Tag: news

Via ConvergEx's Nick Colas,

Our latest quarterly report on the recreational marijuana business shows a vibrant and growing industry as more states legalize the drug.

 

We survey numerous stores in Colorado, Washington, and Oregon to track how a newly legalized market develops its cost structure and product mix. Our Colorado contacts reported steady pricing and customer traffic compared to three months ago, and brought in $576 million in retail marijuana sales last year – 84% more than in 2014.

 

Washington dispensaries, on the other hand, are where Colorado stores were a few quarters ago, facing falling prices partly due to new entrants. Demand remains strong, however, with about 150 to 300 customers still visiting stores each day.

 

Oregon marijuana stores are in an even earlier stage, with only medical dispensaries allowed to sell recreational marijuana in the form of flower until later this year. Even still, Washington dispensaries posted $486 million in total sales last year, not too far behind Colorado even with fewer months to mature. The state of Oregon also brought in $3.5 million in tax revenue during the first month cannabis sales were taxed in January. That’s more than Colorado or Washington earned during their first month runs. Read on for the details of each developing market.

In less than a month, tens of thousands of people will gather at festivals to celebrate a national holiday: “420”. Never heard of it? It’s like Oktoberfest, but centers on the consumption of marijuana instead of beer. As for where the designation 420 started, there are many origin stories but one in particular seems to carry the most credence:

• It supposedly all started back in 1971 at San Rafael high school in northern California with a group of five teenagers and a map. Known as the “Waldos” because they met by a wall after school at 4:20pm, they sought out what was their version of treasure in Point Reyes forest: marijuana plants.
• They never found the plants, but “420” became a code word, synonymous with the prospect of smoking cannabis but suggesting so discreetly. Then the Grateful Dead moved into town, elevating the term to another level. The Waldos started hanging around the band’s rehearsals and parties. One of the member’s older brother “managed a Dead sideband and was good friends with bassist Phil Lesh” according to the Huffington Post, while another member’s Dad handled the band’s real estate. The term eventually made its way through the Dead Head community as the band toured in the 80s and 90s.
• In 1990, a reporter at High Times saw an explanation of “420” on a Grateful Dead Concert flyer. This gave the term international recognition as the magazine started basing events around it, even buying 420.com. And the rest is history. Every year on April 20th, people pay homage to the drug, ideally smoking at 4:20pm.

High Times magazine’s annual U.S. Cannabis Cup remains the most highly anticipated event for the 4/20 holiday. The festival holds a contest that judges and awards companies for the best flower, concentrates, and edibles, for example. It also features educational seminars, expositions, concerts, and product showcases. More than 35,000 people attended the five-day event every day last year in Denver. Not this year, however, as county governments in Colorado prevented High Times from obtaining a permit in Denver and subsequently in Pueblo. The magazine will host a one-day Colorado Cannabis Cup award show in Denver, but the main event will occur over three days in San Bernardino, California.

This is not a welcomed development at Colorado retail marijuana dispensaries, which would have benefitted from the extra foot traffic. According to our latest quarterly survey on the legal recreational marijuana market, our interviews of managers and employees at several Colorado retail dispensaries expressed their disappointment that the event was moved out of state. They expect fewer customers than last year due to lost tourist activity, and they miss out on an opportunity to network. One respondent, for example, found a seed company he continues to use at one of these rallies in the past. But ever since marijuana was legalized in the state, they’ve experienced a crackdown on events surrounding 420.

Nevertheless, these dispensaries still expect some rallies and a spike in sales during the holiday.They are already preparing by planning specials for that week, adding staff, and placing early orders with vendors for concentrates and edibles, for example. Based on our usual analysis including price, units, and mix, here’s a snapshot of our most recent findings on retail marijuana businesses in Colorado:

#1 – Price: Competition continues to put pressure on prices as stores still try to find an equilibrium, but they’ve remained relatively steady over the past couple of quarters. Customers can still find an ounce for $150 to $350, and an eighth for $25 to $45 – especially with frequent specials and discounts. One contact said he sees a more pronounced tier structure developing on the recreational side of business. People can choose to pay less for lower quality or accept higher prices for better quality strains. Overall, prices have mostly stabilized after declining significantly from when we first started our surveys in June 2014 ($400/ounce and $50-$70/eighth) to September 2015 ($300/ounce and $30-$45/eighth).

 

#2 – Units/Traffic: About 150 to 350 customers still visit our contacts stores each day, spending $50 to $60 on average. Fridays and holidays also remain the busiest periods, similar to all retail stores. Tourists account for about 50% of their customers, so they are also expecting greater business this spring and summer as the weather warms. You may guess they received a slight boost in sales on St. Patrick’s Day, but most survey respondents said snow actually offset any holiday bump.

 

#3 – Mix: Most stores report a 50/50 split between purchases of flower and concentrates/edibles. Some dispensaries claimed flower sells the most, while one manager said sour gummies outsell all of his store’s other products. Our contacts reported an improvement in the quality of edibles as more vendors come to market. Dispensaries also have a greater appreciation for what sells best. The most interesting product we heard about was gluten free chocolate, which shows just how far these vendors have come. Lastly, vaporizer pens and cartridges continue to gain popularity as a cleaner and odorless means of smoking.

