Did The Tech Bubble Just Quietly Pop?

While some might scoff at the idea of there even being a bubble in hi-tech start-ups, it appears the massive wall of money that has been thrown at dot-com 2.0 names – all money-losing, social, mobile, cloud name-droppers – has dried up. As The TechCrunch Bubble Index shows, the last 90 days have seen startup-funding announcements collapse over 40% to their lowest level in almost 3 years

 

 

Todd Schneider explains what The TechCrunch Bubble Index is…

The TCBI measures the number of headlines on TechCrunch over the past 90 days that specifically relate to startups raising money. I defined a "startup fundraise" as one where the amount raised was at least $100,000 and less than $150 million. A higher TCBI means more TechCrunch stories about startups raising money, which might broadly indicate a vibrant fundraising environment. For example, a TCBI of 209 on November 16, 2014, means that there were 209 TechCrunch headlines about startup fundraises between August 19 and November 5, or 2.3 per day.

So wait, did the funding bubble burst in the spring of 2014?

In the spring of 2014, investors pumped more than $5 billion into startups (as reported on TechCrunch) over a 90 day period. More recently, in the fall of 2014, that number has declined by almost 40%, to just over $3 bn. The earlier TCBI graph showed a similar decline, from a high of 346 in April 2014 to a value of 209 as I write this. In fact, the TCBI is now at its lowest value since June 2012, and the percentage of all TechCrunch articles that are about startups raising money has declined from 9% to 7% in 2014 alone.

It's also possible that it is simply getting harder to raise money!

I bucketed each fundraise article based on the amount raised to see if there are any trends within investment rounds (seed, series A, etc.):

 

Source: ToddWSchneider.com




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What Does Oil Say About the True State of the Global Economy?

The markets erupted higher this morning on a surprise interest rate cut from China. For those who like to keep track of the madness, this brings the total number of interest rate cuts by Central Banks since the 2008 crisis to well north of 520.

 

US stocks as denoted by the S&P 500 have been in a large megaphone pattern since September. The megaphone, like most technical patterns, is in fact a consolidation pattern that can breakout either way. We’ve now broken out to the upside.

 

 

Stocks are extremely overbought in the short-term. In the medium-term, forecasting just where this move will lead is a fool’s errand as it entails attempting to predict just what the dozens of Central Bankers of the world will say or do in the next week or so.

 

In simple terms, stocks need to correct. Whether the Central Bankers will let this happen or not remains to be seen.

 

Elsewhere in the markets, Oil has broken out of a massive multi-year triangle pattern and is now back at levels not seen since 2010.

 

 

It’s been a brutal bloodbath and has brought many of the Oil majors down to levels at which they are looking attractive from a valuation perspective. Some, such as BP, are approaching Price to Cash Flow multiples not seen since 2008. Others, such as Exxon and Conoco Phillips still have a ways to go.

 

Company

Symbol

2008 P/CF

Current P/CF

Exxon

XOM

6.9

8.6

Conoco

COP

3.5

5.1

BP

BP

3.9

4.2

Chevron

CVX

5.1

6.3

 

Remember, Oil is closely linked to the global economy. What does it say about the true state of affairs that oil is back at levels last seen in 2009-2010… while stocks are at new all time highs?

 

Take note and prepare.

 

If you’ve yet to take action to prepare for the second round of the financial crisis, we offer a FREE investment report Financial Crisis "Round Two" Survival Guide that outlines easy, simple to follow strategies you can use to not only protect your portfolio from a market downturn, but actually produce profits.

 

You can pick up a FREE copy at:

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Best Regards

Phoenix Capital Research

 

 

 

 

 




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Have Central Banks Entered An Undeclared War?

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The monetary tectonic plates are shifting, and predicting the next global financial earthquake is relatively easy.

I recently suggested that the devaluation of the yen was Japan's Monetary Pearl Harbor: a direct attack on the currencies of its major trading partners: the euro (European Union), the won (South Korea), the Australian dollar (AUD) and the U.S. dollar (USD), which affects both the U.S. and China since China's currency, the renminbi, is pegged to the USD.

