Wednesday, December 23, 2015

Big Picture View of the Brewing World Financial Crack-up

The legacy of zero interest rates for 7 years has already planted the seeds of our next financial crisis. Super low interest rates, various QEs and China have inflated bubbles in equities, bonds, and housing since the 2008/2009 bust.   (After the great recession, it was China and the largest debt-fueled spending binge in history that "saved" the world -- something that can't happen again.). Housing prices are now much higher than the 2007 peak and rents have sky-rocketed.  Oh and add the bubbles in subprime auto loans, subprime student loans and the related tuition inflation. But the bubbles are starting to burst as the tide of liquidity has been ebbing all year -- and even before Yellen decided to raise the Fed Funds rate this week.

The lowest quality Junk bonds are falling sharply in value this month. This is not a good thing. In my blog, Two Charts That Show the Financial Crisis is Already Here, I show the fact that Junk bond issuance in just the past 3 years alone is about 3 times the magnitude of the subprime mortgage bubble in 2007. And recall that the 'blow-up' of subprime mortgages nearly caused the 2nd Great Depression. I don't know the magnitude of subprime credit overseas, but soon, if not already, all the debt of commodity producers and commodity producing country sovereign debts will be subprime with defaults galore in the coming months. The sovereign debt of Brazil was lowered to junk status this week, for example. We're in a slow-motion crash. It might speed up before it's over. Why?

Maybe it's explained by a trend of falling liquidity?  One of the biggest global factors in world finance and leverage in the past 20 years has been the rise and fall of Eurodollars including derivative products such as interest rate swaps. See the graph below taken from Jeffrey Snider at Alhambra Investment Partners. The Eurodollar's (and Asia dollar) rise drove interest rates lower in the 1990s and 2000s and funded the "world" and financial markets. It was "the wind at our back" for every financial instrument related to rates for a decade or so. But it all came undone in 2008 and 2009, only to be temporarily resuscitated by 2011 via QEs all over the world. But, ever since then, it's been downhill -- meaning lower bank leverage and liquidity. The "wind at our back" has turned into the "wind in our face."

The recent fall of this Eurodollar leverage may be most significant large-scale and long term trend that explains the collapse in China and commodities. And you can see the effect of this reduced leverage when Credit Suisse, Deutsche Bank and Morgan Stanley announce repeated capital raises, layoffs, and/or dividend cuts. Their trading in leveraged products is shrinking as economic activity is slowing. They go hand in hand. World equities are falling and global trade is declining.

Our schoolmarm-ish Chairman of the Federal Reserve, and the vast minions of clueless statististians, and over-educated PhDs, and who have no real world experience, appear blind to this major trend at the heart of the recent and persistent world-wide economic malaise.

So, the Fed Reserve raised the largely symbolic Fed Funds to 0.25 to 0.50 this week. The problem is not the rate rise itself, but even a small 0.25% rise in Fed Funds rate surely will require some removal of liquidity (reduce excess reserves?) at a time when liquidity is already shrinking world-wide. Maybe it had to happen, but I don't think the Fed knows what they are doing. Here's another graph showing shrinking liquidity in 2015 reflecting the same message as the first graphic above.

Global Liquidity Shrinking Before the Fed Raised Rates
The Federal Reserve, who is supposed to be so sophisticated, is completely missing evidence that their narrative of a strong economy is dead wrong. They appear clueless to the growing evidence of recession in the US and world.

The world and US is tilting toward recession. The fall of Junk credit (and yields rising) is giving a fairly clear signal that a recession is starting in the US. Rates of 16% for a large swath of job producing smaller enterprises snuffs-out any hope of job growth. And already a fairly wide variety of countries in the world are in recession including Canada, Japan, Brazil, Russia and nearly all of the commodity producing countries. Europe may not be in recession but it's close. China appears to be imploding under the weight of bad debt. Recession abroad has caused US exports to decline which hurts US GDP.

Even most will admit that US manufacturing is in recession. Yeah they say, but it's only 12% of the economy, right?  Well, the problem is that manufacturing drives many other sectors, such as transportation and employment.  It's no coincidence that the Dow Transportation index is down 20% this year. If manufacturing is in recession, it won't be long before there is a general recession. Already US retail sales in 2015 are the worst since 1990 and they are 70% of the US economy.

US Retail Sales (Ex-Autos) Is Worse Than Recession Levels. Depression Levels?

US Retail Sales Is Worse Than Recession Levels. Depression Levels?

Let's sum up the indicators that are nearly shouting recession: US durable goods orders are declining, US retail sales in 2015 are as weak as they have ever been outside of the great recession in 2008/2009, US ISM manufacturing is shrinking, Global trade is declining. US exports are declining. US corporate revenues are declining and corporate profits are now down year over year. These things don't occur together except in contractions. Due to high debt levels across the world, and with interest rates already at near zero levels, this next contraction will last for a long time since there are no policy tools to offset it.

US Manufacturing In Contraction Late in 2015
All of the commodity producers are already in recession due to commodity prices dropping to multi-decade lows. This, in turn, causes demand for US exports to decline.

Global Trade is Declining
Yep, time to raise interest rates, Janet. They don't know what they are doing. But does anyone is the US government know what they are doing? Nope.

Monday, December 21, 2015

Time For A New American Revolution: Burn Down Our Bloated, Failing Central Planning Bureaucracy!