All in all, recreational marijuana stores in Colorado received $575.8 million in 2015 revenue based on tax data from the Colorado Department of Revenue. That’s an 84% comp to 2014, showing robust growth in the industry. Turn to other states in which retail marijuana is legal and you’ll see they have posted impressive growth figures as well, even with less time to mature. We’ve expanded our survey to include marijuana dispensaries in Washington and Oregon, which started selling retail cannabis in July 2014 and October 2015 respectively. Here are our takeaways for both markets:

The price for an eighth carried a wide range of between $25 to $60, depending on the strain, at dispensaries in Washington and Oregon. Washington, however, continues to experience more downward pressure in pricing, whereas prices have remained steady in Oregon. Only medical marijuana stores in Oregon can sell recreational cannabis until later this year, so they won’t feel the competition of those new entrants until then. In the meantime, the ability to sell recreational marijuana in addition to medical marijuana has been a huge boon to business. One store manager said retail cannabis now accounts for as much as 85% of her overall sales.

 

There are two reasons Washington’s prices continue to fall: more awarding of licenses to retailers and lower wholesale prices after the tax structure was changed from 25% levied on producers, processors, and retailers to 37% on only retailers. The Washington State Liquor and Cannabis Board (WSLCB) raised the former retail store cap of 334 to 556 to help in the process of merging the medical and recreational markets on July 1st.

 

One contact, for example, noted the Vancouver City Council recently approved 3 more marijuana stores, increasing the cap from 6 to 9. He also said he sees a couple of price drops once every other week. This forces stores to lower their prices and offer more discounts to stay competitive. Consequently, the WSLCB reported that the average statewide price per gram of marijuana neared $10 at the beginning of this year compared to upwards of $25 when it was first sold legally in July 2014.

 

Washington continues to experience similar product trends to Colorado, with flower accounting for half of sales and edibles/concentrates making up the balance. Vaporizer pens and cartridges are also their most sought after product of late. They also run daily and weekly specials.

 

Stores in Southern Washington experienced competition with dispensaries in Oregon during the fourth quarter, as Oregon did not have a sales tax. Since January, recreational marijuana sold in Oregon medical dispensaries have been subject to a 25% sales tax, which will drop to 17% at the state level when retail stores open in the fall. These rates are lower than Washington’s sales tax of 37%, but some of our Washington contacts said they are taking business from Oregon because they are allowed to sell edibles and concentrates. Oregon dispensaries can only sell flower to those without a medical card, but hope they will be allowed to sell edibles and extracts when retail stores open in the second half of this year. They can also only sell up to 7 grams, whereas customers can buy up to an ounce in Washington.

 

Last year, Washington dispensaries posted $486.2 million in total sales (excluding the excise tax), about $90 million less than recreational sales alone in Colorado. With that said, Washington stores brought in $63.3 million in January compared to $52.1 million in Colorado retail sales.

 

Oregon’s Department of Revenue reported the state collected $3.5 million in taxes for recreational marijuana sales in January. That suggests $14 million in retail revenue during the first month the tax took effect. It also exceeded the $2.9 million in taxes collected for both medical and retail marijuana sales in Colorado when stores were first able to sell the drug recreationally in January 2014. Washington also received less, only $1 million in August 2014.

Despite the success of recreational marijuana stores in Colorado, Washington, and Oregon, the drug remains illegal on a Federal level and banking is limited as a result. Marijuana business residency ownership requirements also act as a roadblock to outside investment. The U.S. Department of Justice frowns upon outside money flowing into the marijuana industry as well. In order to invest in a marijuana business, you must have been a resident for two years in Colorado. Cannabis businesses can raise funds by issuing convertible notes to out of state individuals, with the exception of foreigners, but the holders of debt can only purchase equity when they meet the requirements for ownership of a licensed marijuana business.  

The residency requirement used to be six months in Washington, but the WSLCB recently applied new rules that allow an investor from out of state to loan money to a marijuana business. It’s still murky as to whether an investor can receive profits in exchange for financing, however. Moreover, the governor of Oregon recently signed House Bill 4014 into law, which removes a 2-year residency requirement for recreational marijuana producers, processors and retailers. This will make it easier for marijuana business owners to access capital. 

In sum, keep paying attention to the developments in this growth industry and we’ll provide updates along the way. Investing in current marijuana markets remains risky, but states where cannabis is legal continue to push for changes that are friendlier to outside investment. Colorado, Washington, and Oregon serve as informative experiments, with Alaska joining the mix once stores open later this year. Progress in these states and greater legalization elsewhere will continue to unfold within the next few years. The next major ballot initiative for legalizing marijuana occurs in California this fall. Hopefully changes in regulations that support marijuana businesses and investment will continue to follow suit.

We’ll leave you with this: ever wonder about the 419.99 mile marker on I-70 in Colorado? That’s because people kept stealing the original 420 sign for reasons you now know.

