Why The Government Hates Gold

(PARIS)  “It’s a total disaster. It’s like hell here.”
Thus did a trader describe the reopening of the Greek stock market.
The main Athens stock market index, the Athex, ended the day down 16%, after trading was allowed for the first time in five weeks.
And it was down by more than 23% just minutes after the opening bell.
Down and out… despised… scorned – the situation in Greece is excellent.
For investors with ultra-long-term time horizons and strong constitutions, it may be a great time to buy Greek stocks…
Yes, prices are being discovered again… by free declaration of buyers and sellers.
Owners of Greek stocks are discovering that their equity stakes aren’t as valuable as they believed.
But for every seller there is a buyer…
Sellers are losing money. Buyers believe they are getting a bargain.
You can fool all of the people some of the time. Some of the people all of the time. And most of the people once in a while.
You can obstruct price discovery and you can disguise and distort the real value of things. But Mr. Market will get even someday. He always does.
Yesterday, we mentioned but did not explain, that Alan Greenspan betrayed Mr. Market…
In 1987, after President Reagan appointed him Paul Volker’s successor as chairman of the Federal Reserve, Greenspan went over to the zombies… or more precisely, to their allies, the cronies.
It must not have been easy for the former free market defender and member of Ayn Rand’s inner circle…
In the late 1980s and early 1990s – you could almost see Greenspan struggling with the contradictions.
He had been loyal to free markets. But his job carried with it the biggest central planning authority of all time. He knew that currency unbacked by gold was a scam, but his position as chief of the Fed put him in charge of the largest paper money racket ever.
Greenspan believed in letting Mr. Market set prices. But as gatekeeper of U.S. credit, he corrupted more prices than any human being ever had before him.
But what was he to do?
In 1993, at her husband’s inaugural address to Congress, Ms. Clinton – now the leading Democratic candidate for president – chose to stand next to him. It was one of those magic moments in history, when power and money came together to celebrate.
(When we were in Vancouver, we went to an Anglican church. A banner hung down from the ceiling proudly proclaiming the trinity: “King, Country, God.” The parishioners like to imagine that all their leaders are united… It spares them the trouble of choosing just one.)
Of all the bigwigs in Washington, it was Alan Greenspan who had the biggest wig of all. He was practically a god to the members of Congress, to whom the economy was as big a mystery as Heaven itself.
To the American people, Greenspan was a combination of Mr. Fixit and the Wizard of Oz.
They didn’t understand a word of what he said. And why should they?
Greenspan made no sense when he spoke as Fed chairman – intentionally. As he later explained:
What I’ve learned at the Federal Reserve is a new language, which is called Fed-speak.” You soon learn to mumble with great incoherence.
But the blither and blather worked. The politicians kneeled before him. The press took off their hats. And the masses, awestruck by the incomprehensible, thought he was a genius.
What was he supposed to do? Turn his back on all that for the sake of the truth?
“What was the truth?” asked the jesting Greenspan. And he did not wait for an answer.

We wrote contemptuously about Mr. Greenspan from the end of the 1990s until he stepped down as Fed chairman in 2006.
He did his thinking in the bathtub, the press reported. Alan “Bubbles” Greenspan, we renamed him.
He had sold out – for glory, for money, and for power. But we had to admit: He got a good price! Had we been in his shoes, we probably would have been bought at half the price.
But what a pleasure it was to rediscover the old Alan Greenspan, before he turned his coat and forked his tongue. Back in 1966, when he still believed in free markets and sound money, he expressed himself clearly.
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. 
If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. 
The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. 
This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.
But now, who speaks the truth?
No one.
Because the elites – economists… businessmen… academics… policymakers – are paid not to see it. And if they do catch a glimpse of it by mistake, they keep their mouths shut.
Like Alan Greenspan, it is all very well to understand how things really worked. But you wouldn’t want to give up money, power, and status for it.
The Huffington Post explains how the cronies bought the economics profession:
The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession […] 
One critical way the Fed exerts control on academic economists is through its relationships with the field’s gatekeepers. For instance, at the Journal of Monetary Economics, a must-publish venue for rising economists, more than half of the editorial board members are currently on the Fed payroll — and the rest have been in the past. […] 
A Fed spokeswoman says that exact figures for the number of economists contracted with weren’t available. But, she says, the Federal Reserve spent $389.2 million in 2008 on “monetary and economic policy,” money spent on analysis, research, data gathering, and studies on market structure; $433 million is budgeted for 2009. That’s a lot of money for a relatively small number of economists.
But the Huffington Post misses the really big story…
The feds have bought off the entire intellectual, financial, business, and academic establishment.
How?
With easy money.
As we explained in our speech at the Sprott-Stansberry Natural Resource Symposium in Vancouver, there is scarcely a single public figure with substantial wealth or reputation who doesn’t owe it to the great credit expansion.
In 1999, for example, Fortune magazine named Jack Welch “Manager of the Century.”
Was it because of Welch’s genius… or the fact that GE had moved into financial services during a credit boom?
Warren Buffett is regarded as the greatest investor who ever lived. But it was Buffett’s great fortune to be investing during the greatest credit expansion there ever was.
And how did Ben Bernanke and Janet Yellen get to be heads of the Fed?
They could not have done so without the wind of credit expansion behind them, which seemed to make sense of their preposterous theories.
While the cheap credit embellished résumés and reputations, it also made people dependent. Academia reaped tax-free donations from people who had made their fortunes in debt-fueled finance… not to mention more than $1 trillion in tuition fees financed by the feds’ student loan program.
Corporations sold their products on cheap credit… made their profits from cheap credit… and then depended on cheap credit to issue their bonds, buy back their own stock, and pay their bonuses.
Meanwhile, Washington ran deficit after deficit – again, all made possible by cheap credit.
And now, practically every sentient being in the nation (and some Democrats, too!) needs cheap credit to pay his mortgage, keep his job, boost his stocks, and hold down his finance costs.
Who is left to speak the truth?

