Thursday, May 8, 2014

Doug Casey: No Way Out-Stock, Bond and Real Estate Markets Will Collapse

Controversial Cook County forest preserve buy is largest in 45 years

May 06, 2014|By Michelle Manchir, Robert McCoppin and Juan Perez Jr | Tribune reporters
As drivers top the crest of Algonquin Road in Barrington Hills, they’re treated to a rare sight in the Chicago area: a sweeping vista of horses grazing on rolling hills, groves of trees lining the horizon.
The verdant expanse of land that makes up that picturesque view now belongs to taxpayers, and is due eventually to open to the public, now that a judge has ruled that the property, known as Horizon Farms, belongs to the Cook County Forest Preserve District.
At nearly 400 acres, the farm is the largest single piece of land acquired by the forest preserve district since 1968. Advocates say the $14.5 million purchase marks the most important recent expansion of the preserves, and opens the way for prairie restoration, improved wildlife habitat and increased public enjoyment.
“It’s a really big deal,” said Benjamin Cox, president of Friends of the Forest Preserves, an independent not-for-profit group. “They just don’t buy property that big. It’s just not around.”
Created 100 years ago, the Cook County conservation agency purchased a lot of land through the 1970s and became the largest such district in the U.S., but since then has bought very little. While forest preserves in neighboring collar counties went on buying binges in recent decades, paid for by voter-approved loans, Cook County remained largely landlocked by development.
So after BMO Harris Bank initiated foreclosure proceedings on Horizon Farms in 2009, the district swooped in last year, negotiating with the bank to acquire the mortgage note and then buy the property.
The prior owners, Richard Cannon and Meryl Squires Cannon, had bought the land for $19 million in 2006, at the height of the real estate boom. Richard Cannon, an attorney, and Meryl Squires Cannon, founder and president of Merix Pharmaceutical Co. in Barrington, bred and raced horses.
The owners filed suit last year challenging the forest preserve acquisition of their property, arguing that the district has legal authority to buy land but not to buy mortgage notes. A judge ruled against them and the sale was finalized Monday, though they are appealing.
Reached by phone, Richard Cannon said he had understood the bank that originally gave them the loan, Amcore Bank, was going to extend the term of the payments to pay off the note, but when it required a multimillion payment a year later, the couple couldn’t get a loan right away.
“We got stuck in the middle of this foreclosure situation,” he said.
The Cannons’ suit also notes that the property was appraised for them in 2012 at only $7 million.
Cannon said he and his wife had planned to build their “dream house” and retire on the site, where they raised and bred as many as 54 horses. Now they’re living elsewhere in Barrington Hills, but they’re looking for homes for more than a dozen of the horses still on the property.
“All the Cook County residents out there ought to be saying to themselves, ‘Boy, if I (have) any attractive property that’s nearby a forest preserve, I better look out,’” he said.
The property, just west of Illinois Highway 59, contains an estate home with separate guest house, multiple barns, extensive fencing and horse paddock areas, a half-mile horse track, a staff residence, manager’s office, open fields, ponds and wooded and natural grassland areas.
Forest preserve officials have not decided what to do with the land, but will hold public hearings and solicit public input in the coming months, spokesman Don Parker said.
The district might offer some horse stable rentals or ride rentals at Horizon Farms, as it does through stables at several other preserves such as in Tinley Park and Palos Park.
While Horizon Farms is mostly pasture land, with limited natural habitat, it is a prime candidate for restoration as native prairie grassland, Parker said. That would help attract grassland birds like the Henslow’s Sparrow and Bobolink.
Situated between Spring Creek Valley and Crabtree preserves, Parker said, the farm can be an important link for animals as well as people, who might someday be able to use trails connecting the sites, as is done at other preserves.
The farm’s previous owner, the McGinley family, agreed to an easement in 2003 which limited its development to eight homes and protected more than 80 acres of Goose Lake, wetlands and forests as natural areas.
That easement remains in place regardless of who owns the property, said Brook McDonald, president of The Conservation Foundation, which helped broker the deal.
Arnold Randall, the preserves’ general superintendent, said the land was coveted partly for its large tracts of open space, wetlands and native bird habitat.
The property will be closed to the public “pending a full site assessment and any necessary improvements for access and public safety,” preserve officials said.
The only caution Cox offered was that forest preserve officials should hire outside contractors to run any horse-related enterprises because it’s beyond their expertise. Overall, he was encouraged by the expansion.
“I think it’s another sign of an administration that’s working hard to turn things around and do what’s right,” he said. “The forest preserve was asleep for a long time. … Now things have really turned around.”

