Category: zerohedge

Here’s one statistic about the US economy that you probably won’t find in President Trump’s twitter feed.

Thanks to a surge in homelessness centered around several large west coast cities, the overall rate of homelessness in the US ticked higher this year, the first increase since 2010, according to a survey from the Department of Housing and Urban Development.

The U.S. Department of Housing and Urban Development released its annual Point in Time count Wednesday, a report that showed nearly 554,000 homeless people across the country during local tallies conducted in January. That figure is up nearly 1 percent from 2016.

 

Of that total, 193,000 people had no access to nightly shelter and instead were staying in vehicles, tents, the streets and other places considered uninhabitable. The unsheltered figure is up by more than 9 percent compared to two years ago.

 

Increases are higher in several West Coast cities, where the explosion in homelessness has prompted at least 10 city and county governments to declare states of emergency since 2015.

The homelessness crisis is only one byproduct of the burgeoning wealth inequality in the US caused by the Federal Reserve’s decision to pump trillions of dollars of “stimulus” into the markets.

Central-bank money printing has caused asset valuations to balloon while wages for everyone but the most highly skilled workers have stagnated, as the chart below illustrates.

Ironically, the primary culprit that city officials and advocates for the homeless cite as the reason behind the spike in homelessness is a strong regional economy that’s helped drive housing prices to record highs – of course, rock-bottom interest rates have made it cheaper to borrow and obtain mortgages.

All of this is helping driving up rents across every segment of the real-estate market – particularly in trendy urban areas like LA, San Francisco and Seattle.

According to the Associated Press, the most alarming consequence of the West Coast homeless explosion is a deadly hepatitis A outbreak that has afflicted Los Angeles, Santa Cruz and San Diego, the popular tourist destination in a county where more than 5,600 people now live on the streets or in their cars. The disease is spread through a liver-damaging virus that lives in feces.

Homeless populations in California, Oregon and Washington grew by 14% over the past two years, meanwhile the segment of that population considered unsheltered climbed 23% to 108,000. That is in part due a shortage of affordable housing. The unsheltered population in Seattle, the city that’s home to Amazon.com, grew by 44% over two years to nearly 5,500.

The homeless service area that includes most of Los Angeles County, the epicenter of the crisis, saw its total homeless count top 55,000 people, up by more than 13,000 from 2016. Of these, four out of every five are considered unsheltered, meaning tens of thousands of people have no place to sleep other than the streets or parks.

By comparison, while New York City’s homeless population grew to more than 76,000, only about 5 percent are considered unsheltered thanks to a system that can get people a cot under a roof immediately. In the West Coast states, the surge in homelessness has become part of the fabric of daily life.

For many business owners on the west coast – particularly in areas near downtown LA where the infamous Skid Row is home to thousands of homeless people – the burgeoning population of people living in the open air routinely intrudes on daily life and business.

The Monty, a bar in the Westlake neighborhood near downtown Los Angeles, usually doesn’t open until 8 p.m. Partner and general manager Corey Allen said that’s because a nearby shelter requires people staying there to be in the building by 7. Waiting until after that to open means the streets outside are calmer.

 

Allen said the homeless have come into his bar to bathe in the restroom wash basins, and employees have developed a strategy for stopping people from coming in to panhandle among customers.

 

Seventy-eight-year-old Theodore Neubauer sees the other side of it. Neubauer says he served in Vietnam but now lives in a tent in downtown Los Angeles. He is surrounded by thriving business and entertainment districts, and new apartments that are attracting scores of young people to the heart of the nation’s second most populous city.

 

“Well, there’s a million-dollar view,” he said.

 

Helping those like Neubauer is a top policy priority and political issue in Los Angeles.

One of the most interesting characteristics of the spike in homelessness is the concentration of homeless populations in places like LA. If one were to exclude the nation’s second largest city from the data, the national homelessness rate would’ve dropped 1.5%.

Of course, it makes sense that homeless people would gravitate towards cities on the west coast where services for the indigent are plentiful and the risk of dying from exposure is significantly reduced.

However, in cities like Sacramento, where rising housing costs are forcing students at Sacramento State to give up their apartments in sleep in the 24-hour study lounge. Sacramento and Alameda County each saw increases of more than 1,000 homeless individuals over the past year.

Last year, voters in the city and Los Angeles County passed a pair of tax-boosting ballot initiatives to raise an expected $4.7 billion over the next decade for affordable housing and services for the homeless.