Credit Card Debt Surges In Top 25 US Metro Areas According To Equifax Data

(MB 360)  Credit card debt is like crack for the American consumer.  A cheap alternative to pure spending cocaine but enough to keep you on the hamster wheel of consumption.  I recently discussed how credit card debt while remaining subdued since the Great Recession suddenly made a 180 degree turn.  Americans are spending money they don’t have on shiny plastic. Total outstanding credit card debt recently surged beyond the $900 billion mark.  That is a lot of consuming.  And with the average nationwide interest rate of 14% that means spending hamsters are probably dropping tens of billions on interest costs alone.  I found it interesting that I got a few e-mails proselytizing how great credit cards were after my last piece.  My reaction:  So you enjoy locking in future earnings for money you don’t have today?  Keep in mind people pray to the hedge fund gods for a 7% annual return.  Getting a 14% return is like finding El Dorado had a sister name AmEx.  It is amazing to get a 14% return (and with some cards, you are getting close to usury).  Equifax released credit card data on 25 US metro areas and the results are startling.
Spending like you don’t have money
Credit cards do have a purpose in our society.  Yet most people don’t realize that buying a $1,000 TV at 14% interest and paying the minimum can easily turn that TV into a $2,000 or $3,000 purchase.  And many people do this while obviously neglecting retirement savings.  How do we know this?  Because half of retirees rely on Social Security as their primary source of income and would be out on the streets living under a bridge if it were not for Social Security.  Credit card debt is like junk food.  Easily accessible, easy to use, but hard to work off.  We all know junk food is bad but most of the country is overweight.  We know credit card debt is dangerous yet people go into deep debt on a continual basis.
First, take a look at the Equifax data:


Source:  Equifax
This is recent data and reflects an American society consuming goods with money they don’t have.  Just look at the annual growth figures:

This is good news for the financial institutions that are producing these products.  It is also good news for the businesses that rely on consumer spending.  But just look at US household income:

Adjusting for inflation US household income is back to where it was nearly 30 years ago.  So to keep up the pretense that things are perfectly fine with the middle class, people are spending money they don’t have.  This by the way, was at the core of the Great Recession.  It was truly a massive credit bubble let by casino banking.  Americans buying homes and cars they couldn’t afford and using real estate as a piggy bank.  Banks were happy to oblige and when everything went bust, it was corporate welfare and bailouts for the banks and Greek style austerity for the broke public (aka vast oceans of foreclosures and bankruptcies that seem to have been forgotten recently).
But going back to that Equifax data, credit card debt has surged in the last year but income hasn’t followed.  The only thing we can say is that consumer confidence was up last year but this is also waning in recent months:

Apparently many Americans thought those corporate profits were going to trickle down into their paychecks.  The joke is on them!  We have a sea of low wage jobs and this is why politically, we have candidates with populist rhetoric gaining traction.  While people in high paid metro areas shop at Whole Foods and pretend everything is fine, most of the country is feeling the economic pain deep in their wallets.  And by the way, we’ve been on a ridiculous stock market bull run and the housing market is reflecting bubble like behavior.
All of this might make your average Americans feel confused but spending money feels good.  Spending on a credit card feels even better.  Just wait until that credit card statement arrives in the mail.

Despite Epic Crash of World Economy, White Collar Prosecutions at 20-Year Low

But that doesn't mean Wall Street malfeasance itself is on the wane, researchers point out

by

Deirdre Fulton, staff writer

 

Former Attorney General Eric Holder returned to his former employer, the white-collar defense firm Covington & Burling, after leaving the Justice Department. (Photo: US Department of Agriculture/flickr/cc)

Despite lofty rhetoric from politicians who vowed in the aftermath of the 2008 financial crisis to hold Wall Street accountable, U.S. Justice Department statistics show a "long-term collapse" of federal white collar crime prosecutions, which are down to their lowest level in 20 years, according to a new report from Syracuse University.

The analysis of thousands of records by the university's Transactional Records Access Clearinghouse (TRAC) shows a more than 36 percent decline in such prosecutions since the middle of the Clinton administration, when the decline first began. While there was an uptick early in Barack Obama's presidency, current projections indicate that by the end of the 2015 fiscal year, such prosecutions will be at their lowest level since 1995.

But that doesn't mean white collar crime itself—which involves a wide range of activities such as health care fraud and the violation of tax, securities, antitrust, federal procurement, and other laws—is on the wane.

"The decline in federal white collar crime prosecutions does not necessarily indicate there has been a decline in white collar crime," the researchers are swift to point out. "Rather, it may reflect shifting enforcement policies by each of the administrations and the various agencies, the changing availabilities of essential staff and congressionally mandated alterations in the laws." 

They add that "because such enforcement by state and local agencies for these crimes sometimes is erratic or nonexistent, the declining role of the federal government could be of great significance."

Furthermore, failure to prosecute white collar crimes does more than let individual fraudsters off the hook, as journalist Glenn Greenwald argued in 2013:

The harms from this refusal to hold Wall Street accountable are the same generated by the general legal immunity the US political culture has vested in its elites. Just as was true for the protection of torturers and illegal eavesdroppers, it ensures that there are no incentives to avoid similar crimes in the future. It is an injustice in its own right to allow those with power and wealth to commit destructive crimes with impunity. It subverts democracy and warps the justice system when a person's treatment under the law is determined not by their acts but by their power, position, and prestige. And it exposes just how shameful is the American penal state by contrasting the immunity given to the nation's most powerful with the merciless and brutal punishment meted out to its most marginalized.

But while news of the 20-year low is troubling, it's not particularly surprising. As journalist David Sirota noted on Thursday for the International Business Times:

In 2012, President Obama pledged to "hold Wall Street accountable" for financial misdeeds related to the financial crisis. But as financial industry donations flooded into Obama’s reelection campaign, his Justice Department officials promoted policies that critics say embodied a "too big to jail" doctrine for financial crime.

Sirota went on to point out, both the former head of the Justice Department's criminal division, Lanny Breuer, and former Attorney General Eric Holder made similar remarks at the time. "Prior to serving in the Obama Justice Department, both Breuer and Holder worked at white-collar defense firm Covington & Burling," Sirota wrote. "Both of them went back to work for the firm again immediately after leaving their government posts."

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License

UK raises $3.3 billion in 1st sale of Royal Bank of Scotland shares

The UK government sold 5.4 percent of its Royal Bank of Scotland (RBS) shares on Tuesday, kick starting the country’s biggest privatization process. The £2.1 ($3.3) billion raised will be used to settle the national debt.