The Economics Of Marriage

By Michael Snyder
Marriage - Photo by Eric Ward
The marriage rate in the United States has fallen to the lowest level ever recorded.  So why is this happening?  Well, the truth is that there are a lot of reasons why so many young people are choosing not to get married today.  One big reason is money.  Young adults in the U.S. are really struggling to find good jobs, and many are hesitant to take a big step like marriage without achieving a certain level of financial security first.  And as you will see below, many young adults (especially women) do not even want to date someone that is not employed.  In this harsh economic environment, money makes a big difference in the world of romance.  Another big reason for the decline of marriage in America is a seismic shift in cultural attitudes.  Americans (especially young people) do not place the same kind of importance on marriage and having children that they once did.  Instead, more Americans are choosing to “move in together” than ever before.  But if the percentage of Americans that choose to get married continues to decline, what is that going to mean for our future, and what is our country going to look like moving forward?
According to a startling new study conducted at Bowling Green University, the marriage rate in America has fallen precipitously over the past 100 years.
In 1920, there were 92.3 marriages for every 1,000 unmarried women.  In 2012, there were only 31.1 marriages for every 1,000 unmarried women.
That is not just a new all-time low, that is a colossal demographic earthquake.
That same study found that the marriage rate has fallen by an astounding60 percent since 1970 alone.
As a result, U.S. households look far different today than they once did.
Back in 1950, 78 percent of all households in the U.S. contained a married couple.  Today, that number has declined to 48 percent.
That is a very troubling sign if you consider the family to be one of the fundamental building blocks of society.
When young people are asked why they are delaying marriage today, one of the things that always seems to get brought up is money.  There is a feeling (especially among men) that you should achieve a certain level of financial security before making the big plunge.
And it is a fact that the more money you have, the more likely you are to be married.  Just check out the following stats about income and marriage from a recent Business Insider article
83% of 30- to 50-year-old men in the top 10% of annual earnings are married today, whereas only 64% of median earners and half of those in the bottom 25th percentile are hitched.
Now, compare that to men in 1970, whose marriage rates were 95% (top earners), 91% (median earners), and 60% (bottom 25th percentile of earners), respectively.
A lot of people like to think that “love is the only thing that matters” when it comes to marriage, but the cold, hard numbers tell a different story.  In fact, one very shocking survey discovered that 75 percent of all American women would have a problem even dating an unemployed man…
Of the 925 single women surveyed, 75 percent said they’d have a problem with dating someone without a job. Only 4 percent of respondents asked whether they would go out with an unemployed man answered “of course.”
“Not having a job will definitely make it harder for men to date someone they don’t already know,” Irene LaCota, a spokesperson for It’s Just Lunch, said in a press release. “This is the rare area, compared to other topics we’ve done surveys on, where women’s old-fashioned beliefs about sex roles seem to apply.”
Unfortunately for American men, there simply are not enough good jobs to go around.  In fact, the number of working age Americans without a job has increased by 27 million since the year 2000, and businesses in the U.S. are being destroyed faster than they are being created.
Due to a lack of economic opportunities, a rising percentage of our young people have been giving up on the “real world” and have been moving back in with Mom and Dad.  For much more on this, please see my previous article entitled “29 Percent Of All U.S. Adults Under The Age Of 35 Are Living With Their Parents“.  And when you break down the numbers, you find that young men are almost twice as likely to move back in with their parents as young women are.
But economic factors alone certainly do not account for the tremendous decline in the marriage rate that we have witnessed in this country.  Shifting cultural attitudes also play a huge role.
A whole host of opinion polls and surveys show that Americans simply do not value marriage and having children as much as they once did.  For example, the Pew Research Center has found that the younger you are, the more likely you are to believe that “marriage is becoming obsolete” and that “children don’t need a mother and a father to grow up happily”.
In fact, an astounding 44 percent of all Americans in the 18 to 29-year-old age bracket now believe that “marriage is becoming obsolete”.
And why should they get married?  Our movies and television shows constantly tell them that they can have the benefits of being married without ever having to make a lifelong commitment.
This sounds particularly good to men, since they can run around and have sex with lots of different women without ever having to “settle down”.
But there are most definitely consequences for this behavior.  The “sexual revolution” has left behind countless broken hearts, shattered dreams, unintended pregnancies and devastated families.
In addition, the U.S. has become a world leader when it comes to sexually-transmitted disease.
It is hard to believe this number, but according to the Centers for Disease Control and Prevention approximately one-third of the entire population of the United States (110 million people) currently has a sexually transmitted disease.
So nobody should claim that the “sexual revolution” has not had any consequences.
But most Americans don’t actually run around and sleep with lots of different people at the same time.  Instead, most Americans seem to have adopted a form of “serial monogamy“.
In America today, most people only sleep with one person at a time, and “living together” is being called “the new marriage”.
According to the CDC, 74 percent of all 30-year-old women in the U.S. say that they have cohabitated with a romantic partner without being married to them, and it has been estimated that 65 percent of all couples that get married in the United States live together first.
Many believe that by “trying out” the other person first that it will give them a much better chance of making marriage work if they eventually do choose to go down that path.  Unfortunately, that does not seem to work out very well in practice.  In fact, the divorce rate for couples that live together first is significantly higher than for those that do not.
And when it comes to divorce, America is the king.
For years, the U.S. has had the highest divorce rate in the developed world.
But it wasn’t always this way.  Back in 1920, less than one percent of all women in the United States were currently divorced or separated.  Today, approximately 15 percent of all women in the United States are currently divorced or separated.
So why are so many people getting divorced?
Of course there are a lot of factors involved (including money), but a big one is cheating.  According to one survey, 41 percent of all spouses admit to infidelity.  Many Americans simply find it very difficult to stay committed to one person for an extended period of time.
As a result of what I have discussed so far, it is easy to see why people in our society are so lonely and so isolated.  Less people are getting married, more divorces are happening and couples are having fewer children.  This means that our households are smaller and we have far fewer family connections than we once did.
100 years ago, 4.52 people were living in the average U.S. household, but now the average U.S. household only consists of 2.59 people.
That is an astounding figure.
And the United States has the highest percentage of one person households on the entire planet.
But we weren’t meant to live alone.  We were meant to love and to be loved.
Often, those that are being hurt the most by our choices as a society are the children.  They need strong, stable homes to grow up in, and we are not providing that for millions upon millions of them.
When you look at just women under the age of 30 in the United States,more than half of all babies are being born out of wedlock.
That would have been unimaginable 100 years ago.
And of course when there is no marriage involved, a lot of times the guy does not stick around.  At this point, approximately one out of every three children in the United States lives in a home without a father, and in many impoverished areas of the country the rate is well over 50 percent.
In addition, women are waiting much longer to have children than they once did.
In 1970, the average woman had her first child when she was 21.4 years old.  Now the average woman has her first child when she is 25.6 years old.
The biggest reason for this, once again, is money
In the United States, three-quarters of people surveyed by Gallup last year said the main reason couples weren’t having more children was a lack of money or fear of the economy.
The trend emerges as a key gauge of future economic health — the growth in the pool of potential workers, ages 20-64 — is signaling trouble ahead. This labor pool had expanded for decades, thanks to the vast generation of baby boomers. Now the boomers are retiring, and there are barely enough new workers to replace them, let alone add to their numbers.
We are waiting longer to have children and having fewer of them, but those children are needed for the economic future of this country.
Fifteen years from now, one out of every five Americans will be over the age of 65.  All of those elderly Americans are going to want the rest of us to keep the financial promises that were made to them.  But that is going to turn out to be quite impossible.  We simply do not have enough people.
In the end, the economics of marriage does not just affect those that are thinking of getting married or those that are already married.
The truth is that the economics of marriage affects all of us.
So what do you think is in store for the future of the institution of marriage in this country?
Please feel free to share what you believe by posting a comment below…

