news – Page 26478

“Snowboarding with the NYPD” Video Proves Cops Have Discretion, Can Be Cool

Viral videomaker Casey Neistat’s clip of him and his friend Oscar Boyson snowboarding through the streets of Manhattan during last Saturday’s blizzard has been viewed nearly 6,000,000 times on Youtube as of Monday afternoon. Set to a remix of Frank Sinatra’s “New York, New York,” Neistat and Boyson shred the streets of Gotham while holding onto jet ski ropes tethered to the back of a Jeep.

As noted at the start of the video, a city-wide travel ban on cars went into effect at 2:30pm on Saturday and although a behind-the-scenes video indicates that much of the urban extreme winter sporting was done before then, Neistat and his cohort were still on the road for a while after the ban went into effect.

Using GoPro cameras and a drone floating overhead, Neistat and company capture some spectacularly fun footage of weather-weary pedestrians cheering with delight (one even gets to take a brief ride) as these two goofballs risk life and limb to do something deliberately silly and almost certainly in violation of any number of laws. But perhaps the most life-affirming moment of the video comes at the very end, when the riders pass an NYPD vehicle which promptly pulls them over, lights-flashing and sirens-blaring.

Just when you’re expecting the record to scratch and the party to come to a bruising halt, one of the officers (whose face is unseen) tells Neistat, “Someone complained about you, so we’re just gonna act like we’re talking to you, alright?” To which Neistat replies, “You guys are awesome.”

This is a far cry from the NYPD officer who gave Neistat a ticket for riding his bike on the street but outside of a designated bike lane (which is not illegal), an incident which inspired the 2011 viral video of Neistat strictly adhering to bike lanes and thus violently crashing into several impediments (including a police cruiser).

The officers who did not arrest (or even so much as hassle) Neistat this past Saturday provide a living example that cops have discretion over which petty violations they choose to enforce, and that they also have the autonomy to choose how and when to escalate a potential confrontation. Sadly, the NYPD officers who detained Eric Garner on a Staten Island sidewalk over his alleged sale of loose cigarettes chose the opposite tact: to vigorously enforce a “low-level offense” and use violent force to neutralize Garner’s non-violent non-compliance, which led to Garner’s death.

The surprising tolerance of joie de vivre wasn’t confined to New York’s Finest, the blizzard brought out the fun in at least one of Washington DC’s police officers, who played some pretty rough-and-tumble sidewalk football with the citizenry.

In Gainesville, FL a few weeks back, a police cruiser’s dashcam captured an official response to a neighbor’s noise complaint that some kids were playing basketball (loudly!) in the street. The officer who responded casually approached the kids and proceeded to play ten minutes of pickup hoops with them before going on his way. The Gainseville PD edited the video and posted it to Facebook (where it has been viewed more than 15,000,000 times) with the added message that “We’re going to let kids be kids. We’re going to focus on the ones that commit crimes.”

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China Warns “Social Stability Threatened” As 400,000 Steel Workers Are About To Lose Their Jobs

In late September, we were stunned to read (and report) that in the first mega-layoff in recent Chinese history, the Harbin-based Heilongjiang Longmay Mining Holding Group, or Longmay Group for short, the biggest met coal miner in northeast China had taken a page straight out of Jean-Baptiste Emanuel Zorg’s playbook and fired 100,000 workers overnight, 40% of its entire 240,000 workforce.

For us this was the sign that China’s long awaited “hard landing” had finally arrived, because as China’s paper of record, China Daily, added then: “now, many migrant workers struggle to find their footing in a downshifting economy. As factories run out of money and construction projects turn idle across China, there has been a rise in the last thing Beijing wants to see: unrest.“

We added that “if there is one thing China’s politburo simply can not afford right now, is to layer public unrest and civil violence on top of an economy which is already in “hard-landing” move. Forget black – this would be the bloody swan that nobody could “possibly have seen coming” and concluded that as for the future of China’s unskilled labor industries, the Fifth Element’s Jean-Baptiste Emanuel Zorg has a good idea of what’s coming.

Fast forward to today when, if not a full million, Xinhua reports that as part of China’s proposed excess capacity production curtailments the country’s steel production slash will translate into the loss of jobs for up to 400,000 workers, estimated Li Xinchuang, head of China Metallurgical Industry Planning and Research Institute. Li said more people will be affected in the upstream and downstream industries. According to some estimates just like every banker job in New York “feeds” up to three downstream jobs, so in China every worker in the steel industry helps support between 2 to 3 additional job.s Which means, 400,000 primary layoffs would mean a total job loss number anywhere between 1.2 and 1.6 million jobs!

As a reminder, previously China had announced that it would cut steel production capacity by 100 to 150 million tonnes, while coal production will be reduced by “a relatively large amount,” according to a statement released Sunday by the State Council. We have yet to get an estimate of how many coal jobs will be lost.

The reason we were, and remain, skeptical about China ever following through on this production curtailment is precisely the massive layoffs that will result: layoffs which would enflame an already tenuous employment situation because as we showed recently, the number of worker strikes in China has gone parabolic in the past year, soaring to a record high over 2,700 in 2015, more than double the previous year’s total.

Li confirmed this very disturbing trend when he told Xinhua that “large-scale redundancies in the steel sector could threaten social stability.“

Which brings us to the most important topic facing China: how it will respond to the imminent labor market crisis as millions of workers are laid off either voluntarily, or as a result of bankruptcies of their employers: this, as we said in November, was the biggest risk facing China.

