Month: December 2019

North Korea has declared it will send a “Christmas gift” to the United States but without specifying what the potentially menacing ‘surprise’ gift could be.

This after test-firing two short-range missiles on Thanksgiving Day, in a now familiar pattern of doing threatening things on American holidays.

And with that message this week came an early Christmas card of sorts — for what would make the 2019 holiday season complete without a photo of jolly old Kim trotting gingerly on a white horse through snow-covered fir trees?

North Korea’s state-run Korean Central News Agency released a photo set of Kim visiting Mount Paektu, while on horseback, also with his wife in the group. It follows a prior similar visit made in October. 

“According to legend, Mount Paektu is the birthplace of Dangun, the mythical founder of the first Korean kingdom some 4,000 years ago,” CNN reports of the potential symbolism. 

Hopefully Pyongyang is content that these photos are the only “gift” that the US public and Washington needs, given they’ve already spread holiday cheer and an avalanche of mockery online. 

The new threat of a “Christmas gift” however, appears conditioned on whether there can be positive developments in ongoing talks between Washington and Pyongyang. The North has lately accused the Trump administration of leveraging talks with Kim for mere domestic political gain, ahead of the 2020 election. 

“The dialogue touted by the US is, in essence, nothing but a foolish trick hatched to keep the DPRK bound to dialogue and use it in favor of the political situation and election in the US,” Ri Thae Song, a first vice minister at the North Korean Foreign Ministry working on US affairs, according to state media.

“It is entirely up to the US what Christmas gift it will select to get,” warned Ri. But again, someone should let the them know, this is all the gift the Western public needs:

Many fear that this latest threat could be a sign that North Korea is preparing to resume long-distance missiles tests, also amid a looming deadline set by Pyongyang on nuclear negotiations with Trump.

NK officials have said time is up by the close of the year. 

* * *

State media posted the following comments with the release of the latest photos of Kim on white horseback:

“Kim Jong Un, the great leader of our revolution who opens up the period of a great leap for the development of the revolution, personally left the sacred trace in the revolutionary battle sites in Mt Paektu area… through knee-high virgin snow,” an English-language dispatch reported.

NEW: Kim Jong Un looked round the revolutionary battle sites in the area of Mt. Paektu, says KCNA.

Story and more photos up soon @nknewsorg – stay tuned.

(Photos: KCNA) pic.twitter.com/hxTfeNOt8u

— NK NEWS (@nknewsorg) December 3, 2019

“Riding a steed across the vast area of Mt Paektu together with the commanding officers who accompanied him, he recollected the bloody history of the guerrillas who recorded dignity on the first page of the history of the Korean revolution by shedding their blood in the vast plain of Mt Paektu,” it continued.

Meanwhile, speaking of prior holiday classics…

Via SchiffGold.com,

Stocks closed out November on a high note with the hope of a trade deal fueling Wall Street. But is this warranted? And are consumers really doing as well as the mainstream would have us believe? Peter Schiff appeared on RT Boom Bust last week to talk about it. He said it’s all a house of cards and it’s going to come crashing down on American consumers.

Peter started out the interview talking about Hong Kong. The territory became a focal point in trade talks between the US and China after President Trump signed the Hong Kong Human Rights and Democracy Act supporting pro-democracy protestors. Peter said US criticism is a bit hypocritical.

If you look at the index of economic freedom that the Heritage Foundation puts out every year, Hong Kong ranks number one. Today, it’s the freest economy in the world. The United States ranks 12th on that list. So, I’m more concerned about the freedom of our own people. So, rather than worrying about the freest people in the world, how about if our leaders try to find a way to make Americans more free?”

One of the Boom Bust hosts pointed out that President Trump has said he is trying to broker a deal where America does much better than the Chinese. She asked how we can expect to get a deal done when the president doesn’t seem to be interested in a “fair” deal. Peter said pushing for an advantage is just the nature of negotiating. But he said he doesn’t really think Trump is trying to get a deal done.