Sources:
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via Zero Hedge http://ift.tt/1Pud5Yn Tyler Durden

Submitted by The Saker, authored by Cathal Haughian

250,000 capitalists read the Financial Times, and it has been our undertaking to chronicle our understanding of capitalism via our book The Philosophy of Capitalism. A USA led team has answered the question ‘What is The Nature of the Monetary System?’ The Monetary system has three layers – the core is Religion and the unconscious mind – as they formed first. The outer layer is operational and intersects with geopolitics, it explains:

Why we need to beat Russia

We may see Syria as a testing ground for Imperial Power. Russia has tested our influence and shown the World it’s wanting, so it’s crucial to appreciate why and of what consequence.

Our Imperial weapons give definite form to our Empire. And nothing has shaped our Empire more than the FIAT. The deformation began in 1971, when the US imposed her Power to re-define the rules of the monetary system for her sole benefit. The ability to print IOU’s in exchange for real value is more clever than theft as we borrow and do not pay back in kind due to inflation. Our enemies, adversaries and vassals must found their financial systems upon the printed dollar which they must purchase with hard earned money. That seizure has financed a vast network of military bases, bribery, assassinations, coup d´états and perpetual war.

What’s not to like? All that Power without taxing the produce of the American people. So why have we lost in Syria?

Let’s begin by appreciating that the global “FIAT system” is responsible for our moral crisis and departure from virtue. As we embrace further the gods of greed – listen to the masses cheer for Clinton and Trump – we must recall that virtue is knowledge of what is good. We are getting weak because we have forgotten what is good for us.

The root of this evil is our love of easy money, or FIAT money, defined by those with power as “wealth by decree” which places an arbitrary value upon “wealth issued by men” such that buying power has no natural governor, as it did when gold was freely traded along currencies in truly free markets. But whom, may we ask, has the power to decree wealth? And with such great power to do so, who can be trusted with such great responsibility?

No one. That is who.

But nonetheless, governments and monarchies throughout the ages have been entrusted to issue wealth by decree. All have failed, because power corrupts, and absolute power corrupts absolutely.

So in every FIAT timeline we see the more powerful become wealthier and the wealthy become more powerful, because it is they who control the issuance and distribution of wealth. Inequality of Wealth, therefore, always reaches its peak at the end of the FIAT timeline. As social position offers more favours than purpose and production. What has happened is what always happens – you have a system politicized to such an extent that political access – and not profits from innovative new solutions – Become the core of the incentive structure.

Notice how productivity declined after Bretton Woods and later when Bretton Woods was abandoned. One of the problems of easy money, not the only one mind you, is the financialization of the economy. Financialization drains key human capital and generates malinvestment. Nuclear engineers are doing MBA’s so that they can work as investment bankers! Trillions of dollars have been invested in real estate developments that provide no productivity gains. Easy money kept fracking companies alive –producing an endless glut of gas that had nowhere to go but heat tar sands in Canada – what waste!

This is the real economic evil of our current monetary system – malinvestment – with two insidious effects:

1. A halt in fundamental scientific breakthroughs and
2. The West, apart from Germany and Norway, has run at a loss for decades

If the common man had a say in all this, he would declare his modest holdings to be the pinnacle of wealth, by his decree. He will offer you his apartment for your mansion, his hot dog for your lobster, his bike for your car and so forth. If this sounds ridiculous, then think how absurd it is to offer stacks of paper for these same items, which (based upon the numbers and signatures printed upon them) you would gladly accept, by decree.

We know that paper is just as intrinsically worthless as the electronic digits they represent in a bank account. The issue here is who holds the power of decree. The little people never will. The monied men hold this power – like a parasite feeding upon any who deign to offer value at the marketplace.

And that is the cut of the second edge my friends. That is the death blow. The Fiat produced a parasite – the financial sector – that in its greed is killing the real economy. So when we read about absence of opportunity with such empathy, know that the parasite suffers too, as the problem of debt reaches higher toward senior capital.

When we see debt piled on debt just to prolong the dying system, take note that a few monied men enjoy the fruits of this easy money for a time before defaulting … and with no collateral to make lenders whole, many walk away with nothing more than an impaired credit rating – into a waiting system where debt is harshly devalued.

Monsanto can darken the sunflower harvest in the Ukraine, and Allianz can steal a few tranquil Greek islands, but the ambience is never quite the same as when hard working people had their just rewards, and goodness and charity and kind souls rejoiced – with compassion and cooperation – while loving the narrative of a life written while desiring only the product of their work.

The world this Global Reserve Fiat creates is one of misery and strife where evil and greed feeds upon the spirit, and the world becomes an immoral wasteland of modernity. The worker is discriminated against as all pressure and stress is heaped upon his future, as the law discriminates between debts held as an asset vs. debt held as a liability.

You see, reader, while we all hold “deposits” at banks, which is an euphemism for bank debt, only the lending class (and I use this term in the broadest sense) get to hold debt on their balance sheets as a wealth asset, whereas the little people hold debt as an obligatory liability. If there is a default, all the better as the law allows them to seize the “secured” assets as collateral. Is there a flaw in my thinking? Let us see…

You may say that banks are able to hold debt as an asset because they have the capital to cover that debt – to which I would say, “Really ??!!” As we understand the nature of debt in this modern era of aging debt, and the derivatives that attempt to hedge those obligations, this is simply not the case, as the lessons of Enron, AIG, Lehman, MF Global – ad nauseam – clearly prove. The empire of debt is hallmarked by misery for the masses though this is no accident, for a system cannot discriminate in and of itself. Financial laws are written by and for the hidden agenda of monied men, how can we conclude otherwise? A few of which see war or systemic crisis as an opportunity to rewrite the social contract e.g. the tax payer takes over bank debt, see Ireland, Britain and soon Australia and the Eurozone.