One avenue China is actively pursuing realizing it is years behind the curve, is the ad hoc implementation of an unemployment “safety net” – a form of unemployment benefits like those which recently laid off Americans are entitled to for extended periods of time while they try to find a new job. This will not be easy as China has absolutely no practical plan how to implement this.

According to Xinhua, “China will raise funds to help workers reestablish themselves should they lose their jobs when coal and steel firms close amid campaigns to cut overcapacity.”

A large number of coal workers are expected to be affected by future capacity cut, although the State Council did not specify the scale.

To deal with looming redundancies, an “industrial restructuring fund” was initiated on Jan. 1, pooling money from factories across the nation based on their power consumption.

Brokerage Shenwan Hongyuan Securities estimates that the fund could draw in 46.8 billion yuan (7.2 billion U.S. dollars) a year.

“As required by the State Council, related departments are formulating rules on the use of the industrial restructuring fund,” said Jiang Zhimin, vice head of China National Coal Association.

“As far as I’m concerned, the bulk of the fund will be allocated to redundant workers,” said Jiang. The fund will be partly used to compensate laid-off workers, according to Sunday’s State Council statement.

Demonstrating just how “serious” this proposal is, the State Council called on enterprises to think outside the box and find ways to reduce redundancies and compensate laid-off workers.

We give this track about a 1% chance of manifesting in something practical.

In a separate proposal, the government is also encouraging redundant workers to start their own businesses, with tax breaks and other preferential policies.

Alas, the creation of millions of new profitable businesses (because unprofitable startups only thrive in Silicon Valley) is far, far more difficult than it sounds in some Beijing spreadsheet.

A previous round of economic restructuring in the 1990s, when China was transforming from a planned economy to a market economy, saw tens of millions of people losing their jobs, particularly those employed by state-owned enterprises.

Although many redundant workers started businesses, the rising unemployment created social problems. In the current round of economic restructuring, inviable and non-competitive “zombie enterprises” are being targeted by the government, as oversupply has hammered steel prices below the cost of cabbages and beaten coal price to a multi-year low.

This time, Xinhua says that the government will pay more attention to those who lose their jobs. The reason is simple: a few million angry, unemployed workers and China will have precisely the working class insurrection it has been preparing for since 2014.

Xinhua concludes by saying that the leadership attaches great importance to job creation amid the economic slowdown, which is ironic because economic slowdowns are always accompanies by mass layoffs. There is some hope for spin yet: “now a low unemployment rate provides room for the capacity glut reduction…. Surveyed unemployment rate in major Chinese cities was around 5.1 percent in 2015, which remained at a low level, compared with an average of 6.8 percent for the 34-member Organization for Economic Cooperation and Development (OECD) last July.“

The problem, of course, is that just like every other economic indicator in China, this one too is utterly wrong and dramatically inaccurrate, and is simply meant to goalseek what a few politicans demand be shown so they get a few approving nods from the Politburo.

Just how disconnected from reality China’s official unemployment rate is, both now and one year from today, will ultimately determine how violent the social upheaval will be when as part of its hard-landing, China proceeds to lay offs (tens of) millions of low-skilled workers leading to the inevitable response.

via Zero Hedge http://ift.tt/1K6X270 Tyler Durden

What Buyback Slowdown: “Our Buyback Desk Is Very Busy” Admits Credit Suisse

"Do not worry," investors are told day after day, this is just a swoon because companies are blacked out from buying back their own shares and supporting the irrational valuations in stock markets. Well, Credit Suisse just smashed another leg on the 2-legged stool of equity market perma-bullishness as they explain in their daily note that "talk of seasonal oscillation in buyback activity is over-exaggerated."

Lot of talk around buyback blackout periods

We'd note that a large percentage of companies have 10b5-1 plans in place that allow them to continue the buyback process during blackout periods.

Our corp buyback desk has remained very busy thru the market downdraft.

Though they do offer a modest silver lining for stocks…

Watch for Pension rebalances into equities thru month end

Close to an 11% dispersion between stock and bond returns for January. Our model estimated around $11bn into US equities (as of Friday) based on MTD returns (subject to change of course with the moves in the market and assuming funds rebalance at month end)

However, we can't help but expect an overall slowdown in buyback activity as the cost of funding this shareholder-friendliness explodes…

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The REAL Donald Trump – A Fascinating Interview of the Man from 1990

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In 1990, Donald Trump conducted a lengthy interview with Playboy Magazine. It provides an absolutely fascinating window into the man’s mind, which I suggest everyone read in full. Unexpectedly, I came away with a more informed and nuanced perspective on the man. While it didn’t change my opinion of him as President, I do have a much greater appreciation for Donald Trump as a person, specifically how his mind works and what drives him.

I originally came across this interview after seeing a tweet referencing a 25 year old interview during which Trump expressed admiration for how strongly Chinese authorities cracked down on dissent in Tianeman Square in 1989. I immediately thought to myself that this would be the perfect fodder to further elucidate the kind of cold, brutal, authoritarian leader Trump undoubtably would be as President.

While that particular quote did indeed back that up, I decided to read further and came away with many additional observations. I think these observations are worth sharing since I think there’s a very real chance Trump will be elected President within the next ten years. His chances ride on the fact that the current system is terminally corrupt, as well as socially and economically bankrupt. It will crash and burn, whether in slow motion like the past eight years, or very rapidly over the next several. Someone will likely step in to fill this void, and Trump has the personality type and understanding of human nature to possibly propel himself into the position when the timing is right. Is the time right in 2016? Probably not, but a President Trump is far more likely to occur in our lifetimes than many of us want to admit.