Though there have been no overt (that is to say, public) counter-attacks, this may not reflect monetary peace so much as an undeclared war. Correspondent Mark G. observed that the current geopolitical backdrop is considerably more unsettled than the relatively benign global chessboard in 2008:
 
"The Eurozone and the Pacific Rim now have a pair of regional wars being fought out primarily by financial and monetary means. We can infer that the major central banks won't be anywhere near as cooperative during a crisis as they were in 2008."
 
While the American-European financial sanctions against Russia and Russia's counter-moves are being waged in public, the public response of the Korean and Chinese central banks to Japan's massive devaluation has been limited to grumbling.
 
But it is unlikely that other central banks are limiting their response to Japan's aggressive devaluation to words.
 
Let's start by noting that central banks play two games: one is pure public relations: marionettes on strings beat deflation with sticks and declare they'll save financial parasites with "whatever it takes" monetary policies.
Meanwhile, their actions may be mere shadows of the bold policies being trumpeted, or they may be extremes nobody dares make public, for example the Federal Reserve's $16 trillion bailout of literally the entire Western banking sector in the last Global Financial Meltdown.
 
(The Levy Institute came up with $29 trillion after poring over all the data):
 
The U.S. Fed has remained mute, but the yen devaluation has destabilized the global monetary order, whether the Fed acknowledges it publicly or not.
 
Unsurprisingly, central bank public statements don't mention that competing devaluations share certain characteristics with circular firing squads. Beggar thy neighbor policies destabilize currency flows, and from there, imports and exports, and from there, domestic regimes.
 
Is there a beneficiary of devaluations and shadow currency wars? It's not too difficult to imagine gold will eventually be revalued to reflect the decline in purchasing power of devalued currencies. It's also not too difficult to anticipate capital flows into whatever currency isn't being actively devalued–for example, the U.S. dollar.
 
One peculiar consequence of choosing not to devalue one's currency is the resulting inflows of capital fleeing devaluing currencies act as a form of quantitative easing: some of that capital flows into Treasury bonds, effectively replacing the Federal Reserve's QE bond purchases.
 

The monetary tectonic plates are shifting, and predicting the next global financial earthquake is relatively easy. Predicting the timing and the winners–now that's tricky.

 




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Steven Greenhut on Surveillance Sneaking Its Way Into Cities

500 block, 6th Street, San FranciscoIn 1966, the then-Supreme
Court Justice William O. Douglas warned about an
“alarming trend whereby the privacy and dignity of our citizens is
being whittled away.” Each step is imperceptible, he wrote, “but
when viewed as a whole, there begins to emerge a… society in which
government may intrude into the secret regions of man’s life at
will.” What would Douglas think about the post-9/11 world?
 Perhaps people feel powerless to confront federal programs,
writes Steven Greenhut. But a new effort from the ACLU hopes to
empower them to confront local authorities who embrace similar
technologies by prompting cities and counties to pass an ordinance
requiring a public debate and oversight of any such new
technologies.

View this article.

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Tyrant or Liberator? The Pundits React to Obama’s Immigration Plan

ObamaPresident Obama’s announcement
last night of new executive action that would legalize an estimated
4-5 million illegal immigrants has enraged the conservative
commentariat as much as it has placated the liberal punditocracy.
Libertarians, meanwhile, had a wider range of reactions: Many are
pleased with the actual policy but concerned that it came about
through even more executive overreach.

Making the libertarian case that Obama’s decision falls well
within established legal precedent, here is
Ilya Somin
(a George Mason University law professor, Cato
Institute scholar, and Volokh Conspiracy blogger):

Article II of the Constitution states that the president must
“take Care that the Laws be faithfully executed.” But that does not
mean that the president has an absolute duty to prosecute all
violations of federal law, or that he cannot choose which ones to
pursue based on policy considerations. If it did, virtually every
president in the last century or more would be in violation.