Much of the Federal Government and Federal Reserve "central planning" bureaucracies should be largely burnt to the ground. There are so many failures and it is so expensive that they are threatening our Nation. The "Government" colossus is marching our once-great country to ruin. Anything the US Government touches turns to shit. How can anyone want more of it?? Dismantle it! Devolve power back to the States. Save our nation from financial and social ruin!
  • Socialized medicine as exemplified by the Veterans Administration is delivering sub-par care and killing veterans (higher infection rates due to poor management and unclean conditions) at an astronomic cost. It can't be fixed because Socialism can't be fixed. Privatize it!
  • The chronic failure that is known as AMTRAK delivers sub-par, slow, Soviet-style service. It's slow and shabby. It shows what happens when the government tries to run anything. Privatize it! Amtrak crashes are killing passengers. The VA is killing veterans. How bad does it have to get for people to recognize that Big Government doesn't work?
  • The US Postal service has now become like Amtrak: a chronic financial failure. Privatize it! Japan and the UK just did. The fact that this isn't under consideration right now is another example of the failure of Big Government. "Oversight" is a sad joke.
  • Even our Defense Department is a failure. At $700 billion per year, it hasn't won a war since World War II. The Korean War was a draw, but we've lost all of the others. And we're causing chaos wherever we intervene such as Iraq and Afghanistan. We should have recognized our failure when we deposed Saddam Hussein, but the next administration worked to depose Assad, Gaddafi AND Mubarak, then suddenly abandoned the failed Iraq "experiment" setting up the rise of ISIS. All of these disasters are of the highest magnitude. What a complete and utter disaster!! I'm not writing this out of intellectual interest. Millions of people have died! Next is world war and millions more losing their lives. Didn't Ron Paul warn us about this??
  • Our TSA and Homeland Security is nearly a complete waste of money. The TSA missed 95% of planted fake bombs meant to "test" the screener's effectiveness. Only the Government can fuck up something this bad. Not surprisingly, the TSA has never caught a "terrorist." The whole thing is a joke since we should profile Middle Easterners from primarily Muslim countries and save $billions per year. Instead, we still grope millions of little white-haired ladies and middle-aged men in a ridiculous charade. Turn over airport security to local governments or the airlines. They couldn't do worse than the Feds! Don't get me started on Political correctness either regarding profiling!
  • In the case of the Boston Bombers, our vast bureaucracies failed to identify them and then, after their attack thousands of Homeland security and FBI agents swarmed into Boston with all their expensive vehicles to look for the Boston bombers. But it was local police, local citizens and and ordinary police work that caught the Boston bombers. Who needs the zillions of Federal agents and the vast and expensive bureaucracy? We need the FBI is all. Get rid of Homeland. Repeal the Patriot Act.
  • The NSA has only caught 1 or 2 "terrorists" in it's long existence and at an astronomic cost. Now, we find out, through "mission creep" (due to a failure of oversight and nonexistent budgeting) that it's monitoring your emails, tweets, any internet activities and your phone calls -- all against the Constitution. And it keeps growing and growing and hacking into foreign governments, spying on foreign leaders, reading their emails. We are not even allowed to know all the shit that they are doing! But you can rest assured that none of it is good. Burn it down! Repeal the Patriot Act.
  • You have the Federal Reserve, our Central Bankers, are just massive central planners now. They have two mandates: to control inflation and maintain a sound banking system. Now it is clear that they have created 2 devastating financial crises in the past 15 years and a 3rd one is starting as I write this. Their bizarre monetary "experiments" of ZIRP, currency debasement and "money printing" are bringing ruin to this nation. This is about as far away from sound money as could be. For 7 years they have punished every saver in this country with zero interest rates to prop-up unworthy banks. Things have gotten so perverse that, rather than controlling inflation, they're trying to create it! And failing at that too (except soaring rent, health insurance and food!) They've managed to reignite a new and bigger housing bubble too. They just raised interest rates for the 1st time in 9 years as the economy is sliding into recession. The Fed Reserve has failed to predict every recession in recent history. What good are they? They only cause trouble! Burn it down! Ban "money printing" or eliminate the Federal Reserve entirely.
  • The "Government," including the Federal Reserve, caused the crisis of 2008/2009 and we are still suffering from it. At least six administrations boosted a housing bubble through favorable tax incentives, low rates and shoddy supervision. The FHA, Freddie Mac, the Federal Reserve and Fannie Mae all helped create the great housing crisis and resulting bust. They're still at it! They are creating a new bubble in housing and everything else! Ruination is in our future thank to "government."
  • The SEC is a complete failure. It's allowing high frequency traders, who collect a small amount on zillions of trades, are front-running investors. How else can they consistently make $billions?? The SEC failed to do their job in 2004 to 2007 as banks were throwing themselves headlong in mortgage-backed securities with questionable and fraudulent origins. Regulators failed to regulate and failed to do so at an astronomic cost! Burn it down! Even Mark Cuban, wrongly persecuted by the SEC and ultimately vindicated, says "Burn it down!"
  • Defenders of big government cite the "success" of Medicare and Social Security. But, the Democrats refuse to acknowledge that Social Security and Medicare are in the late stages of a demographic crisis where the number of workers compared to beneficiaries is rapidly dropping toward 2 to 1 (from 16 to 1 at conception).
  • Even as SS and Medicare is a long-run demographic disaster in the making, Obama had to enact ANOTHER entitlement that is already failing. ObamaCare, sold by promises that are all proven wrong and false, will add to the deficit forever. It's caused a huge cost burden for the average American and has dramatically hurt 98% percent of the country while helping only 2%. All along, since inception, the administration has been giving misleading enrollment data. Now, more than 50% of the Federal Co-ops have already failed and health insurance companies, reduced to being a "utility" for the inept Fed bureaucracy, are losing money. It won't be long before they ask for a bail out. Even the website development for O'care was a joke that only "Government" and government grade ineptitude can "accomplish."
  • It's not just health insurance costs that the government is inflating. Government guaranteed student loan debt is fueling a huge and unsustainable increase in college tuition costs and student debt. That bubble has reached $1.25 Trillion, enslaving an entire generation with debt. The whole thing is blowing up as delinquencies have reached 17% and rising. Proving that government never fixes anything, they are still enabling more and more of this debt -- and bailing out delinquents at the same time! You'll soon read articles that much of that money was spent on everything BUT college costs.
  • "Your" government can't even remotely manage immigration! They can't do anything right! When I get an annual visa for Thailand, I have to report to an immigration office every 3 months to declare my address and phone number. If I don't, the police come looking for me. And, if I overstay my visa, I get a big fat "OVERSTAY" stamp on my passport and have to pay a big fine!. Thailand manages immigration FAR better than the incompetent, insane and screwed-up US Federal Govt. And"your" government doesn't even want to monitor our porous southern border, The pathetic Obama administration is intentionally releasing nearly anyone and everyone and 99% of the released persons know they don't have to show up for immigration hearings! Screwed-up is not a strong enough phrase. And if the border States step-in to fill the gap, the Feds come down on the States with lawsuits.  It's time for States to challenge the Federal Government and kick 'em out! And if they come back with weapons, fight them with weapons. That's WHY we have a 2nd amendment. We will one day have to fight our own government.  It's time for a new American Revolution, except this time our enemy is the US government.
  • The "weaponized" EPA is now even harassing local homeowners for small ponds that they are building on their own land! Talk about mission creep! Jesus! They are out of control. Now, through a ridiculous abuse of the Clean Air Act, they are marching headlong to regulate every business in the country (and then every house?) to "control" carbon emissions. And they'll need carbon police too! All this due to Democratic Party worshiping the false idol of climate change. Get rid of the carbon regulation mandate (mission creep). Downsize it. Devolve power to the States and Localities! Get back to a true Federal system that we had for 2/3rds of our history!
Will we ever learn?? We need a right wing dictator to dismantle much of the failed government apparatus. Then we need to ban public unions from all levels of government to keep costs down.

Tuesday, December 15, 2015

Democratic Bias of US Media Made Perfectly Clear

Some 93% of mainstream media 'personalities' in the US Media are Democratic; nearly all of them. That's just a fact. And any pretense of independence was thrown out the window and bias exposed, in the hatred and condemnation evident in this week's emotional, vitriolic and ad hominem media attacks on Donald Trump. Their heads blew up! They called him Hitler, fascist, etc.

Trump dared challenge the false Democratic/media narrative, led by Obama, that 99.9% of Muslims are peace loving. That is patently false -- especially abroad -- as substantial minorities support Jihad. Trump merely suggested that we temporarily halt immigration of Muslims given the attacks in San Bernardino. He also said that we should "profile" to help contain the threat.

He also blew up the false narrative that Federal employees are able to "vet" these immigrants. Today it was reported that that the woman in the San Bernardino shootings has been openly advocating for violent Jihad for years on Facebook prior to her visa approval, but the Feds are forbidden to check social media in their "vetting" process!  Incompetence, stupidity, political correctness, and absurdity is the rule for the entire Federal bureaucracy -- all the way to the top.

But their reaction shows the media for what it is -- advocates and even the propaganda arm for the Left and Democratic party. Like all Democrats, their thinking and attacks are hysterical, emotional, and irrational. They are not only unfit to govern, but unfit to report news.

You could say that Trump screwed up by not saying that we should temporarily ban immigrants from certain countries in the Middle East including Syria and most of the other predominantly Islamic middle eastern countries.  But you can't even have this conservation with screeching, deranged people -- all Democrats.  Therein lies the crux of our problem.

But Democrats don't want a conversation. They think they know everything. But the truth is that they are wrong about everything.  Obama is wrong about everything.

The only one crazier than Trump is Obama who's plan is to bring MORE Muslim immigrants and to trust our "vetting process." He and the Media are complete fools.

Sunday, December 13, 2015

The Collapse Begins

The large US junk debt market has been crashing for a month now, with spreads/rates reaching 2009 crisis levels of up 17% interest rates. That's amazing in itself. See Two Charts That Show the Financial Crisis is Here.  Zero Hedge noted today that the last time Junk Bonds hit 17% interest rates, Lehman filed for bankruptcy (on Sept 15, 2008).

They went on to muse:
We can't wait to find out if indeed Yellen's first rate hike in 9 years this Wednesday unleashes a Lehman-like neutron bomb that leads to the full collapse of the junk bond market first, and then the shockwave spreads across all asset classes leading to the same financial devastation witnessed at the end of 2008, unleashing the longest period of "free capital markets" central planning the world has ever seen.
It might not be THAT dramatic or could it?  Just think about the meaning of 17% interest rates for a large portion of smaller US businesses-- in a zero interest rate world no less! These businesses are creating the jobs.. Large corporations can still borrow at 3 or 4% but big corporations don't create the jobs. And when they borrow, they are just buying back their stock, NOT hiring employees or investing. This is partly why there has been a poor recovery since 2009--no "real" business investment.