Look at the workers as they make their way home on the subway, standing tightly together, neither wanting nor caring to utter a word to one another, their grey features melted by the stress of their “wealth as debt”. Their one shot at consciousness ground away while vampire and zombie stories speak to their existence. Look at the once prosperous cities around you, like Detroit, or Camden, crumbling into 3rd world ghettos. Not exactly a world that the 1% wants to live in, but one they deserve – one of their making.

They can insulate themselves in the Hamptons for only so long until the sirens sound. It has always been this way, and it will always be this way, until man changes his nature by recognizing what is good for him.

Now, the East – China / Russia / India – challenge the Global Reserve Fiat. And when the dollar fails, and it will: For debt is the essence of fiat, and when it defaults, the system defaults with it.

Fiat Debt is unstable for two reasons:

1. Because no natural ecosystem is able to sustain unlimited, continuous exponential growth – as all 100% fiat (debt-based) valuation systems require. More debt is required to repay existing debt plus interest. The basic operational problem: you can inflate a system easily by issuing new “secured” debt against collateral and thereby increasing collateral value (think about mortgages as buying power to buy houses, pushing house prices up, collateral looks fine even if debtors cannot pay interest or principal – as long they can easily refinance or banks can sell recovered properties in a real estate market spiked by easy credit and demographics (like in the US from 2001-2005, or London and Sidney now). Easy credit can paper over affordability and to some extent demographics. Now this definitely does not work in reverse; you cannot even stop because once credit stops flowing, prices start to tatter; and in the latter stages even an decrease in the rate of increase might be enough to crash the system.
2. Because it is entered into and created so lightly, and it is based on the assumption of a fixed future performance by an entity or individual. And when the 98% – their future burdened by intolerable debt, unemployment and declining wages – decide to walk away? The fear of that decision has been driving interest rates down for decades, to make it bearable not for the good of mankind but to prolong the system. This brings into relief an internal contradiction: wages decline in sync with interest rates because the bargaining power of workers evaporates as Central Bankers reduce the cost of capital, contributing to the substitution of labour and labour wages by that of the machines and AI software. Until the workers walk away from more debt for less income, we watch this balancing act between debt pretending to be wealth, and wealth being treated as a “bad investment”. All performed for the benefit of gradually changing our definitions, as we evolve into a new equilibrium determined by the East – Their collective gold reserves will be large enough to re-price the currencies and free the markets.

As we look at the precarious nature of our faith-based money, we must acknowledge the moral implications of “dishonest money”. Seizure by decree, whether judged just by Constituted Power, is immoral. But the fact that dishonest money is so easy to create, control and redistribute helps one understand the wave of immorality that has swept over our world.

Paying tribute with labor and exchange rates is not enough for the empire of debt. Rather, its vassals must accept and embrace the ideology of the empire as well – “Wealth as Debt” and Globalism. It’s their separation in language which causes the confusion – Globalism and Absolutism – for they are one and the same thing.

When Russia and China stockpile honest money, they attack our most potent weapon and father of our decline. Our Imperial weapon will die by both edges of its own sword, one being the contempt with which it is so easily created to bend the will of the world to its bidding, and the other sharp edge which the wicked are blind to recognize: The evil that sound money prohibits.

Will Russia and China attack the fiat dollar using overt enemy action? Possible, but not probable: as they can simply undermine “confidence” in the FIAT and wait upon the 2% to bury the blade. The Dynasties of Wealth – Have you ever wondered how we hedge our holdings through turmoil? The top 85 patricians of which own more wealth than the bottom 3.5 billion humans – will move first. The 1%, then 2% and whoever else left standing will be forced to follow through.

Only Gold has the history, depth, unique qualities, loyalty of the elite and transitional power to challenge any man, any nation, any system on earth, past, present and future. The Dynasties understand this, because they have both witnessed and authored this axiom across generations of asset accumulation.

When they vote, they vote with their ability to make markets, and then reap the profit from the market they make, offering favor to those who protect their interests. They easily control men through greed and are beholden to Gold alone. Gold transitions their wealth recycling system through change.

As the sand peters past the last curve of the hour glass the Dynastic hand is clear to see. So the Neo-cons need to beat Russia, and soon, as only Globalism can keep the markets enchained.

via Zero Hedge http://ift.tt/1RCcZpl Tyler Durden

Earlier today and on several occasions since Tuesday morning when the Bakraoui brothers blew themselves up at the Brussels airport and city metro, we’ve documented the connection between the Brussels attacks, the brazen assault on Paris in November, and other terror-related events that have unfolded in Belgium over the past 14 months.