So with that out of the way, let me share some of the things I learned from the interview. First, I think Trump is far less materialistic than people presume, which sounds like a contradiction considering he is unquestionably one of the biggest showoffs on planet earth. While this is true, the motivation behind his ostentatious public persona is primarily to further his brand. As he says repeatedly in the interview, it’s all a show. In other words, he claims it’s pure marketing and I believe him.

What motivates Trump isn’t the collection of material things, rather, it’s a constant need to stroke his enormous ego and stoke his narcissism. Life is merely a giant game for Trump. A game in which the winners collect lots of fame and money, and the losers don’t. He doesn’t simply want to win this game, coming out on top is his entire life’s purpose. The idea of not winning isn’t even an option.

So with this in mind, is the Presidency just the ultimate prize for Trump? Does he want it simply because it is one of the few “wins” he has yet to collect? I think so. Deep down, I think Trump can’t truly envision himself as life’s ultimate winner without the Presidency. This is not to say I think Trump isn’t genuine when he says America is going down the toilet. Indeed, he was hitting on many of the exact same themes back in 1990. In fact, it gives you the impression that Trump has thought America was lacking his entire life, precisely because Trump had yet to be named the country’s CEO.

Trump believes in winning, and he thinks he and America are one in the same. In that sense, I genuinely believe that as President he would do what he thinks is best for America. In that sense, he’s not the typical detached, corrupt, greedy, globalist U.S. President we’ve become so accustomed to. This is precisely what his supporters are picking up on and why they love him.

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Security Woes Threaten OPEC’s Second Largest Producer

Submitted by Tom Kool via OilPrice.com,

Iraq has been one of the key contributors to the uptick in OPEC oil production over the past year and a half. Despite the fact that the country’s crude oil output has continuously been plagued by security concerns and faltering payments to international oil companies from both the Kurdish regional government (KRG) and Baghdad and an ongoing row over oil export rights, it has still managed to ramp up production to record levels.

Iraq’s consistent and record oil output last year is, by and large, contributable to the production in the south of the country. According to a January 16. Reuters report, exports from its southern region have been running at 3.297 million barrels per day (bpd) so far in January, representing around 75 percent of the country’s total production.

Iraq’s South Oil Co.’s Deputy Director Salah Mahdi told Reuters in an interview that Iraq’s southern oil exports have been running smooth over the last year and in spite of recent tribal violence in the region, he expects the company’s drilling and export activities to continue undisturbed in 2016.

Figure 1: Iraqi oil output in 2015 in thousands of barrels per day

(Click to enlarge)

Image courtesy Peakoilbarrel.com

The above chart gives a good view of the production increases of Iraqi oil in 2015. The latest OPEC Monthly Oil Report shows a slight decline in Iraq’s production output in December 2015.

OPEC has Iraq’s oil production at 4,309 mmbpd in December and estimates its rig count at 51.

No reason to worry about Iraq’s oil future it seems… or is there?

As mentioned, the lion share of Iraq’s oil is produced by Iraq’s South Oil Co. around its main export facility, in the province of Basra. The chart below shows the oil deposits in Iraq and all the yellow spots are either giant or supergiant oil fields.

Figure 2: Iraq’s oil deposits and (super) giant oilfields

(Click to enlarge)

Image source: Harvard world map

Even though the oil production around Basra is relatively far away from the ISIS controlled areas in Iraq and Syria, it was the same Iraqi government which was unable to prevent the fall of Mosul, Iraq’s second city, and Ramadi, which has supposedly been liberated from ISIS, although the city is far from safe yet.

As coalition and Russian airstrikes continue to bomb ISIS positions in Syria and Iraq, the terror group is likely to continue to lose territory and influence but if we have learned anything it is that this is could be a long and protracted process. See chart 3 below for the ISIS controlled and contested areas in Iraq and Syria.

Figure 3: ISIS controlled and contested areas in the Middle East

(Click to enlarge)

Image Source: ISW

As the fight against ISIS continues in the north and west of Iraq, Shiite tribal violence has noticeably increased in Iraq’s Basra province after the withdrawal of security forces. The vacuum has given plenty opportunity for tribal militias and criminal gangs to take a hold of the province’ main connecting roads with robberies, kidnappings and hijackings as a result. Last October, the South Iraq Oil Co. itself became victim of the violence as gunmen stole $500,000 in salaries from the company.

Although significant damage to oil assets has so far not been reported, most of the uproar has been dangerously close to the major – 200,000+ bpd – Qurna and Majnoon oilfields in which Shell and ExxonMobil are operating.

Recently, the Baghdad government has seen some success in suppressing the violence after moving in a complete army division and an intelligence unit in order to secure oil assets and bring down tensions in the oil rich city. Many however doubt the effectiveness of this military operation as local tribal clans as well as the local population resent the Baghdad government, with which they do not wish to share their oil profits.

This tension and resentment should be a concern for the Baghdad government as it relies for around 95 percent on oil exports. Government revenues are down sharply with the fall in oil prices – oil prices are down about 70 percent since 2014 and already down 30 percent since the beginning of this year. Not to mention the discount Iraq is forced to give on its crude as competition has grown fierce over the last months.

Is it pump or drown for Iraq in 2016?