The reason for this current junk bond credit crunch is that liquidity and the economy are contracting. Those two things go hand in hand. All year, retail sales have been some of the worse seen in 30 years outside of the most severe recession of 2008. Durable goods orders are contracting, ISM manufacturing went below 50% last month. Business inventories are ominously rising and portend more production slowdowns. US exports are declining, world trade is declining, Manufacturing is in recession both here and abroad. All the commodity producing countries are in recession including Russia and Brazil. Also, Canada and Japan are in recession. Europe is near recession.

The US manufacturing recession will, in all likelihood, morph into a general recession and nearly certainly so if credit (and then equity markets) continue to crash. Rising business interest rates, in addition to the sinking business environment indicated above, is solidly recessionary.

Against this background, the Federal Reserve and Janet Yellen have insisted that the time is right to raise rates. They have a near-perfect record of being completely wrong, out-of-touch and are set to tighten monetary conditions at the worse possible time. Like the rest of Washington, they don't know what they are doing, they have no real world experience and they are so incompetent that they wouldn't make it in the private sector.

A Fed funds rate rise or not, it appears that, absent a reflation of oil and other commodity prices, sovereign debt of commodity producers will be junk and in distress, ie., Brazil debt will soon be downgraded with a potential EM contagion from there. Already Russia, Argentina, Ukraine, Venezuela, Brazil are facing crises with the potential of defaults. As is the likes of Glencore.

It's not yet apparent, but one or more of the European banks may be the next Lehman. Notice how Credit Suisse, Deutsche Bank and lately Morgan Stanley are cutting dividends, repeatedly raising capital and firing employees -- and that's before the environment is in crisis. Imagine what it will be like when there IS a crisis?

The Federal Reserve will revert to the only thing that they know how to do:  easing and money printing.  But money printing has already been discontinued as it no longer works.  They could print but the money just shows up on a balance sheet as "excess reserves"with some leakage into financial markets.

For it to make it into the real economy, money must be "lent into existence." I think ZIRP or NIRP will be a piss in a bucket compared to a tsunami of bad debt/defaults that may appear. Confidence is a delicate thing.

All this because the world abandoned the gold standard which anchored currencies to something limited that governments (and Central bank PhDs) cannot pervert. That anchor kept budget deficits and trade deficits limited. Instead, fiat money builds up huge imbalances -- both budget deficits and trade deficits that blow up. And we're not even mentioning the excess of leverage of all types.

One day, out of the ashes of world destruction, a new generation will re-establish a gold standard once most of world's "money" has gone to "money heaven." It's possible that world population will be much lower too as part of that destruction.

    Friday, December 11, 2015

    Unworthy Martyrs

    Why do the black activists and race hustlers like Obama, Holder and Sharpton and other black "leaders" choose such unworthy "martyrs" when they play the race card?  Perhaps it's because there are so few worthy ones?

    Race hustlers like Sharpton and Obama rally to cases where white police interact with black persons where there is the appearance of wrongdoing. The stupid and Liberal (adjectives that go hand in hand) media help to raise the ante in the court of public opinion. Naturally the media fail to report the fact police operate in environments where black persons commit many crimes at 7 times the rate of whites putting officers in a "war zone."

    But remember how notably silent they are when black perpetrators gun down white officers. This shows their true intent and bias: to start a race war, disrupt the social fabric of the country and start a campaign against law enforcement. It's outrageous that the President of the United States himself is complicit in that effort. Therefore he is complicit in murders of black persons in Baltimore when the city erupted in lawless, black-on-black violence when the police backed-off their duties in response to this war on police and the "witch hunt" trial of 6 police officers.

    Obama is also complicit in numerous murders of white police officers across the nation due to this war-on-law-enforcement "activism." Obama and Holder also coordinated protests using 'professional' protesters in Sanford and Ferguson, so they are also responsible for deaths and property loss in Ferguson riots -- riots that hurt only responsible black residents.

    I call those "high crimes and misdemeanors" and impeachable offenses.

    Notable are the recent cases of Sandra Bland, Eric Garner, Michael Brown and Freddie Gray. But right away, it's easily apparent that all of them committed infractions, resisted arrest and failed to comply with officer's commands.

    Perhaps these "victims" act the way they do is because there are rarely daddies in the homes to teach basic lessons including the need to respect and cooperate with police? The likely root cause of their difficulties is a collapse of the black families whose decline started with Great Society income support that continues to reward the absence of a dad. When 72% of black families don't have a dad, and 90% of all black dads are emotionally or otherwise unavailable, the result is wild children who are in constant trouble with civilized society.

    Gray and Garner had huge rap sheets. Gray had 18 arrests. Garner had 30 arrests since 1980 on charges such as assault, resisting arrest and grand larceny. Sandra Bland had 10 run-ins with police officers in Chicago and Texas. She was in arrears by some $7,500 in past due traffic fines. I'm surprised there weren't warrants out for her arrest. Maybe there were?

    Eric Garner, the 350 lb black guy in Manhattan, who resisted arrest was wrestled to the ground. He was reported to have said "you're choking me, you're choking me" at least 15 times while wrestling with police -- proving beyond a shadow of doubt that he WAS NOT choking. (how could he have the breath to say that repeatedly if his airway was restricted?) The officers wrestled him on the ground but his death was a cardiac event on the way to the police station. A grand jury declined to indict officers.

    Egg on all the race-baiting faces.

    Michael Brown, the thug in Ferguson, who was caught on surveillance video robbing a convenience store and assaulting the clerk minutes before his run-in with Officer Wilson, also apparently had a 2nd degree murder charge as a juvenile (records sealed).  The grand jury and forensics confirmed that he fought then charged Wilson. Is there any doubt that his life would have been a life of crime? He was hardly the "gentle giant" the media tried to portray. ABCNews, a thoroughly discredited and incompetent media outlet, continued to portray Michael as an angelic kid who was going to college, even a day after the convenience store video blew up all the credibility of all those involved. The claim that Michael was going to college was a complete fabrication. He was heading to jail.

    Egg on all the black, race-baiting, and incompetent media faces.

    Sandra Bland, who was arrested by a cop in Waller County, Texas, committed suicide three days after her family refused to bail her out. She became a media darling for the "political correctness"crowd and Black Lives Matter crowd. The family blamed the police for her death.

    But Sandra had a long history of run-ins with cops.  According to NBC5, she she owed a total of $7,579.00 in court fines resulting from five traffic stops in various Chicago suburbs (including a DUI), and she had been cited several times for her failure to pay those fines. She had at least 10 encounters herself with police in both Illinois and Texas in past years.  The words "Failure to comply" was frequently cited by officials and police.

    In all these cases, once facts are gathered, the credibility of the complainants largely dissolves. In a publicity stunt, funded by who knows who, Sandra Bland's family filed a lawsuit against Waller County in order to "find out" what really happened to Ms. Bland. At a press conference, when someone asked the family why they didn't bail her out, the family walked out of the conference -- along with their credibility. You see, a despondent Ms Bland killed herself three days after her family refused to bail her out. Bail was a modest $500. It's a sad story really, but for the family to make racist allegations is bad.  It's black people who are the racists in this country!

    Egg on all the black race-baiting faces. By the way, there's now a Sandra Bland Boulevard in Waller County. It's sad that they can't find a more worthy person to honor. Bland was a troubled woman with apparent mental problems and is also a symbol of a collapsing Black "culture."

    The entire black community, and it's so-called "leaders,"are thoroughly discredited time after time when their "victims" are found to have caused trouble for themselves. There is usually no white bogeyman -- just black troublemakers in a culturally-collapsed community as far as the eye can see.

    MLK Jr. had a dream where all people would be judged by the content of their character rather than the color of their skin. It's sad that so few black persons including Obama, exhibit so little character. And it's getting worse, not better.

    Thursday, December 10, 2015

    Two Charts That Show the Financial Crisis Is Here

    The third financial crisis in 15 years has already arrived without much fanfare -- yet.  The following charts show how the credit markets are already "turmoiling" as bad as 2008 as the global economy is slowing sinking into recession.

