The Oceans Are Trashed. Can Volunteer Scuba Divers Help Clean Them Up?

75 FEET UNDERWATER, CONCH REEF — At first it’s hard to spot among the florid colors of the reef, but there it is: a thick, ugly rope, wrapped around barrel sponges and winding through the fragile coral garden, as out of place and unwelcome as a snake in your living room.

I’m tagging along on a “dive against debris” with Rainbow Reef Dive Center, one of the largest dive operators in the Florida Keys. Three groups of scuba divers are sweeping along Conch Reef, about five miles offshore from Key Largo, on the hunt for marine debris and trash.

Scuba divers around the world, from Oklahoma to Saudi Arabia, were participating in similar dives in late September as part of AWARE Week, a global initiative to clean up ocean debris organized by Project Aware, a nonprofit group that coordinates with volunteer divers.

Several divers go to work on the line with knives and shears, cutting it up in sections to avoid damaging the coral and stuffing the rope into mesh bags that they will haul back to the boat waiting on the surface. A loggerhead turtle making its way along the reef stops to survey the commotion before swimming away.

Modern industry and global trade has raised the standards of living for billions around the world, but the byproducts of that miracle—the packaging that wraps goods, the bottles, bags, and mass-produced doodads of convenience—are filling the oceans and the digestive tracts of the creatures that live there at a fantastic rate. An estimated 8 million metric tons of plastic find its way into the sea every year.

The result is that in under a century, we have come dangerously close to doing something that humans didn’t even think was possible in all the previous millennia of our existence: despoiling the ocean, an area so vast and bountiful that it defies our land-bound imaginations.

By now, most everyone has heard about the giant gyre of floating trash out in the Pacific Ocean, and 32 million people have watched a YouTube video of a sea turtle with a plastic straw stuck up its nose. A pilot whale washed up in Thailand earlier this year with 17 pounds of plastic bags inside it.

In response to dire warnings from conservationists and scientists, governments have started to take action. India has passed some of the toughest anti-plastic laws in the world and pledged to eliminate single-use plastics by 2022. In the U.S., cities are banning bags and straws to cut down on single-use plastics. Major companies, eager to display their corporate responsibility, have joined in. Earlier this year, Starbucks announced it was ditching plastic straws.

Of course, as Reason pointed out, Starbucks’ new strawless lids actually use more plastic to make than the old ones. Environmentalists responded that at least the lids are recyclable, unlike plastic straws, but less than 10 percent of plastic in the U.S. end up being recycled. The back-and-forth illustrated one of the fundamental issues facing those fighting ocean pollution: Can raised awareness, innovation, and policies like straw bans get us out of the mess we’ve created, or are we just painting the rails on a sinking ship?

In the private sector, some people are thinking bigger. The Ocean Cleanup, a nonprofit run by a 24-year-old Dutch entrepreneur, has raised $35 million to set up massive floating booms in the Pacific ocean to collect plastic. If it works, the group says it could cut the size of the great Pacific garbage patch in half in five years. In September, the Ocean Cleanup towed one of its garbage collectors 300 miles off the California coast for a two-week test run.

The problem is no one, not even the Ocean Cleanup, knows if it will work, and marine scientists are skeptical. Can it survive the brutal Pacific seas without breaking up and creating even more ocean trash? (The collector, it must be noted, is made out of plastic.) Will it trap and kill marine life along with plastic bags and water bottles?

The more direct solution would be to stop trash from ending up in the ocean in the first place. Countries with poor waste management, such as China, Indonesia, the Philippines, Vietnam, Sri Lanka, and Thailand are the leading contributors of plastic to the world’s oceans, according to a 2015 study.

“Let’s say you recycle 100 percent in all of North America and Europe,” Ramani Narayan, a chemical engineering professor at Michigan State University, told National Geographic in a June cover story on ocean pollution. “You still would not make a dent on the plastics released into the oceans. If you want to do something about this, you have to go there, to these countries, and deal with the mismanaged waste.”

