Category: zerohedge

Authored by Ron Paul via The Ron Paul Institute for Peace & Prosperity,

Many Americans who have wrestled with a 1040 form, or who have paid someone to prepare their taxes, no doubt cheered the news that Congress will soon resume working on tax reform. However taxpayers should temper their enthusiasm because, even in the unlikely event tax collection is simplified, tax reform will not reduce the American people’s tax burden.

Congressional leadership’s one non-negotiable requirement of any tax reform is “revenue neutrality.” So any tax reform plan that has any chance of even being considered, much less passed, by Congress must ensure that the federal government does not lose a nickel in tax revenue. Congress’s obsession with protecting the government’s coffers causes reformers to mix tax cuts with tax increases. Congress’s insistence on “offsetting” tax cuts with tax increases creates a political food fight where politicians face off over who should have their taxes raised, who should have their taxes cut, and who should have their taxes stay the same.

One offset currently being discussed is an increased tax on imports. This “border adjustment” tax would benefit export-driven industries at the expense of businesses that rely on imported products. A border adjustment tax would harm consumers who use, and retailers who sell, imported goods. The border adjustment tax is another example of politicians using tax reform to pick winners and losers instead of simply reducing everyone’s taxes.

When I was in Congress, I was often told that offsets do not raise taxes, they simply close loopholes. This is merely a game of semantics: by removing a way for some Americans to lower their taxes, closing a loophole is clearly a tax increase. While some claim loopholes are another way government distorts the market, I agree with the great economist Ludwig von Mises that “capitalism breathes through loopholes.”

By allowing individuals to keep more of their own money, loopholes promote economic efficiency since, as economist Thomas DiLorenzo put it, “private individuals always spend their own money more efficiently than government bureaucrats do.” Instead of making the tax system more “efficient” by closing loopholes, Congress should increase both economic efficiency and economic liberty by repealing the income tax and replacing it with nothing.

The revenue loss from ending the income tax should be “offset” with spending cuts. All federal spending, whether financed by taxes or by debt, forcibly removes resources from the private sector. Thus, all government spending is in essence a form of taxation. Therefore, cutting income and other taxes without cutting spending merely replaces one type of taxation with another. Instead of directly paying for big government via income taxes, deficit spending means citizens will be hit with an increase in the inflation tax. This tax, imposed on the people with the Federal Reserve's monetization of debt, is the worst form of tax because it is both hidden and regressive.

Unfortunately, while Congress may make some small cuts in domestic spending, those cuts will be dwarfed by spending increases on infrastructure Keynesianism at home and military Keynesianism abroad. As long as Congress refuses to make serious reductions in spending, the American people will be subject to the tyranny of the IRS and the Federal Reserve.

The suffering will only get worse when concerns over government debt cause the dollar to lose its status as the world reserve currency. This will lead to a dollar crisis and a major economic meltdown. The only way to avoid this fate is for the people to demand a return to limited government in all areas, sound money, and an end to the income tax.

via http://ift.tt/2lipqJ3 Tyler Durden

Starting today, Facebook, in conjunction with Google, will be blocking unsavory news from their platforms in France — thanks to the very generous and progressive assistance of 8 liberal news agencies — including the far left Le Monde. Having learned his lesson during the US elections, CEO Mark Zuckerberg wants to ensure the people of France only get to see the right news and information — generously shielding them from fake news and right wing disinformation campaigns — like global warming is a hoax.

Effective immediately, users will get to mark news articles they deem to be fake. Partners will pass judgment upon them and also get to tag them with an icon — all for the benefit of the 24 million idiot users in France who are, seemingly, unable to decipher the news themselves.

GENEROSITY WITHOUT BOUNDARIES.

Similar projects are being launched in Germany and the United States — fettering out hoaxes and fake news — with the help of ultra left wing Snopes, ABC News and Associated Press.

It’s ‘their’ platform and can do with it as they like. If you do not like it, don’t use the platform.

 

Content originally generated at iBankCoin.com

via http://ift.tt/2kkOjFo The_Real_Fly

Over the weekend we pointed out how the German media perceived the new US President with Der Speigel's highly controversial cover depicting President Trump beheading the Statue of Liberty, calling on Germany “to build an alliance” against the US leader. Not exactly subtle…

Germany’s Die Welt daily sharply criticized the cover, saying that it “damages” and “devalues journalism.” It also stressed that those who decided to depict Trump in such a way, comparing him to Islamist terrorists, had “lost all their moral guidelines.” As RT reports, the daily also accused Der Spiegel of attempts to gain “publicity at any cost” and said that the cover was an “irresponsible exaggeration” that could lead only to the loss of credibility of the German media.