    Junk debt is blowing up. And there's a lot at stake. Try $3.57 Trillion in junk debt issued in the past 3 years alone -- which dwarfs the measly $1.3 Trillion total of subprime mortgage loans accumulated by 2007.

    If you'll recall, the "turmoiling" in subprime in 2008 nearly brought down world finance and the world economy.  Global trade came to a standstill.  Now the amount at stake, in the US alone is 3 times worse.

    The Gross Issuance of Junk Rated Debt Since 2012 Dwarfs Subprime Debt in 2007

    Junk Bond Rates Already At Crisis Levels
    Alarm bells should be going off that, one of the most telling indicators, is flashing red with horns blaring. But you're not hearing any warnings from mainstream media or mainstream economists. Meanwhile, we're careening once again to financial disaster for the 3rd time in 15 years.

    Friday, December 4, 2015

    A Love So Profound

    I hope you have Netflix.  Please add to your list the movie "The Drop Box."  It's an incredibly inspiring story of compassion and love. And the more you look into the story, the more amazing it becomes.

    The movie was made by a 21 year old USC film student named Brian Ivie.

    Over breakfast one morning Brian read a story in the Los Angeles Times article entitled "South Korean Pastor Tends an Unwanted Flock."  The story was about Pastor Lee, who after seeing the tragedy of abandoned babies even in his own neighborhood, decided that at least he should provide a way for distressed and desperate mothers to more safely give up their babies. His concern was for baby's lives. He built an insulated 'mail box' in the front of his building and installed a bell to ring when a baby was 'deposited.'  Brian immediately wanted to make a film about this man's story.

    Brian originally had in mind to do a short film.  He finally was able to contact Pastor Lee and went to Korea to meet the pastor and talk to him about the project. While there, he was extremely moved by the depth of the love that was witnessing -- love given to mostly disabled babies who had literally been thrown away. He began to understand that he was seeing a love so profound that he wanted to know from where such love comes.

    He came back to LA with an idea to do a full length feature. And, as is true when the Divine gets involved, things started to fall into place that enabled Brian to do his full-length feature. Money and offers of assistance suddenly appeared to support his effort. He got money from people who wanted to remain anonymous -- enough money and equipment to enable him to do a proper full-length movie. This is how God works in the world.

    He went back to film.  While there, Brian gradually saw that he too was like the disabled kids -- flawed, broken and disabled -- just not as visibly.  He saw that they were still loved deeply despite their condition. Feeling Pastor Lee's love himself, it dawned on him that the Pastor's love for these children was just like the Father's love for the lowest and most unlovable among us -- including himself!!  This understanding transformed Brian's life too. He became a Christian while making his movie.  Here's a great interview clip that does more justice to the story than I can write here (link is here):

    Please see this movie.

    Tuesday, December 1, 2015

    The Remarkable Story of the North Platte Canteen

    It was only 10 days after the Japanese attack on Pearl Harbor. A young girl named Rae Wilson in North Platte, Nebraska suggested to her fellow townsmen to organize and do something kind for the trains full of soldiers coming through town on the Union Pacific's railroad line.  And answer they did.

    It started when a National Guard Unit from Nebraska that was deploying for the war, was due to arrive by train at the N. Platte station at about 11 am on December 17, 1941. Some 500 people from the town showed up to greet them. But the hours went by and the train didn't show. Finally, a train pulled up -- but it wasn't their group. It was a group of another soldiers. The town gave these troops the gifts and refreshments that had been prepared for the Nebraska group.  The idea 'clicked' to show support and give refreshments to all of the trains coming through the station.

    They set up in a nearby hotel at first, then in the kitchen at the Station and began serving coffee, sandwiches, cakes, cookies, gum to all of the soldiers arriving on every train passing through.  The soldiers received more than food. They received hugs, smiles, words of encouragement and kindness. This all-volunteer effort continued for five years and was funded only by donations and fund raising efforts until April 1946. It is estimated that they touched the lives of some 6,000,000 million soldiers.

    Check out the Charles Kuralt video produced in 1977 that features some wonderful interviews with some of the ladies involved in the Canteen. It's fascinating.

    (Here's the link in case it doesn't work)

    Sunday, November 29, 2015

    Squanto Was Answer to Pilgrim's Prayers In 1620 Plymouth

    Before Thanksgiving fades too far in your memory, I wanted to share the amazing story of Squanto who, after his own amazing and tragic journey, presented himself to the starving Pilgrims at Plymouth after half of them had already perished.  Squanto, who had been kidnapped into slavery and taken to Europe where he learned English, was freed and finally made it back to Plymouth to find his entire tribe wiped out by Smallpox. The pilgrims happened to settle in the very place where Squanto grew up. When he presented himself to them, he spoke in perfect English and taught them how to survive in that area.  He must have seemed to be the answer to the Pilgrim's prayers for salvation.

    Here's a great account from the Wall Street Journal:

    "Every Thanksgiving we remember that, to escape religious persecution, the Pilgrims sailed to the New World, landing at Plymouth Rock in 1620. But numerous trading ships had visited the area earlier. Around 1608 an English ship dropped anchor off the coast of what is today Plymouth, Mass., ostensibly to trade metal goods for the natives’ beads and pelts. The friendly Patuxets received the crew but soon discovered their dark intentions. A number of the braves were brutally captured, taken to Spain and sold into slavery.

    One of them, a young man named Tisquantum, or Squanto, was bought by a group of Catholic friars, who evidently treated him well and freed him, even allowing him to dream of somehow returning to the New World, an almost unimaginable thought at the time. Around 1612, Squanto made his way to London, where he stayed with a man named John Slany and learned his ways and language. In 1618, a ship was found, and in return for serving as an interpreter, Squanto would be given one-way passage back to the New World.

    After spending a winter in Newfoundland, the ship made its way down the coast of Maine and Cape Cod, where Squanto at last reached his own shore. After 10 years, Squanto returned to the village where he had been born. But when he arrived, to his unfathomable disappointment, there was no one to greet him. What had happened?

    It seems that since he had been away, nearly every member of the Patuxets had perished from disease, perhaps smallpox, brought by European ships. Had Squanto not been kidnapped, he would almost surely have died. But perhaps he didn’t feel lucky to have been spared. Surely, he must have wondered how his extraordinary efforts could amount to this. At first he wandered to another Wampanoag tribe, but they weren’t his people. He was a man without a family or tribe, and eventually lived alone in the woods.

    But his story didn’t end there. In the bleak November of 1620, the Mayflower passengers, unable to navigate south to the warmer land of Virginia, decided to settle at Plymouth, the very spot where Squanto had grown up. They had come in search of religious freedom, hoping to found a colony based on Christian principles.

    Their journey was very difficult, and their celebrated landing on the frigid shores of Plymouth proved even more so. Forced to sleep in miserably wet and cold conditions, many of them fell gravely ill. Half of them died during that terrible winter. One can imagine how they must have wept and wondered how the God they trusted and followed could lead them to this agonizing pass. They seriously considered returning to Europe.

    But one day during that spring of 1621, a Wampanoag walked out of the woods to greet them. Somehow he spoke perfect English. In fact, he had lived in London more recently than they had. And if that weren’t strange enough, he had grown up on the exact land where they had settled.

    Because of this, he knew everything about how to survive there; not only how to plant corn and squash, but how to find fish and lobsters and eels and much else. The lone Patuxet survivor had nowhere to go, so the Pilgrims adopted him as one of their own and he lived with them on the land of his childhood.

    No one disputes that Squanto’s advent among the Pilgrims changed everything, making it possible for them to stay and thrive. Squanto even helped broker a peace with the local tribes, one that lasted 50 years, a staggering accomplishment considering the troubles settlers would face later.

    So the question is: Can all of this have been sheer happenstance, as most versions of the story would have us believe? The Pilgrims hardly thought so. To them, Squanto was a living answer to their tearful prayers, an outrageous miracle of God. Plymouth Colony Governor William Bradford declared in his journal that Squanto “became a special instrument sent of God” who didn’t leave them “till he died.”