Iraq’s total oil output currently stands at around 4.3 million barrels per day. The important question is if Iraq can keep up these production levels in the current oil price environment.

Iraq has recently reached out to some of the world’s oil majors in an attempt to secure investment for its southern oil fields as some of its legacy oil fields are in decline. The Iraqi oil ministry and the Iraqi South Oil Co. are wooing ExxonMobil and PetroChina for a multi-billion dollar enhanced recovery project to boost production in some of the declining oil fields. The before mentioned Qurna West and Majnoon oilfields are also set to be revived using enhanced oil recovery techniques.

But as oil majors are massively scrapping new projects and have simultaneously cut their capital expenditure, not only are megaprojects and offshore projects being shunned but also oil projects that carry a high political or security risk may end up being left out.

Royal Dutch Shell has already announced that it will suspend new investment in further development of the Majnoon field and ExxonMobil has not shown itself too eager to take part in the multi-billion dollar development of Iraq’s southern oil fields.

In spite of its deteriorating security situation in the south and the decreasing interest to invest in its new oil developments, one should note that Iraq, together with Iran and Saudi Arabia still have some of the lowest breakeven costs to extract a barrel of crude on a global scale (see below chart).

Figure 4: Breakeven cost estimate per barrel of crude oil

(Click to enlarge)

Source: Alliance Bernstein, October 2014

Conclusion

The question if OPEC’s second largest member can continue to ramp up its oil production significantly in 2016 will depend first and foremost on the Iraqi government’s ability to reimburse international oil drillers who invest in oil projects (Iraq uses a sort of unique model to reimburse international oil companies that invest in its oil projects).

September 30th of last year, the Iraqi government had to ask international oil companies to scale down investments in order to be able to secure revenue payments to these companies in 2016 as it foresaw lower revenues due the drop in oil prices. It is most likely that this message has impacted the willingness and ability of the bigger foreign oil companies to invest and further develop Iraq’s southern oil fields.

Secondly and equally important, Iraq’s ability to provide a secure environment for its oil producing personnel and assets will determine how success these investment become. Lastly, a possible OPEC decision to stage a production cut, in which Iraq would have to participate, could alter output levels.

Considering all of this, it seems unlikely that Iraq will see any meaningful gains in production in 2016.

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Italian officials warn that the system is about to erupt

On August 24 in the year 79 AD, one of the most famous natural disasters in history struck the Ancient Roman city of Pompeii, and its surrounding area.

We have an eye-witness account from Gaius Plinius Caecilius Secundus, whose letter to Roman historian Tacitus vividly describes how the eruption of Mount Vesuvius rained down hot, black cinders and smoldering ash onto the towns below.

Pompeii was buried in about six meters of volcanic ash, and the town’s inhabitants were frozen in time in the exact positions that they stood when they died.

Curiously, despite the volcano nearly wiping out the nearby civilizations, the Ancient Romans rebuilt more towns at the foot of the volcano.

Yet unsurprisingly Vesuvius continued erupting.

The eruption of 472 AD was so severe that volcanic ash fell as far away as Constantinople, over 1,000 km away.

Forty years later the eruptions were so damaging that surviving locals were exempted from taxation.

Mount Vesuvius has barely let up since ancient times, erupting 12 times in the last two centuries alone.

Italian officials are now starting to sound the alarm bell, suggesting that Vesuvius could erupt again, this time endangering the 3+ million inhabitants of nearby Naples, and especially the 600,000 inhabitants within the volcano’s danger zone.

I can’t help but see the obvious parallels in our modern financial system.

This system almost came crashing down eight years ago under the weight of so much stupidity and debt.

Bank balance sheets were stuffed full of worthless garbage, like giant pools of no-money-down mortgages and home loans made to dead people.

Central banks have also been blamed for keeping interest rates far too low for far too long, spurring excessive and idiotic financial excess.

Governments also had a major role to play in the crisis, completely abandoning all fiscal discipline and going deeply into debt.

And consumers fanned the flames by overextending themselves and running up record levels of personal debt.

Yet after the great eruption of the financial system in 2008, the Romans of our time made the most bizarre decision to rebuild at the foot of the volcano.

They ‘fixed’ a financial cataclysm caused by too much debt, and interest rates that were too low, with even more debt, and even lower interest rates.

In other words, they’ve done the exact same things that caused the first crisis, but in far greater volume.

Yet somehow they expect a different result.

No one, of course, knows precisely WHEN Mt. Vesuvius may erupt again. Or when the next financial eruption will occur.

But researchers can certainly monitor geological activity to look for warning signs.

Plus people living within the danger zone can take some sensible steps to ensure they’re ready in case an eruption should occur.

So can we. And when you look around the financial system, those warning signs are everywhere.

Just in the last few days we’ve seen that corporate bond defaults are at the highest level since 2009.

The Italian Finance Minister is publicly acknowledging that Italy’s banking sector is woefully undercapitalized.

Many trade statistics, including railroad cargo and airfreight volumes, sea freight rates, and the World Trade Monitor index, signal drastically reduced global trade.

The Federal Reserve, on a mark to market basis, is now completely insolvent.

And at least one veteran central banker has forecast an ‘avalanche of bankruptcies’ and suggested that central banks no longer have any remaining ammunition to fight off a financial crisis.

These are all rather obvious, recent indications that the next eruption may be approaching.

Fortunately, moving out of the danger zone doesn’t need to be complicated.

If your banking system is pitifully illiquid or even undercapitalized, don’t keep all of your savings there. Simple.