In the pristine waters of the Florida Keys, giant rafts of plastic waste aren’t an issue, but there’s still no lack of work for underwater cleanup crews.

The reef is a protected area inside Florida’s John Pennekamp Coral Reef State Park. The first underwater park in the U.S., it was established in 1963 in response to the devastation right here on Conch Reef. In the early and mid-20th century, enterprising businessmen were pulling up coral with crowbars, and sometimes dynamiting the reef, to sell trinkets of coral to tourists. Today, TNT-toting plunderers aren’t as much of a concern as a sneakier and more persistent foe: trash.

Abandoned “ghost” nets and lines like the ones we found can entangle and kill sea life. The heavier stuff gets tossed by storm surges and bashes against the reefs.

“We’ve found so many crazy things, especially after [Hurricane] Irma,” Rainbow Reef dive instructor Annie Huebner says. “We’ve found refrigerators, we found the top of a golf cart a couple weeks ago. We found a basketball hoop.”

“A big problem here in the Florida Keys is the lobster traps,” she continues. “Before the hurricane, the fishermen didn’t really have time to go get them, so there’s big clusters of traps everywhere. The rope wraps around coral, and the traps themselves damage the coral polyps. It’s doing a colossal amount of damage to the reefs.”

The dive operators at Rainbow Reef say they once pulled four pounds of monofilament fishing line off the sunken wreck of the U.S. Coast Guard cutter Duane, now an artificial reef and home to schools of barracuda, grunts, and snapper, as well as bull sharks lurking in the distance.

Back on shore, we empty the mesh bags, weigh the debris, and record it. Project Aware uses debris surveys like this to track pollution at dive sites.

The total haul is 146 pounds of trash—fishing line, rope, chains, weights, pieces of derelict lobster traps, two anchors, and four bottles of Heineken that look like they were tossed in the ocean that same day.

All told, staff and volunteers at Rainbow Reef will pull 600 pounds of debris out of the sea during AWARE Week. Rainbow Reef’s record weight for debris removed on a single dive is 1,200 pounds.

It’s a drop in the ocean, so to speak, but it’s the sort of act that often precedes something bigger. It’s safe to say no one who picks up a Heineken bottle off the seafloor will throw one back in.

“Thousands of people come through here a year—we’re one of the biggest dive operators in the world—so it’s been a good opportunity to spearhead it,” Huebner says. “We have so many people to show what we’re doing, which is way cooler than working on your own.”

Bonus: Watch Rainbow Reef’s dive against debris in action below.

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Meanwhile, Small Caps Are Crashing In Biggest Divergence In 7 Years

The Dow surged to a new record high today as Small Caps slump post-USMCA…

Another major divergence between big (Dow) and small (Russell 2000) stocks as the former soars relative to the latter and erases any relative performance YTD…

This is the biggest outperformance of Dow over Small Caps since Oct 2011.

Both are now up just over 8% on the year… (Trannies are worse. Nasdaq best)

Macro Risk Advisors technical analyst John Kolovos notes:

“Even though the S&P 500 is OK, the rest of the market is not. Very worrisome breaks in small and mid-cap stocks, as well as poor market internals with a growing percentage of stocks at one-month lows and internals trends at their weakest since April.”

While key price support levels are holding, a few more days of this kind of action will change the narrative to something more sinister.

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Amazon’s New $15/Hour Minimum Wage: Silencing the Critics or Keeping up With the Times?

Retail giant Amazon said today that it is raising its minimum wage to $15 an hour for all U.S. workers. Is the move supposed to silence Amazon’s critics, or is it a market-based response to a falling unemployment rate?

At first glance, Amazon CEO Jeff Bezos’ statement accompanying the announcement suggests it’s the former. “We listened to our critics, thought hard about what we wanted to do, and decided we want to lead,” Bezos said. “We’re excited about this change and encourage our competitors and other large employers to join us.”