Trump just wants the stock market to go up. And as long as the stock market is going up, he couldn’t care less about a deal with China. Maybe if the stock market really started to tank, then he might feel some type of pressure to actually deliver a deal. But as long as he can make the market go up by talking about the prospects of a deal, then that’s all Trump wants.”

As far as the US stock markets go, Peter said there are a  lot of things that should be causing them to go down, but only one thing causing them to go up — the Federal Reserve.

For a while, people were worried about rate hikes. Nobody is worried about rate hikes. The Fed has taken all rate hikes off the table. The Fed has made it clear that the only direction rates can go is down. They’re either going to stay the same, or they’re going to go down. And QE4 is now on autopilot into perpetuity. So, that’s what the markets want. They know they’re never going to have another rate hike and they’re going to have money printing as far as the eye can see, and so that’s what’s driving stocks. And I guess that’s going to continue to drive stocks until something causes that to change. And something is going to happen because the US is headed for a worse economic disaster than the one we had in 2008 and there’s no way this is good for stocks.”

The Boom Bust hosts pointed out that stocks are going up despite a continuing downtrend in earnings. Peter said that’s not the only factor markets are ignoring. He said in some ways, the bad news is good news because it keeps the Fed in play. Meanwhile, mainstream pundits keep telling us the US consumer has never been in better shape. Peter said the opposite is true.

The consumer is completely levered up. He has record amounts of debt.  And the only reason he can spend is because the Fed is keeping rates low enough so that credit continues to flow despite the lack of legitimate savings to finance it. So, this whole house of cards is going to come tumbling down and the consumer is going to be right in the center of that.”

Will consumers continue to spend during the upcoming holiday shopping season?

As long as they can borrow it, they’ll spend it. The question is can they pay it back.”

Overall, Peter said he thinks holiday sales will likely be disappointing again. Brick and mortar retail companies are struggling and we’re seeing high vacancy rates in the retail sector.

A lot of Americans are doing everything they can to squeeze every penny out of the dollars they’re borrowing. So, they’re shopping online and looking for the best deal. And I guess that’s going to continue. But remember, a lot of the stuff we’re buying, and probably almost all of the stuff we’re buying is imported. We’re not making it. It’s made in other countries. So, we’re buying it on a national credit card as well as an individual credit card. So, whatever we spend just means larger trade deficits, and that means the US economy is in an even more precarious position following holiday shopping than before.”

The interview wrapped up with a discussion about Poland repatriating its gold and the continued global central bank gold-buying spree.

I think the central bankers are in a position to know a monetary crisis is imminent. That doesn’t mean it’s going to start tomorrow. Of course, it could. But whether it starts next month, or next year, or sometime in the next several years, they need to have gold. I mean, gold ownership is going to be key to preserving confidence in your currency. And you have to back your currency by something real, not by somebody else’s paper, and that’s gold. I think what Poland is doing is a trend that we’re seeing that it’s not just that you want to own gold, but you want to own possession of your own gold. You don’t want to trust a third party with your gold.”

Kamala Harris’s abrupt departure from the 2020 election due to a lack of funding has already sparked a debate over race – with the logic ultimately circling around to ‘Democrats aren’t ready to nominate and elect a strong black woman.’

Both Cory Booker and Al Sharpton have come out in recent days, lamenting the lack of black Democratic candidates – while blaming her failure as a candidate on sexism and racism instead of her inability to appear authentic, her roiling anger underneath a thin veneer, and general lack of any plan whatsoever.

“…it’s a damn shame now that the only African-American woman in this race … is now no longer in it, and we’re spiraling towards a debate stage … that could have six people with no diversity whatsoever,” said Booker on a Tuesday evening appearance on MSNBC (Harris’s parents are notably from India and Jamaica, and are not African American).

And no, it wasn’t because Samoan-American Tulsi Gabbard dismantled Harris during an April debate, which coincided perfectly with her demise in support.

And it wasn’t a series of articles in the San Francisco Chronicle penned by former California legislator Willie Brown essentially calling his old mistress an unqualified whore whose career he boosted.