It’s 2016. Today it’s possible to move some savings to a stronger, more stable jurisdiction overseas, all without leaving your living room.

You can establish an account to hold precious metals, or even physical cash, in one of the safest depositories in the world, all while you’re sitting in your underwear.

The breadth of opportunities that we have available to us thanks to our modern technology is extraordinary.

And these are solutions that make sense no matter what happens.

I hardly consider myself worse off because I produce my own organic food.

Or because I have multiple passports allowing me to live, work, travel, and invest easily in dozens of places across the world.

Or because I hold a portion of my savings at an incredibly well-capitalized bank in a jurisdiction with no debt that has never had a banking failure ever.

Financial crises and eruptions have occurred over and over again since ancient times.

Governments and policymakers keep making the same mistakes and expecting different results.

But you and I now have more options at our disposal to do something about it than ever before in history.

This is exciting, and taking action should be a no-brainer.

To help you get started, I’ve asked my team to pull some of the most educational articles from our archives to send to you this week while I’m in southern Chile with the Board of Directors of our agricultural company.

And in early February, I’ll put together a special webinar to teach you about some of the most critical components of creating your own Plan B. More to follow.

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Billion Dollar Baby Bye Bye – Theranos Lab Found “Deficient”

It seems billion dollar baby of Silcon Valley, Elizabeth Holmes, is facing yet another unicorn-slaying moment as the fairy-take ending for Stanford drop-out looks increasingly distant after a WSJ report that U.S. health inspectors have found serious deficiencies at Theranos Inc.’s laboratory in Northern California, according to people familiar with the matter. With a board full of big swinging dicks about to be exposed for the greater fools they truly are, failing to fix the problems could put the Theranos lab at risk of suspension from the Medicare program.

We reported on the beginning of the end of the multi-billion dollar dream here, when its core "new technology" – known as a Capillary Tube Nanocontainer (CTN) – was exposed as essentially unacceptable for use.

And now, as The Wall Street Journal reports, U.S. health inspectors have found serious deficiencies at Theranos Inc.’s laboratory in Northern California, according to people familiar with the matter.

The problems were found during an inspection by the Centers for Medicare and Medicaid Services, the chief federal regulator of clinical labs, at the blood-testing company’s facility in Newark, Calif. Failing to fix the problems could put the Theranos lab at risk of suspension from the Medicare program.

The inspection results are expected to be publicly released soon, these people said. A spokesman for the agency said it “can’t confirm any survey conclusions or results at this time.”

Theranos spokeswoman Brooke Buchanan said the company “does not have the report from last year’s regularly scheduled CMS audit of its California lab.”

The problems observed by regulators were far more severe than those cited by CMS following its last inspection of the same lab in December 2013, according to the people familiar with the matter. The previous inspection cited infractions that Theranos said it promptly resolved.

This deficiency comes just days before a CMS inspection report critical to Theranos future relationship with its main retail partner Walgreens Boots Alliance,

The drugstore operator has 41 blood-drawing “wellness centers” in stores in Arizona and California, which are Theranos’s primary access to consumers. Walgreens had aimed to expand the sites nationwide but has suspended those plans until Theranos answers questions about its technology, said the people familiar with the matter.

In recent weeks, Walgreens has debated whether to close the wellness centers, and the results of the latest inspection by CMS could lead the retailer to take an even harder look at what remains of its partnership with Theranos, these people said.

Since October, Walgreens representatives have met a number of times with Theranos Chief Executive Elizabeth Holmes and her executive team but were dissatisfied with their responses, the people added.

An earlier review of the contract led Walgreens officials to conclude that it would be difficult to exit the agreement, but the inspection findings could alter that conclusion, according to people familiar with the matter.

Finally, as Aswath Damodaran chastened just a few months ago, looking back at the build up and the let down on the Theranos story, the recurring question that comes up is how the smart people that funded, promoted and wrote about this company never stopped and looked beyond the claim of “30 tests from one drop of blood” that seemed to be the mantra for the company. While we may never know the answer to the question, Aswath Damodaran offers three possible reasons that should operate as red flags on future young company narratives…

1. The Runaway Story: If Aaron Sorkin were writing a movie about a young start up, it would be almost impossible for him to come up with one as gripping as the Theranos story: a nineteen-year old woman (that already makes it different from the typical start up founder), drops out of Stanford (the new Harvard) and disrupts a business that makes us go through a health ritual that we all dislike. Who amongst us has not sat for hours at a lab for a blood test, subjected ourselves to multiple syringe shots as the technician draw large vials of blood, waited for days to get the test back and then blanched at the bill for $1,500 for the tests? To add to its allure, the story had a missionary component to it, of a product that would change health care around the world by bringing cheap and speedy blood testing to the vast multitudes that cannot afford the status quo.

The mix of exuberance, passion and missionary zeal that animated the company comes through in this interview that Ms. Holmes gave Wired magazine before the dam broke a few weeks ago. As you read the interview, you can perhaps see why there was so little questioning and skepticism along the way. With a story this good and a heroine this likeable, would you want to be the Grinch raising mundane questions about whether the product actually works?

2. The Black Turtleneck: I must confess that the one aspect of this story that has always bothered me (and I am probably being petty) is the black turtleneck that has become Ms. Holmes’s uniform. She has boasted of having dozens of black turtlenecks in her closet and while there is mention that her original model for the outfit was Sharon Stone, and that Ms. Holmes does this because it saves her time, she has never tamped down the predictable comparisons that people made to Steve Jobs.