To which critics is Bezos referring? Sen. Bernie Sanders (I-Vt.) is the first name that comes to mind. As Reason‘s Zuri Davis reported, the avowed democratic socialist has hammered Amazon in recent months for not paying its workers enough. In April, Amazon revealed that the median annual pay for its workers around the world was just $28,466. And in August, nonprofit outlet The New Food Economy reported that thousands of Amazon employees in the U.S.—including one-third of the company’s Arizona workers—were enrolled in the Supplemental Nutritional Assistance Program (SNAP).

Bezos, by contrast, is believed to be worth upward of $150 billion.

In response, Sanders accused Bezos of contributing to the “gap between the very rich and everyone else.” Then last month, he introduced the Stop Bad Employers by Zeroing Out Subsidies Act, also known as the Stop BEZOS Act. The legislation would mandate that companies with more than 500 employees—like Amazon—foot the bill for government benefits their workers receive.

The proposed bill has yet to gain much traction in Congress. But the bad publicity may have been enough to force Amazon to act. Coupled with the nationwide push to raise the minimum wage to $15 an hour, Amazon may have felt that sooner or later, it would have to increase wages anyway. Instead of waiting for state and local governments to gradually mandate higher pay, Amazon may have opted to get ahead of the curve.

As a result, more than 250,000 of Amazon’s U.S. workers, as well as the 100,000 seasonal employees it plans to hire for the holidays, will be getting a pay raise. That’s a big change from the company’s previous policy, where starting pay was dependent on location and type of work, The Wall Street Journal reports. The new minimum wage affects full-time, part-time, and even temporary employees.

Amazon wants people to know it supports higher wages for workers at other companies too. According to Senior Vice President of Amazon Global Corporate Affairs Jay Carney, the company will “be working to gain Congressional support for an increase in the federal minimum wage,” which is currently $7.25 an hour. “We intend to advocate for a minimum wage increase that will have a profound impact on the lives of tens of millions of people and families across this country,” Carney said in the company’s statement.

The minimum wage increase could also be seen as an attempt to keep up in a “tight labor market,” Neil Saunders, managing director of the consulting firm GlobalData Retail, tells CNN. “Without a rise in wages, Amazon would be placing itself at a disadvantage in the labor market,” Saunders observes, adding that this is particularly true as the holiday season approaches.

Saunders has a point. Unemployment in the retail labor market has dropped from 5.7 percent in January to 4.4 percent in August. That’s a negative 1.3 point differential over the first eight months of the year, compared to a 0.8 point drop from January to August 2017.

Ultimately, there’s more than one factor at play here. The retail labor market certainly favors workers right now; at the same time, raising pay is a good publicity move for Amazon, particularly in light of recent criticism.

We’ll soon see how it impacts the company’s bottom line.

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Pat Buchanan Asks: Are Republicans Born Wimps?

Authored by Patrick Buchanan via Buchanan.org,

Republican leaders are “a bunch of wimps,” said Jerry Falwell Jr.

Conservatives and Christians need to stop electing “nice guys.”

“The US needs street fighters like Donald Trump at every level of government because the liberal fascists Dems are playing for keeps.”

So tweeted the son and namesake of the founder of the Moral Majority, and he has here a self-evident point.

Thursday, 11 GOP senators on the judiciary committee freely forfeited to a female prosecutor their right to cross-examine Christine Blasey Ford, the accuser of Judge Brett Kavanaugh.

The Republicans feared that televised images of 11 white men, sharply questioning the credibility of Ford’s claim to be a victim of Kavanaugh’s sexual assault, would be politically lethal.

So, while the Republicans mutely abstained from challenging her, Ford was treated by the Democrats as the reincarnation of Joan of Arc, though not a single witness has corroborated her story.

Friday, Sen. Jeff Flake caved to Democratic demands for another weeklong FBI investigation of the judge. The Republicans, egg visible on their faces, endorsed their colleague’s capitulation.