5 Ways US Medical Billing Is Way More F#@ked Than You Think

Via Imgur
Meh, just tighten up the eating-out budget a little bit.
Hospital bills topping one million dollars are on the rise, and even a minor injury can leave you with a bill that looks like the hospital replaced all of your internal organs with diamond-studded plutonium. But beyond the initial punch to the wallet, the awfulness of ridiculous medical bills extends to places you might not have thought. Such as ...

#5. Even Insured People Are Going Bankrupt

The majority of bankruptcies in America are now caused by medical bills. Clearly, these bankruptees were devil-may-care hooligans who chose not to protect themselves with health insurance. Oh, wait: Most of them did have insurance. Three-quarters of Americans whose medical bills contributed to their bankruptcies were insured when their health problems began. Their real problem was that these un-American slackers were dumb enough to not be able to afford a low-deductible plan, or clumsy enough to come down with something that their insurance didn't cover.
And when you look at the random bills that even insured people get hit with, it's not hard to see how this can happen. I have a friend who broke an ankle slipping on her frozen driveway during the seven-month ice storm people in New York call a "winter." She was insured with an 80/20 plan, but still received a bill for around $6,000. This month, I got a letter from my own insurance company arguing that a single blood test I got back in March wasn't "medically necessary" and warning me that I might have to cough up the full price. How much was the full price of that single blood test? Just 5,000 freakin' dollars. Luckily nothing came of it, because otherwise I would have had to dip pretty deep into my weekly writer's salary.
Allan Danahar/Photodisc/Getty Images
It's so embarrassing when you're at the local writer's club and can't afford to tip the valet.
These incredibly high and apparently random medical costs get even more ridiculous when you consider that ...