“This is an important first step in returning the bank to private ownership, which is the right thing to do for the taxpayer and for British businesses: it will promote financial stability, lead to a more competitive banking sector, and support the interests of the wider economy,”said Chancellor George Osborne.

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RBS CEO Ross McEwan comments on this morning’s announcement from the UK Government: http://rbs.tm/8nknYK 

2:23 PM - 4 Aug 2015

However, HM Treasury sold the stake at a loss: 330 pence per share, 33 percent below the 502p the government bailed it out with.
The 170 pence difference represents a loss to the taxpayer of just over £1 billion.
The sale cuts the government’s stake in RBS to 73 percent.
“Labour has always supported the eventual return of RBS to the private sector, but taxpayers who bailed out the bank will want their money back and will be suspicious of any fire sale,” said Shadow Chancellor Chris Leslie, asking Osborne to justify the price.
When asked why the process wasn’t launched earlier, when shares were more expensive, Harriett Baldwin, economic secretary to the Treasury, said the Exchequer was recommended to act by the Bank of England.
“There are going to be people who say we started too early and people who say we shouldn’t start at all. But that would disagree with the advice of the governor,” the Financial Times quotes Baldwin as saying.
Baldwin added that about 75 percent of the government’s stake would be sold over the course of the parliament.
During the 2008 global financial crisis, the British government rescued RBS from a collapse, giving it £45.5 billion in exchange for a controlling stake. At the time, RBS was one of the largest banks in the world, with assets exceeding £2 trillion.However, the bank has been selling assets and cutting jobs to restore profitability.
In the second quarter of 2015, RBS unexpectedly announced a net profit of £293 million pounds. During the last seven years, it had been operating unprofitably.

Farmers See Record Profits As Organic Boom Continues

(WASHINGTON)  Charles Johnson remembers that a decade ago, his family farm in eastern South Dakota couldn’t find enough buyers looking specifically to buy organic grain. But that’s all changed. Today, organic is one of the hottest sectors in the multi-billion-dollar food industry.

Because of “unmet demand,” the 58–year old farmer has benefited from higher prices, with his organic corn routinely fetching as much as $12 a bushel and soybeans $26. That compares to bushel prices of $3.70 and $9.80 for conventional corn and soybeans. The focus on organic has allowed Johnson, his brother and his cousin, who farm 3,000 acres in Madison, to shrug off the sharp drop in corn and soybean prices that has left some producers struggling, following years of robust income.

“The last five to 10 years, we’ve had no problem at all,” said Johnson who grows organic corn, soybean, oats and alfalfa. “I could have sold my grains multiple times over, just based on the demand. My last three years of farming has probably been better than the last 30-years combined. That’s how much of an uptick there is now.”

Organic food sales have risen by double digits annually as the public consumes more fruits, vegetables, pastas, dairy and meats raised and grown without pesticides, genetically modified crops or antibiotics, among other stringent requirements.

Despite the organic farming’s booming growth — organic food revenue has tripled over the past decade to a record $36 billion last year — it remains a small fraction of the $630 billion in total supermarket sales in 2014 reported by Progressive Grocer Magazine.

The industry’s growth isn’t expected to subside anytime soon, according to the Organic Trade Association. It predicts sales will increase 12-to-15 percent annually for the next three years.

But the rapid growth has brought challenges the organic industry is struggling to address.

One of those challenges is demand, which organic producers are struggling to meet. Shortages of some organic products has led to sky-high prices. And more livestock producers, hungry for organic feeds, are importing from overseas because they can’t find enough in the U.S.

The Organic Trade Association (OTA) concedes that because of incomplete data, competition for land in some areas, and the three-years it takes to earn certification as an organic farm, it’s difficult to know how many new acres of organic crops will come into production.

“The biggest thing holding back growth isn’t demand, it’s shortages,” said Laura Batcha, executive director of the OTA. “There is not a major retailer in the country that doesn’t have appealing to the organic shopper in their strategy right now. But what happens if the industry can’t fulfill that opportunity and people walk away?”

Batcha said some private-sector food makers and retailers are buying land to produce their own organic produce, or are enticing producers with long-term contracts that offer to pay them extra while they transition to organic. The transition period can be costly for producers, who must deal with lower yields and input costs but aren’t able to take advantage of the premium that organic producers receive.

The trade group is evaluating options to help growers transition to organic. One possibility would offer farmers a chance to participate in a program that would make sure they follow necessary requirements while completing the 36-month transition period. It also would help food companies plan for the future by giving them a sense of how much new land is in the organic pipeline.

“The momentum is not going to dissipate for organic,” Batcha said.

Grocery stores, restaurants and other users often struggle to find the products they need to meet demand for organic products, yielding unique, creative strategies for wooing prospective farmers and ranchers.

Elevation Burger, which sells organic, grass-fed, free-range beef at 55 stores mostly in the U.S., shares its sales growth figures and projections of store openings with suppliers to give them a glimpse into the company’s long-term needs.

Elevation also sometimes pays for producers to obtain their certificates signifying they’re organic — which can cost up to $4,000 — in exchange for a slice of future supply. In addition, the burger chain has hired consultants to help farmers convert their operations to organic.

“It’s all about supply. Every farm we bring on supports our growth,” said Michael Berger, a founding partner of Elevation Burger. “If you want to be in the business like we are of having a consistent organic protein supply, your only option is to control and grow the supply chain to your customized needs, and that is to go directly to the growers.”

Berger said one of his meat processors abroad was decimated by a cyclone seven months ago and couldn’t deliver a promised 50,000 pounds of beef. The burger chain had to scramble to procure enough meat from other suppliers at a higher cost.

“We were stuck biting our nails, down to the wire,” said Berger, who estimated Elevation will buy 4 million pounds of beef and 500,000 pounds of chicken during the next 12 months. “You can’t just call a regular distributor and say, ‘Hey, sell me that.'”

Wal-Mart Stores, the world’s largest retailer, carries more than 1,600 organic items ranging from dairy and produce to peanut butter and macaroni and cheese at many of its more than 4,500 U.S. stores. John Forrest Ales, a spokesman for Wal-Mart, said the company works with farmers and other suppliers to outline its organic needs three to five years out so farmers can plan and invest.

“We’re always realistic when we plan,” Ales said. “If you’re going to supply organic to a grocer as large as Wal-Mart, that is not always a fast turnaround time.”