To the extent that large-scale use of prosecutorial discretion
is ever appropriate, it is surely so in the case of helping people
whose only violation of the law is fleeing poverty and oppression
under terrible Third World governments. Few
other offenders have such a compelling moral justification for
breaking the law
. I strongly support the legalization of
marijuana and the abolition of the War on Drugs more generally. But
illegal immigrants violating the law to escape Third World
conditions are considerably more deserving of our compassion than
college students violating it to experiment with marijuana or other
illegal drugs. If exemption from prosecution is acceptable for the
latter, it should be permitted for the former too.

Somin argues that all presidents must set uneven enforcement
priorities—it’s simply impossible to do other wise. The president’s
decision to focus on certain categories of lawbreakers instead of
others can hardly be deemed illegal. Plenty of laws considered
silly by the authorities go unenforced. That may be a problem in
and of itself—and it’s made worse by the sheer volume of federal
laws—but now is a strange time for libertarians to make that
argument, given that the outcome of not enforcing restrictive
immigration laws is liberty-maximizing.

Eric Posner, a professor of law at the University of Chicago,

wrote
 that immigration enforcement is unlike other aspects
of the law and is uniquely the purview of the executive branch:

Thus, the president’s discretion to enforce the immigration laws
has always been the cornerstone of a de facto guest-worker (or, if
you want, caste) system from which most Americans have greatly
benefited. That’s why Republicans’ claim that the president is
shredding the Constitution sounds so odd to people knowledgeable
about immigration law. He’s just doing what countless Congresses
have wanted him to do, and have effectively forced him to do, so
that Congress itself could avoid charges that it has created a
two-tier system of citizenship where the bottom tier is allowed to
stay in this country and work, but is not allowed to vote, to
benefit from welfare programs, to travel freely, or to enjoy the
full protection of workplace laws. Of course, you might say that
the whole illegal immigration system, with its two-tier system of
rights, violates the Constitution or at least constitutional
values, but the fault for that lies with Congress, not with the
president.

On the right, conservatives accused the president of unilateral
tyranny. National Review‘s Rich Lowry
set the tone
:

Altogether it would have been a wholly adequate pitch for
Congress to pass comprehensive immigration reform, in the normal
give-and-take over proposed legislation. But he’s out of that
business. Now he proposes and disposes, and the only alternative is
assent.

This charge was echoed and
amplified
by a host of Republican politicians. Sen. Ted Cruz
called Obama “a monarch.” Rep. Michele Bachmann called him “a
dictator.” Speaker John Boehner’s office referred to him as
“Emperor Obama.”

Even Sen. Rand Paul, a libertarian-leaner seen as more
sympathetic to immigration reform than many other Republicans,
accused the president of “lawlessness” and attempting to issue
“executive amnesty.” He wrote on
Facebook:

President Obama is not above the law and has no right to issue
Executive Amnesty. His actions blatantly ignore the Separations of
Powers and the principles our country was founded on. The President
has said 22 times previously that he does not have the power
to legislate on immigration. 

I believe that immigration reform is needed, however for true
and effective reform, we must first secure the border. I will not
sit idly by and let the President bypass Congress and our
Constitution.

The Washington Post‘s Jennifer Rubin
criticized 
the notion that other presidents have taken
similar paths on immigration reform:

His assertion that other presidents have done the same is
patently false, something the former constitutional law instructor
should know.  No,
in other cases the presidents acted to interpret existing
law
 as Congress authorized them to do. And the huge number
of the persons affected by Obama’s actions in and of itself sets a
new and disturbing precedent.  In short, prior presidents were
not operating in direct contravention of law that Congress refused
to change.

Just about the only hint of praise on the right came from the
editors of the conservative New
York Sun
 
in a terrific editorial extolling the
virtues of sane immigration policies:

President Obama’s immigration speech last night could yet go
down as his finest hour. No doubt there are those who will retort
that this isn’t saying a whole lot, given the disappointments of
his presidency. But we are among those on the right who reckon that
if we want — as we do — the free movement of trade and capital we
also need the free movement of labor. Nor does the free movement of
people burden our economy. The virtue of our system of democratic
capitalism is that incents individuals to produce more than they
consume, so that the more is the merrier.