If a central ingredient of a credible narrative is authenticity, and I think it is, trying to dress like someone else (Steve Jobs, Warren Buffett or the Dalai Lama) undercuts that quality.

3. Governance matters (even at private businesses): I have always been surprised by the absence of attention paid to corporate governance at young, start ups and private businesses, but I have attributed that to two factors. One is that these businesses are often run by their founders, who have their wealth (both financial and human capital) vested in these businesses, and are therefore as less likely to act like “managers” do in publicly traded companies where there is separation of ownership and management. The other is that the venture capitalists who invest in these firms often have a much more direct role to play in how they are run, and thus should be able to protect themselves. Theranos illustrates the limitations of these built in governance mechanisms, with a board of directors in August 2015 had twelve members:

I apologize if I am hurting anyone’s feelings, but my first reaction as I was reading through the list was “Really? He is still alive?”, followed by the suspicion that Theranos was in the process of developing a biological weapon of some sort. This is a board that may have made sense (twenty years ago) for a defense contractor, but not for a company whose primary task is working through the FDA approval process and getting customers in the health care business. (Theranos does some work for the US Military, though like almost everything else about the company, the work is so secret that no one seems to know what it involves.)

The only two outside members that may have had the remotest link to the health care business were Bill Frist, a doctor and lead stockholder in Hospital Corporation of America, and William Foege, worthy for honor because of his role in eradicating small pox. My cynical reaction is that if you were Ms. Holmes and wanted to create a board of directors that had little idea what you were doing as a business and had no interest in asking, you could not have done much better than this group of septuagenarians.

via Zero Hedge http://ift.tt/1Sfb1sK Tyler Durden

Decades of Big Government Result in Massive Doubts It Fixes Anything

"They will, once they've got their pensions nice and spiked." The Obama Administration can insist that it’s winning the war on terror and that the Affordable Care Act is working, but Americans don’t agree. A new poll from the Associated Press-NORC Center for Public Affairs Research shows the majority of Americans (six in ten) have little to no confidence that the federal government may actually fix problems. The skepticism cuts across party lines. A trio of quotes from the AP:

“They can’t even seem to get together and pass anything that’s of any importance,” said Doris Wagner, an 81-year-old Republican from Alabama who said she’s “not at all confident” about seeing solutions in 2016. “It’s so self-serving what they do,” said Wagner, who called herself a small-government conservative.

In Texas, Democrat Lee Cato comes from a different political perspective but reached a similar conclusion. She allowed for “slight” confidence, but no more. The 71-year-old bemoaned a system of “lobbyists paid thousands upon thousands of dollars to get Congress to do what they want” for favored industry. “They aren’t doing anything for you and me,” she said.

Joe Flood, a GOP-leaning independent, said he sees government’s inner-workings in his job as a federal contractor. A 49-year-old resident of the District of Columbia, Flood described the executive branch as a bureaucratic behemoth and the legislative branch as an endlessly partisan wrangle. “That’s why government can’t get anything done,” he said.

People say this all the time. Heck, even President Barack Obama himself complained about bureaucratic red tape in his final State of the Union address, even though his administration has introduced tens of thousands of new regulations that contribute to the bureaucratic nightmare Flood is complaining about.

Though it may seem somewhat contradictory, the poll answers could help explain the popularity of strongman candidates with populist appeal like Donald Trump and Bernie Sanders. While it’s been common for candidates to try to present themselves as political outsiders no matter how much they’ve fed at the public trough, nobody has managed to ride that populist wave in recent elections like Trump and Sanders (even though neither of them are actual outsiders, either).

They’re not promising to “reform” the system. They’re promising to either bypass it entirely (Trump) or break it entirely and rebuild it (Sanders). They’re promising to make big government work for their constituency.

For libertarians and small-government conservatives, this all seems nonsensical. It’s the increasing size and scope of federal government power that causes both the heavy lobbying and the bureaucratic nightmares. The more the government can control what big business may and may not do, the more money those corporations are going to spend—indeed they more money they need to spend—to influence those policies in their favor. The federal bureaucracy defends itself above all things, as does any bureaucracy. It will always make sure there is more work to do and a that there is a need for an incrasing number of employees.

It helps explain why presidential candidates are so reluctant this election cycle to even suggest that there are things that they may not have the authority to do as president.

While it appears very much to be a call for bigger, stronger, more authoritarian government, there’s a bit of a paradox here in the subtext. All three of the people quoted above seem to understand that the big government that exists is not working in their interests. The challenge is getting them to understand that this is the nature of big government and inherent in federal bureaucracy, and not because of a particularly special political dynamic that is in play just at this moment.

Pity National Review & Conservatives, For Donald Trump Has “Stolen” Their Issues

As Matt Welch pointed out in his must-read summary of National Review‘s full-throated excoriation of Donald Trump’s candidacy for the Republican presidential nomination, the most important takeaway might be the revelation that the American electorate doesn’t really care overly much what journalists and policy wonks think about things, especially when it comes to ideological purity and major-party strategizing. Alas, gatekeepers in all areas of life keep taking in on the chin.

Which isn’t to say the editors of National Review, in the house editorial anchoring the mag’s “Against Trump” package, don’t shy away from condemning Trump on every level. Indeed, they even knock him for inheriting a “fortune” from his father, marking perhaps the first time the magazine has engaged in class warfare or implicitly questioned the wisdom of reducing the estate tax to zero. “Donald Trump is a menace to American conservatism who would take the work of generations and trample it underfoot in behalf of a populism as heedless and crude as the Donald himself,” write the editors.

