Feds Arrest Man Who Communicated With FBI’s Fake Terrorists

“I would love to join Allah’s
army, but I don’t even know how to start,” Nicholas Teausant, a
20-year-old community college student in California and
failed trainee in
the National Guard, purportedly wrote on Instragram around 10
months ago.

Unfortunately for Teausant, the FBI knew exactly where to start
and exactly how it’d end.

The story goes like this: Teausant started writing on the
Internet last year about his apparent interest in making
“terrorist” his next career move. This tipped off the feds, and the
FBI paid an informant to befriend him.

The informant claims that Teausant told him that once, on a
camping trip, he came up with a plot to bomb the Los Angeles subway
system. However, “investigators never corroborated that such a
camping trip actually occurred,”
according
to the Associated Press (AP). The 20-year-old talked
about other plots as well and the idea of fighting Syrian dictator
Bashar al Assad, according to a court complaint. The AP
reports:

The informant put Teausant in contact with a “mentor” — in
reality, an undercover federal agent — who could purportedly
approve his efforts to join the extremists. Early this month, the
“mentor” blessed Teausant’s travels, and he boarded a train for
Seattle on Sunday night

[…]

When the bus arrived in Blaine, just south of Vancouver, B.C.,
U.S. Customs and Border Protection stopped it and questioned
Teausant about where he was headed. He responded that he was
traveling to Vancouver and was arrested

On Monday, he was charged in federal court with a single count
of attempting to provide material support to a foreign terrorist
organization. He faces up to 15 years in prison and a $250,000
fine.

Although it’s alarming that Teausant may have wanted to harm
Americans or conduct terrorist activities abroad, the Digital
Fourth rights-advocacy group highlights the
fact that he never “provided any help whatsoever to terrorists, or
that he was in contact, ever, with any actual terrorists.”

This wouldn’t be the first time members of the FBI posed as
terrorists. Last year, they reeled in a
teenager
from Chicago. In 2012, members of the Occupy movement
in Cleveland
claimed
the FBI pressured them into trying to blow up a bridge.
Last year, Reason reviewed
a book with details on the pervasive practice within the FBI of
manufacturing “terrorists” like these.

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The Stunning History Of “All Cash” Home Purchases In The US

Yesterday’s news from the NAR that in February all cash transactions accounted for 35% of all existing home purchases, up from 33% in January, not to mention that 73% of speculators paid “all cash“, caught some by surprise. But what this data ignores are new home purchases, where while single-family sales have been muted as expected considering the plunge in mortgage applications, multi-family unit growth – where investors hope to play the tail end of the popping rental bubble – has been stunning, and where multi-fam permits have soared to the highest since 2008. So how does the history of “all cash” home purchases in the US look before and after the arrival of the 2008 post-Lehman “New Normal.” The answer is shown in the chart below.

This should not come as a surprise to regular readers, who saw this chart, along with our analysis of it last August, as well as the correct forecast that mortgage origination is slamming shut for virtually all financial firms. For those who missed it, here it is again.

* * *

Remember when housing was the primary aspirational asset for a still existent US middle class, to be purchased with some equity down by your average 30 year-old hoping to start a family in his or her brand new home, and, as the name implies, aspire to reach the American dream? Those days are long gone. Back in those days the interest rate on the 10 Year bond mattered as it determined the prevailing marginal affordability of leveraged real estate. That is no longer the case, at least not for about 90% of Americans, because as Goldman shows, while before the great crisis only 20% of home purchases were “all cash”, since then the number has soared threefold, and currently the estimated percentage of cash transactions (by count and amount) has hit a record 60%. In other words, less than half of all home purchases are debt-funded, and thus less than half of all home purchases are actually representative of what middle-class America is doing.

Goldman’s take:

Exhibit 4 shows the estimated cash transactions as percent of total home sales both by transaction count and by transaction dollar amount. Relative to the pre-crisis years, percent cash transactions has risen by about 30 percentage points. This change is broadly in  line with the increases suggested by DataQuick data. The 30 percentage point increase in percent cash transactions explains almost the entire decline in the “mortgage per dollar transaction” series (with the remainder explained by small changes in average LTV ratios per mortgage). We do not have data to assess who these all-cash homebuyers are, but presumably investors who have been purchasing distressed properties and turning them into rental units have played an important role.

The WSJ has a few thoughts to add:

The surprisingly large cash-share of purchases helps to explain why home sales have jumped over the past two years despite more muted increases in broad measures of new mortgage activity, such as the MBA’s mortgage application index.