In his defense of the controversial cover, Klaus Brinkbaumer, Der Spiegel editor-in-chief, told Reuters that the media outlet is actually "defending democracy" in "serious times," and "does not want to provoke anybody."

“We want to show what this is about, it's about democracy, it's about freedom, it's about freedom of the press, freedom of justice and all that is seriously endangered,” he said, referring to the cover published on Saturday’s magazine.

 

…

 

“On our cover the American president beheads the symbol which has welcomed migrants and refugees to the United States since 1886, and with democracy and freedom,” Brinkbaumer told the German news agency DPA, implying that the cover was a response to Trump’s executive order temporarily banning travelers and immigrants from seven predominantly Muslim countries, which was dubbed ‘the Muslim ban.’

Der Spiegel is one of Europe’s largest weekly magazines, and the cover provoked a heated discussion on social media both in Germany and abroad, and drew criticism from other German media outlets and some politicians.

Many media outlets stressed that Der Spiegel’s cover could underpin Trump supporters’ belief that the media is biased against him and “belong to the establishment, which he is allegedly up against.”

“The Spiegel cover is just what Trump needs – a distorted image of him which he can use to further his own distorted image of the press,” Bild said.

Meanwhile, populist anti-immigrant party Alternative for Germany (AfD) mocked Der Spiegel’s cover by presenting its own version of the cartoon, featuring the figure of Chancellor Angela Merkel holding a burning German constitution in one hand and a bloodstained knife with a Muslim crescent symbol on it in the other.

The picture also features Merkel’s well-known slogan, “We can make it!”

 

Neues @DerSPIEGEL Cover. http://pic.twitter.com/V3MeLi8Oh6

— AfD Berlin (@AfDBerlin) February 5, 2017

How many special snowflakes in Germany were triggered by that?

via http://ift.tt/2kM2VhE Tyler Durden

On Monday evening, a Federal Appeals Court announced that the legal showdown with the Trump Administration will take place on Tuesday evening around 6pm, when the 9th U.S. Circuit Court of Appeals will hear oral arguments on whether to restore President Trump’s executive action on immigration and refugees. Oral arguments will be made by phone, with each side getting 30 minutes of argument time. A recording of the call will be made public after the hearing.

At around the same time, the Justice Department filed a brief with the Court of Appeals in support of President Donald Trump’s travel and refugee ban. The filing said the Trump administration executive order that bans travelers from seven nations is a “lawful exercise” of presidential authority. A federal judge in Washington state put the order on hold Friday.

“The court’s sweeping nationwide injunction is vastly overbroad,” the administration said of a Seattle judge’s ruling Friday that halted PresidentDonald Trump’s plan. After the filing, a three-judge panel of the appeals court scheduled a hearing by phone for Tuesday at 3 p.m. in San Francisco.

As Bloomberg recaps, since the Seattle judge’s ruling, refugees and travelers have been rushing to the U.S. before another legal turn closes the door. The 11 days since Trump’s Jan. 27 executive order have been chaotic as travelers were initially stranded at airports, protests raged worldwide and a litany of lawsuits were filed across the country. “Companies, universities, citizens and refugees have sought relief from the courts in crucial tests of the president’s unilateral ability to decide who threatens the nation.”

The question before the federal appeals panel in San Francisco is narrow, springing from a case brought by Washington and Minnesota, which argued that the ban was unconstitutional and that their economies were being harmed. U.S. District Judge James Robart in Seattle temporarily halted Trump’s ban on Friday. The Justice Department seeks to void that order. The loser is likely to appeal to the U.S. Supreme Court.

If the Trump administration loses its appeal, the case will go back to the Seattle court, where Robart would weigh whether to reject the ban on a longer-term basis. The administration reiterated that Congress has granted the president “broad discretion to suspend the entry of any class of alien into the country.” It also argued that an alien outside the U.S. has no substantive right for a judicial review of a denial of a visa. Nor, do the states have a right to act on their behalf, government lawyers said.

The order doesn’t violate the Constitutional rights of lawful permanent residents, the government argued. The executive order is “neutral with respect to religion,” it said.

If the government fails to persuade the appeals court to block the order, it might petition the Supreme Court to intervene. Five of the eight justices would be needed to reverse that decision. However, Kathleen Kim, a professor at Loyola Law School in Los Angeles said “I think it’s unlikely this makes it to the Supreme Court,” adding  “I believe that if the Supreme Court wants to maintain its integrity as a majoritarian body serving as a legitimate system for checks and balances, it will not consider an appeal.”