Thursday, Sen. Lindsey Graham had been the Republican lion of the hearing, indicting Democrats for the moral atrocity they had deceitfully and dishonorably perpetrated against the judge.

By Friday, our Cicero was reaching out in collegiality to the same senators he was castigating 24 hours before.

Falwell’s point: Democrats fight savagely and for keeps, while Republicans — street-fighter Trump excepted — are wimps, often bewailing any loss of camaraderie with their colleagues across the aisle.

As my late friend Sam Francis said in the title of his book, many Republicans are perfectly content with being “Beautiful Losers.”

Yet the stakes here are immense. Consider how the Supreme Court has remade the America we grew up in.

Since World War II, the court has de-Christianized all public schools and the public life of a land Woodrow Wilson and Harry Truman called a “Christian nation.” It has established secularism as our state religion.

Despite civil right laws declaring race discrimination illegal, the court has given its blessing to affirmative action, deliberate discrimination in favor of peoples of color against white men in the name of diversity and equality.

The court has declared that what were once crimes, abortion and homosexuality, are now constitutional rights all Americans must respect.

These changes were not legislated democratically, but imposed dictatorially by the high court. While a Senate confirmation of Kavanaugh would not reverse these mandated changes, it might halt any further imposition of this radical social revolution by unelected judges.

But while the Democratic left, understanding the stakes, is fighting bare-fisted, Republicans are sparring with 14-ounce gloves and seeking to observe Marquess of Queensberry Rules.

In other ways as well America has been remade.

Not only has Christianity, and all its symbols and expressions of faith and belief, been removed, but also a purge is underway of monuments and statues of the explorers, colonists and statesmen who, believing in the superiority of their religion, culture and civilization, set out to create the county we inherited.

And William Frey, resident demographer at the Brookings Institution, writes about how America is being changed — without the consent of the people.

“Since 2000, the white population under the age of 18 has shrunk by seven million, and declines are projected among white 20-somethings and 30-somethings over the next two decades and beyond. This is … a trend that is not likely to change despite Mr. Trump’s wish for more immigrants from Norway.

“The likely source of future gains among the nation’s population of children, teenagers and young working adults is minorities — Hispanics, Asians, blacks and others.”

When we are all minorities, and all behave as minorities, making our separate demands upon the country, what then holds America together?

In Federalist 2, John Jay famously wrote:

“Providence has been pleased to give this one connected country to one united people — a people descended from the same ancestors, speaking the same language, professing the same religion … very similar in their manners and customs…

“This country and this people seem to have been made for each other, and it appears as if it was the design of Providence, that an inheritance so proper and convenient for a band of brethren, united to each other by the strongest ties, should never be split into a number of unsocial, jealous, and alien sovereignties.”

Yet, each decade, less and less are we descended from the same ancestors. Less and less do we speak the same language, profess the same religion, share the same manners, customs, traditions, history, heroes and holidays.

Does America look today like the “band of brethren united to each other” of which Jay wrote, and we seemed to be as late as 1960?

Or does not the acrimony attendant to the nomination of Judge Kavanaugh suggest that we have already become a land “split into a number of unsocial, jealous and alien sovereignties.”

With all our new diversity, whatever became of our unity?

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Italian Bond Yields Resume Plunge, Yield Hits Highest Since 2014

Earlier today, we laid out the three main reasons why, according to to Goldman, the Italian bond turmoil was set to get worse: in brief, these were rising government debt (as a result of the sharply higher projected budget deficit of 2.4% through 2021), fading ECB support (QE ending at the end of 2018), and diminished market liquidity (wider bid-ask spreads and declining volumes).