Nope, according to Al Sharpton, whose Harlem-based charity pays him over $1 million per year, ‘black women are held to a different standard.‘

Sharpton also shared Booker’s disappointment that the Democratic field will likely be too white.

“I think that the real problem the Democrats are going to have is the next debate, you have no black [candidate] on that stage,” Sharpton told MSNBC’s “Deadline.” “And the Democratic Party cannot have a stage where black voters do not see themselves reflected — where they don’t see themselves reflected and expect that we’ll come out and vote in big numbers.”

“You must have had black turnout, but we don’t turn up in the debate? There is something that is wrong with that, and some of us are not going to be quiet about it.”

Sharpton added that Harris was “taken apart” and “treated badly” by the press – partially because “black women especially are held to a different standard.”

Watch:

Authored by Michael Lebowitz and Jack Scott via RealInvestmentAdvice.com,

“3. And they said to one another, ‘Come, let us make bricks, and burn them thoroughly.’ And they had brick for stone, and bitumen for mortar. 4. Then they said, ‘Come, let us build ourselves a city, and a tower with its top in the heavens, and let us make a name for ourselves; otherwise we shall be scattered abroad upon the face of the whole earth.’” Genesis 11:3-4 (NRSV)

Technology

Technology can be thought of as the development of new tools. New tools enhance productivity and profits, and productivity improvements afford a rising standard of living for the people of a nation. Put to proper uses, technological advancement is a good thing; indeed, it is a necessary thing. Like the invention of bricks and mortar as documented in the book of Genesis, the term technology has historically been applied to advancements in tangible instruments and machinery like those used in manufacturing. Additional examples include the printing press, the cotton gin, and the internal combustion engine. These were truly remarkable technological achievements that changed the world.

Although the identity of a technology company began to emerge in the late 1930s as IBM developed tabulation equipment capable of processing large amounts of data, the modern-day distinction did not take shape until 1956 when IBM developed the first example of artificial intelligence and machine learning. At that time, a computer was programmed to play checkers and learn from its experience. About one year later, IBM developed the FORTRAN computer programming language. Until the early 1980s, IBM was the dominant tech company in the world and largely stood as the singular representative of the burgeoning technology investment sector.

The springboard for the modern tech era came in 1980 when the U.S. Congress expanded the definition list of copyright law to include the term “computer program.” With that change, software developers and companies like IBM involved in programming computers (mostly mainframes at that time) had a legal means of preventing unauthorized copying of their software. This development led to the proliferation of software licensing.

As further described by Ben Thompson of stratechery.com –

This highlighted another critical factor that makes tech companies unique: the zero marginal cost nature of software. To be sure, this wasn’t a new concept: Silicon Valley received its name because silicon-based chips have similar characteristics; there are massive up-front costs to develop and build a working chip, but once built additional chips can be manufactured for basically nothing. It was this economic reality that gave rise to venture capital, which is about providing money ahead of a viable product for the chance at effectively infinite returns should the product and associated company be successful.

To summarize: venture capitalists fund tech companies, which are characterized by a zero marginal cost component that allows for uncapped returns on investment.

Everybody is a Tech Company

Today, every company employs some form of software to run their organization, but that does not make every company a tech company. As such, it is important to differentiate real tech companies from those that wish to pose as one. If a publicly traded company can convince the investing public that they are a legitimate tech company with scalability at zero marginal cost, it could be worth a large increase in their price-to-earnings multiple. Investors should be discerning in evaluating this claim. Getting caught with a pretender almost certainly means you will have bought high and will be forced to sell low.

Pretenders in Detail

Ride share company Uber (Tkr: UBER) went public in May 2019 at a market capitalization of over $75 billion. Their formal name is Uber Technologies, but in reality, they are a cab company with a useful app and a business producing negative income.

Arlo Technologies (Tkr: ARLO) develops high-tech home security cameras and uses a cloud-based platform to “provide software solutions.” ARLO IPO’ed at $16 per share in August 2018. After trading as high as $23 per share within a couple of weeks of the initial offering, they currently trade at less than $4. Although the Arlo app is available to anyone, use of it requires an investment in the Arlo security equipment. Unlike a pure tech company, that is not a zero marginal cost platform.