That would leave the merits of the arguments to be debated in a Seattle courtroom, with the case and perhaps others making their way to the top court for review in months or even years – especially if appeals courts issue conflicting rulings on whether it’s legal. The immigration case has already cropped up in the confirmation process for Supreme Court nominee Neil Gorsuch, with Democrats questioning whether he would be able to check Trump’s exercise of executive power. Gorsuch, a conservative who favors originalism when interpreting the Constitution, could be the tie-breaking vote on the currently split court.

 

via http://ift.tt/2jVL2sM Tyler Durden

Submitted by William Anderson via The Mises Institute,

Nearly four decades ago, political pundits were shocked as voters turned away President Jimmy Carter and voted in Ronald Reagan, who promised to bring fundamental change to Washington and the indwelling political establishment. At the time, unemployment was rising quickly and inflation raged in double-digits, and Reagan had promised to deal with the economic failures by cutting income tax rates, slashing government spending, and reducing the regulatory burden.

As we know, Reagan succeeded in convincing Congress to do one of those three things — cut income tax rates — but the spending and regulatory monster continued to grow. The Carter administration already had initiated most of the major deregulation initiatives, and Reagan’s role in that area was minor at best. Reagan had to deal with something else in 1982 that threatened to turn his presidency into a one-term failure: a major recession in which the nation’s unemployment rate rose to above 10 percent and the disappearance of whole swaths of the nation’s industrial sector, resulting in what has been called the “Rust Belt” of the northern United States.

Ending 1970s-Style Inflation

We know the rest of the story. The economy recovered (despite interest rates that were above 10 percent) and Reagan won re-election in 1984 in a huge electoral landslide. We also know that while the Reagan administration had many failures, capital investment nonetheless turned toward the “high-technology” sectors and telecommunications.

The one thing that was on no one’s political agenda in 1980 was on Federal Reserve Chairman Paul Volcker’s mind: how to wring inflation out of the system and reestablish some balance in the monetary sector. Reagan claimed that by cutting tax rates, businesses would follow with new investments and increase the supply of goods available to consumers, thus reducing inflation on the “supply side.” This is why the Reaganites referred to their plan as “Supply-side Economics.”

Volcker understood, however, that while supply-side’s boosters might have claimed it to be a painless way to end inflation, it clearly would be doomed to failure, something Austrian economists like Murray Rothbard and others also comprehended. Inflation is first and foremost a monetary phenomenon and reducing inflation would not come about by just cutting taxes and producing more goods. Instead, Volcker and the Fed needed to stop expanding the economy’s money supply and also allow interest rates to rise — and rise they did.

Unfortunately, the pundits (along with most economists — who should have known better) employed the post hoc ergo propter hoc fallacy, claiming that higher interest rates caused the severe recession of 1982. Instead, the higher interest rates exposed the economic malinvestments that needed to be liquidated before the economy could have a real recovery, and while Austrian economists are not necessarily satisfied with what the Fed and US government did during the 1980s, some positive things happened with the economy during the 1980s.

Will Trump Pop the Bubble?

Donald Trump faces a much different situation post-election than did Ronald Reagan, but nonetheless a recession looms, as the Federal Reserve policies of the past two decades have piled up a mountain of malinvestments, and especially since 2008, when the housing bubble finally crashed.

Since then, the economic “game plan” for the Fed and the Barack Obama administration has been to prop up the weak sectors of the economy through a combination of outright subsidies and Fed security purchases. The stunning diagram below explains in part why both interest rates are extraordinarily low and the US economy remains sluggish.

As one can readily see, Fed purchases pre-2008 meltdown consisted mostly of six-month U.S. Treasury Bills, with the dollar amount being about 5 percent of US Gross Domestic Product (GDP). Post-meltdown purchases, however, have skyrocketed, and the Fed, while cutting back on six-month T-bills, has engaged in two very questionable activities, including the purchase of massive numbers of mortgage securities to continue what is left of the housing bubble, and buying long-term US bonds in order to decrease the interest rate spread between short-term and long-term securities. This is something that former Fed Chairman Ben Bernanke called “Operation Twist” (or what Peter Schiff more aptly said should be named “Operation Screw”).