#4. Stupid Frivolous Shit Actually Costs Us Less

These bills are high, but hey, maybe doctor stuff just costs a lot. Those long white coats and stethoscopes-around-the-neck don't pay for themselves! Except that while fixing a broken ankle apparently costs as much as a new car or two, the charge for laser eye surgery is usually only around $2,000 per eye. And this isn't a freak outlier: Nonessential procedures like cosmetic rhinoplasty often cost a lot less than surgeries that people actually need.
Why is essential medical care so much more expensive? Look at it like this: Say you're a plastic surgeon who performs extra-nipple implants. This procedure isn't considered medically necessary, and therefore is not covered by most insurance companies, meaning that your patients must pay you directly. If patients choose not to buy your extra nipples for $5,000 per nipple, you'll have to lower the price to $4,000, or else change your business model.
Siri Stafford/Digital Vision/Getty Images
"Nipple pills? Nipple serum? Aerosolized nipple spray?"
But when you add in the American system of mostly-employer-based health insurance, things get weird. The patient doesn't pay the doctor directly -- a lot of Americans don't even realize that this is an option. Instead, hospitals and medical practices bill the patient's insurance company. Because insurance companies are usually big and powerful enough to have bargaining power, there's a good chance that they will respond by farting on the bill and sending it back. Hospitals know this, and so over the years they've started making up their own extremely high prices and throwing them at insurance companies in the hope that they will pay something. These so-called "chargemaster" rates have grown so ludicrous over the years that they now include things like $37 Tylenol pills and $137 IV bags.
Siri Stafford/Digital Vision/Getty Images
"For $137, that IV bag damn well better contain at least one nipple."
Once again, these chargemaster rates are mostly completely made up and have nothing to do with what these things actually cost. They're simply part of the monetary dance-off that insurance companies and hospitals are doing with one another. In most cases, the insurance companies agree to pay a small amount of the stupidly high bill, the hospital accepts this reduced amount, and everyone is happy. Except for uninsured and underinsured people, that is, because they are also billed at the chargemaster prices.
There are a bunch of other factors at work, of course, but this is a big reason why a single petting-zoo mishap could end up costing you the price of a small car. But most hospitals will still tell us that everything is fine for Joe Injured American, because ...

#3. Everyone Is in on the Con but You

When asked how people could be expected to pay chargemaster rates, the vice president of the American Hospital Association insisted that $37-Tylenol-style prices are not so bad, because they are "generally not what a consumer would pay." In other words, only suckers pay sticker price. Big medical bills are just a silly game between hospitals and insurers, and us consumers should just laugh it off for the same reason we laugh off the neighbors' late-night throwing-knife fights: It doesn't affect us, and it isn't our problem.
Let's pretend now that the American Hospital Association is telling the absolute truth. Let's pretend that all patients have to do is call and ask, and hospitals will slash the bill every time (and not just sometimes, as is really the case). Let's pretend that cancer patients have the time and money to dispute every single item on their $70,000 chemo bill while they are trying to concentrate on having the goddamn cancer. Let's pretend that people are really only at risk of medical bankruptcy if they break their leg 60 times in a row.
James Woodson/Digital Vision/Getty Images
"Dammit! Again!"
We'll assume all that, and it still doesn't matter, because most people don't know that chargemaster rates are a joke. Do a quick survey of posts about medical bills on social media, and you won't find many stories of Americans receiving a letter, rolling up their sleeves, and marching down to the hospital to dispute the fuck out of some billing. Instead, most people receive bills and immediately start wondering how they can pay the whole thing off, whether it's by getting another job or asking for donations or by cooking meth or whatever.
Tom Brakefield/Stockbyte/Getty Images
Personally, I'm running an illegal wombat-smuggling ring.
Why are so many people unwittingly allowing themselves to be ripped off like this? Maybe it's because America is not a bargaining culture. Guidebooks written for Americans traveling overseas are full of warnings about not paying full price for traditional French penis statues or whatever: French penis-mongers, the books will tell you, quote high prices but expect to be haggled down. Maybe Americans need these warnings because in this country bargaining is generally something that happens only when you're dealing with professions seen as shady or dishonest, like car dealerships. Yet at some point doctors and hospitals, the people we trust with our family members' lives, have migrated into this same shady "don't trust the quoted price" category. And then we're surprised that some people don't realize this.

als, patients' bills go up.
Jupiterimages/Stockbyte/Getty Images
"And here's where I drew a dick on a piece of paper. It's going to cost you $32,000."
Once a hospital chain becomes the dominant health provider in an area, insurance companies are pretty much forced to keep that hospital as a client, because otherwise they'll lose customers faster than if they changed their name to "Death Panels of America, Inc." Who would sign up with an insurance company that isn't accepted by any doctor in a 100-mile radius? Once insurers are trapped like this, hospital chains are free to start pushing up their prices even more.
A big problem here is that when Americans think about healthcare costs, we're used to pointing at insurers like they're the sole bad guys. After all, for most of us, "insurance company" means "those guys who call you up in the ER after you've been bitten by a mountain lion and question whether you really need all those stitches." Hospitals, on the other hand, are the good guys: They sew us up, remove all those mountain lion teeth, and save our lives. Unfortunately, these days a lot of hospitals seem to be taking this innocent goodwill and using it to turn into the antagonists in a James Cameron movie.
Medioimages/Photodisc/Photodisc/Getty Images
If you're ever depressed about the modern world, it sometimes helps to imagine yourself as the hero in a cool dystopian sci-fi.
And one of the worst things about these increasingly awful medical bills is ...