Peloton (Tkr: PTON) makes exercise bikes with an interactive computer screen affording the rider the ability to tap in to live sessions with professional exercise instructors and exercise groups from around the world. Like Arlo, the Peloton app is available to anyone, but the experience requires an investment of over $2,000 for the stationary bike. PTON went public in September 2019 at the IPO price of $29 per share. It currently trades at roughly $23.

Recent Universe

From 2010 to the end of the third quarter of 2019, there have been 1,192 initial public offerings or IPOs. Of those, 19% or 226 have been labeled technology companies. Over the past two years, many of the companies brought to the IPO market have, for reasons discussed above, desperately tried to label themselves as a tech company. Using analysis from Michael Cembalest, Chief Strategist for JP Morgan Asset Management, we considered 32 “tech” stocks that have gone public over the past two years under that guise. We decided to look at how they have performed.

In an effort to capture the reality that most investors are not able to get in on an IPO before they are priced, the assumption for return calculations is that a normal investor may buy on the day after the IPO. We acknowledge that the one-day change radically alters the total return data, but we stand by it as an accurate reflection of reality for most non-institutional investors.

As shown in the table below, 23 of the 32 IPOs we analyzed, or 72%, have produced a negative total return through October 31, 2019. Additionally, those stocks as a group underperformed the S&P 500 from the day after their IPO date through October 31, 2019 by an average of over 35%.

Data Courtesy Bloomberg

Summary

Over the past several years, we have seen an unprecedented move among companies to characterize themselves as technology companies. The reason is that the “tech” label carries with it a hefty premium in valuation on a presumption of a steeper growth trajectory and the zero marginal cost benefit. A standard consumer lending company may employ technology to convince investors they are actually a new-age lender on a sophisticated and proprietary technology platform. If done convincingly, this serves to garner a large price-to-earnings multiple boost thereby significantly (and artificially) increasing the value of the company.

A new automaker that can convince investors they are more of a technology company than other automobile companies’ trades at many multiples above that of the traditional yet profitable car companies. Still, the core of the business is making cars and trying to sell them to a populace that already has three in the driveway.

Using the technology label falsely is a deceptive scheme. Those who fall for the artificial marketing jargon are doomed to sacrifice hard-earned wealth as has been the case with Lyft and Fiverr among many others. For those who are not discerning, the lessons learned will ultimately be harsh as were those described in the story of the tower of Babel.

It is not in the long-term best interest of the economic system or its stewards to chase high-flying pseudo-technology stocks. Frequently they are old school companies using software like every other company. Enron and Theranos offer stark lessons. Those were total loss outcomes, yet the allure of jumping aboard a speculative circus is as irresistible as ever, especially with interest rates at near-record lows. The investing herd continues to follow the celebrity of popular “momentum” investing, thereby they ignore the analytical rigor aimed at discovering what is reasonable and what allows one to, as Warren Buffett says, “avoid big mistakes.”

France is bracing for major transportation disruptions throughout the country starting Thursday, as trade unions launch a strike in response to changes President Emmanuel Macron wants to make to the country’s retirement system, while port blockades have resulted in widespread fuel shortages across the country. Much of the Paris Metro will be shut down, as will many national and international train lines, including certain Eurostar services. Flights will also be canceled, as air traffic controllers say they will join the protests through Saturday.

Hundreds of filling stations around western France have run out of gasoline and diesel as blockades of oil refineries enter their second week according to industry group UFIP. According to The Local, construction workers have been blockading refineries in Brittany since last week and a blockade at La Rochelle has resumed.

French media reported on Tuesday morning that 390 filling stations have no fuel at all, and another 389 have limited supplies. The areas affected include Brittany, the west of France, the south east coast area around Marseille and some parts of eastern France near the Swiss border.

For an interactive map of which filling stations are affected, click here.