The purchases tended to level off after 2014, but not until the Fed was propping up a quarter of U.S. GDP through its purchases. Yes, the official rate of unemployment in this country is less than 5 percent, but no one — not even Paul Krugman — is claiming that all is well. Certainly, both Bernie Sanders and Donald Trump were able to generate a lot of political enthusiasm for saying the economy is in peril.

The Real Problems Underlying This "Expansion"

Because Keynesians are wedded to the false “theory” of aggregate demand and aggregate supply, they are incapable of understanding the real issues facing the economy, and no one should be surprised. After all, Japan’s political and business leaders have been delusional for a quarter of a century, as the government now is trying to “stimulate” the economy via negative interest rates, something that truly places the government in a war with nature. For that matter, Krugman’s recent claims that future “austerity” measures — presumably imposed by the future Trump administration — will lead to a recession actually demonstrates a terrible ignorance of what actually causes economic downturns.

The US economy clearly is sluggish, yet interest rates are very low, thanks to Fed programs like quantitative easing. Yet, while Keynesians call for increased amounts of government borrowing and spending (called “fiscal policy” in Keynesian jargon), the problem isn’t a lack of government-bred “stimulus.” The problem is that of large-scale malinvestments. When the Fed finds it necessary to use its large checkbook to manipulate huge swaths of the economy through playing with interest rates, there is no doubt that there are large underlying weaknesses throughout the economic system. Combine that with the vast government subsidies of “green” energy and the gargantuan amounts of money being poured into the unproductive US Armed Forces, and one can see that the government is cannibalizing the productive sectors in order to prop up the unproductive ones.

What Must Be Done

What needs to be done, or more specifically, what must the government not do so that a real economic recovery can occur? First, and most important, the Fed must stop purchasing mortgage securities and long-term treasuries. That means that both mortgage rates and long-term interest rates will rise, and this also will pull up short-term rates. The economy cannot have a recovery if the Fed fails to do this.

All of this seems to be counterintuitive, since both Keynesians and Austrians agree that the immediate effect of the Fed’s discontinuation of such purchases would mean a steep, short-term recession. Permitting interest rates to rise means that both housing and related industries will be hit hard (as was the case in 1982 — and the industry demanded a bailout). The current economy — sluggish as it is — is addicted to low rates, and this cannot go on if the USA is going to avoid the fate of Japan and Europe, where the economy also is weak.

Austrians vs. Keynesians

However, Austrians and Keynesians diverge at interpreting what actually is happening after interest rates increase. Keynesians claim that aggregate demand is falling and will continue to fall until the economy reaches bottom unless government intervenes through spending and more money creation. Austrians, on the other hand, realize that in the short term, malinvestments that built up during the credit-caused boom are being liquidated, and if government and monetary authorities permit the liquidation and do not block the redirection of resources, entrepreneurs will lead the economy into a real recovery.

For that matter, Austrians and Keynesians are not even on the same planet when it comes to interpreting the role of interest. Austrians note that interest rates are connected to time preferences of borrowers and savers, and that interest rates send signals regarding the direction of capital goods and consumer goods. Keynesians, on the other hand, see interest rates as the gateway for aggregate demand, and suggest that interest rates generally should be lower than they would be if set by the market.

This difference of thinking is crucial. Keynesians demand an economic version of the alleged Einstein definition of insanity: doing the same thing repeatedly and expecting different results. Japan has engaged both in massive government spending (read that, building tunnels, roads, and bridges to nowhere) and monetary manipulation, even resorting to negative interest rates, and yet Japan suffers from anemic economic growth — and will continue to experience the same until someone is willing to admit that 25 years of “stimulus” does not an economy make.

Donald Trump will face this moment, like it or not. Barack Obama faced it and decided to kick the can down the road and opt for yet more “stimulus.” How Trump deals with it will determine whether or not the US economy recovers from bad policies, or goes the way of Japan and Europe.

The irony (at least for Keynesians and fellow True Believers) is that the very thing that Keynesians believe will create long-term economic downturn — raising interest rates — is what the US economy needs most. More than a decade of artificially-low interest rates has distorted the economy’s structures of production to the point where it will take a sharp recession to bring back productive balance — as counterintuitive as that may seem to many readers. There is no doubt that should Trump agree to allow rates to rise, he will pay a steep political price, as there is no doubt that the Dow Jones Average will tank and short-run liquidation of malinvestments will create some havoc.