#1. They Destroy the Way You Think About Money

Although the average American cable news station spends approximately 50 billion hours a year discussing healthcare, one thing hardly anyone talks about is the psychological effect of these stupidly huge bills. I know all about this, because I'm a person with chronic health problems who recently switched to private health insurance after many years participating in the socialized healthcare system known as "the U.S. military." I have the best insurance I can afford, and yet every trip to the mailbox involves psyching myself up for this week's third surprise bill, or maybe even another letter accusing me of getting a medically unnecessary blood test, because apparently I'm some kind of blood-test junkie who bursts into clinics and shakes down doctors to get my next phlebotomist-administered hit.
Keith Brofsky/Digital Vision/Getty Images
The needle is the only way I can feel anything anymore.
Logically, at this point I should become super financially responsible so I can pay these bills, right? But nope, it's a constant effort not to react in the exact opposite way. I want to be a responsible middle-class person with a mortgage and a sensible haircut and well-organized kitchen utensils, I really do, but what's the point in trying? At any moment in the near future, my insurance could decide to dispute a random medication and send me a bill that wipes out all my savings and more. So tell me why I shouldn't live in the moment and spend $250 on a jewel-encrusted cockring.
Digital Vision./Photodisc/Getty Images
Sir Edgar Crowington deserves only the best.
Yes, many things can go wrong in life. Your house might burn down. A dying bald eagle might fall on your parked car. The difference with medical bills is that they're so potentially huge and arbitrary that there is no preparing for them. You can't just buy insurance and stop worrying: Insurance might cover your bills, but it might not. You can't predict how bad your bills are going to be if you get hurt in an accident, because costs are pretty much random. I have no idea why one of my generic medications costs me $150 after insurance and the other costs me $15. It's not like the first one works 10 times better, or a panel determined that the second medicine is needed only by people who are jerks. The extent of your money-beatdown depends entirely on how your body decides to go wrong and how unlucky you are.
We're living in a society where an ordinary misfortune like a broken bone or a car accident can strike normal, responsible, insured Americans out of nowhere, and it could cost us $200 or it could cost us $200,000. There's nothing any of us can do to prevent this looming financial shark attack, except be incredibly rich. And we're all getting older, and most of us aren't in perfect health, so why not just say "fuck it, YOLO" and spend all our income on monster trucks and golden unicorn statues? Yet you'll hear people refer to this whole shitty situation as some kind of opportunity to learn and practice "personal responsibility." Guys, those words: I don't think they mean what you think they mean.
C. Coville has a Twitter here and a Tumblr here.

The NASDAQ Is Falling, And A Bunch Of Big Names Are Getting Crushed, Russell Broke Below Its 200MA Line, Upside Breakout In The Japanese Yen Starting ?!

The NASDAQ Is Falling, And A Bunch Of Big Names Are Getting Crushed
It’s already down over 1% in the early going. This comes on top of yesterday’s big losses.
In addition to the index losses, there are some big notable drops.
AOL is down 18% after beating on revenue but missing on earnings.
Twitter is down 3.5%. That stock got clobbered yesterday on the lockup expiration, and obviously the selling isn’t over yet.
Yahoo is down 5.6%. This is ominous since the world just got a look yesterday at the Alibaba S-1, which Yahoo owns a big part of.
King, the maker of Candy Crush, is down nearly 10% after earnings this morning..
Whole Foods is down 21.5% after the company warned on weak same-store sales numbers, which was the result of bigger competition.
Momentum stocks whacked again as Nasdaq declines
Russell Plunges To 3 Month Lows
Productivity Slows At Fastest Pace In A Year As Labor Costs Soar
Non-Farm productivity fell most in a year at 1.7% in Q1 - notably worse than the 1.2% drop that was expected. Output growth slowed dramatically and real compensation also fell.
Upside Breakout in the Japanese Yen starting???
This multi-year chart of the Japanese Yen (upper left) reflects that rising channel is in place looks to be in place with support tested of late. Over the past couple of years a bullish falling wedge could well have formed.
Is a breakout above the wedge taking place while traders own positions where rallies often take place in the Yen???
If the Power of the Pattern read is correct on the Yen, it could have an impact on portfolio construction and risk assets!
This only took place in 1999 & 2007…Now its happening again!
Only twice in 35-years has the NYSE Index been at all-time highs, when the Russell 2000 broke below its 200MA line. Those two times were in 1999 & 2007.
The above chart reflects where the S&P 500 was, when this took place.
Now its taking place for the third time in three decades. Will the “Third Time be a charm” per being different this time?
Stay tuned!!!
Is the Bull Trend in Transports about to derail?
The DJ Transportation Index is doing very well, as it is at/near all time highs. With two thirds of the economy fueled by the consumer, how these stocks perform can be viewed as a barometer of how the economy is doing.
Rail Traffic looks to be in good shape at this time, see below…
The Strategy I use is called TB&M, which stand for “Tops, Bottoms & No Middles.” I attempt to find key highs and lows, where reversals or exhaustion of trends might take place.
Without a doubt, the trend in the Transports is up right now, no matter which way you look at it. The confluence of trend lines and the Fibonacci extension has the “potential” to disrupt the trend in the Transportation index.
With the trend up, odds favor a breakout! Should these resistance points at (1) change the trend, we might pay attention to the potential message coming from Transports about  the direction of the economy.
Time to Worry About Stock Market Bubbles
Relative to long-term corporate earnings – and more in a minute on why that measure is important – stocks have been more expensive only three times over the past century than they are today, according to data from Robert Shiller, a Nobel laureate in economics. Those other three periods are not exactly reassuring, either: the 1920s, the late 1990s and in the prelude to the 2007 financial crisis.