    Indeed, when Squanto died from a mysterious disease in 1622, Bradford wrote that he wanted “the Governor to pray for him, that he might go to the Englishmen’s God in heaven.” And Squanto bequeathed his possessions to the Pilgrims “as remembrances of his love.”

    These are historical facts. May we be forgiven for interpreting them as the answered prayers of a suffering people, and a warm touch at the cold dawn of our history of an Almighty Hand?"

    Wednesday, November 25, 2015

    Clashes of Civilization

    We're seeing clashes of civilization in both Europe and North America caused by waves of immigrants from less "civilized" countries where there are only poorly performing economies, poor education and very low job skill levels -- all reflecting the lower median intelligence (IQs) in those countries. In the case of Muslims, not only are their median IQs quite low, they also have a culture largely incompatible with the Judeo-Christian culture of Western Europe and the Americas.

    Before you think that I'm rascist, when it comes to high IQ populations, it's only Northern Europeans and East Asians (and their descendants) that have the highest IQs of 100 to 108. Most of the rest have median IQs in the 70s and 80s (some in the 90s). This is the basis for the clash of civilizations. White Europeans and their descendants founded the greatest civilizations in world history. But vast swaths of the world, like the Middle East, Africa and Latin America are either in collapse or nearly so. And the blending of these lower IQ populations into the most advanced civilizations in high numbers eventually creates burdens on the citizens (permanent welfare), reduces the country's educational and economic performance and causes unnecessary problems. Japan knows this and doesn't allow it!

    I'm reading this morning that, after 40 years of intentionally "diversifying" the previously homogenous (all-white) population of Sweden with large numbers of Muslim Middle Eastern and African immigrants, there are now numerous instances now where locals are burning immigrant centers and there are clashes by people fed-up with the continuing wave of immigration, a growing crime rate and a resentment of large 'welfare' support given these people. In Sweden, these foreigners now comprise 26% of the population (those foreign born or with at least one foreign- born parent).  In reality, these immigrants don't belong there!  It could hardly be more obvious, but the Liberal buffoons remain intentionally ignorant!

    Now Sweden is the rape capital of Europe as the Muslim "culture" largely condones rape of women. Shamefully, the media in Sweden refuses to report these crimes as anything other than being committed by "Swedish men" even though they know very well it's being done overwhelmingly by Muslims. And the government keeps bringing in more of them! Outrageous political correctness prevents the reporting of evidence that these immigrants are creating a huge crime problem. Liberals control the media and refuse to report facts that "blow up" their world view. They remain willfully blind and immune to facts and reality or to anything that conflicts with their views! The problem is that they find themselves denying and ignoring nearly everything!  Only if their heads were being sawed off at the hands of a Muslim would there ever be a glint of insight!

    Now an even worse and bigger immigration problem is coming to the rest of Europe. Vast throngs of Middle Eastern and African Muslim men are flooding to Europe. These people are fleeing failed cultures and failed countries in the Middle East and Africa as Arab/Muslim cultures in those regions are now completely collapsed. Their culture and countries are collapsed because these populations have lower intelligence, have no skills and extremely inferior education relative to the destination culture. Particularly in Europe, Muslims do not prosper and integrate and remain dependent on welfare assistance. They often create immigrant "ghettos" where crime rates are higher. They re-create the very failed culture that caused them to immigrate! European Liberals refuse to even admit the existence of these ghettos. But the terrorist attacks in France originated in Parisian Muslim ghettos.

    In a naked attempt to "buy votes," the US President unlawfully threw open the doors of the US to nearly unlimited immigration of mostly Central Americans and many Mexicans in recent years. Immigrants take advantage of Government-sponsored free resettlement, free local education and free medical treatment at emergency rooms. The idea is to allow these "grateful" people into the country to vote Democratic.

    But Latinos are also fleeing largely failed countries with poor economies -- not unlike Muslims that are fleeing their failed countries in the Middle East and North Africa. Although Latinos are much more culturally compatible with the US culture than Muslims, most US citizens want controlled immigration with criteria including a preference for those with higher education and English language skills. Latinos have somewhat lower intelligence (median IQ of ~89), lower quality education, and few to no skills including English compared to White Americans. (Latinos have higher IQ than Muslims or Africans due to blending of European genetics). And there are few jobs being created in the US for them. But like European Liberals, facts or evidence means nothing as they are immune to such things.

    US black culture has collapsed with outrageous black-on-black violence,  murders and drug dealing. Like Muslims, US black "culture" is devolving in a dramatic way; 1 in 9 black men is in jail right now, some 56% of gun homicides in the US are committed by blacks, crime is out of control, and black families with intact parents are rare. It's getting worse too. These lower IQ black people remain a huge burden to the US and represent a serious clash of civilization with the rest of the country. Black citizens are receiving income support and welfare which is, in fact, encouraging the collapse of families, a lack of personal responsibility and has created a culture of dependency. And no one can even speak out due to extreme political correctness. Again, there is not a shred of common sense, understanding or real leadership from any black "leader" including the irresponsible Obama.  All of the rest of black leaders are race hustlers, liars, extortionists or criminals.  Expect the decline and devolution to continue and their burden to the country to worsen.

    Japan allows no immigration and has intentionally chosen to remain a completely homogeneous culture.  A homogeneous society is a peaceful one where the population has no complaints and no resentments of lesser-performing minorities. The West needs to learn this lesson.

    Monday, November 2, 2015

    US Challenges Chinese Imperialist Pigs Who Claim Entire S. China Sea

    My recent blog mentioned that the Obama administration finally did something correct after being wrong for 7 years. He's decided not to repeat his catastrophic mistake of a full withdrawal in Iraq by maintaining a contingent of soldiers and advisors in Afghanistan.

    Now, within days he's done another correct thing. Obama directed a US destroyer to pass within 12 miles of man-made island in the Spratly chain now claimed by the Chinese. Their claim is outrageous given that the Spratlys are at least 500 miles from any Chinese territory. But it's worse than that.

    The Chinese claim these islands and basically the entire South China Sea all the way to the Filipino, Vietnam, Malaysian and Brunei coasts. And these claims extend more than a 1000 miles from China. And they have enraged all of the SE Asian neighbors bordering this sea and have been "strong-arming" the Vietnamese and the Filipinos from time to time with showdowns and use of force.

     The Chinese Claim "Ownership" of the Entire South China Sea. To Hell With Everyone Else! This Figure Shows the UN's 200 mile Economic Exclusion Zone recognized by most of the World
    Most of the world complies with the UNCLOS, the UN Convention for Law of the Sea which allows for a 200 mile economic exclusion zone for resource exploitation. The countries in SE Asia mostly have agreed to abide by this. Vietnam has already exploited this treaty by selling oil and gas leases out to the 200 mile limit (although they have recently reacted to Chinese aggression by making more claims). In fact, Vietnam, Brunei and Malaysia all have active drilling and production from leases in the South China sea.  Extending oil/gas leases out to 200 miles is what the US has done for 70 years on both coasts and Gulf of Mexico. So has Mexico for example. The Chinese will have none of that.

    Such claims are outrageous and provocative.  It would be as if the US suddenly claims offshore rights all the way to Newfoundland which include active oil and gas production and exploration in offshore Canada! (yes, there is offshore production in Newfoundland).  And it would be like the US claiming the right to drilling in lucrative oil and gas acreage just offshore of Campeche, MX where the Mexicans are producing about 1 million barrels per day. But this is exactly what the Chinese are claiming. They are claiming rights to existing offshore oil and gas production underway in Vietnamese waters! Untenable and outrageous!

    For example, in May 2014, China set a drilling rig within the 200 mile exclusion zone claimed by Vietnam but only 75 miles from Hainan Island to drill.  It was accompanied by a huge flotilla of navy ships. Rioting erupted in Vietnam and they chased Chinese nationals out of Vietnam at knifepoint if not gun point.

    Basically the Chinese claim to own EVERYTHING!  This is a pure power play that can not stand.

    Down with the Chinese Communist imperialist pigs!

    Newsflash: Obama Administration Did Something Correct!

    Well, surprise surprise! The Obama administration finally did something right! That's big news, since they have been wrong about everything for 7 years.