 

There’s no exact way to know who is responsible for all of these cash purchases, though they are likely to include some combination of investors, foreign buyers, and wealthy homeowners that don’t want to go through the hassle of getting a mortgage before closing on a sale. Mortgage lending standards have sharply tightened up since the housing bubble, with banks scrutinizing borrowers’ tax returns and bank statements to verify their incomes and the source of their down payment.

Our personal thoughts: just like the stock market has been levitating on zero volume and virtually no broad distribution, so the entire housing market appears to have morphed into a “flip that house” investment vehicle used by the usual suspects (wealthy foreign oligarchs abusing the NAR’s anti-money laundering exemption to park their stolen funds in the US, government sponsored firms such as BlackStone using near zero cost REO-to-Rent subsidies, and other 0.01%-ers) who piggyback on cash flows deriving from alternative cheap credit-funded investments and translate their profits into real-estate investments.

It also means that if nobody used leverage (i.e., mortgages) to buy houses before, they certainly won’t do it now, all the more so with interest rates soaring and purchase affordability imploding in front of everybody’s eyes.

Finally, due to the very thin marginal source of bidside interest (flipper flipping to flipper and so on), it means that most of America has not participated in this mirage “recovery”, and all it will take to send the buoyant housing market crashing is for the one marginal buyer to become a seller. What they will next find, is that when dealing with a bidside orderbook that has zero depth, one indeed takes the escalator down from where the lofty heights achieved courtesy of Fed-funded stairs.

* * *

What is the implication of all the above? Simple: anyone hoping that bank profitability will surge on a steepening of the yield curve due to the imputed positive impact to Net Interest Margin will be disappointed for the simple reason that Americans increasingly refuse to borrow, either due to affordability of availability of credit constraints, and thus the borrow credit cheap, lend expensive arb trade for the banks will simply not work. Incidentally we wrote this in August of last year – since then banks have fired tens, if not hundreds of thousands of mortgage originators having arrived at precisely the same conclusion.

Which also means that the only core driver of revenue, in addition to IPO and M&A fees now that bank fixed income and commodity, not to mention FX, flow trading revenues are crashing, was and remains prop trading, courtesy of the $2.7 trillion in excess reserves parked on bank trading books, which continue to be used as generously levered (think 20 times and above) initial margin with which to keep chasing risk higher.


    



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Young Bronie Gets to Keep His School Bag

If you look for more images, for heaven's sake, turn "safe search" on. Some people.What do we do about a boy who
likes pretty pastel ponies? Well, what do we do about the thousands
of boys (and men!) who like pretty pastel ponies?

It’s time to talk about bronies! For those who don’t know who
they are, bronies are male fans of the show My Little
Pony: Friendship is Magic,
a reboot launched in 2010 of the
popular cartoon/toy from the 1980s. Despite ostensibly being
girl-centric, the show has garnered a significant cult following
among guys—not just boys but men. There’s even a documentary about them, and they
have their own conventions.

Bronies ended up in the news this week as 9-year-old Grayson
Bruce found himself bullied for carrying his backpack emblazoned
with flying pony Rainbow Dash at his elementary school in Buncombe
County, N.C. The school initially responded to the bullying by
banning
the kid from carrying the bag, saying it “triggered” bullying,
granting his schoolmates a heckler’s veto rather than dealing with
inappropriate behavior. His mother responded by yanking Grayson out
of school and homeschooling him.

The school got a lot of negative publicity over the decision and
now
they’re backing off
. According to USA Today, the
school will let Grayson bring his bag to school and work on
initiatives to address bullying.

So why are bronies, anyway? When the phenomenon
developed, I hunted down the first two episodes of My Little
Pony: Friendship is Magic
 on YouTube. I didn’t find the
show compelling enough to start watching but it definitely had
decent depth, characterization, and humor. If there’s one thing I’m
envious of millennials (and the generation after them) for it’s how
much better cartoons have gotten, starting around the mid-1990s. My
god, cartoons during the Gen X-era were so awful. I think the
current animation renaissance is in part created by Gen-Xers who
didn’t want their kids to have to sit through the same mindless
crap.

But that doesn’t really answer the bronie question, does it? I
think bronies are a reflection of a show that acknowledges that
girls like girly things and objects (like ponies) but that doesn’t
mean girls aren’t interested in interesting stories, adventure,
danger, and fun. I recall watching a number of girl-oriented
cartoons and found them to be dreadful, unfunny affairs. They all
felt like they were being written by Marge
Simpson
. My Little Pony: Friendship Is Magic presents
the idea of a show targeting girls that can also be funny, zany,
and adventurous.