Well after today’s initial selloff, when euroskeptic Claudio Borghi and president of the Lower House’s budget committee commented that the country would have solved its fiscal problems if it had its own currency while Deputy PM Luigi Di Maio said he’s not concerned about spread widening, it did not take long for the market to digest Goldman’s warning and to resume the selling in Italian government bonds, with the 10Y plunging for the second time today, and pushing the yield to 3.448%, the highest since 2014…

… while “lo spread” between Italian and German 10Y paper has blown out beyond 300 bps, the widest going back to 2013.

Curiously, unlike during today’s first selloff, the late day liquidation has not been accompanied by a drop in the Euro, which however may be explained by the sharp drop in the dollar index which has slumped back to session lows.

For now the Italian bond turmoil remains relegated within its borders, but the question on every trader’s mind is “for how much longer.”

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Making money isn’t supposed to be easy

I remember having a conversation with a woman during the peak of the housing bubble, probably 2005…

She was a psychologist based in Florida. And she was explaining to me how she was flipping condos that hadn’t even been built yet.

Back in the boom times, buyers would line up at condo sales offices and have to decide within minutes if they wanted to put down a deposit. The demand for these undeveloped units was so large, developers would raise prices, sometimes multiple times a day, to whip buyers into a frenzy.

The woman I was talking to would put down a deposit before the developer had broken ground. Then when the building just started construction, she’d sell the contract and make money.

She was literally cackling to me on the phone… “It’s just so easy,” she said before laughing.

This was a long time ago. And I didn’t have anywhere near the deal experience or financial know how that I have now.

Still, even then, I remember thinking that making money isn’t supposed to be that easy.

There’s supposed to be risk, hard work and effort involved with making money. And simply flipping contracts on yet-to-be-developed condos for huge profits didn’t make sense to me.

This woman was just one of the legions of people that were able to make quick profits in real estate because, at the time, there was an enormous amount of debt flowing into that sector.

Banks would issue mortgages to unqualified borrowers (often without a job or an income), the issuer would quickly sell that mortgage to a large bank, the bank would chop the mortgage into a mortgage-backed security, get the US government to stamp a guarantee and sell it to investors around the world.

Mortgage-backed securities and their many derivatives were the hottest investment in the world, with almost unlimited demand.

Eventually, of course, reality caught up with us. People realized that when you loan $1 million to an unemployed, former bus driver with a bad credit history… it’s probably not the best investment.

All of the condo flippers, and other leveraged players in the real estate space, got wiped out.

They say history doesn’t repeat itself, but it often rhymes.

And almost exactly 10 years since Lehman Brothers collapsed, we’re back where we started, with a twist…

Years of easy credit and low interest rates are blowing another bubble… But instead of lending money to unemployed, ex-bus drivers, investors are lending absurd amounts of money to companies with ZERO chance of paying those debts.

We discussed this in yesterday’s Notes about billionaire investor Howard Marks and his concerns about the economy today.

As of June, U.S. non-financial firms are sitting on a record $6.3 trillion in debt.

AT&T alone has an astounding $180 billion of debt, making it the most indebted non-government controlled and non-financial firm in history… and more indebted than many governments around the world.

And the quality of corporate debt is getting worse and worse.

More than 40% of US corporate bonds are rated BBB – just one notch above non-investment grade, or “junk” – an all-time record. The riskiest, “junk” borrowers, have a record $8 of debt for every $1 of cash on their books.

A full 14% of companies in the S&P 500 don’t even make enough money to cover the interest on their debt.

Within the corporate debt market, there’s also the fast-growing, $1 trillion “leveraged loan” market. That’s just a fancy name for loans made to companies that already carry lots of debt, making them even riskier.

And 77% of leveraged loans are what’s called “covenant lite,” meaning lenders are waiving their right to certain protections when lending to these incredibly risky companies.

You’d think with all of this bad debt floating around, investors would at least require a healthy interest rate for making these loans. Not the case… the extra yield lenders demand to make these riskier loans is near its lowest in history.

Remember, this behavior is taking place in a rising interest rate environment.