HUD Secretary Ben Carson praised the region for dealing with the issue and not relying solely on the federal government, but LA mayor Eric Garcetti responded that insufficient federal funding for affordable housing was one of the drivers of the crisis.

“We need to move a little bit away from the concept that only the government can solve the problem,” Carson said.

 

But Mayor Eric Garcetti said that insufficient federal funding for affordable housing and anti-homelessness programs are part of the reason for the city’s current crisis.

 

“Los Angeles’ homelessness crisis was not created in a vacuum, and it cannot be solved by L.A. alone,” Garcetti said in a statement.

Meanwhile, areas that recorded a decline in homelessness, according to the survey, include Atlanta, Philadelphia, Miami, the Denver area and Hawaii, which declared a statewide homelessness emergency in 2015.

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By Chris at http://ift.tt/12YmHT5

Have you ever asked yourself what happens when you place a trade?

I hadn’t given it much thought until about 10 years ago when something happened which opened my eyes to a single company that holds what is probably the most concentrated risk position in the US market.

Here’s what happened…

So, I took a position in a private placement. The shares came free trading after a 6-month lockup, and the stock had been running like the cops were after it.

It had a half warrant attached, which was deep deep in the money, and I wanted to scoop a healthy chunk of money off the table. Heck, this was a bloody drill play which, as you probably know, are more often than not burning matches. Bright and brilliant until they burn your fingers.

So, I’m busy scrambling to get the stock placed with a broker so that I can trade it.

First up was a very well known broker whose name I’ll keep out of the spotlight (I like the guys and gals there and it’s not that important). I’ll call them broker X.

I have an account with them and they said, “Sure, no problem.” A week later, “Ah sorry Sir, we’re having some questions from compliance.” And then another week passes and “No, so sorry, we can’t take that one.”

I can’t remember the reason now but at this point I’m two weeks down, the stock’s “en fuego,” and I’m getting antsy. I quickly call my broker at Sprott and they took the stock. This took only a couple of days.

Now, with the stock placed I’m free to trade it. And I do. The same day, I pull up my account at broker X and looky here. There is the original stock sitting in my account. Wait! What?! That can’t be. So I pull up my online account at Sprott thinking someone slipped my something in my drink but no…there she is. This is voodoo, or magic, or a cock up. It’s in two places at once.

I’m sure if I hit the sell button at broker X their back office will spasm, and before the bean counters can have a heart attack the system will vomit up the true position. Plus, I’m not an ass and knowing the truth I can’t in good conscience do that. I only own a certain position, not double it as much as I might wish that was the case.

Down the Rabbit Hole

And so this is what led me down the rabbit hole of actually looking at what takes place when you place a trade.

I contacted broker X and we finally sorted out the problem. They performed their accounting magic and the position disappeared from my account but this is where it scared the isht out of me.

When I asked my broker how did they typically account for client positions I was told that the Depository Trust & Clearing Corporation (DTC) holds the securities.

All securities, I asked?

Yes, all. Or at least 99.99% of all outstanding securities. So broker X (and indeed all brokers) have an account with the DTC, and the two accounting systems need to match, showing “brokers’ clients'” securities, which need to reflect the securities held at the DTC on a netted basis.

Ok, I got it. It’s a central clearing house. Duh. I’d just never really given it any thought until that day… and it was then that I instantly realised the truly massive concentrated risk.

Massive Concentrated Risk

When you buy a stock, you think you own it. But you don’t. What you own is an IOU to your broker dealer. Much like your bank deposit isn’t yours because that, too, is an IOU from your bank. Anyone who’s ever been caught in a bank run gets this. And anyone who’s even read about one gets it.

So like a traditional bank the DTC acts in a similar way. By the way, in Europe Euroclear and Clearstream perform exactly the same function as the DTC does in the land of apple pie.

The DTC was actually formed back in the 70’s after the back-office scandals at that time. It was a solution for the increased trading volume on Wall Street, which had become too much to handle, with brokerage firms falling behind with mountains of paperwork, and trades taking forever to clear, and counter-parties not knowing when, where, or who.

The result was that the Wall Street firms could more easily track shares by having to deal only with themselves and the DTC. Companies were and still are eliminated from the process.

So now when a listed company you own look at their share registry, they don’t see your name in there. They only see the DTC. And when brokers trade stock, all that happens is a ledger entry at the DTC with a netting taking place. You just own a derivative. Lucky you.

In fact, if you own an option contract, or a warrant, or any sort of derivative, you own a derivative of a derivate. Fun heh!