The press coverage of bronies seems to suggest a generation of

young men who are just more sensitive
and care more and face
criticism for it. While that may be true, I think such an argument
downplays the idea that perhaps entertainment that targets girls is
improving, and because the show treats girls like they also enjoy
adventures and fun, it’s naturally going to start drawing in guys
as well. It’s probably an important lesson for everybody working in
entertainment.

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Affirmative Action and Diversity Don’t Mix

California Democrats are in a state of shock that that Asian
Americans – who voted for Obama at rates comparable to those of
blacks – handed a resounding defeat to the proposal to reinstate
racial preferences in California universities. The state Senate had
approved 27-9 a measure to scrap Prop 209 for the November ballot.
But Asian Americans, who apparently didn’t get the party memo that
they should abandon their spots in top universities to further
liberal diversity goals, went into high-gear to oppose the measure,
causing the Assembly to scuttle it and three state senators to
withdraw their support.

But this is only the taste of things to come for affirmative
action Democrats, I note in my Washington Examiner column this
morning:

Trying to perform a racial balancing act in a country that was
neatly divided into two groups — the white discriminators and
the black discriminated — was one thing. But pulling it off in a
diverse country with diverse groups with diverse histories and
diverse interests is quite another. Foisting preferences on a
diverse America will pit various groups against each other — as
well as against Democrats, as the fight in California amply
demonstrates. Diversity
and racial preferences are directly antithetical — contrary to
liberal orthodoxy.

Diversity and racial preferences don’t mix.

Go
here
to read the whole thing.

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Hawaii Cops Demand the Right to Have Sex With Hookers

Hawaii’s
prostitution law
 includes an exemption for “any member of
a police department, a sheriff, or a law enforcement officer acting
in the course and scope of duties.” A
bill
that the state legislature is considering originally
would have limited
that exemption to exclude “sexual penetration or sadomasochistic
abuse.” In response to police objections, that qualification was
eliminated; the current
version
of the bill, which was unanimously approved by the
state House of Representatives earlier this month and is now before
the state Senate, leaves the exemption as it is.

That’s right: Cops insisted that they must be free not just to
receive blowjobs and handjobs from prostitutes but also to engage
in vaginal and anal intercourse with them. Evidently the police
also need permission to engage in “flagellation or torture by or
upon a person as an act of sexual stimulation or gratification”
(Hawaii’s definition
of “sadomasochistic abuse”). Just in case. Since an entire chamber
of the state legislature agreed to this request, the cops must have
had a pretty persuasive argument. Here it is, as
summed up
by Jason Kawabata, captain of the Honolulu Police
Department’s Narcotics/Vice Division:

As written, this bill would nullify the exemption if the officer
agrees to pay a fee for sexual penetration or sadomasochistic
abuse. This would limit the type of violations law enforcement
officers are able to enforce. Even if the intent of the amendment
is merely to limit actual conduct by the officer, we must oppose
it. Codifying the limitations on an officer‘s conduct would greatly
assist pimps and prostitutes in their efforts to avoid
prosecution.

In other words, if it were generally known that police are not
allowed to engage in sexual penetration or sadomasochistic abuse
with prostitutes, suspicious hookers might insist that undercover
officers do so to show they are not cops. When those officers
balked, their status as agents of law enforcement would be
revealed. That scenario seems rather implausible, since a person
commits the
offense
of prostitution as soon as she “agrees or offers to
engage in sexual conduct with another person for a fee.” For
Kawabata’s fear to be realized, a prostitute would need to have sex
first to make sure her customer was not a cop, then negotiate
payment afterward, which does not seem like a very good business
strategy.

Critics of the exemption
argue
 that it is unnecessary, that it invites abuse, and
that it could inflict additional trauma on women coerced into
prostitution. More fundamentally, the double standard demanded by
police highlights the utter absurdity of prostitution laws. Police
do not commit murder to catch killers or knock over banks to catch
robbers. Yet here they are insisting that they need the leeway to
have sex with prostitutes in order to stop people from having sex
with prostitutes. Even if cops never take advantage of that
freedom, they routinely commit the
crime
of agreeing to pay for sex, except that in their case it
is not treated as a crime. That exemption is considered acceptable
only because exchanging money for sex, unlike murder and robbery,
does not violate anyone’s rights. But if so, why not broaden the
exemption to cover everyone?