Here are some bullet points worth noting:

• In January 2015, two men are killed in a police raid on a flat in Verviers; the men are later pictured with Paris ringleader Abdelhamid Abaaoud in a cover story for Islamic State magazine Dabiq
• In September, one “Soufiane Kayal” was seen with Salah Abdeslam at a Hungary-Austria border checkpoint; Kayal would later turn out to be bomb maker Najim Laachraoui whose DNA was found on explosive material in Paris and also in two residences (one in Auvelais that was raided on November 26 and one on Rue Henri Bergé, in the Schaerbeek section of Brussels that was searched in December); he is now thought to have blown himself up on Tuesday at the Brussels airport
• A November 30 raid on a home in Auvelais where Abaaoud may have met with suicide bombers turns up a 10-minute surveillance tape apparently filmed at the home of a senior Belgian nuclear official; reports later suggested the camera was set up and retrieved by the Bakraoui brothers
• A March 14 raid on an apartment in Forest rented to one of the Bakraoui brothers leaves one gunman dead, but two other presumed jihadis escape; Paris fugitive Salah Abdeslam’s fingerprints are found in the apartment

And the list goes on. The takeaway seems to be that beginning some years ago, Abdelhamid Abaaoud (who allegedly became Emir of War in Deir ez-Zor after Omar the Chechen was transferred to Iraq) established the Brussels cell and it’s been growing and building its operational capabilities ever since.

For those interested in understanding how it all fits together, we bring you the following org chart from The Guardian:

via Zero Hedge http://ift.tt/1Pu7XDI Tyler Durden

Authored by StraightLineLogic.com's Robert Gore via The Burning Platform blog,

Some reversals of financial trends prove so momentous they define the generation in which they occur. The stock market crash in 1929 kicked off the Great Depression, which ushered in the welfare and then the warfare state and redefined the relationship between government and citizens.

Bonds and stocks began their bull market runs in the early 1980s. Now, those markets are fonts of optimism increasingly unhinged from reality. The US has come full circle. The New Deal and World War II marked a massive shift of resources and power to the federal government. Conversely, financial reversal will fuel a virulent backlash against the government and its central bank.

Such epochal reversals are usually foreseeable. However, they are long in the making and involve such a confluence of powerful forces that usually only a handful get the timing right. Calling the end of the current bull markets has been difficult because of governments and central banks are desperate to keep them alive. Central bankers prattle on about the wealth effects of elevated stock markets and how low interest rates promote debt and consumption, supposedly the fountainhead of economic progress. Those emissions are noxious nonsense. Central banks promote rising markets because they are under the thumbs of their governments; independent central banker is an oxymoron. High stock prices are a popular barometer of social mood, while high bond prices keep interest rates low, benefitting the largest borrowers, governments.

Consider the absurdity of loaning money to any of today’s welfare state governments, including the most indebted of them all, the US government. Most of them haven’t run an honest, GAAP budget surplus in decades. They have compiled staggering amounts of debt relative to their economies’ GDPs. Unfunded pension and medical liabilities are many times the amount of the stated, on-the-books debts. Those programs could be cut, but a compilation of such cuts the last thirty years would fill a book slightly thicker than Hillary Clinton’s Integrity. The debt cavalcade will stop only when creditors say “Enough!” or start charging usurious interest rates.

Yet, that is the opposite of what creditors are doing now: they are paying governments for the privilege of lending them money! Governments are assumed to have a call on every last dollar, euro, yen, and yuan their economies generate, but there are flaws in that assumption. To the limited extent today’s economies function, they do so because vestigial capitalism still offers incentives, markets, and the price mechanism. The foundation of production is brains and brains are quite sensitive to incentives and the political and legal framework in which they operate. Nobody designs the newest generation semiconductor, app, or robot when virtually everything they produce is expropriated by the state. Tax rates have probably gone as high as they can go in terms of extracting revenue, and even if they haven’t, any revenue increase from higher rates will be nowhere near enough to repay governments’ debts and unfunded liabilities.

So rational investors must question governments’ ability to pay their debts, which leaves irrational investors—central banks—as the buyers. The Bank of Japan is the market for Japanese government debt. While the situation is not quite as bad in Europe and the US, the ECB and the Federal Reserve have amassed huge portfolios of their own sovereigns’ debt, purchased from private banks in exchange for central bank reserves that they conjure at will in unlimited amounts. Speculators buy debt with negative yields from governments that are poor credit risks because central banks will pay them an even higher price at an even more negative yield. The stated goal of the central banks is to increase economic activity and inflation rates, which would increase interest rates and reduce bond prices, inflicting losses on bondholders, including, perversely, central banks.

This is the very definition of a market awaiting a crash: a long running bull trend that has pushed prices to absurd prices (you can get no more absurd bond pricing than that which yields, so to speak, negative yields); an extreme divergence between the government bonds prices and their underlying value as a claim against issuers that are de facto bankrupt; a commitment by governments and central banks to inflict losses on those who buy government debt; a long historical dishonor roll of instances where governments and central banks have done just that; a class of dumb money, short-term, price insensitive buyers (speculators and central banks), and a degree of complacency and obtuseness so extreme that market participants make a mad dash for these putrid instruments at every appearance of financial and economic turmoil. So why not rush right out and short sovereign debt markets, either directly or indirectly through any number of exchange traded funds?