But That’s Not All

Lots of crazy isht can take place here. For example, instead of executing a trade in the market (where it’s transparent) brokers can transfer shares between clients and book the trade as a sale.

Transparent? Not so much. Sure, they’ve an obligation to get you the “best” price in the market, but how’s that possible without actually putting it up for sale in the market?

Brokers can and do also lend out your shares to someone who wants a borrow in order to sell short the stock. Often you don’t even know about it….small print, being…well small.

Imagine someone borrowed your car because the car park attendant lent it out to them. His job being the safe keeping of your car, and here he is making money by lending it out. If that doesn’t make you livid, you’re a weirdo. For the rest of us we’re none too happy.

Now, this brings up another super crazy setup.

Imagine this: You buy some Tesla stock (silly I know, but let’s play the game). You think you own it. You even report it to the tax man. Your broker reports it on his balance sheet, too.

But then he lends it out to a short seller who goes through another broker who, too, reports it on his balance sheet. One security is being reported by multiple parties on their balance sheets. Fractional reserve banking in the securities market.

In fact, there are 5 separate institutions in each trade. Your broker, who processes to the custodian, then from the custodian to the DTC, who then process to the next custodian, who then process to the broker on the other side. No wonder it takes 3 days to settle a trade.

Thank heavens these institutions in this daisy chain aren’t levered and at risk of failing. Imagine they were levered.

Oh wait… What am I saying? I’m sorry, I’ve not had my medication.

So we buy and sell with our fingers crossed that in the trade settlement process (either T+2 or T+3, which I dare say is horse and buggy slow) nothing goes wrong to screw up our trade, leaving us with an IOU from the next Bear Stearns, Lehman Brothers, or MF Global.

Of course, once settled we’re still left with this queasy feeling in our stomach because we’ve got this entity that holds trillions of dollars of stocks, bonds, and derivatives. One single entity. Think about that.

This entire fustercluck of a setup hasn’t really changed since the early 70’s. Think about what that actually means.  Here’s technology from that time.

70’s ground-breaking technology

There’s a reason we no longer use this stuff. It’s antiquated.

And this brings me to something else I’ve been harping on about here: Cyber security, where I showed you this:

Consider recent data hacks in the corporate sector:

• eBay (NASDAQ:EBAY): 150 million passwords
• JPMorgan Chase (NYSE:JPM): 73 million emails
• Target (NYSE:TGT): 40 million credit card numbers
• Yahoo (NASDAQ:YHOO): 1 billion accounts

So would someone, anyone potentially, be hacking the DTC? Is the Pope Catholic?

When every security is held in one centralised location, is this not the epitome of concentrated risk?

There is, however, an answer to all of this mess…

Cast your vote here and also see what others picked

– Chris

“Put all your eggs in one basket… the handle’s going to break. Then all you’ve got is scrambled eggs.” — Nora Roberts

 

 

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Liked this article? Then you’ll probably like my other missives on

this topic as well. Go here to access them (free, of course).

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On Thursday, the Palestinian armed group al-Nasser Salah al-Deen Brigades announced in an official statement that its fighters fired several rockets from Gaza strip targeting Israeli settlements north of it. The statement was released by al-Nasser Salah al-Deen news agency “al-Buraq” and the armed group stressed that this is only the first response to Trump’s decision to recognize Jerusalem as Israel’s capital and warned that more will follow.

A volley or rockets was fired out of Gaza on Thursday in response to Trump's controversial Jerusalem announcement.

Meanwhile, the region continues to be on edge with widespread protests breaking out Thursday in response to Trump's Wednesday afternoon speech formally recognizing Jerusalem as the Israeli capital, and included plans to move the US embassy from Tel Aviv to Jerusalem. Many of these protests spiraled into violent confrontations at various locations across Israel and the Palestinian territories, including clashes between Arab protesters and Israeli soldiers in Ramallah and other places in the West Bank and Gaza Strip. Protests frequently featured the burning of the American and Israeli flags as well as images of President Trump.

During the evening Thursday (local time), the Israel Defense Forces (IDF) confirmed the volley of rockets from the Gaza Strip, issuing a statement through the official IDF Twitter account, while also stating that the Israeli Army responded to the attack. "A short while ago, a projectile was fired from northern Gaza & exploded in southern Israel. In response to that fire & the projectiles fired at Israel throughout the day that fell short in Gaza, an IDF tank & an IAF aircraft targeted two terror posts in Gaza" the message stated.