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Gold Completes Golden Cross

For the first time in 13 months, gold’s 50-day moving-average is above its 200-day moving-average. This so-called “golden cross” occurred in Feb 09 before gold surged over 100% in the following years (but also occurred ‘falsely’ in September 2012.

 

 

Some technicians are reflcting on the last big run that gold had…


    



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Gas Talks Between Ukraine And Gazprom Cancelled, Naftogaz Chairman Detained On Corruption Probe

Yesterday we warned that the honeymoon is over as Ukraine expects gas prices to rise 40% as Russian discounts fade. Today it appears the situation is even worse:

  • *NAFTOGAZ, GAZPROM TALKS FOR MARCH 20-21 CANCELLED: INTERFAX
  • *UKRAINE POLICE DETAINS NAFTOGAZ CHAIRMAN BAKULIN: AVAKOV
  • *UKRAINE NAFTOGAZ RAID PART OF CORRUPTION PROBE, AVAKOV SAYS

The issues up for debate, of course, are supply and pricing of gas from Russia and the payment for over $2bn of existing debt owed. While Interfax reports that this was because the Ukraine gas company executive was unable to leave the country, which now appears due to corruption allegations ("there's corruption going on here?") but merely exacerbates any Russian gas retaliation concerns.

Via Interfax,

Talks originally planned to take place on March 20 and March 21 between Ukraine's national oil and gas company Naftogaz Ukrainy and Russian gas giant OJSC Gazprom (MOEX: GAZP) have fallen through at the last minute, a source from the Ukrainian government told Interfax.

 

"The Naftogaz Ukrainy delegation was prepared to fly out [for the meeting], but the head of the company [Naftogaz Ukrainy] was not allowed to leave the country at the last minute," the source said.

 

The main issues to be discussed were supposed to be the purchase and transit of natural gas, as well as the payment schedule for existing debt.

 

The source said this concerned a personal ban on leaving the country for Naftogaz's CEO Yevgeny Bakulin.

As we noted yesterday,

What is certain, is that the struggling population, most of whom never wanted the recent political overhaul and were quite happy with life as it was, will suddenly demand a return to the living standards under the old, if "horrible" regime, and demand an even quicker overhaul of the current administration.

 

Something Putin knows all too well.

 

Why does he know it? Because current events are a carbon copy of what happened in 2007 that led to the infamous 2008 Ukrainian political crisis.


    



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Illinois Lawmakers to Millionaires: Get Out!

Burning cashIn what appears to be part of a

full-fledged class warfare strategy
that includes comparing
Republican gubernatorial candidate Bruce Rauner to C. Montgomery
Burns of The Simpsons, Illinois Democrats propose a
referendum on imposing a “millionaires tax” targeted at high-income
state residents. In a state that has already enjoyed
government credit downgrades
with
little expectation of improvement
for poor habits, including
putting off paying its bills into the murky future and not funding
public pensions, the move could raise fears that politicians plan
to resolve their own failures by mugging anybody with assets to
speak of (not that it’s
easy to accumulate assets
in Illinois). It just could send the
targets of the millionaires tax heading for the exits, as they’ve
already done in New Jersey.

Earlier this year, financial firm RegentAtlantic
reported that New Jersey is suffering a net loss of taxpayers and
adjusted gross income
to lower-tax states, and that “the
average income coming into New Jersey is approximately 50 percent
less than the income that is leaving.” Overall, the company found
that the state lost taxable income of $5.5 billion in 2010 as
residents moved to relative tax havens.

Note that New Jersey ranks at 44 out of 51 jurisdictions in
WalletHub’s
recent ratings of tax burdens
(1 is the least burdensome).
Illinois comes in at 47.

By contrast with New Jersey, Stanford University reports that
high tax rates
don’t drive the highest earners to flee
California.
But Illinois doesn’t quite have California’s natural attractions,
for which wealthy people may be willing to pay a premium.

And California is still
hemorrhaging money and people
as many seek tax relief and

opportunity
, even if millionaires are willing to stick around
for the nice views. If Illinois can’t find itself some redwoods and
pretty coastline, and quick, look for a line at the exits.

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Senator Dan Coats’ Top 10 Reasons Why Russian Sanctions Suck

Having noted the ridicule with which the Russians view the sanctions barrage between the EU and US, we thought it worth reflecting, courtesy of Senator Dan Coats, on the absurd political farce that is the entirely useless (and purely public-relations-based) war of words (and not actions) that is under-way as the West realizes the Russian “boomerang” is coming any minute…

 


    



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