As a general principle, as the amount of debt increases, you should also see defaults increase. But today, while the level of corporate debt is exploding to record highs, defaults are plummeting toward record lows. And this widening divergence can’t continue forever.

Eventually those defaults will come, at a time when debt as a percentage of GDP has never been higher. And you’ll see a significant percentage of GDP that just disappears.

When you look back throughout economic history, almost every crisis happens because there’s too much debt… the Great Financial Crisis, the Savings & Loan crisis, the Asian crisis.

It’s the same ingredients every single time… we see lots of debt, followed by complicated financial instruments to encourage more debt. Eventually, market participants take it too far and something cracks.

Today we’ve got all the same ingredients. Can we honestly expect it to turn out any different?

Source

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“Hero” Survivors Who Confronted Jeff Flake Work For Soros-Funded Nonprofit

Outgoing Arizona Senator Jeff Flake has insisted that his last-minute decision to demand that the FBI reopen its background check investigation into Trump SCOTUS nominee Brett Kavanaugh wasn’t inspired by a pair of young women who accosted him in the halls of the US Capitol and loudly berated him with tear-jerking stories of sexual abuse.

But the timing of Flake’s change of heart is certainly curious, and the liberal press has widely heralded the two young women has “heros” for helping to force a delay of Kavanaugh’s confirmation by at least another week.

But one thing the progressive press hasn’t reported is that the two young women weren’t merely concerned citizens speaking truth to power. The reality is that Ana Maria Archila and Maria Gallagher are both professional political activists employed by the Center for Popular Democracy.

And guess who finances the CPD?

That’s right…

Soros

According to a report in the New York Post, the CPD is financed primarily by George Soros’ Open Society foundation, the massive non-profit that supports groups fighting on behalf of the billionaire investors’ political agenda across Europe and the US. That dramatic confrontation in front of a Senators-only elevators was a political stunt organized by a Soros-funded organization. This means that Soros has played as large a role as anybody in helping delay a confirmation vote on Kavanaugh.

Make no mistake. The Center for Popular Democracy is at the heart of the effort to stop Kavanaugh. A source forwarded to me an email sent from the organization: “Last week, you saw protestors interrupting the Kavanaugh hearings, trying to slow it down and show the Judiciary Committee how much they/we care. Those protests were organized by the Women’s March and the Center for Popular Democracy and other groups.”

Archila has another role beyond her duties as co–executive director of the center. She is also a member of the national committee of the New York-based Working Families Party. The WFP was founded in 1998 by the leaders of ACORN, the now-disbanded and disgraced group of community organizers.

In 2009, ACORN finally ran off the rails. Guerrilla videographer James O’Keefe secretly recorded employees in its offices in Brooklyn, Baltimore, Washington and San Bernardino, Calif. O’Keefe and a colleague posed as a prostitute and a pimp and said they were planning to import underage women from El Salvador for the sex trade. They asked for and received advice on getting a housing loan and evading federal taxes.

The impact that this confrontation had on Flake was readily apparent…

…Media reported an instant change in his demeanor, with his “eyes wet” and his chin tucked into his chest.

Additionally, one of the women has ties to the Working Families Party, and organization financed by alumni of ACORN, the group of community organizers that shut down in 2009 after conservative journalist James O’Keefe exposed some of its “organizers” engaging in nefarious behavior on behalf of the organization.

Furthermore, just imagine if two women cornered Dianne Feinstein in an elevator and demanded that she investigate how Christine Blasey Ford’s letter describing her alleged assault leaked to the press?

But imagine if two women had cornered a Democratic senator in an elevator and demanded an investigation of who had leaked to the media Christine Blasey Ford’s letter alleging that Kavanaugh had sexually assaulted her. (Sen. Lindsey Graham said Sunday that he planned to investigate the leak.) There would have been sputtering outrage in media circles, and reporters would have breathlessly hunted down any ties between the women and outside groups.

If there is a takeaway here, it’s that the US media is far too lenient on these “activists”, often neglecting to perform even a simple background check to determine if they have any affiliations that might be cause for bias.