Following the sirens that were sounded in Hof Ashkelon & Sha'ar HaNegev regional councils in southern Israel earlier this evening, 2 launches from Gaza towards Israel landed within the Gaza Strip

— IDF (@IDFSpokesperson) December 7, 2017

The IDF followed the message with a warning that it would hold Hamas directly responsible for all "hostile activity" and threats coming from Gaza: "The IDF holds Hamas responsible for the hostile activity perpetrated against Israel from the Gaza Strip."

The Al-Nasser Salah al-Deen Brigades rocket attack was likely coordinated with the Hamas Movement as the al-Nasser Brigades are one of the main allies of Hamas in the Gaza Strip.

The Gaza based Al-Nasser Salah al-Deen Brigades took credit for the Thursday rocket attack on southern Israel.

Local sources from the Gaza Strip reported that Israeli warplanes are currently highly active over Gaza right now. The sources added that warplanes were seen dropping flares for unknown reasons.

The Israeli Army will likely respond to the Gaza rocket attack in the upcoming hours or overnight; however, unlike previous sporadic exchanges of fire, things are likely to escalate to a dangerous level due to the ongoing Jerusalem crisis.

The Israeli Army confirmed that at least two rockets targeted the settlements of Hof Ashkelon and Sha’ar HaNegev north of Gaza Strip in southern Israel. Several Israel sources claimed that the Israeli anti-rocket system “Iron Dome” successfully intersected the rockets; however, the Israeli Army did not confirm these claims and there were no reports of casualties from the rocket strikes. 

Previous to Trump's announcement, Palestinian Authority President Mahmoud Abbas and Jordan’s King Abdullah II had warned the president that the announcement would have “dangerous” repercussions for regional stability. Separately, the Palestinian delegate to the United Kingdom said on Wednesday that President Trump's move to recognize Jerusalem as the capital of Israel signals "a declaration of war" in the region. “He is declaring war in the Middle East, he is declaring war against 1.5 billion Muslims, hundreds of millions of Christians that are not going to accept the holy shrines to be totally under the hegemony of Israel,” Manuel Hassassian told BBC 4 Radio's "Today."

The Palestinians seek east Jerusalem as the capital of a future independent state and fear that Trump’s declaration essentially imposes on them a disastrous solution for one of the core issues in the Israeli-Palestinian conflict. “There is no way that there can be talks with the Americans. The peace process is finished. They have already pre-empted the outcome,” said Palestinian official Hanan Ashrawi. “They cannot take us for granted.” The U.S. decision “destroys the peace process,” added Palestinian Prime Minister Rami Hamdallah.

As anger builds among Palestinians and within the broader Arab world, some observers fear that a third intifada could be imminent – this after Hamas leader Smail Haniyeh called for a new Palestinian intifada, or uprising early on Thursday.

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Authored by 720Global's Michael Lebowitz via RealInvestmentAdvice.com,

The term “priced in” is a phrase used frequently by Wall Street and the financial media. This expression is used to describe how much the price of stock or a market has accounted for an anticipated event. For example, consider a pharmaceutical stock that has risen 50% over the last few days on the prospects of getting regulatory approval for a new drug. If the collective “market” deems that the stock should increase a total of 100% if the drug is approved, then we can say the “market” has “priced in” a 50% chance the drug will be approved.

The term “market”, as used above, is vague. It is meant to represent the consensus view. Importantly to investors, it represents potential opportunity when an investor has a view that differs from the consensus.  If you were 100% certain the drug in the prior example would be approved, you could make a 50% gain on the stock if proven correct.

This article is a follow-up to one published November 29, 2017, Corporate Tax Cuts – The Seen and the Unseen. In that piece, we provided an analysis of the proposed corporate tax reduction that lies within the pending tax reform bill. We pointed out that, while investors appear focused on the benefits to corporations, they are grossly negligent ignoring the negative economic effects that higher individual taxes will have on consumption (70% of GDP) and the adverse influence of an additional $1.5 trillion deficit.

In this piece, we consider how the consensus is quantifying the positive effect the tax bill should have on stocks. Specifically, we discuss what is “priced in” to the market. This example, unlike that of the drug maker, is not black and white. However, by explaining how market projections are created, we offer guidance on how much the market has priced in for corporate tax cuts. This in turn offers investors a non-market opinion on what the corporate tax cut is worth and a basis to take appropriate actions.

To be clear, our view of the implications of this legislation are likely negative to GDP and therefore corporate earnings. That said, we also want to understand how the consensus views the proposal in order to form an opinion about how the market may trade. In due time the consequences of poorly constructed tax reform will appear but in the meantime, 720Global does not set the market price, the consensus does.