To win certification as organic, a farm must stop using pesticides and make other changes, then maintain those practices for three years. During that time, they may not benefit from the higher prices linked to organic products. Livestock producers also need to transition their animals and land before they can be certified.

Colin Johnson, a corn and soybean farmer in southern Iowa, said the lower yields associated with organic farming coupled with higher larger labor and input costs have discouraged him from switching his 700 acres.

“I haven’t thought very deeply about it,” Johnson. “For us, we’re at a pretty sustainable system now with our crop rotation.”

But the fourth-generation farmer said if he was approached by a grain processor or supermarket with a lucrative deal to make the change, he “would definitely consider it.”

Bob Quinn of Big Sandy, Mont., who started raising organic crops in 1986, worries that high prices might deter some organic buyers.

“It’s really too much to be sustainable,” said Quinn, whose grain customers include an organic dairy and bread makers. “You can’t price your customers out of business where they can’t sell their products. We can see ever-faster growth if the supply was greater and the price was a little lower so that the final (cost) wasn’t such a shock.”

What is organic?

Organic, which is governed by strict government standards, requires that products bearing the organic label are made without the use of toxic and persistent pesticides, synthetic nitrogen fertilizers, antibiotics, synthetic hormones, genetic engineering or other excluded practices, sewage sludge, or irradiation.

So what can organic farmers use instead?

Organic farmers rely on hand weeding, mechanical control, mulches, cover crops, crop rotation and dense planting.

Who sets the organic standards?

Certified organic foods are produced according to standards set by the U.S. Agriculture Department’s National Organic Program. These regulations outline what the grower must do to use the word “organic” or the USDA organic seal.

How long does it take to transition from conventional to organic?

A farmer must go through a three-year transition period of compliance with organic requirements. During this time, growers generally face lower yields and increased input costs but do not benefit from higher prices given to organic producers. Livestock producers also need to transition their animals and land before they can be certified.

Tunnel People

The CEO of collapsed bitcoin exchange MtGox has been arrested in Japan

© Jiji Press/AFP/FileMark Karpeles, CEO of the collapsed MtGox bitcoin exchange, is suspected of having accessed the computer system of the exchange and falsifying data on its outstanding bitcoin balance, reports say.
Japanese police on Saturday arrested Mark Karpeles, CEO of the collapsed MtGox bitcoin exchange, over the loss of nearly $390 million worth of the virtual currency, local media said.
Karpeles, 30, is suspected of having accessed the computer system of the exchange and falsifying data on its outstanding balance, Kyodo News and public broadcaster NHK said.
The global virtual-currency community was shaken by the shuttering of MtGox, which froze withdrawals in February 2014 because of what the firm said was a bug in the software underpinning Bitcoin that allowed hackers to pilfer them.
The exchange filed for bankruptcy protection soon after, admitting it had lost 850,000 coins worth 48 billion yen ($387 million) at the time.
Karpeles later said he had found some 200,000 of the lost bitcoins in a "cold wallet" -- a storage device such as a memory stick that is not connected to other computers.
Bitcoins are generated by complex chains of interactions among a huge network of computers around the planet and are not backed by any government or central bank.
Immediate confirmation from police was not available.

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Read more: http://www.businessinsider.com/afp-japan-police-arrest-mtgox-ceo-over-loss-of-bitcoins-media-2015-7#ixzz3hwopIZJR

Smart Money Dumps Assets at Record Pace, But Who the Heck Is Borrowing and Buying Like There’s No Tomorrow?

Wolf Richter wolfstreet.com, www.amazon.com/author/wolfrichter
Private Equity is a big force in the investment scene. There are nearly 4,000 of these firms in the US, and they’ve invested in about 13,000 companies. They’re considered the “smart money” because of their acumen, insider knowledge, and ability to time the markets, which they have to in order to profitably exit their their long-term illiquid investments.
OK, even the smartest among them got caught with their pants down last year when the oil price crashed. And those that invested in natural gas drillers have been regretting this move for years, after the natural gas price crashed in 2009 without ever really recovering since. Fracking, which boomed thanks to a near endless flood of money from Wall Street, including PE firms, has dished out costly lessons in return.
So, even the ultimate “smart money” can get carried away by its own hype. But recently, they’ve been doing something else: they’ve been dumping existing investments at record pace.
In the second quarter this year, exit volume by US-based PE firms “exploded” to $125 billion, according to a report by the Private Equity Growth Capital Council. This includes sales to the public via IPOs and to “strategic and financial investors,” such as corporations.
It brought the first-half exit volume to $195 billion, up 46% from the same period in 2014 and up a stunning 275% from the same period in 2013. Something is going on, and they want out.
And they’re not going to slow down anytime soon, “as corporate acquirers clamor for deals,” according to The Wall Street Journal:

On Monday, McGraw Hill Financial agreed to buy SNL Financial LC, the data provider backed by New Mountain Capital LLC, for $2.2 billion. That came on the heels of a $2.35 billion deal launched by WPX Energy Inc. for First Reserve-backed RKI Exploration & Production LLC.

They figured out, in an environment where nearly all assets are overpriced, it’s a great time to sell.
They already waited too long exiting their oil-and-gas investments, which now have started to collapse under the weight of debt and negative cash flows. Instead of struggling to salvage parts of their portfolio companies during restructuring or bankruptcy proceedings, they should have exited in 2013 and early 2014, when exuberance about oil covered up even the depression among natural gas drillers.
But elsewhere, things are still hopping. And it’s high time to get out before the energy debacle and the turmoil at the riskiest end of junk bonds spread more deeply into the PE firms’ portfolios.
And there have been eager buyers: the unsuspecting public via funds that invest in IPOs; and corporations that are buying everything in sight.
Corporations have been buying back their own shares. They’ve been buying privately held companies, including those dumped by PE firms. And they’ve been buying each other in the most awe-inspiring wave of merges and acquisitions the world has ever seen. The higher the price and the premium, the better. Corporations have become the relentless bid.
And they’re funding this binge with cheaply borrowed money. Junk bonds have seen rough waters recently, with investors getting re-spooked by the energy debacle, and issuance is down so far this year, compared to last year. But high-grade bonds are still booming though the first ripples have appeared.
US corporations issued a total of $802.9 billion in investment-grade bonds this year through July, according to Dealogic, up 27% from the same period in 2014. The most ever.
Of that, $701.7 billion were issued in the US, the highest ever, up 32% from the prior record set during the M&A bubble in 2007 (a now paltry $531.3 billion).
The average deal size jumped 33% from last year to $672 million, also the highest ever.
Yet, even in this rosy scenario, there were problems in July. For seven trading days early in the month, as the turmoil around China and Greece percolated through the markets and as commodities spiraled into a rout, no investment-grade bonds were issued at all. But then the floodgates opened. During the week ended July 17, a “blockbuster $46.9 billion” in investment-grade bonds were issued, according to S&P Capital IQ’s LCD.
In total, $130 billion in investment grade bonds were issued in July, despite the shuttered first week, the highest volume on record for a July, “dwarfing the $47 billion printed” in July 2014 and the $69 billion printed in July 2013. LCD:

July’s blockbuster issuance is owed predominantly to large M&A-driven deals. Earlier on in the month, Charter Communications printed a $15.5 billion bond offering in six parts, as it sought funds to complete its $80 billion acquisition of Time Warner Cable. This was the largest deal of the month.
During a year fueled by M&A action, the Charter bond issue ranked fourth in size, so far this year, behind Actavis ($21 billion in March), AT&T ($17.5 billion in April), and AbbVie ($16.7 billion in May).

Other mega bond deals hailed down in July: CVS Health placed a $15 billion offering to fund its acquisition of Omnicare and Target’s pharmacy businesses. UnitedHealth sold $10.5 billion in bonds for its purchase of Catamaran. Intel sold $7 billion in bonds for its acquisition of Altera. Etc. etc.
Corporations are buying everything in sight, offering huge premiums on top of the already insane valuations, and they relentlessly bid for their own shares, no matter what the price, and they do all this with cheaply borrowed money, even the smart money is dumping assets at record pace.
PE investments are largely illiquid. Exits take months and sometimes much longer to pull off. PE firms know that the window of opportunity will eventually close, and they can’t wait for the last minute.
Corporations are on the other side. Their angle is financial engineering and oligopoly building; to perfect this game, they’ve become the ultimate dumb money. But it doesn’t matter to their executives; they’re rewarded for financial engineering. And when the party is over, stockholders and bondholders pick up the tab.
But the acrid smell of burned fingers is wafting through the junk-bond market. Read…How Much Worse Can the Junk-Bond Sell-Off Get?

Taxpayers Asked To Clean Up Their Own Streets, While Paying More Taxes

PDF: 190 Gun Mods, Suppressors, Blueprints & Plans

(Aaron Hutchins)  For the past few weeks the Mormon dominated (74.5%) Gem State city of Pocatello has been running TV PSAs asking taxpaying residents to voluntarily clean out storm drains in their neighborhood streets.  This comes after revelations of “abuse of authority” at the hands of the city’s Mormon mayor (“Blad is clearly conservative, something his Mormon, southern Idaho upbringing certainly influenced…”-Tara A. Rowe, commenting on Blad’s suprise 2009 election win), and a new investigation by the state Attorney General for a trend that’s hitting cities across the U.S.: Pavegate.
Pocatello’s storm clean up campaign (led by mascots Drip and Drop) is also part of a growing trend across the country, as cities supposedly don’t have the tax funding to pay their own road crews to do the clean-up, but in Pocatello’s case Pavegate makes the public service campaign questionable.
Pocatello’s (aka Pokey) Pavegate started back in June 2014, when residents  noticed Pocatello road crews doing road work in other cities.  This pissed off Pokey taxpayers because for years they’ve been told there wasn’t enough funding to tackle all the road work needed in Pocatello.
When the city council was first questioned about it, they denied it was happening.  In July 2014, local TV station KPVI even questioned Pokey mayor Brian Blad about it, he actually denied knowing anything: “I don’t know if our crews were up there or not. I know our equipment was up there. We may have had crews up there. If we did, then there will be a swap where the County is doing the work for the City of Pocatello for us as well.” 
In that instance KPVI was asking about Pokey road crews doing work for the city of McCammon.  McCammon administrators indicated that Pokey administrators offered to save McCammon taxpayer money by doing needed road repairs for the cost of materials only, the labor was free (meaning Pokey taxpayers paid for the labor)!
By August 2014, city council members (who are part timers only) were concerned enough to pay for an independent investigation: “We’ve got to have the facts. We just don’t know at this point.”-Craig Cooper, council president
In September 2014, KPVI was basically told that what was to be called Pokey Pavegate was nothing more than semantics: “I’m confident that what they are looking at is not an invoice. What they are looking at is a work order……No we haven’t reimbursed the City of Pocatello for these costs.”-Kurk Bybee, attorney for the city
It is not uncommon for one city to hire-out its road crews to another city, and get paid for it.  But in this case it seemed that the full time mayor indeed knew about the farming out of Pokey road crews to other cities (after denying it on local TV news) but did not charge for the labor, and the part time city council members continued to claim they knew nothing.  Industrious taxpaying residents found out otherwise: “A large volume of documents secured by Pocatello resident Steven Medellin under a Freedom of Information request show numerous paving projects were done in Driggs and Teton County dating back to 2013 with no documentation showing payments to the city of Pocatello for the work.”–Out-of-town Pocatello paving projects spur audit (even at this point the mayor feigned no knowledge of the Pavegate)
These Pavegate lies by Mormon dominated city administration are just the tip of the iceberg, as residents have publicly questioned the jacking up of property taxes, the hiring-on of 30 new city employees, “secretive” projects and the seemingly sudden disappearance of millions of taxpayer funds.
In January 2015, Deanton & Company made public the results of their Pavegate investigation:  “Although there appears to be an abuse of authority, because of the nature of fraud, no assurances can be given that fraud does not exist……..it became clear that various levels of management within the city of Pocatello do not fully understand their level of authority…….There was also a lack of supporting evidence of communication between management and….City Council.”
The quickly done investigation said Pokey taxpayers paid for at least $15,773 USD worth of labor costs, and in response the mayor adamantly stated that he would not seek reimbursement from the cities that benefitted from that labor: “…we’re going to move on and be done with it.”  
In February 2015, the city’s own Chief Financial Officer, Joyce Stroschein, revealed that they’re basically missing $1.5-million!  She blamed it on three ongoing projects in which there was no accountability in how the money was spent: “It’s all about cleaning house….. Cleaning up the project resolution because the projects have ended at this point.”
By April 2015, the Idaho Attorney General announced an investigation of his own.  The investigation was pushed for by a Pocatello grass roots committee Taxpayers for Honest Government: “Taxpayers for Honest Government has methodically investigated and reviewed public information…and found that the city of Pocatello is in serious trouble, both financially and ethically….most of the problems facing the city of Pocatello are because of the abuse of power created by Mayor Blad’s secretive, closed-door governing style.”– Helen Delahunt-Avila
The disappearance of millions of taxpayer dollars, confirmed by the city’s own treasurer in February, should be noted because the mayor continually stated the city wasn’t hurting for money.  Now Pokey tax payers are being asked to clean out the storm drains in their neighborhood streets.