Fortress’ Novogratz: Bitcoin is a fascinating story, and I think it’s real

Michael Novogratz, principal of Fortress Investment Group, spoke with Bloomberg Television anchor Stephanie Ruhle from the Sohn Investment Conference in New York today.
Novogratz talked about Bitcoin, saying, “Intellectually it’s a fascinating story to me, and I think it’s real. If you look at the total market cap of Bitcoin, it’s probably somewhere between $4.5 billion, $5 billion. There are in best estimates somewhere 30,000 individual programmers working on Bitcoin. My college roommate lives down in Barbados. He was the smartest guy that we went to school with. He full time works on derivatives of Bitcoin. So there’s this open source community where there’s huge brain power, let alone all the VC money that’s going in. And so from Marc Andreessen and his company to Benchmark…there’s lots of smart money going in. I’ve never seen a small project with more human capital going into it, and so I kind of want to bet just on that alone.”
He also commented on the state of the banking industry, saying, “Banks are going to slowly look more and more like utilities…Banks are going to be in less sexy businesses…The money-management business, and certainly the alternative money-management business, is about talent, and we’re always looking to pick up talent.”

STEPHANIE RUHLE, BLOOMBERG TELEVISION: I am here with the one, the only, Novo. Michael, we’re get into your trade idea, Brazil, so bad it’s good. Let’s talk macro. If you were a macro investor right now following trends, how are you surviving?
MICHAEL NOVOGRATZ, PRINCIPAL AND DIRECTOR, FORTRESS INVESTMENT GROUP: It’s been a frustrating year. Each time it looks like you’re going to get a break out, markets just kind of resume into the ranges they’ve been in. And so partly it’s you reset your – your mindset to let’s trade the next five to six week data series and let’s trade the ranges. Unfortunately, the ranges have gotten tighter and tighter and tighter, and so most macro funds seem to be chopping themselves up and losing small amounts of money.RUHLE: If volatility stays low, what do you do though?NOVOGRATZ: Well when volatility stays low and you can predict it to stay low for a while, trades like carry trades work. So emerging market carry works. Global equity markets should rally. What’s worrisome is volatility is low but we know it’s at an all-time low. And there’s a consensus around why it’s low, and so that just makes me nervous.RUHLE: When you say equity markets should rally, when you look at your overall business, do you think, I want to put more resources in equities, I want to hire equity teams. Is that how you chase the market?NOVOGRATZ: I think overall business, yeah. There’s going to continue to be a shift from bonds to stocks at one point. And so I think the equity markets are vibrant. There’s been a tremendous amount of rotation in the equity markets this year. And so not everyone’s done well in them, but there’s been certainly opportunity – sector opportunity in the equity space.RUHLE: But how hard is it? If you don’t have the good fortune to simply be a long-term investor if you’re got to be an active trader, how do you survive here? Look at the equity markets. It hasn’t been the easiest time.NOVOGRATZ: No, it’s been tough. Listen, it’s not – if this job was easy we’d all be rich. It’s not supposed to be an easy job and there are periods where it’s tougher than others. Wisdom hopefully is (ph) when it’s tough to bet less and to bring the – take some chips off the table and waiting until markets start trending.RUHLE: Well you’re avoiding the big trends and you’re going big. You’re wearing the shirt. I have to love that shirt. Brazil, so bad it’s good. Just a few years ago you and I were at the Ira Sohn conference where Eike Batista stood on that stage talking about what an incredible country it is, but it hasn’t had a good run.NOVOGRATZ: Brazil’s had a bad run and things are kind of going from bad to worse. Inflation has remained sticky. Potential GDP continues to kind of ratchet down. The unemployment rate stays low, which is keeping the pressure on inflation yet growth is slowing. And so it’s just not a good mix. My bet is that it is so bad that you’re going to see regime change come the October elections. And because pessimism is at an all-time high, when you go down and visit Brazil every local you speak to is wildly depressed.And broadly in markets, when everyone’s bullish you want to at times think about taking the other side, and when everyone’s pessimistic and there’s a possible catalyst for change and the catalyst will be either the pressure forcing President Dilma to a reform agenda or more likely her going further populist and losing the election.RUHLE: But are there any signals that make you believe they are going to turn the corner? Because everything you’re pointing out, whether it’s the worst preparation for Olympics ever, inflation, general sentiment, it’s all bad. So from where I sit, it feels like it’s only going to get worse.NOVOGRATZ: So from a trade perspective, the most promising thing is Dilma’s poll numbers continue to plummet. And if you had asked a Brazilian – if you had told a Brazilian two months ago, three months ago there was a shot that Dilma would lose the election, they would have said it was a five in 100 chance. And right now it’s probably a 30 percent chance in their mind (ph). And our view is she’ll probably lose the election.RUHLE: What’s the timing on when to put this type of trade on though? Because if we’re doing it now, you may have to go through a really rough year, and people don’t necessarily have that time horizon.NOVOGRATZ: I actually think the timing is now and into the election when people realize there’s a very