Corporate Tax Cuts

Since at least 1947, historical data has provided sufficient evidence to show that corporate tax reductions, subsidized by federal deficits and individual taxpayers, have resulted in slowing GDP growth. Accordingly, we believe that the current proposal will follow the path of prior tax reductions and result in weaker economic growth and ultimately lower corporate earnings than would have occurred without the legislation.

While our opinion, as stated above and detailed in the previously referenced article, differs widely from the “market”, we thought it might be helpful to provide a framework using the logic of most investors to value the corporate tax reduction.  The following paragraph from the article reviews our findings.

Based on this simple analysis thus far, it is easy to understand why equity investors are giddy over a sizeable reduction in the corporate tax rate. If the statutory rate is reduced to 20% as proposed, and the effective rate remains 10% lower, the amount of money corporations pay in taxes will be reduced sharply. Based solely on this assumption, corporate after-tax profits, in year one alone should increase by almost $200 billion, while federal corporate tax receipts will be reduced by the same amount. Such a boost in corporate earnings would increase the forecasted internal rate of return (IRR) on the S&P 500 by approximately .90%. Holding everything else constant, this equates to a price increase of 285 points for the S&P 500 or an 11% gain from today’s level.

We recently read an article in which the Swiss investment firm UBS claims “Stocks could surge 25% if the Republican tax bill passes.” Given the juxtaposition between the paragraph above and the UBS forecast, we wanted to walk you through the math and let you judge for yourself what investors think the tax cut is worth.

Valuation Math

The graph below compares corporate earnings with a tax cut (green line) to one without the cut (red line).  As a reminder, corporate earnings will be affected by the changes in the effective tax rate not the statutory rate. As such, we base our analysis on an expected decrease in the effective tax rate from the current level of 22% to 10%, and assume earnings in both cases grow at 5% a year.

The present value of the difference between the two lines above is the likely approach that most investors are using to price the value added from the tax plan. In turn, the present value figure of that differential yields a dollar premium that can then be added to the current price of the S&P 500 to arrive at an expected price after the tax cut. Based purely on the earnings shown in the graph, an investor looking to receive those cash flows would be indifferent between paying the current price for current earnings and paying the current price plus $285 per share or 2925 for the earnings benefiting from the tax cuts. The current price of the S&P 500 is 2640. Thus, investors that believe the tax cut will reduce the effective tax rate by 12% should expect the S&P 500 to increase by approximately 11%.

In order to validate our findings above, we take a different approach and quantify how the change in earnings would affect the price to earnings ratio (P/E). Currently, the one year trailing earnings for the S&P 500 are $107 per share and the P/E is 24.63. If earnings increased by 12% due to tax cuts, the P/E would decline to 21.99. If the market were to price in the increased earnings under the assumption that valuations are unchanged, the price of the S&P 500 would need to increase 12% to bring P/E back to its current level. This different approach delivers a very similar result.

Starting Line

Thus far, the analysis seems relatively straight forward, however there is another major concern when gauging how much of the tax bill is priced in to the market. We need to ask, “When did the market begin to price in the benefits of tax relief for corporations?”  Obviously it is impossible to pinpoint a date, but we selected three possibilities to show why this matters. The table below uses the night before the Presidential election, the date Congress began debating tax reform and the current date. The current price of 2640 allows us determine how much the S&P 500 has priced in.

As shown above, those that believe the tax deal has not been priced in and its passage will increase corporate valuations by 12% ought to expect a full adjustment in the price of the index from current levels. On the flip side, those that similarly believe the tax bill will boost valuations but believe this has been known by the market since the day Donald Trump was elected might expect a decline of 9.59%. They would argue the market has priced in a corporate tax reduction and then some. Another option is that in addition to tax cuts, the market is giving some consideration to other Trump policies that may be beneficial to the market such as regulatory reform. Although we try to isolate and quantify the effects of tax cuts, there are clearly many other dynamics in play.

Summary

UBS believes stocks are worth 25% more than current levels if proposed tax cuts become law. While we do not know how they arrived at such a large number, we can use our analysis above to solve for possible answers. Based on the framework of our analysis, it is likely that UBS thinks corporations will reap the entire 12% tax benefit and corporate earnings will grow 1.25% faster due to broad economic benefits stemming from the bill. Their assumption also implies that none of the 25% is priced in. In other words, the true gains due to the tax bill are likely even higher.