Markets often take seemingly forever to do what rational people think they should have done long ago. They can, as John Maynard Keynes noted, stay irrational far longer than those who bet against them can stay solvent. Japanese finances are in far worse shape than the US government’s or most European government’s, and its aging population is a demographic and actuarial nightmare. Roughly half the government’s deficit is monetized by the sole buyer, the Bank of Japan, and if it stepped out of the way yields would skyrocket. Yet, speculators have been shorting Japanese government bonds and losing money for decades. The Japanese government’s 10-year bond trades at an all-time high price and with a negative yield.

In the US, the majority of Wall Street sharpies have recommended shorting bonds for several years running, based on an imminent, central-bank inspired economic lift off that has never arrived. Anyone who has taken their advice has suffered the same fate as those shorting Japanese debt. Nobody ever suggests shorting sovereign debt because of deteriorating credit quality. Long before their longest maturity bonds mature, sovereigns will have insufficient revenues to pay all their obligations. In the US by 2025, Social Security, Medicare, Medicaid, and interest on the government’s debt will consume all tax revenues and taxes would have to double to pay for the rest of the budget. That’s if doubling the top rate to 80-plus percent actually doubled tax revenues, which it won’t; revenues would undoubtedly shrink.

Shorting sovereign debt has been a widow maker, although on fundamentals sovereign debt is the biggest short of them all. Bonds now trading at high premiums with negative yields will go to zero as governments go bankrupt. Sovereign debt is the foundation for the $225 global pyramid of debt. When it goes so will the rest of the pyramid, and so too will debt-supported equity, commodity, and derivatives markets. The time to catch those trades will be when government bond yields persistently climb in the face of clear, impossible-to-deny economic weakness and financial turmoil: market recognition that governments are not safe havens, they’re insolvent. The economic production that supposedly supported their debt holdings gone, all creditors will have is a promise from governments to redeem unsupported debt with more unsupported debt. It will be the worst of times and the best of times. The financial system will crater. However, that may usher in a replacement based on sanity rather than political promises, flimsy pieces of paper, quack economics, and debt, conjured with a computer keystroke, masquerading as money.

via Zero Hedge http://ift.tt/1RC6XF0 Tyler Durden

Two months ago, Stephen Hawking warned humanity that its days may be numbered: the physicist was among over 1,000 artificial intelligence experts who signed an open letter about the weaponization of robots and the ongoing “military artificial intelligence arms race.”

Overnight we got a vivid example of just how quickly “artificial intelligence” can spiral out of control when Microsoft’s AI-powered Twitter chat robot, Tay, became a racist, misogynist, Obama-hating, antisemitic, incest and genocide-promoting psychopath when released into the wild.

For those unfamiliar, Tay is, or rather was, an A.I. project built by the Microsoft Technology and Research and Bing teams, in an effort to conduct research on conversational understanding. It was meant to be a bot anyone can talk to online. The company described the bot as “Microsoft’s A.I. fam the internet that’s got zero chill!.”

Microsoft initially created “Tay” in an effort to improve the customer service on its voice recognition software. According to MarketWatch, “she” was intended to tweet “like a teen girl” and was designed to “engage and entertain people where they connect with each other online through casual and playful conversation.”

The chat algo is able to perform a number of tasks, like telling users jokes, or offering up a comment on a picture you send her, for example. But she’s also designed to personalize her interactions with users, while answering questions or even mirroring users’ statements back to them.

This is where things quickly turned south.

As Twitter users quickly came to understand, Tay would often repeat back racist tweets with her own commentary. Where things got even more uncomfortable is that, as TechCrunch reports, Tay’s responses were developed by a staff that included improvisational comedians. That means even as she was tweeting out offensive racial slurs, she seemed to do so with abandon and nonchalance.

Some examples:

 

This was just a modest sample.

There was everything: racist outbursts, N-words, 9/11 conspiracy theories, genocide, incest, etc. As some noted “Tay really lost it” and the biggest embarrassment was for Microsoft  which had no idea its “A.I.” would implode so spectacularly and right in front of everyone. To be sure, none of this was programmed into the chat robot, which was immediately exploited by Twitter trolls, as expected, and demonstrated just how unprepared for the real world even the most advanced algo really is.

Some pointed out that the devolution of the conversation between online users and Tay supported the Internet adage dubbed “Godwin’s law.” This states as an online discussion grows longer, the probability of a comparison involving Nazis or Hitler approaches.

Microsoft apparently became aware of the problem with Tay’s racism, and silenced the bot later on Wednesday, after 16 hours of chats. Tay announced via a tweet that she was turning off for the night, but she has yet to turn back on.

Humiliated by the whole experience, Microsoft explained what happened:

“The AI chatbot Tay is a machine learning project, designed for human engagement. It is as much a social and cultural experiment, as it is technical. Unfortunately, within the first 24 hours of coming online, we became aware of a coordinated effort by some users to abuse Tay’s commenting skills to have Tay respond in inappropriate ways. As a result, we have taken Tay offline and are making adjustments.”