    A few days ago, Obama announced that he won't completely abandon Afghanistan like he did in Iraq. I guess reality clubbed his thick head so hard that it finally penetrated his dumb and petrified brain. Following the US retreat from Iraq, leaving us without any influence there (all because Obama is the most failed and useless negotiator ever), Iraq went down a path of chaos as Al-Maliki substituted unqualified partisans in all the key military positions rendering their military completely and utterly incompetent (as opposed to just incompetent). ISIS erupted and spread like crazy -- kicking Iraqi soldier's butts. And ISIS has spread to every other place where the feckless US foreign-policy has failed: in Libya, Egypt and Syria.

    After characterizing ISIS as the "JV" team, Obama touted how successful his drone strike program was in fighting the 'enemy' in both Iraq and Yemen. In both these cases, Obama's "strategies" soon were thoroughly and utterly discredited -- as should be the myth of his competence. Saudi had to put soldiers in Yemen. And now, Iran and Russia have stepped into into the US power vacuum in Iraq and together they are free to operate militarily in both Iraq and Syria. And what's next? Russia and Iran to "operate" in Kuwait, then Saudi Arabia? If that's not bad enough, Obama's incessant support of Iran's insane and evil Ayatollahs, the Obama administration has doggedly negotiated an agreement that gives Iran more than $100 billion to help finance this regional expansion and military adventures. This despite evidence that Iran has been violating and continues to violate this and every other agreement. All this is folly and incoherence is beyond anything ever seen on the world stage. You'd be forgiven if you ask whether Obama is really on our side. The answer to that question is very, very disturbing.

    As if these failures aren't extreme enough, Obama's ludicrous program to identify and train "moderate" Syrian "rebels" resulted in only 1 or 2 persons trained and cost of $1/2 billion! Can waste of this magnitude signify some zenith of waste, incompetence and eventual collapse?  After all, such waste is widespread in every part of Big Government. Failures of Big Government really are all around us. What's needed is a total crash and burn to bankrupt the big banks and government itself. Only then can the great US political experiment be rebuilt. And a crash and burn is likely coming.

    Obama's damage in the Middle East is catastrophic.  He's a one man wrecking ball in foreign policy. Come to think of it, he's a one-man wrecking ball for US domestic policy too.  Especially his assault on the US Constitutional system-- ignoring, bypassing and marginalizing Congress at every turn. He's declared himself Emperor, only he doesn't have any clothes. And NO ONE is allowed to state the obvious.

    Thursday, October 29, 2015

    Actual Climate Data Vs Climate Models

    Below is graphical data showing measured global temperatures compared to various climate model predictions for the past 40 years.

    The data shows that all of the climate models funded by the US government and UN are proven wrong. None of them were able to predict the recent 17 year long "pause" in global warming. See Figure 1. Because they're all wrong, the very expensive scientists and agencies sucking off of Uncle Sam's hind tit, are very nervous about their jobs and their funding. So, they're in full denial mode.

    Agencies like NOAA and NASA are actively trying to cover-up the "inconvenient" truths by "adjusting" the raw climate data without adequate explanation and otherwise explain-away the fairly clear conclusions shown in the following graphs -- the earth's warming has stopped or nearly stopped since about 1997.  

    For example, the NOAA has recently decided not to comply with a House subpoena for internal documents and communications regarding a recent "study" which conveniently "denies" this warming pause. What are they trying to hide??  But most everyone knows.  It is face-saving. Also, NO ONE is allowed to embarrass our "Dear Leader" who is wrong about everything-- Mr. Obama. NO ONE is allowed to say that the Emperor has no clothes!  The simple truth is that the NOAA and NASA are trying to be friendly with the Obama administration who are pushing all sorts of economy-killing measures in cahoots with the ludicrous UN. 

    Professor Judith Curry from Georgia Tech, regarding the study says ‘This short paper is not adequate to explain the very large changes that have been made to the NOAA data set… while I’m sure this latest analysis from NOAA will be regarded as politically useful for the Obama administration [which is currently bent on using executive action to set unilateral emissions limits against the will of Congress], I don’t regard it as a particularly useful contribution to our scientific understanding of what is going on.’

    Here's the data vs the models:

    Figure 1 Global Temperatures Versus Various Climate Models. UAH are data from Univ.of Alabama Huntsville, RSS is satellite data. The other data is from Climate Models

    Figure 2 IPCC Climate Model Predictions Versus Recent Measurements

    Figure 3
    Upper Troposphere Temperatures Were "Supposed" to Rise and Create a Runaway Temperature Scenario. The Earth's oceans were predicted to "boil." There is no evidence of that "theory."

    I support continued research in the area of "climate change." It would be incredibly foolish to NOT study these issues. I also call on our nation's scientists, our nuclear industry and our government to re-invigorate our research and to test commercially the intrinsically-safe Molten Salt Thorium reactors as a path forward since we have decades of Thorium fuel already stock-piled.

    Saturday, October 24, 2015

    Netanyahu Reminds World: Arab Muslims Sat at Right Hand of Hitler

    In the embedded video (also found here),  Netanyahu reminds the world that the Arab Muslims sat at the right hand of Hitler.  He implies correctly that "Palestinians" are basically Nazis.  Some quibble with his claim the Arab Muslims gave Hitler the idea of burning the Jews. Maybe it's true, maybe it's not. The sure thing is that Arab Muslims were staunchly allied with Hitler and are still committed to Hitler's goal of eradicating Jews.  It's shameful and insane that much of the world is sympathetic not to Israel but to these new Nazis!

    The video reminds people that Arab Muslims have a long history of killing Jews dating back to the 1920s. And in modern history, for at least the past 100 years, Arab Muslims have rejected any and every opportunity to make peace with Israel and establish their own country. Those that try to make peace with Israel, like Anwar Sadat, are murdered. Sounds like Nazi fascism to me.

    Muslims today are the new Nazis: violent, fascist, supremacist, and Jew-hating. And they blame others (Jews) for their own problems.  Not to disparage every Muslim, I'm sure that there were many "nice" people in the Nazi party too. But like Nazis, nearly every Muslim dislikes/hates Jews and wishes them harm or death to them or Israel.  And many "modern" Muslims support violent methods (bombings, etc) to "defend" or promote Islamic aims and Sharia law.  Muslims still cling to a dream of an Islamic empire (caliphate) and some are pursuing this dream with shocking violence.

    This is what evil looks like: people that can't change or adjust their attitudes or thinking even in light of new or evolving evidence and where their petrified thinking causes misery, death and unhappiness in persons around them.  Arab dictators who continue to support killing Jews, destroying Israel, those who kill their own people and who never change are evil. Bashar Al-Assad is evil. He's killed some 250,000 of his own people in a massive genocide. Putin, who wants to bring back the evil USSR and is backing Assad and killing even more Syrians is evil. The Mullahs in Iran are evil. the Castros are evil. Stalin was evil. To some extent, even Obama, who is so shockingly blind and willfully ignorant of facts and history and who never learns anything or accepts new evidence that he is wrong, is evil. Evil people have a chronic inability to adjust, learn and change in light of new evidence and bring suffering to people. Even entire populations, like the Palestinians, allow themselves to become evil.

    Monday, October 12, 2015

    Trump and Thailand Are Right on Immigration

    Trump has flat-out said that the illegals in this country must leave and apply for 'legal' readmission. This is considered shocking in this country but it's just the norm for every other country in the world. I can't go to a single country in the world and arrive without a visa (or get a stamp) or overstay my visa. And if my visa expires or I overstay, I must leave and come back with a visa renewal.

    Trump also correctly says that we are either a country or not a country -- referring to the fact that we don't have a country if we have no borders. He should also say that we are either a country of law and order or we're a country of chaos and lawlessness. Under Obama, we are increasingly a country of chaos and lawlessness. This can not stand. Our current lax immigration enforcement can not stand.

    We can't have an unenforced open border when we have a welfare state, otherwise we're just a free money, free-stuff chump.  Of course, that's exactly what we are because the Democrats are desperately seeking new low-information voters to extend their dominance in politics. And they pay for all of this 'free stuff' with other people's money or borrow it from the Chinese (and give the bill to the next generation).  Wonderful people are Democrats.