Yeah, not so much. Donald Trump’s appeal among Republicans is directly related to issues and attitudes that mainstream conservatives and Republicans have been harping on for virtually all of the 21st century, if not longer. Anyone with even passing familiarity with National Review, which rarely misses an opportunity to tout its central role in the post-war conservative movement, knows that the magazine has long been extremely hostile to immigration, extremely bellicose when it comes to foreign policy and projecting American “strength” abroad, and extremely quick to attack any real and perceived slights to “American exceptionalism” (a term more often invoked than defined with any precision) while excoriating any real and perceived concessions to “political correctness.”

These are exactly the grounds upon which Trump has seized the day in the Republican primary season, so if he is in fact “a philosophically unmoored political opportunist”—and I think that’s a pretty fair description—National Review‘s editors might at least acknowledge that they helped to create the opportunity in the first place. After all (and whatever his past affiliation), Trump isn’t running in the Democratic primaries, is he? And despite the editors’ claim that since Jesse Jackson entered the 1984 Democratic race “both parties have been infested by candidates who have treated the presidency as an entry-level position,” the plain fact is that it’s the GOP and conservatives who regularly trot out and swoon for the likes of Donald Trump, Carly Fiorina, Ben Carson, and Herman Cain.

According to National Review‘s Ramesh Ponnuru, “a hard line” on immigration is not simply one issue among many but is now a “defining” issue for contemporary conservatism. At least going back to the 1990s, the magazine, despite being edited by an immigrant (the Brit John O’Sullivan) inveighed against immigration in article after article. Many of these were penned by another immigrant, Peter Brimelow, who would go on to start the odious racialist site VDare.com (I had trouble finding Brimelow’s articles at National Review’s site, but to get a sense of the arguments he published for the mag, read this Reason review of his book Alien Nation). In “Against Trump,” the editors actually chide Trump—who has said he would even deport fully legal children of illegals!—for being wishy-washy on immigration:

Trump says he will put a big door in his beautiful wall, an implicit endorsement of the dismayingly conventional view that current levels of legal immigration are fine….

Trump piles on the absurdity by saying he would re-import many of the illegal immigrants once they had been deported, which makes his policy a poorly disguised amnesty

Conservatives typically claim that only limousine liberals and Chamber-of-Commerce elitists are in favor of the sort of immigration that has long defined America. In fact, polls show persistent majorities of Americans favor either “current” or “increased levels” of immigration. Last year, for instance, Gallup found the 40 percent of respondents wanted immigration kept at current levels and 25 percent wanted it to be increased, while just 34 percent wanted to see it reduced. Perhaps more telling, fully 73 percent of respondents said they agreed that “on the whole” they thought immigration was “a good thing” while just 24 percent considered it a “bad thing.”

Let’s be clear: To the extent that Trump is widely and accurately understood to be openly hostile to immigration and immigrants, especially from Mexico, he is not at odds with National Review, conservatives, or all the other Republican presidential candidates. He is completely in accord with all of them—and they are all at odds with most of the country.

When it comes to overseas interventions and growing the military, National Review again has been extremely supportive for its entire run. Over at The American Conservative, former National Review staffer Rod Dreher reminds readers of “David Frum’s infamous ‘Unpatriotic Conservatives’ cover story for the magazine, published on the brink of the Iraq War in 2003.” Frum’s article was one of the ideological high-colonics the publication administers on a semi-regular basis, clearing out fellow travelers whose apostasies are deemed no longer worth entertaining (Frum himself would eventually be swept away later in the Aughts). Frum’s article concludes:

War is a great clarifier. It forces people to take sides. The paleoconservatives have chosen [to criticize the Iraq invasion] — and the rest of us must choose too. In a time of danger, they have turned their backs on their country. Now we turn our backs on them.

Dreher writes that after reading the new attack on Trump, he re-read the piece by Frum.

I agree with a lot of Frum’s criticism of the paleocons. But the paleos got one big thing right: the catastrophic foolishness of the Iraq War. It would be have been nice in the ensuing fallout to have observed some humility among the conservative elites, a sense that they may actually have no idea at all what’s going on, or what to do about it.

Does anyone seriously dispute that National Review is properly characterized as hawkish and, at least as long as a Republican is running the show, more often in favor of military action than not? And when it comes to increasing defense spending, it doesn’t matter who occupies the White House; the answer is always more spending. The editors call Trump “a nationalist at sea” and stress that he obviously doesn’t really have any idea of what he’s talking about when it comes to international relations. That’s true, but their real beef seems to be less with Trump’s willingness to take the fight directly to ISIS and his suggestion that he’d happily let Russia do much of the dirty work in the Middle East. Certainly, it’s rich for a magazine that has spilled a lot of ink defending any and all of George W. Bush’s actions during the War on Terror to fret that Trump “casually suggested a few weeks ago a war crime — killing terrorists’ families — as a tactic in the war on terror.”

Trump’s appeal to Republican primary voters stems in large part from his campaign promise to “make America great again” and his willingness to denounce political correctness, which he led with in the first GOP debate (if memory serves, he identified that as the biggest problem facing America). These gestures too are part and parcel of contemporary conservativism and National Review‘s identity. When Obama isn’t destroying the Constitution via an imperial presidency that calls to mind…George W. Bush, he is a “weak” president and the acceptance of Republican Caitlyn Jenner’s transgendered self is not only a sign of “social decay” but an occasion for contributor David A. French to fret that “the response of so many social conservatives has been so timid and uncertain.”