But given the current climate, we don’t expect this to change any time soon.

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California Imposed Its Own ‘Net Neutrality’ Law. The Feds Aren’t Happy About It: New at Reason

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California’s blue state rebellion against President Donald Trump has spread to internet regulation.

The U.S. Department of Justice filed a lawsuit this week against California, arguing that the state’s new law—which will strictly regulate the business practices of AT&T, Comcast, T-Mobile, and other internet providers if allowed to take effect—is “part of a pattern of recent actions by the state that purport to nullify federal law.”

“Once again the California legislature has enacted an extreme and illegal state law attempting to frustrate federal policy,” Attorney General Jeff Sessions said in a press release. “The Justice Department should not have to spend valuable time and resources to file this suit today, but we have a duty to defend the prerogatives of the federal government and protect our Constitutional order.”

For the Trump administration, asking the courts to quell California’s incipient revolt against federal authority is becoming something of a habit. In March 2018, the Justice Department sued Sacramento over laws aimed at protecting illegal immigrants, saying a trio of state laws impermissibly prevent federal immigration officers from doing their jobs. A month later, in April 2018, the Justice Department sued to block a state law that attempted to give California veto rights over federal land sales. Environmental activists had claimed that Californians would see “public lands sold off to oil and mining interests” otherwise, writes Declan McCullagh in his latest piece at Reason.

View this article.

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Bubbles And Zombies

Authored by John Coumarianos via RealInvestmentAdvice.com,

They say nobody rings a bell at the top of the market. But whether this is the top or not, two prominent market observers and historians, Robert Shiller and Edward Chancellor, are expressing concern.

First, Shiller warns readers not to take big increases in earnings too seriously because earnings are volatile.

Everyone knows that stock prices have risen dramatically since 2009. A $100 investment in the S&P 500 in 2009 has grown to nearly $400 at the end of August 2018. But Shiller reminds us that earnings have grown dramatically too. In fact, “real quarterly S&P 500 reported earnings per share rose 3.8-fold over essentially the same period, from the first quarter of 2009 to the second quarter of 2018,” according to Shiller. Prices, in fact grew a bit more slowly than earnings since the end of the crisis.

So should we think stocks are reasonably priced since earnings have grown at the same pace as prices? Not so fast, Shiller says. Earnings, the difference between two other data sets — revenues and expenses, are volatile, and cyclical. Rapid rises in earning are often followed by a return to long term trends or subpar levels. Such episodes have occurred more than a dozen times in U.S. stock market history.

Earnings can grow dramatically from things like “panicky demand” for U.S. goods from Europeans at the beginning of World War I. This led to political calls for “wealth conscription” or a heavy taxation on war-related profits. At that time stock prices didn’t follow profit advances as investors seemed to realize those gains would be short-lived.

In the “Roaring ‘20s,” however, emergence from a “war to end all wars” and a spirit of freedom and individual fulfillment spurred stock prices by Shiller’s lights. And this, of course, led to a crash at the end of the decade.

Another period where price gains outstripped earnings gains was 1982-2000. Real stock prices increased 7.5-fold, while real annual earnings only doubled, according to Shiller. Indeed the S&P 500 Index delivered an eye-watering 17% compounded annual return from 1982 through 2000, mostly on the back of multiple expansion (the increased price investors are willing to pay for underlying earnings).

In the next period, from 2003 through 2007, real corporate earnings per share almost tripled, but the real S&P 500 didn’t manage a double, because, as Shiller puts it, “investors apparently were unwilling to repeat their mistake in the years leading to 2000, when they overreacted to rapid earnings growth.”

After the 2008 financial crisis, which decimated earnings and prices, both have increased dramatically in tandem. Shiller can’t easily analyze investor psychology to know why, but he thinks it must be rooted in the “public’s loss of healthy skepticism about corporate earnings, together with an absence of popular narratives that tie the increase in earnings to transient factors.” In other words, nobody think earnings will go down dramatically or that their recent increase might be tied to something that can’t last.