Moving leftward, Andrew Sullivan expressed similar
sentiments:

The paradox of living somewhere and building a life and knowing
that it can all be suddenly swept away; the thought of being
separated from those you love – for ever; the stresses within
families and marriages that such a shadowy existence can create. We
need a full-throated defense of immigration in these cramped and
narrow times, and the president was more than eloquent on that
tonight – and made his case with a calm assurance and intensity.
I’m gladdened by it – and I can only begin to appreciate how his
words will have felt to millions of others.

The Atlantic‘s Peter Beinart wrote that the president’s
announcement was all about living up to his progressive activist
roots:

For progressives, this was always the real promise of Barack
Obama. It was the promise that a black man with a Muslim name who
had worked in Chicago’s ghettos—a man who had tasted what it means
to a stranger in America—would bring that memory with him when he
entered the White House. It’s a promise he fulfilled on Thursday
night.

Former White House Press Secretary Jay Carney was
willing to admit
that the president had flip-flopped on the
legality of such action, at the very least:

“Well, here’s what I say,” said Carney. “I think if he could
have those words back, especially the first clip where he
specifically talked about suspending deportations–that is
literally what he is doing today. In later instances including when
I was there he would speak carefully about what he could not do as
president. He can’t change the law. He can’t provide a path to
citizenship.”

Important questions
remain
about what the actual impact of this policy will be.
Does Obama’s sucessor now have the express power to roll back this
exact enforcement decision? If he does, many immigrants might
wisely decide to pass on Obama’s call to become legal citizens.
Better than that register with the government and face deportation
two years from now under a President Cruz or Perry.

At Reason, we love immigration but hate executive
overreach, so things like this will always be something of a mixed
bag. Peter Suderman thought the plan was “legal
but unprecedented
.” Matt Welch was
critical of Obama’s definition of the word
 amnesty and
wrote: “People really resent line-jumpers when
the queue stretches back as
far as the eye can see
; speed up that process and our national
debate would look a lot more reasoned and thoughtful.”

Since I despise the enforcement of expansive, confusing, and
cruel laws, I personally count this as one of the president’s more
gratifying decisions.

What say you?

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Here Is The Only Thing You Need To Know As Goldman’s|New York Fed’s Bill Dudley Testifies To The Senate

As everyone listens in silence as Goldman’s New York Fed’s Bill Dudley gets emotional during his Senate Banking Committee testimony, and his only response to why there is Goldman capture of the NY Fed being that $3 trillion in Fed excess reserves have made banks “stable”, yet why absolutely nothing will change, there is only one thing everyone needs to see to understand just how the system works.

Presenting the total donations by Goldman Sachs to members of Congress in 2014 alone via OpenSecrets.

Q.E.D.

 

And yes, it cost Goldman only $1.8 million to purchase Congress for one more year.




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RBS Shares Tumble After Admitting Stress Test “Error”

Dear Mr. Draghi, we are very sorry but we messed up on the ‘stress test’. The Royal Bank of Scotland shares are sliding after it admitted that it made an error – not in favor the bank – in its stress test calculations…

*RBS: CET1 STRESS TEST RATIOS OVERSTATED ON CALCULATION ERROR

Under the corrected Adverse Scenario, RBS capital cushion was slashed from 6.7% to 5.7% (just barely above the 5.5% minimum). Still – we should all trust the stress tests as ‘proof’ how strong Europe’s banking system is. What a farce!!

 




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Obama Waterboards the Definition of Amnesty in Immigration Speech

Let's not impugn each other's motives! Especially since Republicans are evil! ||| Whitehouse.govIn his
immigration speech
last night, President Barack Obama said “We
need reasoned, thoughtful, compassionate debate that focuses on our
hopes, not our fears.” If only we had a president who could meet
this pressing need.

Consider this passage, on the emotionally loaded word
“amnesty”:

I know some of the critics of the action call it amnesty. Well,
it’s not. Amnesty is the immigration system we have today. Millions
of people who live here without paying their taxes or playing by
the rules, while politicians use the issue to scare people and whip
up votes at election time. That’s the real amnesty, leaving this
broken system the way it is.