Workers are staging blockages at depots in Brest, Lorient, Le Mans and Vern-sur-Seiche. Further south, in the region of La Rochelle, another blockade was cleared at 4.30pm on Friday, but resumed at midnight on Monday. The blockaders belong to the public construction group BTP, Bâtiments et Travaux Publics (“Buildings and Public Construction”). They are protesting a fuel tax hike planned for 2020, which they say will have a negative financial impact on their companies. Until now, the so-called gazole non routier (GNR), used mainly by construction workers and farmers, is subject to a tax benefit that is planned to be phased out in 2020.

According to the workers this will increase their fuel prices by 45%, adding an hourly cost of about €10 for an average mechanical excavator, which they fear will hurt especially the smaller construction businesses.

The government suspended the fuel tax hike last December to appease the “yellow vest” protesters, whose main demands included abolishing the fuel tax.

In a separate dispute about a different type of fuel tax, truck drivers from the group Organisation des Transporteurs Routiers Européens will also be staging protests including rolling road blocks across France from Saturday, December 7th onwards. The French truck drivers are angry about a two cent increase in diesel tax and say their protest will start on Saturday, and could go on for an unspecified number of days.

The group’s press release says that: “Tired of not feeling defended and heard, road transport companies will express in the street the legitimate anger of the profession.” The protests will be “from December 7th and the following days”.

The strike action could also lead to some disruption on the roads as one of the hauliers unions is involved and ‘yellow vest’ protesters have said they will be staging a day of action. Nothing has been specified yet, but in the past motorway toll booths have been a frequent target for ‘yellow vest’ demonstrations.

Their protest is not linked to the unlimited strikes that are hitting France from December 5th – those are over plans to reform the pension system – but will coincide with what is expected to be a very difficult weekend for transport as rail employees, Metro drivers, bus drivers, airline ground crew and air traffic controllers all walk out.

The last time the French government seriously tried to overhaul its pension system, in 1995, protests also paralyzed the country for more than three weeks and forced then-President Jacques Chirac to back down and accept a stinging political defeat. And although French transport unions largely steered clear of the yellow vest demonstrations over the past year, they are expressing the same anger that certain segments of the population have been abandoned by their leaders.

Adding to the chaos, yellow vest protesters could join these demonstrations. Teachers unions, postal workers, hospital workers and the police may also support the strikes.

“It’s the coalition of all frustrations, and it demonstrates the isolation of the elite, the isolation of the president, even the personal rejection of Macron,” said Dominique Moïsi, a French political scientist and the author of a recent book on emotions in politics.

“There is a deep sense of injustice right now, that inequalities have exploded, that the state is much less protective than it was of the weak, and much more protective of the strong,” Moïsi said.

France uses forty-two different retirement schemes and under some of those schemes, such as those for train drivers and Paris Metro operators, certain employees can still retire as early as age 50 or 52. Paris Metro drivers are entitled to monthly pensions as high as $4,100, according to a government report in July. Many private-sector employees, by contrast, can retire only at 62, and the average government pension ranges from $1,400 to $1,600 a month. As we showed recently, France is the “winner” among all nations in the expected number of years a worker can expect to live in retirement.

Alas, such a generous arrangement is no longer sustainable, which is why Macron’s idea is to create a universal points-based system that would calculate pensions in the same way for everyone, regardless of their profession.

This has angered the powerful French labor unions, which have called for Thursday’s protest and who insist that Macron’s new calculation would harm lower-income workers and those who have been temporarily employed.

However, the resistance is not just about retirement income.

Laurent Berger, the head of the French Democratic Confederation of Labor, one of the country’s major unions, couched his movement’s actions in general terms in a recent interview with France’s LCI television. “The government is in the process of losing everyone,” he said. “It’s lost everyone.”

According to an Ifop poll published Sunday by France’s Journal du Dimanche newspaper, 76 percent of the French are in favor of overhauling the retirement system. But 46 percent of those polled also expressed a positive view of those who plan to demonstrate.

Meanwhile, as the WaPo notes, it remains unclear how long the transport workers strike will last. Eurostar has said that because of expected disruptions, it will run a reduced timetable of its high-speed-train service at least through Dec. 10.