good chance she’s going to lose. Brazil’s going to host the World Cup. They will have a temporary spike in inflation. It’s tough to be a president in a – in a developing country like Brazil who’s got a history of hyper inflation when you can’t get inflation under control. And so the spike in inflation I think will make her popularity even go lower. She’s praying for the soccer team like all the Brazilians to maybe give the country a lift and her to get some – some momentum from it, but – but our real sense – our serious sense is that she’s on a one-way ticket lower in polls. And as those polls tick lower, Brazilian assets will tick higher.RUHLE: All right. Well what happens if the World Cup doesn’t go so well? What happens if the Olympics is a whiff? What does that do to this trad?NOVOGRATZ: Listen, I think the – the bet is whoever comes next is going to have a reform agenda. And Brazil’s going to have some tough medicine to take. 2015 will be a tough medicine year, but we see in markets, markets discount good policy. And so listen, if Nevez, the opposition candidate comes in, he’s already made it clear through back channels he’s going to try to get Arminio Fraga as finance minister. Markets would respond spectacularly well for a while. Listen, does the trade last? It only lasts if those reforms actually happen. But you don’t need to have them happen for the market to at least want to anticipate them.RUHLE: Well when you’re talking about this trade a long-term win, it makes me think about smaller hedge funds, new guys that don’t necessarily have the opportunity to make the big investments you do, make the long-term investments. And the market has been really difficult this year. So is your overall opinion of the hedge fund space, are they going to have a tough time performing this year, especially for those who have less than a billion?NOVOGRATZ: Yeah. Listen, it’s – I think for both big and small hedge funds it’s been a tough start to the year. And when you have a tough start it makes it a tougher year, right? Fighting out of a hole is harder than starting when you’ve got 5 to 6, 10 percent of the – of the – the house’s money on your – on your table. And so it’s going to be a tougher year.RUHLE: Let’s talk about Bitcoin for a moment. You have been one of the big supporters of Bitcoin, something that has been criticized by the masses. Why you buying into the BC, brother?NOVOGRATZ: First of all, to be clear, I made a personal investment and our firm has made some small investments in Bitcoin.RUHLE: But your own money says more than the firm’s money.NOVOGRATZ: Intellectually it’s a fascinating story to me, and I think it’s real. If you look at the total market cap of Bitcoin, it’s probably somewhere between $4.5 billion, $5 billion. There are in best estimates somewhere 30,000 individual programmers working on Bitcoin. My college roommate lives down in Barbados. He was the smartest guy that we went to school with. He full time works on derivatives of Bitcoin.So there’s this open source community where there’s huge brain power, let alone all the VC money that’s going in. And so from Marc Andreessen and his company to Benchmark to…there’s lots of smart money going in. I’ve never seen a small project with more human capital going into it, and so I kind of want to bet just on that alone.RUHLE: But are you concerned at all that this could be Netscape? It’s a great idea in terms of being a disrupter, changing the way global payment takes place, but Bitcoin itself will be a failure. It’s only the first chapter.NOVOGRATZ: I think it’s got first mover advantage, but certainly there are risks. There will be a revolution in payment systems. And quite frankly there’ll be a democratization of finance at one point.RUHLE: What do you mean?NOVOGRATZ: I think you’re going to see things like peer-to-peer lending. The banks are – their biggest I think threat is the same thing that’s happened in so many other industries now happening to the finance industry, right? The Internet disintermediates large players and I think Bitcoin is just one of the threats that the finance industry the way we know it has coming against it.RUHLE: Bitcoin, the buy side and regulation, all those things are hurting banks. You’re someone – you came from Goldman Sachs. You interact with banks every day of the week. What’s the plight for banks? What’s the plight for bankers right now?NOVOGRATZ: I think banks are going to slowly look more and more like utilities and they’re going to be a nice place to work, but the regulators certainly don’t want them to grow. You’ve seen it now both Citibank wanting to – to return capital and not being able to. And so I think banks are going to be in less sexy businesses and they are going to run more – more regulated with higher risk. Banks are like fortresses right now. The one thing that has worked is the Volcker rule has worked. I think there’s very, very little risk in any of our banks right now. They run far, far less risks to equity than they did five, six years ago.RUHLE: Then in terms of human capital or business lines, are there any areas where you’re looking to increase your business today where banks or their people are getting out?NOVOGRATZ: Listen, the money management business, and certainly the alternative money management business, is about talent. And we’re always looking to pick up talent. I think you’d rather bet on the talent than on the specific niche that someone is in. And lots of talent are leaving the banks because of the compensation structure and the regulation. And so yes, we’re looking at picking up lots of talent in all kinds of positionsRUHLE: All right. Michael, thank you so much for joining us. Michael Novogratz. He’s the co-founder and president of Fortress Investments. 