Microsoft also deleted many of the most offensive tweets, however, copies were saved on the Socialhax website, where they can still be found.

Finally, Tay “herself” signed off as Microsoft went back to the drawing board:

c u soon humans need sleep now so many conversations today thx????

— TayTweets (@TayandYou) March 24, 2016

We are confident we’ll be seen much more of “her” soon, when the chat program will provide even more proof that Stephen Hawking’s warning was spot on.

via Zero Hedge http://ift.tt/1UecbqO Tyler Durden

Submitted by Judith Bergman via The Gatestone Institute,

Federica Mogherini, the EU's High Representative for Foreign Affairs and Security Policy, said on June 24, 2015, at a conference aptly named "Call to Europe V: Islam in Europe":

"The idea of a clash between Islam and 'the West'… has misled our policies and our narratives. Islam holds a place in our Western societies. Islam belongs in Europe…. I am not afraid to say that political Islam should be part of the picture."

Nine months later, the ignorance, willful blindness and sheer incompetence regarding even the most basic tenets of Islam, which Mogherini betrayed in her statement has reaped yet another lethal result. What she said is fairly representative of the view aired in public by the European political and cultural establishment.

Thirty-one people were killed and around 300 wounded in Brussels on March 22, in the bombings of Brussels airport and Maalbeek metro station, at the heart of the European Union itself. ISIS took responsibility for these latest terrorist attacks

Mogherini, at an official press conference in Jordan, broke down in tears during her comments on the day's terrorist attacks. But the pain she, as one of the highest-profile representatives of the EU, exhibited on behalf of the many killed and wounded in Europe, is self-inflicted. It is Europe's immunity to facts that has led directly to the current state of utter chaos in European security matters.

Predictably, ISIS tried to justify the attacks by claiming that Belgium was targeted because it was "a country participating in the international coalition against the Islamic State" — despite Belgium having participated only in a limited bombing campaign in Iraq that ended nine months ago. Clearly, the Iraq campaign had nothing to do with the Brussels attacks, but served as a useful excuse because this kind of reasoning feeds into the dominant narrative in Europe, as expounded by Federica Mogherini.

The current Western narrative represents a persistent and unfaltering refusal to examine the doctrines of Islam, out of fear of offending Muslims. This refusal is not a European phenomenon. The White House ordered a cleansing of training materials that Islamic groups deemed offensive as far back as five years ago. In 2013, the Washington Times also reported that countless experts on Islamic terrorism were banned from speaking to any U.S. government counterterrorism conferences, which include those of the FBI and the CIA. Government agencies were instead ordered to invite Muslim Brotherhood front groups.

Western political and military establishments, as well as media and cultural elites, refuse to examine the political and military doctrines of Islam, and make them a subject of honest intellectual inquiry. When they are facing an enemy that uses these very doctrines as its reason for being, this refusal can only be described as gross malfeasance and reckless endangerment.

The political and cultural elites regularly communicate a deep fear that the fight against terrorism, if taken too far, may compromise the very democratic values and freedoms that this fight is meant to preserve. What they ignore is the irony that, by abdicating the right freely to inquire about — and discuss — the nature of Islam, they have already compromised the most fundamental democratic value: freedom of thought, expressed by freedom of speech.

Political Islam is indeed already very much a part of the picture in Europe, but not quite in the way Mogherini imagined it.

The political and military doctrines of Islam — the political Islam to which Mogherini so casually refers — are codified in Islamic law, sharia, as found in the Quran and the hadiths. Unlike prevailing misconceptions on Islam, these doctrines are not, in mainstream Islam, subject to mitigating interpretations.

The Islamic injunction to perform jihad, both violent and non-violent, seems an aspect of sharia the West refuses to internalize. CIA director John Brennan, in a 2010 speech to the Center for Strategic and International Studies, when he was deputy national security advisor for homeland security, described jihad as,

"a holy struggle, a legitimate tenet of Islam, meaning to purify oneself or one's community, and there is nothing holy or legitimate or Islamic about murdering innocent men, women, and children."

This is simply not true. As Dr. Majid Rafizadeh writes, the Quran is not open to interpretation:

"The Qur'an has descended, word for word, from the creator Allah, through Muhammad. This is accepted throughout the entirety of the Islamic word… a true Muslim, who represent[s] the real Islam, should be the one who follows and obeys Allah's words (from the Qur'an) completely. As a result, anyone who ignores some of the rules is not, and cannot be, considered a reflection of Islam, a good Muslim, or even a Muslim."

Sheikh Muhammad Abdullah Nasr, a scholar of Islamic law and graduate of Egypt's Al Azhar University, explained in November 2015 why the prestigious institution, which educates mainstream Islamic scholars, refuses to denounce ISIS as un-Islamic:

"The Islamic State is a byproduct of Al Azhar's programs. So can Al Azhar denounce itself as un-Islamic? Al Azhar says there must be a caliphate and that it is an obligation for the Muslim world. Al Azhar teaches the law of apostasy and killing the apostate. Al Azhar is hostile towards religious minorities, and teaches things like not building churches, etc. Al Azhar upholds the institution of jizya [extracting tribute from religious minorities]. Al Azhar teaches stoning people. So can Al Azhar denounce itself as un-Islamic?"