What should Trump do when higher interest rates expose many of the dislocations? In a word, nothing. When the 1982 recession was in full force and much of official Washington, along with journalists, was calling for reflation of the economy, bailouts, and other “corrective” measures, President Reagan simply replied, “Stay the course.” Although, as noted earlier, Reagan did a number of things that were both politically and economically harmful throughout his presidency, nonetheless, he was right on that point, and ultimately his stubbornness bore some economic fruit.

via http://ift.tt/2jVUKAp Tyler Durden

The CFTC on Monday fined Forex Capital Markets, parent FXCM Holdings LLC and founding partners Dror Niv and William Ahdout to pay $7 million to settle charges it defrauded retail foreign exchange customers and engaging in false and misleading solicitations. As part of the settlement, FXCM agreed to withdraw its registration and never seek to register with the CFTC again, effectively banning it from operating in the US. The CFTC found the retail FX broker had an undisclosed interest in the market maker that consistently won the largest share of FXCM’s trading volume, and was therefore taking positions opposite its retail customers.

The CFTC also found that FXCM willfully made false statements to the National Futures Association in order to conceal FXCM’s role in the creation of its principal market maker as well as the fact that the market maker’s owner had been an FXCM employee and managing director.

The commodity regulator said in a statement that “between Sept. 4, 2009 though at least 2014, FXCM engaged in false and misleading solicitations of FXCM’s retail customers by concealing its relationship with its most important market maker and by misrepresenting that its ‘No Dealing Desk’ platform had no conflicts of interest with its customers.”

Niv, FXCM’s chief executive officer, and Ahdout, its managing director, are also barred from future CFTC registration and acting for those who are registered for the agency.

FXCM is currently the largest Retail Foreign Exchange Dealer (RFED) in the US, with an estimated market share of approximately 34.0% in December. It is unclear what the fallout will presently be for the US FX market following the CFTC order. The shakeup could prompt a Jefferies/Leucadia takeover, given the company’s existing financial obligations and past deal with Leucadia in the aftermath of the Swiss National Bank (SNB) crisis. The news also comes during after hours trading in the US – prior to the enforcement action, FXCM’s share prices had already been trading close to its 52-week low of $6.65, having closed at $6.85 Monday.

According to Gretchen L. Lowe, Principal Deputy Director and Chief Counsel of the CFTC’s Division of Enforcement, in a recent statement on the order, “Full and truthful disclosure to customers and honest discourse with self-regulatory organizations such as NFA are vital to the integrity and oversight of our markets. Today’s action’s demonstrates that the CFTC is committed to protecting customers from harm in the markets it regulates.”

Following the CFTC order, the National Futures Association (NFA) also stipulated that the group’s founders William Ahdout and Dror (Drew) Niv as well as FXCM have been forced to withdraw from NFA membership, also facing a permanent ban. The effective date for these actions is February 21, 2017. The NFA has accepted the settlement offer of FXCM, and the aforementioned individuals neither admitted nor denied the allegations outlined in the order.

As for FXCM’s thousands of retail clients, they may soon have to find more creative ways of losing their money than “investing” in 50x levered, central-bank dominated, HFT-infested currency markets whose  only purpose these days seems to be to inflict the greater damage by stopping out the largest number of positions possible.

via http://ift.tt/2ld8PcO Tyler Durden

By Chris at http://ift.tt/12YmHT5

So today I’m going to leap all over the place and show you some some interesting things that’ve come across my desk in the last week. Why no full fledged blog?

Well, if you didn’t notice, this week’s WOW on the “Trumpification” of US foreign policy (and its winners and losers), was, I dare say, a bit of a beast. And so for all my avid readers who managed to get through it all, it was worth it for me. Also, I’ve been spending some time on my latest Insider alert and time is running short.

First out of the gate, a funny conversation I had with my dear wife:

Wife: So, let me get this straight: you’ve got thousands upon thousands of people on your list but only 42% of them read your work?

Me: Well, I guess only 42% open their emails, yes. I couldn’t understand it for a while.

Wife: You’d better step up your game, that’s awful.

Me: Well, I’m told it’s actually quite good as open rates for this blogging stuff are typically around 20%, so in theory I’m killing it, honey.

Wife: Well, that makes no sense. Why would someone sign up and then not read your emails? It must be that you’re just not that good. I think you should just focus on your fund and leave all this stuff alone.

Me: Well, this helps me to concentrate on thinking stuff through so that the fund will do well. And look, it’s working.

Wife: Seems all backward to me.

Me: Yeah, but you don’t use the net like most and you never use social media at all so you wouldn’t know.

I was hoping she wouldn’t ask if all of the 42% who open the emails (according to my mail system) are members of Insider (they’re not). Then I’d have some explaining to do. She didn’t. Whew!