In June 2015, despite missing millions in funding Pocatello created a new Public Information Officer job, hiring a former KPVI reporter as their new Public Information Officer.  The first order of business for that PIO was reporting that Pokey administrators suddenly ordered road crews to put fresh blacktop on dozens of city streets, and then claim it was done in a way that saved taxpayers money.  City administrators say they are now conducting an almost year long review of finances as “…a kind of review of how we look at ourselves.”
In July 2015,  CFO Joyce Stroschein proposed jacking up taxes and fees for Pokey residents, in order to fund the city’s 2016 fiscal year.
Pokey’s Martin Luther King Way project, despite no money
Pocatello considers fines for false fire alarms
Pocatello Fire Department responds to record number of calls
Pocatello considers moving money to fund connector project
Despite being broke, Pocatello Sanitation Department loans $2 million to Federal Aid Project
Pocatello Regional Transit gets free busses?
Massive Wellness Complex no cost to taxpayers?
Pokey’s South Valley Connector project 
Pocatello & Chubbuck consider merging Fire Departments
City Council OKs $1.04 million for vehicles
City Must Cut $2.2 Million from Budget
LDS leader arranged outside attorney on LGBT ordinance
NSA paying Mormons big bucks to guard data centers! 

CRASHING: Apple, Twitter, Oil, Commodities, Greek Stocks, Chinese Stocks… A Full-Blown Financial Crisis About To Erupt!

By Michael Snyder
image: http://theeconomiccollapseblog.com/wp-content/uploads/2015/08/Crash-Public-Domain-460x304.jpg
The month of August sure has started off with a bang.  Tech stocks are crashing, oil is crashing, industrial commodities are crashing, Greek stocks crashed the moment that the Greek stock market reopened for trading, and Chinese stocks continue to crash.  At this point we have not seen a broad crash of U.S. stocks yet, but it is important to note that the Dow is already down more than 700 points from the peak in May.  If it continues to slide like it has in recent days, it won’t be too long before we will officially reach “correction” territory.  Just a few days ago, I described August as a “pivotal month“, and so far that is indeed turning out to be the case. A full-blown financial crisis has not erupted yet, but we are well on the way.  In this article, I want to look at a few of the “crashes” that are already happening…
Apple
This is more of a “correction” than a “crash”, but it is very noteworthy because it is happening to one of the most important U.S. stocks of all.  The price of Apple stock has already broken through the 200 day moving average, and at this point it is down nearly 11 percent from the peak…

Shares of Apple are down 10.9% from their highest point in a year — which places the stock squarely in what’s considered to be a correction. The unofficial definition of a correction is a 10% or greater drop from a recent high. Shares of Apple hit a 52-week (and all-time) high on $134.54 on April 28.

Twitter
If you want to see a real crash, just look at what is happening to Twitter.  The stock was down close to 6 percent on Monday, and overall it has fallen 58 percent since early last year.  The price of Twitter stock has never been lower than it is right now, and many investors are very apprehensive about what comes next…

Twitter shares hit a record low on Monday, closing down nearly 6% to $29.27.
That is 58% below their peak in January 2014.
Shares have fallen to their lowest point since the company went public in November 2014 weighed down by negative comments on growth from company executives that rattled investors. Its previous low was $30.50 in May 2014 as concerns over slowing user growth began to take a toll.

Of course there are tech companies that are in far worse shape than Twitter.  For example, just consider what is happening to Yelp.  Shares of Yelp recently plummeted 25 percent in a single day, and they are down about 70 percent over the past year.
Greece
The Greek government was quite eager to reopen their stock market this week.
Perhaps they should have waited longer.
On Monday, we witnessed the greatest stock bloodbath in Greek history.  The following comes from Reuters…

Greece’s stock market closed with heavy losses on Monday after a five-week shutdown brought on by fears that the country was about to be dumped from the euro zone.
Bank shares plummeted 30 percent before loss limits kicked in to stop investors selling any more. The main Athens stock index .ATG ended down 16.2 percent, recovering slightly after plunging nearly 23 percent at the open.
It was the worst daily performance since at least 1985 when modern records began, including a 15 percent fall when Wall Street crashed in 1987.

Puerto Rico
Things also continue to unravel for “America’s Greece”.  On Monday, a U.S. commonwealth territory defaulted on debt for the first time ever…

Puerto Rico’s Government Development Bank announced Monday that it was only able to make a partial payment on its Public Finance Corporation (PFC) debt service due over the weekend.
In response to the non-payment of the full service, Moody’s said it viewed the situation as a default.
“Due to the lack of appropriated funds for this fiscal year the entirety of the PFC payment was not made today (the first business day after the Saturday deadline),” GDB President Melba Acosta-Febo said in a statement. This was a decision that reflects the serious concerns about the Commonwealth’s liquidity in combination with the balance of obligations to our creditors and the equally important obligations to the people of Puerto Rico to ensure the essential services they deserve are maintained.”