Supple as it may be, the English language does not permit us to
address the discomfort of certain words by changing their plain
meaning. Most definitions of “amnesty” run something like this: “the act of
releasing or protecting a person or persons from prosecution for
wrongdoings
.” Obama’s proposal last night was to release a
large category of persons from punishment for breaking U.S. law, if
they agree to meet certain conditions. So by a fair reading of the
word’s dictionary definition, this is a conditional
amnesty, or even a temporary conditional amnesty, given
that President Ted Cruz will likely reverse it. But an amnesty
nonetheless.

What is definitely not amnesty is what Obama said it
was: the status quo, in which the class of people under discussion
live under a
permanent, destabilizing threat of deportation
. Yes, some of
them don’t pay their income taxes, but, believe it or not, many
(and possibly most)
do
. Many also pay into Social Security without much hope
of ever receiving anything back, providing a little bonus
surplus
to our sagging welfare state. And of course, where
applicable, illegal immigrants pay sales and property taxes as
well.

The most significant way that illegal immigrants aren’t “playing
by the rules,” is the fact that they live here without government
permission. Is that de facto amnesty? No: They have not
benefited from a “releasing or protecting” from punishment; they’re
just on a lucky streak, but still liable to be ejected from the
country at any time. At least until Obama’s temporary conditional
amnesty kicks in.

My fellow supporters of vastly increased legal immigration to
this country do not, I believe, further their cause by retreating
into soft-focus euphemism (DREAMers!) or sidestepping uncomfortable
language just because it has proven politicially effective for
people on the other side of the issue.

If you recognized the existence of more than 10 million
unpermitted residents in this country as the product more of
prohibition than of criminality, and acted upon
that insight foremostly by expanding and deregulating legal
immigration, then I predict the word “amnesty” would start to lose
some of its negative potency. People really resent
line-jumpers when the queue stretches back as
far as the eye can see
; speed up that process and our national
debate would look a lot more reasoned and thoughtful.

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S&P 500 “Most Overbought” Since Feb 2012

The explosive surge in US equity markets off the ‘Bullard’ lows have swung the Relative Strength Index (RSI) from its most oversold in 24 months to the most overbought in 33 months in a record amount of time. The last time the market was this ‘overbought’, the S&P 500 fell almost 11% in the following few weeks…

 

 

Chart: Bloomberg




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Deutsche Bank: “People Are Talking About Helicopter Money And Debt Cancellation Being The End Game”

If Deutsche Bank’s Jim Reid is right, what just took place overnight from the PBOC is just a pleasant start and an enjoyable dress rehearsal of what is about to take place. Where it ends is precisely where we have said it would ever since QE1 was announced in March 2009.

I had a few meetings yesterday and one of the biggest surprises I had was that for the first time in a long time people were talking about helicopter money and debt cancellation being the end game. This was a major theme of our 2013 long-term study but one that we’ve struggled to get much traction with over the last year. Perhaps there’s an increasing weariness that more QE globally whilst inevitable, is a blunt growth tool and that stopping it will be extremely difficult (let alone reversing it) without a positive growth shock. Maybe Japan’s move this week in delaying the further sales tax increase and the economy’s adverse reaction to the first increase reminds the market how difficult it might be to actually pay the bills with real money. As we said earlier this week it could be that the last few days marks the first steps towards monetization. Anyway, this is not something for today or tomorrow but the fact that different clients brought it up independently of each other makes me think that’s its starting to get into people’s thoughts.

Indeed it is, as we warned last September in “Bernanke’s Helicopter Is Warming Up” and yet everyone will be shocked, shocked, when the playbook that was clearly revealed by Ben Bernanke himself in 2002 is finally implemented:

… A broad-based tax cut, for example, accommodated by a program of open-market purchases to alleviate any tendency for interest rates to increase, would almost certainly be an effective stimulant to consumption and hence to prices. Even if households decided not to increase consumption but instead re-balanced their portfolios by using their extra cash to acquire real and financial assets, the resulting increase in asset values would lower the cost of capital and improve the balance sheet positions of potential borrowers. A money-financed tax cut is essentially equivalent to Milton Friedman’s famous “helicopter drop” of money

      – Ben Bernanke, Deflation: Making Sure “It” Doesn’t Happen Here, November 21, 2002




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