It made me realise how much I’ve learned since starting this blog and how many people, just like my wife, don’t understand revenue models for businesses which brings me to…

Hahaha! Going in at an eye watering valuation of $25 billion.

Now, if you’re one of those guys (you know who you are) who are running an IPO book, then you’ve been waiting for something like this. The equity markets have seen a dearth of these so it’s about time, heh? After all, all the fun’s been in fixed income (aka bubble) markets.

Your problem is that the media is pretty hyped about this little baby and so the bookmakers don’t need to give you that stock allowing you to dump it in the first few weeks. Nope, you’ll have to take the lockups they offer you and then you and I both know the risks you’re running now, don’t we? I look forward to see how you play it.

You’re playing on the gullibility of the retail guy. And for the retail guys amongst you, remember this and etch it into your brain: IPOs are NOT an entry. They are an exit. Realise that you are the last in line after founders, venture capitalists, lawyers, and investment bankers. They are all looking for liquidity – exiting.

If that’s not enough then consider the following:

• Negative gross margins and a $2 billion commitment to Google.
• What the hell is the business actually? I mean is this a social media/advertising business or is it a data center reseller?
• Amusingly the company actually calls itself a “camera” company in its company filings. No, it’s bloody not. If you make your money selling cameras, you’re a camera company, OK? If you make it selling advertising, then you’re an advertising company. And if you make your money selling your clients data, then you’re a data reselling company, OK? These guys are most certainly not a “camera” company. Sheesh!

If you buy into the IPO, you’re speculating. This isn’t investing. At some point – and we’ll return there again – investors are going to give a s**t about profits again and companies that fight for eyeballs and concoct valuations based on eyeballs (and not hard cash in the till) will find a significantly different environment.

If you want my take on valuing businesses based on “eyeballs” go read “Watch Out For Your Eyeballs”, which was fun to write but not half as fun as the responses I received from venture capitalists explaining to me how wrong I was and that “this time it’s different”.

Back to Snipsnap chitchat. Even if the market really likes it. Explain to me where’s the asymmetry in this? High risk, low reward. Why bother?

What You See Is What You Get

I think this is going to become my mantra for Trump.

Friends who hated the thought of the basilisk winning automatically became Trump supporters. I think it’s a terrible idea to think that not voting for one party should equal cheerleading their foe. Trump is a perfect example of this.

The man shows disturbing signs of adolescence. He’s childish, petulant, and self obsessed. Again, what you see is what you get. Trump the president is the same as Trump the “before president”. People mistakenly believed he’d “grow up” and become more “presidential”. Nope!

Case in point: Mexico.

He’s lost a lot of money in Mexico and clearly holds a grudge. Fine for an individual but as a foreign policy?

Time published an entire list of Trumps tweets on Mexico:

This is a guy who is combative, a bully, and unfortunately doesn’t seem to understand that threatening nuclear superpowers is, ahem… dangerous.

As I mentioned in my Wednesday’s WOW, talking to China like it’s a naughty adolescent is plain stupid.

When Trump was on the campaign trail telling the paid for media and the elites to get knotted this was a lot of fun but treating Iran and China like misbehaving schoolchildren while at the same time pissing off allies (Germany, Britain, Australia, Canada) simply means that you’re backing yourself into that corner that every bully ultimately gets backed into – the one where he finds himself with a blood nose and the other school kids laughing at him.

A Question

Lastly, I’ll answer a question and, as always, my sincere apologies to all those who wrote to me with questions which I haven’t replied to. I do read them all but if I had to answer them all I’d be divorced, and there’d be no blog.

Chris,

 

Your understanding of the world is truly unique. Yours is easily the most insightful financial publication on the internet… and I’ve been a consumer for financial publications for over 30 years now. I have gone back and read many of your posts from years ago and though I’ve not tabulated any results you’ve definitely got an impressive track record. 

 

I realise that I’m just a little guy unlike some of your readers who are clearly sophisticated investors and professional money managers. I’m a retail investor with a small portfolio (about $200k) and if you’d be so kind I’d love to know how you would allocate a portfolio of this size.

 

Thanks very much for all your work.

Firstly, allocations are dependant on so many factors such as your current income, cost of living, obligations, tolerance to risk, and experience in managing your money.

I do think the most valuable thing I’ve ever managed to do, and it’s an ongoing process, is to “know yourself”.