China
As I noted the other day, the Shanghai Composite Index declined 13.4 percentduring the month of July.  It was the worst month for stocks in China since October 2009.
On Monday, Chinese stocks were down another 1.11 percent.  Since closing at5,166.35 on June 12th, the Shanghai Composite Index has fallen precipitously.  As I write this, it is sitting at just 3622.86.
Oil
In the months prior to the financial crisis of 2008, the price of oil crashed hard.
Now it is happening again.
In July, the price of oil plunged 21 percent.  That was the worst monthly decline that we have seen since October 2008.
And on Monday, the oil crash continued.  The following comes from Business Insider…

On Monday in New York, West Texas Intermediate (WTI) crude fell more than 4% and slipped below $45 per barrel, a level it hasn’t touched since March.
Brent crude oil, the international benchmark that joined WTI in a bear market last week, dropped more than 4%, below $50 per barrel for the first time since January.

Commodities
In recent weeks, I have been writing over and over about industrial commodities.  This is yet another striking similarity to the last financial crisis.  In 2008, they started crashing before stocks did, and now it is happening again…

We see the Bloomberg Commodities index now at a 13-year low. Copper is down 28 percent for the year, tin is down 30 percent, and nickel is down 44 percent.

This is a giant red flag that indicates that we are plunging into a deflationary cycle.  When global economic activity slows down, so does demand for industrial commodities.  I don’t understand why more people can’t see this.
I have been warning that a deflationary downturn was coming for a very long time, and so have others.  For instance, just consider the following excerpt from a recent article by Nicole Foss…

Our consistent theme here at the Automatic Earth since its inception has been that we are facing a very powerfuldeflationary depression, following on from the bursting of an epic financial bubble. What we have witnessed in our three decades of expansion and inflation is nothing short of a monetary supernova, and that period has been the just culmination of a much larger upward trend going back many decades at least. We have lived through a credit hyper-expansion for the record books, with an unprecedented generation of excess claims to underlying real wealth. In doing so we have created the largest financial departure from reality in human history.
Bubbles are not new – humanity has experienced them periodically going all the way back to antiquity – but the novel aspect of this one, apart from its scale, is its occurrence at a point when we have reached or are reaching so many limits on a global scale. The retrenchment we are about to experience as this bubble bursts is also set to be unprecedented, given that the scale of a bust is predictably proportionate to the scale of the excesses during the boom that precedes it. We have built an incredibly complex economic system, but despite its robust appearance it is over-extended, brittle and fragile after decades of fueling its continued expansion by feeding on its own substance.

Things continue to line up in textbook fashion for a major financial crisis during the fall and winter.
I hope that you are prepared for what comes next.

Gold Sentiment Is Just Ugly

by GoldCore
The headlines are dramatic, ugly and depressing to anyone who holds gold right now. Broad market sentiment has shifted from disdain and dismissive to highly negative. Hedge funds are shorting gold aggressively, hedge funds that own gold are being “outed”. The market pundits are are sticking the proverbial knife in and twisting it with glee. The Financial Times published an interesting article over the weekend.
“Why gold has lost its shine for investors”
by Mohamed El-Erian. He is one of the world’s most respected investors and market commentators. In his piece he makes a number of interesting observations.
According to El Erian the gold is falling because:

• In a world of ETFs investors can mange risk more effectively and therefore do not need a traditional safe haven such as gold.
• Gold does well in inflationary environments, we don’t have one right now, ergo, gold does poorly.
• Central banks are not buying gold as aggressively as they once did; lower demand, lower prices.
• Gold has not reacted as a safe haven as it should. Greece should have sent the price soaring but it did not.
• Official and institutional demand for gold has not materialised.
• Physical market demand at lower prices is not strong enough to create a firm bid for gold, there are not enough small guys in the market.
• Gold’s recent price move up $1,000 from $700 in 2008 was the outlier and not the norm and gold is now priced more correctly then it was then.
• But then he drops the biggest bomb of all. He states that gold could buck its recent trend and the reason he gives should give you all reason to take notice.

“This situation is unlikely to change soon but it need not be terminal. A shift would probably require a broader normalisation of financial markets, including a diminution in the direct and indirect role of central banks in determining asset prices and their correlations.”

Does this not strike you as a particularly insightful statement, from one of the world’s foremost investment minds no less?
I read it as follows, “the game is rigged until it is not rigged and then and only then will gold normalise to its true market value (straw poll please), as will other assets.”
Nearly all his previous points are rendered mute if in fact the market is rigged and we lack an effective fair price discovery mechanism.
The fact is the markets are massively dependent on central bank funding, central bank benchmark rates and central bank meeting minutes. The small matters of risk premia, allocations, efficiencies, debt levels, productivity, ROCE, even dividends are not so important any more. Just look at the rise of the Fed balance sheet and the S&P500. Literally, they are one for one.
Nope, its the unelected masters of the universe that now control the financial destiny of every human on the planet. Not one of them was ever elected. We are witness to the most extraordinary concentration of power that has ever existed, and our political representatives have allowed this to happen.
If you are foolish enough to trust in the markets’ internal risk pricing mechanism, efficient market theory, think again.
For example do a search on “Alladdin”. You will find that it is a centralised risk management service and asset manager monster that now controls a massive, circa $17 trillion, of the global capital market, or circa 8% of the world’s stocks, bonds and loans. 17,000 traders the world over rely on its risk models directly or partially.
We may all be witness to the first chapter of the MBA class of 2025’s required course “Failed Monetary Theories of the Last 100 Years”. Your grand kids may even ask you what it was like…. before the great reset.
Trust me this will get a lot worse before it gets better. I would wager that the central bank officials of the Fed and the BOE, BOJ and that intellectual vacant organisation that is the ECB, wear with great unease the new found power that they have.
If you need proof look at the number of market mechanisms that have been wholesale rigged for the past 15 years. These operators never operated in absolute secret. The watchers that watched knew and their silence implied unofficial sanction. Soon the banks again will be recapitalised, this time not with nameless tax payers but with your pensions and your savings. Bail-ins are coming, google “bail-ins” and read up.
Gold may well fall further in the near term and the powers that be may well keep the bus on the road for the near future, but if history teaches us anything is that you never bet against the wisdom of the crowd. Ultimately, these markets will be freed up and when they do gold will be bid up aggressively. On the other hand, the markets can stay irrational longer then you can stay liquid, so don’t put all your money into gold but do keep a small percentage (5% – 20%) and look at it as a firm of financial insurance. If it is falling in value then the rest of your assets should be rising and that is the essence of investing: asset diversification.