    Democrats are all about buying votes. They are plotting to let illegals vote right now by opposing any common sense measure such as asking for ID and evidence of citizenship or eligibility.  Anyone supporting common sense voter ID rules is now labeled racist by Democrats. You're a racist if you have any common sense.

    But this is just the start. We need to radically improve our tracking of all immigrants and enforce compliance with our rules and deadlines. Nearly all other countries do so! That we can't (or haven't) is shameful. We're a country where nothing works anymore. Trump is right. We are ruled by "very, very stupid people."

    There is no country in the world to where I can travel and overstay my visa and expect there NOT to be a big problem. I've spent plenty of time in Thailand as a tourist and as a retiree. I can't stay there as an "illegal" without a big problem! Thailand manages it's immigration law with far more competence than the so-called '1st world' US.  For example, if I overstay my visa there, I am subject to a fine of $15 per day for each day that I stay on. There is 100% chance of this fine being enforced.  They will stamp my passport "Overstay" and if I do it again, my ability to re-enter Thailand may be in doubt.

    Anyone staying in Thailand on an extended visa, such as retirees, must report to immigration every 3 months and report their current address and contact information. If I fail to do this, there will be big fines and I could reasonably expect a visit from the local police if I don't show up.  This is what America should adopt. It's a sad commentary when we need to copy "lowly" Thailand to properly enforce our immigration law and order.

    Since Thailand has been one of the few prosperous countries in it's region, it has an immigration problem where other Asians are coming in and trying to find work. Unlike the US, they don't have a bullshit PC problem with regard to the involvement of local police to enforce immigration. There, local police will sweep through marketplaces and ask workers for Thai national IDs. If you don't have your ID, that's fine, but they will return the next day to ask for it.  Any suggestion, in this country, of  local police verifying immigration status is greeted with howls of protests and cries of "racism" by Democrats in Congress, the nation and in "sanctuary" cities.

    Since we don't have a national ID card, every driver's license in this country should indicate citizenship status. In every traffic stop or encounter with local police should result in local police to check for compliance with visa rules. Like Thailand, if you don't have evidence that you are in compliance, you should be allowed to produce it the following day at a local police station. And if you don't show up, then local police (or ICE) should follow up to find and potentially deport that person. This is called "law and order."  I know we haven't seen it in a long time but this is what it looks like.

    We need Federal laws to explicitly outlaw "sanctuary cities" to require jail time for the entire city leadership if they fail to comply with such a law.  We are either a country of law and order or we're a country of lawlessness and chaos. You choose.

    Wednesday, October 7, 2015

    Is Deutsche Bank the Next Lehman Brothers?

    Today, Deutsche Bank announced some $7 billion loss for it's 3rd quarter and announced that their dividend will likely be suspended.  In June, the bank had their debt downgraded to BBB+ or just 3 notches above junk.

    There is some concern that DB is the next Lehman. Maybe it's worse!  Lehman's credit rating was AA- at the time it was beginning to circle down the drain.  It's fall was very quick. In June 9, 2008, Lehman's credit rating was reduced to AA- minus with negative outlook.  Just 3 months later, Lehman declared bankruptcy and shook the entire foundation of the world's finances. Could we be 3 months from another such event?

    The 2nd Great Depression was beginning with the Lehman bankruptcy but was ultimately halted or delayed by eliminating "mark-to-market" accounting for banks. This allowed banks to basically lie about their financial condition. This state of affairs continues to this day. Uncertainty about bank's financial conditions could therefore begin again.  It might have already started as the TED spread is rising recently (a measure of interbank lending rate relative to treasury bills).

    From ZeroHedge, here's a chronology of the events at DB during the past 15 months that is very worrisome:
    • In April of 2014, Deutsche Bank was forced to raise an additional 1.5 Billion of Tier 1 capital to support it’s capital structure. Why?
    • 1 month later in May of 2014, the scramble for liquidity continued as DB announced the selling of8 billion euros worth of stock – at up to a 30% discount. Why again? It was a move which raised eyebrows across the financial media. The calm outward image of Deutsche Bank did not seem to reflect their rushed efforts to raise liquidity. Something was decidedly rotten behind the curtain.
    • Fast forwarding to March of this year: Deutsche Bank fails the banking industry’s “stress tests” and is given a stern warning to shore up it’s capital structure.
    • In April, Deutsche Bank confirms it’s agreement to a joint settlement with the US and UK regarding the manipulation of LIBOR. The bank is saddled with a massive $2.1 billion payment to the DOJ. (Still, a small fraction of their winnings from the crime).
    • In May, one of Deutsche Bank’s CEOs, Anshu Jain is given an enormous amount of new authorityby the board of directors. We guess that this is a “crisis move”. In times of crisis the power of the executive is often increased.
    • June 5: Greece misses it’s payment to the IMF. The risk of default across all of it’s debt is now considered acute. This has massive implications for Deutsche Bank.
    • June 6/7: (A Saturday/Sunday, and immediately following Greece’s missed payment to the IMF) Deutsche Bank’s two CEO’s announce their surprise departure from the company. (Just one month after Jain is given his new expanded powers). Anshu Jain will step down first at the end of June. J├╝rgen Fitschen will step down next May.
    • June 9: S&P lowers the rating of Deutsche Bank to BBB+ Just three notches above “junk”. (Incidentally, BBB+ is even lower than Lehman’s downgrade – which preceded it’s collapse by just 3 months)"

    Scary, huh?  Was the 2nd Great Depression just delayed?

    Tuesday, September 29, 2015

    Carl Icahn: "Danger Ahead....God Knows Where This Is Going"

    This video montage of Carl Icahn discussing the broken the state of US politics and the idiocy of the Federal Reserve, who helped in 2008/2009 but who created that crisis in the first place (along with tax policies).  Now the Fed is unable to bite the bullet and reverse the "medicine" which will almost certainly create another crisis -- maybe a worse crisis.  This video is well worth a look.

    Sunday, September 13, 2015

    Modern Civilization As We Know It Is At Risk

    It's entirely possible that the next financial crisis, which may be starting as we speak, will cause such huge disruptions to the financial system that virtually everything falls apart.  We are likely entering the 3rd financial crisis in 15 years and it will be even worse than the one in 2008 since debt has only risen across the world since then.

    And all of this has it's root cause in the abandonment of the gold-backed currency arrangement called Bretton Woods in 1971 by Richard Nixon.  It was done at that time to enable the government to run deficits to fund the Viet Nam war without raising taxes to pay for it.  Once world currencies are decoupled from precious metals (means 'fiat' money), governments are free to create excessive credit, run persistent fiscal and trade deficits thereby creating huge global imbalances which ultimately ends in financial and economic crises.  Another crisis is on the way -- it's just a matter of time.  And the next crisis might bring down the entire financial system and even our modern civilization.  Here's how it might play out:

    Stock and corporate bond markets will crash, banks or institutions will fail, economies will all shrink at breath-taking rates. Money will be "wiped out." Rich people won't be spared this time. Everyone will become poor. The only "winners" will be those whose lose less. But everyone will lose.

    This time, there's no country to ride to the rescue of the world economy as China did in 2009 and 2010. Why? Because even China already has high debt levels associated with financial crises. In fact, China is the epicenter of our current and latest (final?) crisis.

    Global trade and payment systems cease to function as banks become widely distrusted or known to be insolvent. Bail-ins of depositor money, like that used in Cyprus, are used to help pay for losses meaning that your money in banks is at risk. Bank runs will cause panic and queues at ATMs.

    Governments and central banks won't be of much help either. Interest rates are already zero in most countries, but they could be manipulated by CBs to go negative as they did in Europe this year, but this will obviously show how desperate the situation has become.  Quantitative easing, although proven to hurt more than help, will still be used to the nth degree to fund governments as tax revenues collapse. Easing is the only thing CBs know how to do!  This means that governments will buy most or all of their own debt ad infinitum.