I’m largely risk tolerant. This is due to my personality but also because of my background. I didn’t come from wealth and it is risk taking that has brought me so much. I know that if you dropped me into some unknown country in my underpants I’ll come out OK. This feeling or attitude allows me to take risks few would dare take.

But risk for the sake of risk is dumb. You want risk that is skewed in your favour. Vegas is dumb risk. Investing in cyclical sectors that are bottoming is skewed risk.

That said, I believe that you should try focus on income generating assets for the core part of your wealth. That’s tough in today’s environment where dividend yields are low, bond yields are non-existent, and equity valuations are far from cheap (I’m referring to the US here).

My personal attitude is to protect the majority of your capital and not expect anything from it, and then to take a portion of your portfolio (and only you can decide what that is) and focus on the greatest asymmetry around.

Coincidentally, I believe we have more on offer in that space than at any time in history. Literally every asset price has been distorted by the actions of central bankers, creating huge misallocations of capital as asset mangers have chased one sector after another in search of returns. I believe we’re in the early stages of this unwinding. As a reader, you’ll know it’s a topic I’ve covered extensively.

We’re not in any “normal” investing environment today. What worked for the last 10 years almost certainly isn’t going to continue to last for the next 10. This is a time to be really vigilant. And that’s what I’m doing.

That’s it for this week.

Break a leg and see you next week!

– Chris

“We have incurred operating losses in the past, expect to incur operating losses in the future, and may never achieve or maintain profitability.” — from Snap’s IPO filing

————————————–

Liked this article? Don’t miss our future missives and podcasts, and

get access to free subscriber-only content here.

————————————–

via http://ift.tt/2jVZzd5 Capitalist Exploits

By EconMatters

We discuss the fact that Central Banks have basically morphed into Hedge Funds with similar risky investing strategies, except they buy without any regard to the underlying fundamentals of the assets they are buying. When did the Swiss Citizens say it was the proper role for the Swiss National Bank to be buying US Stocks? How is this stimulating the Swiss Economy? Central Banks have really gone off the rails with regards to their Monetary Policy Tools.

This is clearly exemplified in what the Swiss National Bank is currently doing in financial markets, these bizarre overstretch of policies put the entire financial system at risk, and have resulted in massive stock market bubbles around the world. These Central Banks are not even investing based upon company fundamentals, just trying to square account imbalances in what has become the race to the bottom in the Currency Wars! We need to start having hearings on these matters because Central Banks have morphed into Risky Hedge Funds, well beyond their intended purpose of managing interest rates in the course of normal business cycles.

Mario Draghi has put a lot of pressure on the Swiss National Bank to employ extreme measures to keep their currency from appreciating against his bevy of extreme Monetary Policy Initiatives, and as a result the slippery slope of unintended consequences has the Swiss National Bank holding more US Stocks than most Hedge Funds who do this for a living. The ZIRP Central Bank Madness needs some kind of checks and balances to prevent some of the bizarre market practices that we have witnessed under the excuse of the Financial Crisis to just lever up the entire system with unmeasurable risk.

If the Regulators need regulating, then the entire system is setting up to fail. Who is in charge of the Regulators? Nobody that I can see is stepping up to call out the Central Banks for this Extreme Policy Madness. There needs to be some kind of system check for the central banks in my opinion far greater than what currently exists, because the current system is not working properly if Central Banks in Foreign Countries can start loading up on US Stocks at all-time highs like some speculative Hedge Fund! I am sure the Swiss Citizens would concur as well here regarding this bizarre monetary policy by the Swiss National Bank.

 

© EconMatters All Rights Reserved | Facebook | Twitter | YouTube | Email Digest | Kindle    

via http://ift.tt/2lht7xH EconMatters

Overnight we reported that Germany’s default swaps spiked to the highest level since Brexit as a recent poll showed that Merkel’s lead in the polls had slid to multi-year lows ahead of Germany’s elections later in the year, provoking some concerns that a formerly unthinkable “tail risk” outcome was becoming more likely. However, according to new data unveiled today, Merkel’s headaches are only just starting, because in a brand new poll released this afternoon, the CDU would get 30% of the vote, while the suddenly resurgent SPD would get 31%. This means that the SPD’s new head, Martin Schulz, would enter any coalition talks as the leader of the largest party, hence becoming Chancellor, leading to a stunned reaction by JPMorgan.