Union organizers have vowed to continue until the government responds sufficiently to their concerns. But the coming Christmas holidays may deflate the crowds they draw.

Some observers have noted that the tense atmosphere in France is the same kind of discontent with democratic systems that is on view across the West, but manifested in a French style. “In Great Britain, when you are dissatisfied, you get a new election, and we are about to see the third one” in four years, Moïsi said. “In France, when you get dissatisfied, you take to the streets. And you have the symbol of the barricade.”

“You don’t use the ballot box but the stone, which you are going to throw at the symbol of authority.”

Via Al-Masdar News,

The Syrian Pound (also lira) has significantly improved over the last 24 hours after reaching an all-time low, Al-Watan newspaper reported on Wednesday morning. Earlier this week it hit an all-time exchange low of 950 SYP for every $1 (in the years leading up to the start of war in 2011, it stood steady at about 50 SYP for $1). 

According to Al-Watan, the Syrian Pound improved by more than 15 percent on Wednesday, reaching 850 SYP for every $1 (USD).

Local markets yesterday witnessed a severe recession, so that a large number of economic and commercial activities and shops closed until the direction of the exchange rate was clear.

Panicky Syrians rushed to buy dollars on Monday, causing the Syrian pound’s value to plunge to record lows, two dealers and a banker said.

The pound, worth 47 to the dollar just before Syria’s civil war broke out nearly nine years ago, plunged to 950 pounds to the dollar, weakening it by another 25% in the past few days. It fluctuated around 765 pounds to the dollar last week.

The pound’s fall has accelerated since mid-October, when Lebanon’s economic crisis worsened amid a wave of anti-government protests. — Reuters

The Board of Directors for the Damascus Chamber of Commerce Mohammed Hallak said that the instability of legislation is reflected in the instability of the exchange rate, explaining in a statement to Al-Watan that stability is leading to the survival of the production process as it is, stressing that what is required today is real partnership between business and government in order to raise confidence.

He added: “We have to be objective, any trader or industrial consumer of goods in his home, which confirms that the reflection of the depreciation of the exchange rate is negative by all standards because any industrial or trader has workers and employees to contribute to the productive process.”

Earlier this week, the Syrian Pound hit an all-time exchange low when it hit 950 SYP for every $1 (USD).

A gang of pirates have kidnapped 19 sailors after waylaying then boarding a supertanker loaded with oil, according to various media reports.

Hong Kong-flagged crude supertanker the Nave Constellation, owned by Navios Maritime Acquisition Corporation, was attacked during the evening hours of Dec. 3 while the ship was traveling through Nigerian waters. The attack occurred roughly 60-70 nautical miles south (reports vary) of Nigeria’s Bonny Island Offshore Terminal, where the ship was stocked with cargo.

Seven crewmembers were left aboard the ship by the pirates.

According to sources, 18 of the kidnapped were Indian nationals, along with one Turk.

Security firm Dryad Global believes the attack is part of a growing trend, with six incidents and four kidnappings in the area of Tuesday night’s incident.

The string of attacks suggests a well-armed and resourceful pirate action group, most likely operating from one or more “mothership”-type vessels, with other smaller, nimbler crafts at their disposal.

A representative for the tanker’s owner said the top concern was for the kidnapped crew, according to the New Indian Express.

“Navios as Owners and Anglo-Eastern as Technical and Crew Managers’ prime concern is the safety and early return of the 19 persons taken by the pirate gang. All the appropriate authorities, including the Flag State, have been alerted and are responding and all the necessary action is being taken to secure their wellbeing and early release.”

As we noted recently, One Earth Future’s annual State of Maritime Piracy report highlights incidents of hijacking, kidnapping, robberies and boarding attempts on the high seas. In recent years, they’ve recorded a steady drop in the number of incidents in East Africa and around Somalia in particular, which was a hotspot for pirate attacks for years.

You will find more infographics at Statista

This pullback has allowed West Africa to take over as the Continent’s biggest piracy hotspot. Oil piracy is also big in the Gulf of Mexico, where the number of incidents is also on the rise.