Again and again in its pages, National Review writers ascribe an unwillingness to attack “social decay” where you find it to political correctness and fear of media ostracism rather than to an honest disagreement about social issues. There remains, too, an unwillingness among National Review conservatives, who have effectively lost all the culture-war arguments they have entered, to concede that libertarians are truly distinct from conservatives. From government-enforced racial segregation (a big issue for National Review in the 1960s) to embracing pop culture (Buckley famously hated the Beatles) to gay marriage to pot legalization to abortion rights, things have consistently gone libertarian rather than conservative. Jonah Goldberg can joke that libertarians are “a bit like the Canadians you meet abroad who go to almost obsessive lengths to show everyone that they aren’t American,” but he can’t fully let go of the conviction that, deep down, libertarians are a sub-species of conservative.

I understand and appreciate National Review‘s interest in dissociating itself and conservatism from Donald Trump, who just might become the nominee of the Republican Party, for which NR is an unofficial cheerleader and powerful agent of influence (before the Trump contretemps, it was going to co-host a party debate). Certainly from a libertarian perspective (a perspective which has been mostly attacked and dismissed in the pages of National Review for virtually all of its run), Trump is bad news on virtually all fronts, and especially those elements that are part and parcel of the modern conservative and National Review catechism.

But let’s not pretend also that National Review won’t actually support Trump should he actually become the Republican candidate. In his 2006 Reason review of a memoir about National Review by longtime contributor Jeffrey Hart, Brian Doherty noted that the magazine’s philosophical pragmatism “led the magazine to a bizarre combination of success and impotence” that shines a light on its current pose. In particular, Doherty stresses that the magazine’s early lights, especially Bill Buckley’s mentor James Burnham, disdained pie-in-the-sky plans in favor of specific here-and-now political commitments to specific politicians. Burnham famously pushed the idea of voting for the “most conservative electable candidate” in any given race, a compromise position that still echoes throughout Republican Party coalitions.

Standing ultimately not for any firm ideological viewpoint but for some version of the “most conservative electable candidate” led the magazine to a bizarre combination of success and impotence….The Bushism that the magazine too often bows down to these days—defending his administration’s peccadillos and power grabs, mostly standing by him through some of the biggest expansions of domestic spending in the magazine’s history—stands for little recognizable in the magazine’s ideological tradition. As Hart acknowledges, that’s true even in matters of religion. Bush’s modern evangelical Christianity is distinct from the creedal and traditional Christianity-with-authority of NR‘s Catholic roots.

Back in 1965, James Burnham wrote in NR that it was absurd for the right to try to fight Medicare. Forty budget-busting years later, NR‘s man Bush has expanded the program to impossible proportions. While NR‘s editors complain about that on occasion, it won’t lead them to abandon their “most conservative electable candidate.” What seems more realistic not in short-term political terms but in recognition of mathematical and economic facts: Burnham’s respectable centrism or the radical libertarianism that says such programs were illegitimate and disastrous?

Whole thing here.

So, just as it would be sporting if National Review‘s editors could at least acknowledge in passing the role the magazine has played in setting the stage for a character like Trump to rise to the top of Republican primary polls, it would also be sporting if they would also acknowledge that they will surely vote for him if he ends up being the GOP nominee for president.

There was a time when National Review eschewed endorsing presidential candidates (in fact, the magazine didn’t officially endorse anyone in ’56 or ’60). But how dedicated is National Review to seeing a Republican, any Republican, in the White House these days? Recall that just four years ago, it endorsed Mitt Romney, who once supported abortion rights and gay rights and, as governor of Massachusetts took credit for the program that served as the prototype for Obamacare. Conservatives pride themselves that they do not have a systematic and dogmatic vision of governance or politics that demands complete agreement on all issues (though that never stops them from insisting on pro-life candidates). No, leave that sort of crazy thinking to the progressives and the libertarians, still trapped in the constructivist, utopian thinking of the French Revolution. Rather, conservatives compliment themselves on living in the real world, which is but a crude approximation of Eden before the Fall. If he’s on the ballot in November, there’s a good chance that the “most conservative electable candidate” will be Donald J. Trump. And that means the very magazine that is telling him to take a hike now will be asking you to vote for him over Hillary Clinton or Bernie Sanders.

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What Squeeze: Bets Oil Will Drop Below $25 Hit Record High

Having briefly reached bull market status (ripping 20% off last week's lows), WTI crude oil is collapsing again this morning as the reality of excess supply and dwindling demand crash on the shores of manipulated futures and ETFs. However much hope was imbued into this rally as "setting the bottom" for oil, it seems the rally was used by 'investors' to hedge the downside as bets on a bearish plunge have soared to record highs.

Hope fades for a big stimulus package…

And reality hits oil with the chaos in financial markets remaining…

As the last week has seen bearish bets soar to record highs…

As Bloomberg reports, bets that crude oil will retreat below $25 a barrel have reached an all-time high as stockpiles continue to grow.

Open interest, or the amount of total contracts outstanding, for March West Texas Intermediate crude $25 put options rose to 29,023 on Jan. 22, the highest among all March WTI options. The puts expire on Feb. 17.

“There is a big debate surrounding $25,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “A lot of people believe that we are going to test that area before we bottom.”

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It's Not Over Yet!

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