for all the traffic he gets.

You don’t have to like or support Alex Jones to see the broad, sweeping arm that took him down. None of us with a public profile is immune.

I wrote more about the social media purge here. Just because it doesn’t directly affect you or you’re not on social media doesn’t mean that it won’t have an effect.

photo credit: Bored Panda

Insidious bills get stealthily passed all the time while we are distracted by ridiculous things like the Kavanaugh hearings and the Kardashians and the Kaepernicks of the world. People are freaking out about football while algorithmic governance is creeping up, unchecked.

You can find that episode of Black Mirror on Netflix. It’s terrifying because you could honest-to-goats see it happening.

Start distancing yourself from “the system” as fast as you can. And then, fight this crap tooth and nail. We, the good people of America, have raised our voices before on things that we see as injustice and we’ve won.

This is the fight of our lives. This is the fight FOR our lives. If this goes down on the scale that it is in China, the ONLY recourse would be pulling the plug. Ending the system altogether and going back 200 years in time for a do-over. No more grid, no more system.

I hope it never gets to that, but I’m far from optimistic.

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Three years ago, when UBS looked at the world’s most expensive housing markets, it found that London and Hong Kong were the only two areas exposed to bubble risk.

What a difference just a few short years makes, because in the latest report by UBS Sealth Management which compiles the bank’s Global Real Estate Bubble Index, it found that six of the world’s largest cities are now subject to a massive speculative housing bubble. And while still unnaturally low mortgage rates are to blame for the rapid ascent of home prices, investors and offshore money laundering operators – especially in Canada – continue to play a role, as their favorite markets of Vancouver, Toronto and Hong Kong all made this year’s list.

Bubble risk appears greatest in Hong Kong, Munich, Toronto, Vancouver, London and Amsterdam. Major imbalances also characterize Stockholm, Paris, San Francisco, Frankfurt and Sydney.

This year’s study highlights increasingly strained affordability. Buying a small apartment in most world cities exceeds the budget of most people who earn the average annual income paid in the highly skilled service sector.

Prices continue to soar, but in half of the cities in the study, housing markets are booming with inflation-adjusted prices rising at least 5% in the last four quarters. However, in the other half of the cities house prices were stalling or declining.

According to UBS – if not Ben Bernanke – the typical signs of a housing bubble include real estate prices rising out of sync with incomes, as well as economic imbalances like excessive lending and construction activity. However, unlike the boom of the mid-2000s, there’s no evidence of simultaneous excesses in lending and construction, the report said, and outstanding mortgage volumes are growing at about half of the rate of the pre-crisis period.

“Although many financial centers remain at risk of a housing bubble, we should not compare today’s situation with pre-crisis conditions,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a statement.

That will hardly comfort all those millions of residents in the bubble cities who continues to find themselves priced out of the market. That said, there was some good news: while housing bubbles are still pervasive, the rate of price increases is slowing:

Inflation-adjusted city prices increased by 3.5% on average over the last four quarters, considerably less than in previous years but still above the 10-year average. They remained on an explosive uptrend in the largest Eurozone economic centers, as well as in Hong Kong or Vancouver. But the first cracks in the boom’s foundation have begun appearing: house prices declined in half of last year’s bubble risk cities.

As UBS warns, fewer and fewer resident households can afford to buy their own home. The crowding out of long-time residents from their local housing markets by foreign investors is triggering political reactions. This is observed most directly in Canada, Australia and New Zealand where recent regulations have emerged making it difficult for foreign buyers to snap up local real estate.

Foreign and buy-to-let investors are the main group being targeted by new regulatory measures. It is becoming more difficult, more expensive and in some cases outright impossible for them to acquire residential space. Especially in the luxury market, regulatory intervention can bring demand to a standstill and trigger a price correction.

So if not regular people then who is buying up the real estate? Answer: investors, who have outperformed stocks by buying housing and renting it back out.

Over the past five years, owner-occupied homes have been a good investment: the median total return of the most important financial centers was 10% annually, accounting for an imputed rental income and book profits from rising prices. So “golden concrete” has seemingly outperformed the stock markets.