UBS clearly presumes the tax cut will benefit the corporate bottom line due to a decreased tax burden and will also spur economic growth. As we discussed in the aforementioned article, there is no precedent for such a claim. History does not support UBS’s case, nor does common sense. We also remind you that UBS makes money selling stocks. Despite spurious math, as a for-profit financial institution, their interests are well-served by pitching the idea of a big post-tax cut rally.

If you believe like we do that the benefits to corporate earnings are being grossly overestimated by the consensus you are at a distinct advantage. This does not mean you must sell all stocks and short the market immediately. It does however require you to proceed with caution, for when reality catches up with the consensus, market valuations could be at risk.

To reiterate a point we made in the prior article:

“Given the historical evidence regarding the implications of corporate tax cuts, we are left questioning the so-called “Trump bump.” We argue that a market rally based on that premise is incoherent, and the market should be discounting prices and valuations due to the tax cuts not inflating them.”

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Daniel Ellsberg – America’s most famous whistleblower, the former military analyst who leaked the Pentagon Papers which helped end the Vietnam war – has just published a book revealing that he was also one of the main nuclear war planners for the United States in the 1960s.

Ellsberg said in an interview this morning that the U.S.  had plans for a first strike on every city in Russia and China … and that numerous field-level commanders had the power to start nuclear Armageddon:

[Interviewer] So, you made copies of top-secret reports for plans about nuclear war years before you copied the Pentagon Papers—

 

DANIEL ELLSBERG: That’s right.

 

[Interviewer] —and released them to the press?

 

DANIEL ELLSBERG: Essentially, my notes, and sometimes verbatim excerpts, not the entire plans themselves, but on plans that were then unknown to the president, to begin with, to President Kennedy. I briefed his aide, McGeorge Bundy, in his first month in office on the nature of the plans and some of the other problems, like the delegation of authority to theater commanders for nuclear war by President Eisenhower, which was fairly shocking to McGeorge Bundy, even though Kennedy chose to renew that delegation, as other presidents have.

 

But I was given the job of improving the Eisenhower plans, which was not a very high bar, actually, at that time, because they were, on their face, the worst plans in the history of warfare. A number of people who saw them, but very few civilians ever got a look at them. In fact, the joint chiefs couldn’t really get the targets out of General LeMay at the Strategic Air Command.

 

And there was a good reason for that: They were insane. They called for first-strike plans, which was by order of President Eisenhower. He didn’t want any plan for limited war of any kind with the Soviet Union, under any circumstances, because that would enable the Army to ask for enormous numbers of divisions or even tactical nuclear weapons to deal with the Soviets. So he required that the only plan for fighting Soviets, under any circumstances, such as an encounter in the Berlin corridor, the access to West Berlin, or over Iran, which was already a flashpoint at that point, or Yugoslavia, if they had gone in—however the war started—with an uprising in East Germany, for example—however it got started, Eisenhower’s directed plan was for all-out war, in a first initiation of nuclear war, assuming the Soviets had not used nuclear weapons.

 

And that plan called, in our first strike, for hitting every city—actually, every town over 25,000—in the USSR and every city in China. [Ellsberg isn’t the first to discuss U.S. plans for a nuclear first strike.  In the 1986 book To Win a Nuclear War: The Pentagon’s Secret War Plans, one of the world’s leading physicists – Michio Kaku – revealed declassified plans for the U.S. to launch a first-strike nuclear war against Russia.  The forward was written by former U.S. Attorney General Ramsey Clarke.]  A war with Russia would inevitably involve immediate attacks on every city in China. In the course of doing this—pardon me—there were no reserves. Everything was to be thrown as soon as it was available—it was a vast trucking operation of thermonuclear weapons—over to the USSR, but not only the USSR. The captive nations, the East Europe satellites in the Warsaw Pact, were to be hit in their air defenses, which were all near cities, their transport points, their communications of any kind. So they were to be annihilated, as well.

 

***

 

The weapons, the machinery that will carry this out, this was no hypothetical plan, like Herman Kahn might have conceived at the doomsday machine that he thought up at the RAND Corporation as my colleague. This was an actual war plan for how we would use the existing weapons, many of which I had seen already that time.

 

***

 

Every president has delegated. I don’t know the details of what President Trump has done or since the Cold War. Every president in the Cold War, right through Carter and Reagan, had delegated, in fact, to theater commanders in case communications were cut off. That means that the idea that the president is the only one with sole power to issue an order that will be recognized as an authentic authorized order is totally false.