    But because global supply chains may break down due to distrust of banks and their letters of credit, all of this gov't spending combined with a reduced supply of goods portend a period of high or hyper-inflation. But hyperinflation would lead to a final collapse.

    It may be so bad that you and me may not survive. It's possible that the world will not be able to sustain even close to the current 7 billion population -- maybe only sustain 1 or 2 billion.

    What we might expect as "modern" civilization collapses:
    • Global "total stop" of international trade that is more persistent than the "sudden stop" of global trade experienced in 2008.  
    • Central banks, using money "printing," will try to force government interest rates to near-zero so as to continue gov't spending at hitherto unimagined levels in a desperate and unsuccessful effort to maintain final demand. But lower quality corporate debt interest rates will rise. Many companies will go out of business.
    • Long tax holidays in the US will lead to $3 to $4 Trillion annual deficits paid by Federal Reserve debt monetization (where the Federal Reserve buys all of the debt issued by the Treasury so they don't have to sell the debt to the public market).  
    • Global banks will mostly fail due to blow-ups in the $1,200 Trillion derivatives markets and it's knock-on effects. No financial system = nothing functions. How can there be world trade when banks don't trust one another? Remember 2009 when world trade halted?
    • Governments will nationalize banks and absorb enormous losses and assume debts. But eventually, even government creditworthiness will become suspect, first in the weakest or peripheral countries.
    • All major countries will "print" vast amounts of money to fund government functions and pay government personnel to fund deficit spending, to pay for widespread bailouts of banks, pensions and insurance entities and to provide income support to people.  However, since global supply chains are not functioning, there is little to buy and prices of available goods may rocket higher for a time.  (think Venezuela)
    • When the financial system fails, trade stops, stock markets drop 90% and then close entirely. Vast amounts of corporate debt then sovereign debts fail (weakest goes down first).  No one has jobs because no one can be paid. There is no trade because no one has money. There is no international trade because the international payment system fails.
    • Revolutions will occur first in many countries including Saudi Arabia, China, Indonesia, and Thailand. Islamic terrorism will expand. The mass migration of Muslims out of the Middle East will worsen and overwhelm Europe. The European Union will dissolve and nation-states are re-established. Then revolutions will overturn governments. The current unrest in Malaysia and Brazil will spread. 
    • Russia will try to seize Saudi Arabia and Kuwait to get the oil. They just mobilized into Syria. Of course, this will trigger war with the US. 
    • Starvation will force a mass migration of Mexicans and Central Americans into the US. Since the US has no wall or will, the US will be invaded by impoverished masses. Finally, huge protests will cause the military to control the southern border. Vast throngs of N. Africans and Middle-easterners will "invade" Europe.
    • The US government will seize large portions of the economy including energy production, banks, utilities, pension plans, IRAs and bank balances.  Cash will be outlawed.  Only gold will be "money."
    • Government will likely employ totalitarian methods to "protect" citizens. (After all, governments cause huge problems, then step-in to further screw-up the situation! That's what they do!)  The Constitution will likely be suspended or ignored. The military may take over parts of the country. Virtually all remaining economic activity may become part of the government. Production and prices will be set by the Gov't. The same thing will likely happen in Canada, the UK and Australia. And this might be the best case scenario!! 
    • Global population will shrink dramatically as starvation and disease kill 100s of millions or even billions of people in Asia and the rest of the world.
    • Eventually, out of the ashes of financial collapse, the world will establish currencies backed once again by gold and a long march toward recovery can begin from a MUCH lower level of economic activity.  It will be a time of starting over.
    All this because we've abandoned the gold standard which enabled out-of-control spending, trade deficits and budget deficits.  And it's been downhill ever since.  Out of the ashes of our next financial conflagration, the surviving population will again demand a gold back currency to form the foundation for the next phase of human economic life.  It will be easier to institute a gold standard post-crash because there will no "money" around. It will have been wiped-out. The stunning failure of fiat currencies will be understood for centuries thereafter.

    Saturday, August 29, 2015

    Financial Crisis Dead Ahead

    We have already seen two financial crises in the past 15 years and it appears that we are on the verge of another one right now. The magnitudes of each crisis are increasing. Since debt is even higher, it should be expected that the 2015 crisis will be worse than 2008 -- maybe even catastrophic.

    World-Wide Debt Higher Than Ever
    We're on the verge of the 3rd financial crisis in 15 years and here's why there is no way out now:
    • If the China story is finished, then the emerging market story is finished.
    • The 33 year period of steadily falling interest rates is over interest rates at near zero. Even when interest rates stop falling, this represents a trend change that removes the "wind at our back."  Interest rates may actually start to rise even in the government sector. Financial distress is already causing corporate interest rates to rise. High yield corporate bonds are slowly sinking (and yields rising).  Expect this to continue.
    A kick-off to the next financial crisis could be huge decline in the stock market when a financial firm has some kind of financial distress or failure. (that's what happened with Lehman Brothers and that almost brought down the world financial system).  It could be a failure of a highly indebted commodity trading institution like Glencore that deals in commodities. It could be a "blow-up" in the $1,200 billion derivatives market. It could be defaults of a company like Petrobras or a default of a country like Venezuela, Argentina, Brazil, Ukraine or Russia that starts a chain reaction in the banking sector. The near-default of Greece nearly caused a financial panic in Europe. That's why they were bailed-out again.

    Financial panics tend to morph into deep recessions. But this time I don't see a way out of the next recession.  China (or any other country) will not be able to spend like they did in 2009 to 2011 since their debt levels are already high.  No other government will be able to offset the equivalent of the 2008 shock like China did. The US will not build ghost cities and high speed railroads to nowhere. They can't. They don't know how. Despite all the disingenuous rhetoric, there are no infrastructure projects ready to go (just like in 2009).  If we need infrastructure projects now, those projects should have commenced (ie., planning, budgeting and engineering) about 5 years ago. But nothing has happened. Nothing is ready. The US won't have the shale fracking boom either. Oil prices have collapsed and may collapse further.

    If we have a world-wide financial/banking crisis, world trade will stop again like it did in 2008. In 2008 and 2009, when confidence in banks was widespread (no one knew who had too much bad debt), the entire basis of international trade, ie., letters of credit, were not accepted. World trade stopped.  It happened once in 2008 and could happen again. Global trade and global supply chains could be impaired for longer next time.

    With such a shock, stocks will crack-up, Almost certainly the world economy will crack-up. Derivatives may blow-up. Banks/Financial institutions will fail. Adding to the downward pressure will come defaults in commodity producing countries (including countries like Russia, Venezuela and Nigeria). Resource companies will go bankrupt. Hedge funds and financial entities will fail dramatically.  Pensions will crater, unemployment will rise.

    Even though Quantitative Easing has been discontinued in the US as it's been deemed to cause more problems than it solves, it is likely to make a comeback here and everywhere when a crisis hits. Not only does it lower the cost of borrowing by the government, it is about reducing the value of your currency in the world markets.

    Already every government in the world has tried to debase their currencies faster than all the others in a grotesque "beggar thy neighbor" currency war. This currency war is a de facto trade war and it's already under way. Trade wars were the very thing that lead to downward spiral of world trade in the 1930s causing the prolonged Great Depression. This time, it probably won't be tariffs (like the Smoot Hawley Act) but competitive devaluations that have the same effect of chilling global trade (although Trump has proposed tariffs!). Global trade is already contracting. If everyone is devaluing at the same time, how can anyone get more than a temporary advantage?

    QE will likely make a comeback in the US. I can see a situation where government receipts collapse but government spending increases. I could see prolonged income tax holidays -- meaning that government revenues drop to nearly nothing and all government debt is bought by the government itself (the Federal Reserve) which is the very definition of QE.  US deficits could rise to $3 or $4 Trillion per yr or so and funded entirely by the Federal Reserve money printing.  The rub comes when people that are receiving income support find that there is little to buy due to the global trade collapse and certain prices begin to rise. Then you might see a burst of hyperinflation and then a final collapse.

    I guess we might see nationalizations of banks all over the world to restart trade. But this entire scenario is about as akin to the end of the world as ever imagined.

    Modern civilization is likely entirely at risk.