According to UBS, Chicago was the only undervalued housing market in the 20-city index, while Milan, Singapore and Boston are deemed fairly valued. Ten cities, from New York to Sydney to Stockholm, are overvalued, while six are in bubble-risk territory, with Hong Kong’s market the most inflated. Still, some questions about the methodology linger: just a year ago, New York had been scored as fairly valued (it is now seen as “overvalued”).

As UBS further notes, last year the house price boom in key cities was already losing intensity and scope. Inflation-adjusted prices declined in almost half of the cities analyzed, which prompted UBS to warn that returns of owner-occupied homes in the next few years is questionable.

Yet while home prices may not be rising quite as fast as in recent years, houses in these cities remain out of reach for most ordinary homebuyers as prices in major cities have increased by 35% on average in the last 5 years:

Over the course of the last five years, house prices in major cities have increased by 35% on average. In San Francisco, Munich and Vancouver price growth was double the average. Overall, the price boom has not been spectacular, but it has been broad-based. Until recently nearly all the cities enjoyed rising house prices, something seen in the late 1980s and before the 2008 market crash. This exceptional breadth of the current house price boom has various roots. Easy financing conditions boosted demand almost everywhere. Major cities profited from the growing importance of the digital economy and the wider trend toward urbanization. Finally, the number of wealthy households searching for safe assets in the most attractive residential areas surged.

Why are most housing market inaccessible to mere mortals? Simple: incomes aren’t climbing fast enough to keep up with the price appreciation in many areas. For example, it would take a skilled service worker in Hong Kong 22 years of their average annual income to buy a 60-square-meter (650-square-foot) apartment near the city center. A decade ago it was 12 years.

Meanwhile, the U.S. has managed to avoid UBS’s bubble territory, and a repeat of the 2007 housing crisis, for now…even though markets like San Francisco and Los Angeles look set to give it another try…

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Submitted by Nicolas Colas of DataTrek

JP Morgan just launched the largest ever real-world blockchain application, developed to facilitate corporate cross-border payments. In that surprising development lies several lessons for public equity investors of financial services companies.

The classic paradigm of disruptive innovation assumes incumbent companies remain quiescent as new tech-enabled competition starts to nibble away at the low end of a market. This is not an assumption of corporate laziness. Rather, it makes sense that established businesses would actually not mind losing low-margin, low average revenue/unit customers. “Let the upstart take them… our return on capital actually improves when we shed that segment of the market!”

Well, Amazon’s success over the last decade has changed that mentality to some degree within even the largest companies. No one wants to be Barnes & Noble. Or Wal-Mart, for that matter. But altering large company behavior remains difficult, so it is still unusual to see a brand-name multinational really thinking – and acting – outside the box.

We did recently come across one example: JP Morgan’s initiative to remake the cross-border payments business using an Ethereum-based blockchain system called Quorum. Sending dollars from a corporate account in the US to Europe or Asia may sound easy, but in reality anti-money laundering and know-your-customer regulations are complex and everything has to be done just so. At our prior company, partly owned by another very large multinational bank, we had to sit through hours of compliance training on such topics. It’s no joke…

Payments such as these are exactly where you would expect to see big financial institutions like JP Morgan cede ground to new blockchain-enabled startups with a cost advantage over large commercial banks. “Blockchain” is the technology that powers bitcoin and other crypto currencies. It offers a secure way to validate transactions and is much cheaper to run than a centralized, company-specific system. And payments are a low margin business for most banks, offered primarily to keep corporate Treasury customers happy so they will buy other more lucrative services. New technology meets low-profit business line = classic disruption story.

Other banks must see the same threat, because yesterday the Financial Times reported that JP Morgan has signed up more than 75 of the world’s largest banks to its new Interbank Information Network, powered by the Quorum blockchain. Two banks – RBC and ANZ – had been testing IIN since October of last year along with JPM. All this makes the IIN/Quorum the single largest real-world application of blockchain technology out there, according to JPM.