 

How many fingers are on buttons? Probably no president has ever really known the details of that. I knew, in ’61, for example, that Admiral Harry D. Felt in CINCPAC, commander-in-chief of Pacific, for whom I worked as a researcher, had delegated that to 7th Fleet, down to various commanders, and they, in turn, had delegated down to people. So when you say, “How many altogether feel authorized?” if their communications are cut off—and that happened part of every day in the Pacific when I was there—communications got better, but the delegations never changed.

 

****

 

Generally, they allow for lower-level majors, colonels to decide, “The time has come. We’ve lost our commanders. The time has come to go.”

 

Ellsberg says that not much has changed since he served as a nuclear war planner. Indeed, experts say that new U.S. weapons technologies are geared towards first strike capabilities.

Background:

• Former U.S. Government Official: U.S. Is ALREADY at War with China and Russia
• Trump Abandons His Base, Goes toward Nuclear War
• American, British, Polish and Russian Experts Warn that Continued Fighting In Ukraine Could Lead to Nuclear War
• Experts: Invasion of Syria Could Lead to Nuclear War
• Indications that the U.S. Is Planning a Nuclear Attack Against Russia
• Former U.S. Defense Secretary Explains Why Nuclear Holocaust Is Now Likely

 

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Legendary investor Jack Bogle is apparently not all that optimistic that public pension funds in the U.S. are going to be able to meet their future funding obligations.  Speaking with Bloomberg earlier today, Bogle predicted that bond returns will be a paltry 3% over the next decade, with stock returns not that much better, making it almost impossible for pensions to meet their arbitrary 7.5%-8.0% return hurdles.

The founder of Vanguard Group thinks a conservative portfolio of bonds will only return about 3 percent a year over the next decade, and stocks won’t do much better, with a 4 percent annual gain over a similar period. This is “totally defeating” for pensions, which “are not going to be able to meet their 7.5 percent or 8 percent obligations,” Bogle said in a Bloomberg Radio interview that aired Thursday.

 

“The only return you get on a bond is from the interest coupon,” with fluctuations in prices eventually evening out and becoming relatively negligible over the longer term, he said. Given a portfolio of about half corporate bonds and half U.S. Treasuries, the blended yield is about 3 percent today.

 

“So that’s what you get over the next decade,” he said.

 

“It is almost a given that it will end badly,” he said.

Of course, Bogle’s sentiments on the imminent demise of public pension funds should come as no surprise for our readers as we’ve frequently warned that the arbitrary nature of pension accounting rules, primarily the ability to randomly pick discount rates out of thin air, has allowed managers to consistently understate liabilities for decades. Moreoever, as we pointed out in a post entitled “An Unsolvable Math Problem: Public Pensions Are Underfunded By As Much As $8 Trillion,” the reason that the public pension ponzi has been allowed to persist by regulators for so long is quite clear…the truth is simply too scary.

We decided to take a look at what would happen if all federal, state and local pension plans decided to heed the advice of Mr. Gross. As one might suspect, the results are not pleasant.  We conservatively assume that public pensions are currently $2.0 trillion underfunded ($4.5 trillion of assets for $6.5 trillion of liabilities) even though we’ve seen estimates that suggest $3.5 trillion or more might be more appropriate.  We then adjusted the return on asset assumption down from the 7.5% used by most pensions to the 4.0% suggested by Mr. Gross and found that true public pension underfunding could be closer to $5.5 trillion, or over 2.5x more than current estimates.  Others have suggested that returns should be closer to risk-free rates which would imply an even more draconian $8.4 trillion underfunding.   

And while the sentiments expressed by Bogle should be a substantial overhang for the economy, no one seems to care for now.  Certainly legislators have no incentive to address the issue… the country’s 15 million union employees may not be so happy about supporting their political candidates if they knew their retirement plans were insolvent… much better to let the system break in 20 years then fix it with a massive taxpayer bailout after convincing the electorate that the problem was somehow created by top earners not paying “their fair share.”  After all, it’s only $23,000 per man, woman and child.

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Despite all the risk/margin worries, and volatility fearmongering, and fraud allegations, Bloomberg reports that, according to a person familiar, Goldman Sachs plans to clear bitcoin futures contracts when they go live next week.

“Given that this is a new product, as expected we are evaluating the specifications and risk attributes for the bitcoin futures contracts as part of our standard due diligence process,” Tiffany Galvin, a spokeswoman for the bank, said in an emailed statement.

Goldman Sachs Chief Executive Officer Lloyd Blankfein said last month that it’s too early for his bank to need a bitcoin strategy and that he doesn’t consider the digital currency to be a store of value.

Blankfein said in the Bloomberg Television interview that he felt no urgency for his firm to develop a plan for dealing with bitcoin given its volatility.