Hedge Funds Helped Wreck Puerto Rico’s Economy, And The Poor Are Paying The Price

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(SAN JUAN)  Angry graffiti scrawled across the brightly colored buildings of San Juan tells the creditors of the world exactly where they can stick their plan to extract roughly $73 billion in debt from the struggling U.S. territory. “Puerto Rico comes first. To hell with the debt,” reads one wall. “Don’t play around with my retirement,” says the side of a major freeway. Down by the University of Puerto Rico, the walls and sidewalk are filled with laments — “Look into my unemployed face” — and calls to action: “Study and fight!”
Depending who you ask in Puerto Rico, the debt crisis was caused by neo-colonial and imperialist policies from the U.S., the Puerto Rican government’s wasteful overspending and corruption, or the cadre of hedge funds that are currently profiting from the island’s woes. Add to that toxic mix a series of free-trade agreements that triggered mass outsourcing, and a population in rapid decline due to out-migration, and you arrive where we are today, with the government on the hook for tens of billions of dollars.
After the island’s Public Finance Corporation failed to make a major payment due this weekend, the threat of a default looms larger still.
Two recent reports, one by former consultants of the International Monetary Fund and the other by the island’s hedge fund creditors, say the only way out of the mess is a regime of harsh austerity that eliminates the minimum wage, sells off public buildings and assets, lays off teachers and shutters schools, cuts workers’ vacation and benefits, and raises sales taxes and electricity rates.
Pedro Pierluisi, Puerto Rico’s sole representative in the U.S. Congress, told ThinkProgress he somewhat agrees with this model. “When you tell me ‘austerity,’ I tell you, of course we have to be austere. Of course we have to be fiscally responsible. When our financial viability is at stake, we should all be concerned.”
Speaking to ThinkProgress in the office of his pro-statehood political party, Pierluisi said in alternating English and Spanish that Puerto Rico must prioritize paying its debt — not only because their Constitution mandates it, but because it’s the “adult” thing to do.
“We can’t follow Argentina. Argentina has spend 12 years fighting its creditors before tribunals and they’ve lost billions in foreign investments. I don’t want that model for Puerto Rico,” he said. “So we have to talk to our creditors in a responsible and civilized way. We have to say, ‘I want to pay you. Help me pay you.’ That’s what I don’t see: both sides sitting down at the table to negotiate like adults.”

Rep. Pedro Pierluisi hugs a supporter outside the offices of his pro-statehood party.

Pierluisi, who will run for governor of Puerto Rico in 2016, has introduced bills that would give the island the same bankruptcy protections as U.S. states and cities. This would allow the commonwealth to restructure its debt in a more manageable fashion. But Pierluisi has no vote in Congress, even though he represents more U.S. citizens than any other House member, and hope for passing the proposal has fizzled in the face of Republican opposition. Furthermore, the White House has already ruled out a bailout.
Without a lifeline from the mainland, the island could run out of cash as soon as this summer, sending the economy into a Greece-like spiral that makes the path to austerity all the more likely.
For some U.S. progressives, including presidential candidate Bernie Sanders (I-VT), this is a “moral outrage.”

“At a time when 56 percent of children in Puerto Rico are living in poverty, the last thing that Puerto Rico needs is more austerity,” he said in a recent statement. “The people in Puerto Rico should not be forced to suffer so that a handful of billionaires can make even more money.”
According to a new investigation, many of those same billionaires demanding payment from Puerto Rico have also profited from the debt crises in Greece, Argentina, and Detroit. These hedge funds specialize in buying up “distressed” assets and pushing governments to take on debt they can’t afford under predatory rates and conditions. At the same time, the groups are lobbying Congress to not allow the island to declare bankruptcy, as doing so would cut into their profits.
“The reason Puerto Rico has such unsustainable debt has everything to do with the policies of austerity and the greed of large financial institutions,” said Sanders. He additionally noted that just seven years ago, Congress “acted with a fierce sense of urgency to bail out Wall Street,” yet is now dragging its feet on helping the commonwealth of Puerto Rico.
In the working class neighborhood of Santurce, in a union hall decorated with the Puerto Rican flag and photos of “martyrs of the struggle,” a group of a few dozen professors, laborers, and activists met in late-July to pick apart the proposals on the table and brainstorm their own solutions. Those at the meeting and other residents who spoke to ThinkProgress blasted Pierluisi and other politicians for supporting the proposed austerity model, which they warned would only further decimate the fragile economy, and push even more Puerto Ricans to flee to the mainland United States.
“Austerity is usually oriented at the people who need the most,” said Aaron Gamaliel Ramos, a professor of Caribbean Studies at the University of Puerto Rico. “Our greatest concern should be for workers in the lower echelons of society.”
Today, the island has the highest unemployment rate in the nation, at over 12 percent, and more poverty than any other state.
While Ramos acknowledged that a high level of corruption and wasteful spending does exist in Puerto Rico, he criticized the calls from the hedge funds to shut down schools — more than 100 of which have already been closed — and slash the social safety net.
“It’s not a black and white debate — cuts or no cuts,” said Ramos, whose own retirement fund is on the chopping block, along with his 92-year-old mother’s Social Security. “We need to ask: what should we do before we cut? What is so valuable to society that it should not be touched?”

Yet others say there should be no cuts at all, at least for now. Instead, argues Martha Quiñones Dominguez, an economics professor at the University of Puerto Rico, the country should order an independent audit of the debt to see which creditors’ claims are valid and which are illegal. She also called on the government to raise taxes on the wealthy and corporations, put a moratorium on debt payments, and use the money instead for sustainable development that will help cut down on costly imports.

“The current model of catering to foreign business and capital is a model of dependency,” she told the workers’ meeting. “We have to invest in local businesses that are truly invested here and won’t pick up and leave when things get tough. Walmart will leave. Costco will leave. What will be left?”
Many of those present, including Dominguez, told ThinkProgress they identify as independentistas— those who want the commonwealth to break off from the U.S. and become its own sovereign nation. If this happened, they argued, the island could set its own wages and trade policies to boost development.
As it is, many expressed frustration that the average Puerto Rican has no say either in the U.S. Congress that may decide its fate, or in the high level negotiations between the creditors and the government that are now taking place behind closed doors.
“They’re debating our future without consulting us,” said Dominguez. “If they claim the debt belongs to all of us, they need to talk to all of us. The people are the most important bond holder in Puerto Rico.”