Shiller doesn’t know if this is a bubble. He asks the question initially, but doesn’t answer it completely. I suspect that’s because Shiller thinks bubbles rest more on narratives and human psychology than on things like interest rates, and he can’t find a compelling narrative currently.

But Edward Chancellor thinks record low interest rates since the financial crisis have produced bubbles galore and zombies, meaning overpriced assets and unproductive companies sustained only by low rates.

Chancellor, concentrating less on psychology in his recent article, reminds us of Adam Smith’s remark that “the ordinary price of land… depends everywhere upon the ordinary market rate of interest.” That’s because one discounts future income by the interest rate to arrive at the present value of an asset. The lower the rate, the higher the present value, and vice versa. Unfortunately, central bankers refused to accept this Smithian calculation after the collapse of Lehman Brothers. And so, they have kept rates so low for so long that they have created bubbles in industrial commodities, rate earths, U.S. farmland, Chinese garlic bulbs, fine or not-so-fine art, vintage cars, fancy handbags, super-city properties from London to Hong Kong, long-dated government bonds, listed and unlisted technology stocks, and the broader American stock market. Finally, Chancellor wonders whether low rates have encouraged a cryptocurrency bubble.

U.S. stocks are very expensive on dependable valuation measure such as total market value relative to GDP and on replacement cost basis (Tobin’s Q) compared to historic levels. American companies have also been on a borrowing binge. The problem is the economic rebound has been lackluster, and Chancellor blames easy credit and zombie corporates for this. Usually, a severe recession washes out weak companies, and investors reallocate capital to productive enterprises. “Business failures are essential to the recovery.”

Low interest rates have allowed companies that would have otherwise gone out of business to stay alive, and this has caused a tepid recovery. Chancellor notes the cumulative default rate on junk bonds during the entire recession was 17%, or “around half the level of the two previous downturns.” And while central bankers might view this as a victory, he views it as the cause of economic weakness.

The lessons for investors are to remain vigilant about stock valuations and higher yielding bonds. At some point the zombies will not be able to sustain themselves any longer. And that’s when having a good financial plan and asset allocation will help.

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Texas says ‘Pickles’ Only Come From Cucumbers. So This Couple’s Farm Went Out of Business.: New at Reason

Anita and Jim McHaney are retirees who moved from Houston to the Texas countryside in 2013. Their plan was to live well and grow food on a 10-acre homestead, earning extra money selling produce at the local farmers market. They grew okra, carrots, kale, swiss chard, and beets. Lots and lots of beets.

“That soil out there is very sandy, and those beets just grew like mad,” says Anita. “Now the obvious thing to do when you have more beets than you can sell, is to make pickled beets and can them.”

And this is where the McHaney’s ran into trouble.

Like most states, Texas has a so-called cottage food law that exempts certain items sold at farmers markets from the state’s commercial food manufacturing regulations—foods like bread, produce, nuts, jams, popcorn, and, of course, pickles.

But what constitutes a “pickle,” and who gets to decide? The McHaneys discovered that the Texas Department of State Health Services (DSHS) taks the narrow view.

According to the DSHS, “A pickle is a cucumber preserved in vinegar, brine, or similar solution, only pickled cucumbers are allowed under the cottage food law. All other pickled vegetables are prohibited”

“The legislature didn’t say that, the health department did,” Anita explains.

So in order to sell their pickled beets at the farmers market, the McHaneys needed a commercial food manufacturers license, to build a commercial kitchen, submit their recipes to a government contractor at Texas A&M University, and register for a $700 food manufacturing class. However, the class is only offered once a year.

“We got right down to signing up for the class…even though people said ‘you won’t learn a damn thing in there,'” says Anita. “Then I saw that $700. I thought, you know, this is crazy. This is insanity.”

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