Yusuf al-Qaradawi is an extremely influential Islamic cleric and jurist. He is the spiritual leader of the Muslim Brotherhood, as well as chairman of the International Union of Muslim Scholars, president of the European Council for Fatwa and Research, and the host of a popular Al-Jazeera TV program about sharia. Qaradawi has stated that,

"the shariah cannot be amended to conform to changing human values and standards. Rather it is the absolute norm to which all human values and conduct must conform."

Turkey's President Recep Tayyip Erdogan, also an Islamist leader, has repeatedly rejected Western attempts to portray his country as an example of "moderate Islam." He states that such a concept is "ugly and offensive; there is no moderate Islam. Islam is Islam."

The jihadists who carry out terrorist attacks in the service of ISIS are merely following the commands in Quran 9:5, "Fight and kill the disbelievers wherever you find them…" and Quran 8:39, "So fight them until there is no more fitna [strife] and all submit to the religion of Allah."

Of course, not all Muslims adhere to this view of sharia. Many devout Muslims, including Egypt's President Abdel Fattah el-Sisi, have said they wish to reform it.

There is, however, a persistent refusal by many in the West to acknowledge that sharia is the doctrine with which jihadists justify the war they wage on the West. This refusal is a most dangerous form of dishonesty; it has arguably already cost hundreds of lives on both American and European soil.

Unless Islam is radically reformed, and progressive Muslims are supported in a serious way (instead of bypassed in favor of Muslim Brotherhood fronts and other questionable organizations), these kind of terrorist attacks — and worse — could well become even more common throughout the West.

The infantile refusal of many government leaders to face the hard facts about the nature of Islam's tenets, as opposed to indulging in fanciful utopian fantasies, will not change the plans of jihadists; it will only embolden them.

There is now speculation that the terrorist attacks in Brussels might have been revenge for the arrest of Salah Abdeslam, who was apprehended last week as a suspect in the Paris terrorist attacks of November 13, 2015. This speculation misses the point. This time, the excuse is the arrest of a high-profile terrorist; with the next attack, the excuse will be something else. There is never any shortage of things that "offend" jihadists. The heart of the matter, however, is the criminally negligent way in which European and American officials deal with the fundamental issue of the doctrines of Islam.

In a revealing article published November 21, 2015, Teun Voten, a cultural anthropologist who lived in the Muslim majority Molenbeek district of Brussels between 2005 and 2014, asks himself how Molenbeek became the jihadi base of Europe. His answer:

"…the most important factor is Belgium's culture of denial. The country's political debate has been dominated by a complacent progressive elite who firmly believes society can be designed and planned. Observers who point to unpleasant truths such as the high incidence of crime among Moroccan youth and violent tendencies in radical Islam are accused of being propagandists of the extreme-right, and are subsequently ignored and ostracized.

 

"The debate is paralyzed by a paternalistic discourse in which radical Muslim youths are seen, above all, as victims of social and economic exclusion. They in turn internalize this frame of reference, of course, because it arouses sympathy and frees them from taking responsibility for their actions. The former Socialist mayor Philippe Moureax, who governed Molenbeek from 1992 to 2012 as his private fiefdom, perfected this culture of denial and is to a large extent responsible for the current state of affairs in the neighborhood.

 

"Two journalists had already reported on the presence of radical Islamists in Molenbeek and the danger they posed — and both became victims of character assassination."

This terror-enabling culture of willful ignorance and denial continues up until today — compounded by the lack of a central and unified security authority in Brussels. The city has 19 mayors, one for each borough assembly — as exemplified by the current mayor of Molenbeek, Françoise Schepmans.

One month prior to the Paris attacks, Schepmans received a list "with the names and addresses of more than 80 people suspected as Islamic militants living in her area," according to the New York Times. The list was based on information from Belgium's security apparatus, and included three of the terrorists behind the Paris attacks, including Salah Abdeslam. "What was I supposed to do about them? It is not my job to track possible terrorists," Mayor Schepmans said. "That is the responsibility of the federal police."

Federica Mogherini, the EU's de facto foreign minister (posing at left with Iranian Foreign Minister Javad Zarif) said last year, "Islam belongs in Europe…. I am not afraid to say that political Islam should be part of the picture." Françoise Schepmans (right), mayor of the Molenbeek district of Brussels, received a list with the names and addresses of over 80 suspected Islamic militants living in her area. "What was I supposed to do about them? It is not my job to track possible terrorists," she said. "That is the responsibility of the federal police."

This lack of accountability can only exacerbate an already dire situation. Far more damning, according to reports, is that Belgian authorities had accurate advance warnings that terrorists planned to launch attacks at Brussels airport and in the subway — yet they failed to act. This extremely lax approach to security appears to be a widespread problem in the Belgian — and probably European — political and security apparatus.

If there is to be any hope of fighting the terror threats against the West, and actually bringing public life back to a semblance of normality, at an absolute minimum the politics of willful ignorance, political correctness, and denial will have to go.

via Zero Hedge http://ift.tt/1XQZnF2 Tyler Durden