For public equity investors that have investments in financial services companies, three quick observations to finish off this section:

• There are many reasons why JP Morgan (+7.6%) has done so much better than the S&P Financials (+0.2%) this year, and the story above is too small a part of the company to have a financial impact. Still, we find the bank’s efforts to push the technological envelope refreshing and unusual for its peer group. Whether this ethos sparks a modest revaluation in JPM over the next 3-5 year remains to be seen, but it can’t hurt.
• To the degree to which traditional financial stocks suffer from a “disruption discount”, this story shows it is possible for old-line companies to adapt. Case in point: the market cap of American Express is $93 billion while PayPal’s is $106 billion. On less than half of AXP’s revenue base. That’s what disruption is worth when you do it correctly.
• Regulation is actually a friend to incumbents. All that KYC and AML paperwork makes corporate cross-border payments a tough nut to crack for disruptive new entrants. And since financial services is one of the most regulated industries in the US, there is (in theory) plenty of time for this industry to adapt.

 

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Earlier this week, we published a summary of an internal document via Kyodo News from China’s People’s Liberation Army (PLA) that specified a military crisis at sea between China and Japan could be on the horizon.

The internal report, authored by two Chinese military officials at the Naval Military Research Institute and Dalian Naval Academy, suggested that the probability of a significant military crisis at sea between both countries is rapidly increasing due to disputes over islands in the East China Sea. In particular, the Japan-owned Senkakus Islands, which are also claimed by China, where the land masses are known as the Diaoyu, and Taiwan, which calls them Tiaoyutai.

“The Diaoyu clearly possess economic and sovereign value, but its military significance is even more evident,” the PLA report states. “Its location is strategically important if we choose to take Taiwan by force. It is also important in competing with Japan for maritime rights.”

Not long after the PLA report surfaced, officials of the Defence Ministry in Tokyo told Jiji Press news agency that it plans on funding the next generation of supersonic glide bombs designed to defend its outer islands from enemy forces [China].

Funding for the program has already been set aside, while an additional 13.8 billion yen ($122 million) has been requested for 2019.

Garren Mulloy, a professor of international relations at Japan’s Daito Bunka University, said the new weapon would be used in tandem with cruise missiles to thwart the take over of the highly contested islands in the East China Sea.

“Up until now, the Japanese have been very short of these precision-guided munitions, especially in comparison to the US, Nato or the Russians, so it comes as no surprise that they want to look into these sorts of weapons,” he said.

The weapons are expected to be deployed aboard mobile, land-based launchers.

“Given Tokyo’s concern over the possibility of China occupying the Diaoyu Islands – the archipelago in the East China Sea that Tokyo controls but Beijing claims – it is possible that the first units would be deployed on islands within range of that potential flashpoint,” said The South China Morning Post.

The South China Morning Post also said the missile systems would launch a projectile 12 miles above sea level before the glide bomb/warhead separates and is guided at speeds of more than 768 mph.

The glider’s speed and steep angle of approach could render some missile defense systems obsolete. This weapon is similar to the hypersonic glider that China, Russia, and the US are currently testing in separate defense programs.

Mulloy said, “it was likely that the new bombs would be designed for use against military vehicles, fixed emplacements, buildings and smaller ships, such as troop-carrying vessels, while cruise missiles would still be used to attack larger ships.”

The glide bomb comes as Japan, faced with Chinese territorial claims, is boosting its 2019 defense budget by 2%. The budget calls for a 200% funding increase for missile defense, including two land-based versions of the US Navy’s Aegis missile defense system. Also, the budget calls for upgrading F-15 fighters and purchasing six F-35 stealth fighters. Northrop Grumman was recently awarded a $153 million contract to deliver a fourth E2-D Advanced Hawkeye airborne early warning aircraft to Japan.

It seems Japan could soon be relying on missiles to defend sovereignty over islands geographically closer to China and Taiwan than mainland Japan raises new concerns. “Due to their long range, glide bombs, along with Japan’s planned long-range cruise missiles, could be construed as offensive in nature and therefore raise concerns in neighboring countries,” the Japan Times said.

While neighboring countries include China and also Russia both have territorial disputes with Japan, both have nuclear arsenals and both could mistake a supersonic glide missile launch as a more powerful missile.

As a result, we can now add the smoldering China-Japan maritime crisis to the list of powderkegs ready to ignite into a regional, or global, armed conflict.

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