In a note released this afternoon by JPM’s Greg Fuzesi, the strategist writes that following the recent resignation of Sigmar Gabriel as leader and chancellor candidate of the SPD, there has been much attention on how his replacement Martin Schulz would perform. Having spent most of his career in the European Parliament, most recently as its president, and being relatively unknown in Germany, this is not easy to predict. In his first major TV interview, he was recently pressed to explain how exactly he differs from his predecessor Gabriel and also from Chancellor Merkel, and what his focus on fairness would mean in practice. This was not entirely straightforward for him.

Nevertheless, opinion polls were beginning to show a bounce last week and this appears to be continuing.

This afternoon, a new opinion poll from INSA showed the SPD gaining further support and overtaking the CDU/CSU for the first time in many years. If elections were held now, the INSA poll suggests that the CDU would get 30% of the vote, while the SPD would get 31%. This means that Schulz would enter any coalition talks as the leader of the largest party, hence becoming Chancellor.

It also means that a SPD-Green-Left coalition would currently win exactly 50% of seats, so that a government without the CDU/CSU could even be possible. In effect, the SPD has gained 10%-pts of support in past two (weekly) INSA polls, taking votes away from all other parties (see second chart below). Interestingly, the AfD has also suffered a significant decline.

Given that Schulz is relatively new to German politics, a novelty factor may be partly responsible for the jump in the polls. It is far too early to say whether this will endure, given that the election campaign has yet to properly begin. It will also be important to see whether other polls replicate the swing. The SPD has gained support in all recent polls, but these are all a week or more old and do not show the latest jump in the INSA poll. That said, there is no reason to dismiss the INSA poll. It is the newest organization and the only one to be done entirely online, but it (arguably) performed only marginally worse than other polls at the last Bundestag election.

A Schulz-led SPD-Green-Left coalition or a Schulz-led grand coalition would certainly be a huge event in German politics. Such possibilities no longer look like tail risks. A SPD-Green-Left coalition would bias German policymaking towards greater fiscal expenditure and investment, and center-left policies. But, even such a coalition would not mark a dramatic break with the past in many areas and would, we expect, continue Germany’s strong support of the EU and single currency.

In short, “Chancellor Schulz” may be just what Brussels, and to a lesser extent President Trump, ordered.

via http://ift.tt/2kAYsws Tyler Durden

Having recently accused the US of 'wasting $14 trillion on war instead of its people', China's second richest man, Jack Ma, continued to voice his concerns to President Trump on a recent trip to Australia, warning retreat from globalization will only result in trouble.

While meeting US President Donald Trump last month, Ma announced Alibaba would help to create a million jobs in the US, but speaking in Melbourne, where the e-commerce giant Alibaba opened its Australia and New Zealand headquarters, RT reports that Ma warned…

“Everybody is concerned about trade wars. If trade stops, war starts,”

 

“But worry doesn't solve the problem. The only thing you can do is get involved and actively prove that trade helps people to communicate,”

 

The globalized economy is more than just transactions of money and goods, according to Ma.

 

“We have to actively prove that trade helps people to communicate. And we should have fair trade, transparent trade, inclusive trade,” he said.

 

“Trade is about a trade of values. Trade of culture,” said the billionaire, stressing that he felt a personal responsibility to fly more than a hundred thousand kilometers in the past month to promote global commerce.

Jack Ma spoke with Australian Prime Minister Malcolm Turnbull on Friday about creating ‘a regional e-hub’ a trade zone allowing freer online business with less border bureaucracy to deal with… which for now appears not to include the US.

Furthermore, Ma's words came at the same time as Reuters reports that China on Monday said it had "lodged representations" with the United States over Washington's new sanctions list targeting Iran, which includes Chinese companies and individuals.

The sanctions on 25 people and entities imposed on Friday by President Donald Trump's administration, and came two days it had put Iran 'on notice' following a ballistic missile test.

 

Those affected by the sanctions cannot access the U.S. financial system or deal with U.S. companies, and are subject to secondary sanctions, meaning foreign companies and individuals are prohibited from dealing with them or risk being blacklisted by the United States.

 

The list includes two Chinese companies and three Chinese people, only one of whom the U.S. Treasury Department explicitly said was a Chinese citizen, a person called Qin Xianhua.

 

Chinese Foreign Ministry spokesman Lu Kang said that Beijing had lodged a protest with Washington, and that such sanctions, particularly when they harmed the interests of a third party, were "not helpful" in promoting mutual trust.

 

"We have consistently opposed any unilateral sanctions," Lu told a regular press briefing.

Executives of two Chinese companies included on the list said on Sunday they had only exported "normal" goods to the Middle Eastern country and didn't consider they had done anything wrong.

via http://ift.tt/2kALkXY Tyler Durden