Bank of America Corp. and Citigroup Inc. won’t immediately offer clearing of the products when they start trading, people briefed on those lenders’ decisions said. The Wall Street Journal reported the banks’ decisions earlier Thursday.

However, we suspect that Goldman's confirmation will bring the rest quickly to market.

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Artist's impression of what Bitcoin did today…

 

Today was all about Bitcoin – no matter what kind of investor you are…

 

Several exchanges had glitches with GDAX down for about 25 mins as Bitcoin plunged off its intraday highs…

At its highs today, Bitcoin was bigger than Wells Fargo…

 

Is this what is fueling Bitcoin's gains?

 

One Bitcoin can now buy 12.5 ounces of gold, it began the year at 1…

 

Equity indices were all higher on the day led by Trannies… (Dow and S&P lagged the Nasdaq and Small Caps)

 

FANG Stocks managed to get back to positive for the week…

 

Tech outperformed financials for the 3rd day in a row…

 

Banks opened lower (on Citi and tax news) but were bid into the European close…

 

High Tax outperformed low tax…

 

USDJPY and Stocks decoupled (as the former pushed on up to 113.00 and sequities ignored it)…

 

Bond yields caught up to Nasdaq…

 

Stocks seemed to dislink the extra curve steepening today…

 

Treasury yields were higher on the day…with the long-end pulling back to unchanged on the week…

 

With the curve steepening after President Trump said he was ready to begin his infrastructure plan… this was the 2nd biggest curve steepening in 2017

 

The Dollar rallied for the 4th day in a row…

 

Cable was the most noisy currency of the day amid on-again, off-again Brexit headlines…

 

WTI rebounded a bit today but copper, and PMs extended the week's losses…

 

Gold and Silver were clubbed like baby seals today…both ended at their lowest levels since July…

 

Silver underperformed gold again pushing the gold/silver ratio to almost 80x – the highest since April 2016

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Authored by Anthony Gockowski via Campus Reform,

As another Christmas quickly approaches, colleges across the country are issuing their annual guidelines on how to make the season as inclusive as possible.

At the University of California, Irvine, for instance, individual departments are encouraged to “focus on celebrating a special occasion, instead of a specific holiday,” suggesting that they have a “year-end celebration” or celebrate “seasonal themes such as fall, winter, or spring.”

The California university also requests that academic departments “ensure that office celebrations are not indirectly celebrating religious holidays,” suggesting that they display “diverse symbols representing a variety of faith traditions along with secular ones.”

The State University of New York, Brockport has issued similar guidance on “culturally sensitive holiday decorations,” even advising employees to “consider a grab bag instead of a ‘Secret Santa’ gift exchange.”

“Keep decorations general and nonspecific to any religion. Create a winter theme with lights and color rather than religious icons, or include decorations from all the cultural traditions represented in your department,” the guidelines add, saying the “holiday season should be considered an opportunity to demonstrate cultural sensitivity and inclusivity.”

Similarly, Ohio University put out a guide on “holiday expenditures,” noting that decorations cannot be purchased with university funds, but that any decorations “displayed in public areas” should “be secular in nature.”

The same paragraph mentions campus policy 42.501, which pertains to “the safe and appropriate use of decorations,” yet the policy contains no provisions on requiring secular-themed decorations, and the university did not respond to Campus Reform’s request for clarification.

Meanwhile, Life University is sponsoring a holiday decorating contest, but will judge participants on “inclusiveness, or how the decorations are respectful of all the religious winter holidays,” along with three other criteria.

Eastern Connecticut’s Public Liberal Arts University is offering students the chance to participate in “an inclusive holiday decorating party,” while numerous other institutions have omitted the word “Christmas” from their annual “tree lighting” ceremonies.

Among them is Mercyhurst University, a Catholic college in Pennsylvania, which refers to its celebration as the “annual holiday tree lighting.”

Not to be outdone, the University of Alabama’s student newspaper ran an editorial attacking President Trump for returning a nativity scene to the White House grounds, calling the move “disrespectful.”

“Bringing back the nativity scene is a slap in the face to the remaining religions thriving within America,” the editorial declared.

 

“Placing the nativity scene on the grounds of the most important house in the United States is sending the message that their president forgets those who do not practice Christianity.”

CORRECTION: This story originally stated the the nativity scene editorial was published by Harvard University's student newspaper, rather than the University of Alabama's. The article has also been corrected to reflect that Ohio University does not allow decorations to be purchased with university funds.

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