Property Rights and Property Taxes—and Countries That Don’t Have Them

Do you really own something that you are forced to perpetually make payments on and which can be seized from you if you don’t pay?
I would say that you don’t.
You would possess such an item, but you wouldn’t own it—an important distinction
A ridiculous perversion of the concept of ownership and property rights has infected most of the world like a virus: something that most people unquestioningly accept as a normal part of life—like it’s a part of the eternal fabric of the cosmos.
I am talking about property taxes, of course.
You know, the annual tax you pay that is based not on whether any income was generated, but rather on the underlying value of real estate you supposedly “own.” There is no way to pay off this obligation in one fell swoop; it stays with you for as long as you “own” the property.
In actuality, you don’t own anything which you must pay property taxes on—you are merely renting it from the government.
Suppose you bought a sofa set and coffee table for your living room for $5,000 cash, and then had the obligation to pay $100—or a percentage of the furniture’s value—in tax each year for as long as you “owned” it. Then suppose that for whatever reason you’re unable or unwilling to pay your furniture’s property tax. It won’t take long for the government to swoop in and confiscate it to pay off your delinquent taxes. You get to “own” it as long as you pay the never-ending annual fee—stop paying and you’ll find out who really owns it.
While many people would correctly find a furniture property tax absurd, they also illogically find it acceptable for the government to levy an insatiable tax on different assets—namely their homes, offices, and raw land.
But to me at least, the type of asset being taxed is not what makes it absurd, it’s the concept of property taxes that is absurd.
Respect for property rights and property taxes are mutually exclusive concepts. What’s yours is yours, and you shouldn’t need to pay the government for permission to keep it.
It’s not uncommon for people in North America and Europe to pay tens of thousands of dollars per year in property taxes… just to live in their own homes. And this burden will almost certainly continue to rise. Property taxes are constantly being raised in most places, especially in places with poor fiscal health.
It’s very possible that over a lifetime, the total amount of property taxes extracted will exceed what was paid for the underlying property in the first place.
And, just like the furniture example above, if you don’t pay your property tax (AKA government rent) on the home you thought you owned, it will be confiscated. This is not as uncommon as some would believe. It was estimated that 10,000 people in Pennsylvania alone lose their homes annually because they aren’t able to keep up with the property taxes.
Using the word “own” and “ownership” in these contexts is the sloppy use of the word—which always leads to sloppy thinking.
Speaking of sloppy thinking, expect Boobus Americanus to say things like “how would we pay for local services like public schools if it weren’t for property taxes?” Of course, these services could be funded in many different ways—or better, they could be provided for in the free market. But don’t expect that to happen. In fact, given the social, political, and economic dynamics in the US and most of the rest of the West, expect the opposite—property taxes have nowhere to go but north.
It doesn’t have to be this way. You can own real estate in certain countries and can skip the annual property-tax harvest.
I have previously written that I view real estate in foreign countries—along with physical gold held abroad—as superior vehicles for long-term savings.
However, foreign real estate has its drawbacks. It’s illiquid and has carrying costs like maintenance expenses and, of course, property taxes. To diminish these costs that eat away at your real estate investment, it is essential to minimize or eliminate them.
Here’s a list of countries that do not levy any property taxes:
That’s it. If you want to escape the rapacious and ridiculous property tax, these are your options.
Ireland would have been on this list, but it recently adopted a property tax. This does not bode well for other EU countries that conceivably could face fiscal troubles and turn to property taxes as a solution—like Malta and Croatia.
Colombia, Costa Rica, Ecuador, and Nicaragua have property taxes, but the obligations are generally negligible.
The risk, of course, is that since a property tax is already in place in these countries it can easily be increased whenever the government decides it needs more revenue. Case in point: the bankrupt government of Greece. Consider the excerpt below from an article in The Guardian.
"The joke now doing the rounds is: if you want to punish your child, you threaten to pass on property to them… Greeks traditionally have always regarded property as a secure investment. But now it has become a huge millstone, given that the tax burden has increased sevenfold in the past two years alone."
The country on the list above that most interests me is the Cayman Islands, but to each his own. This is because most Caymanians are vehemently opposed to all forms of direct taxation and have never had it in their history. That attitude and history is a good guarantor that it will be very unlikely for a property tax to be imposed sometime in the future.
In any case, buying foreign real estate is a very individualized and often complex decision—but one that provides huge diversification benefits. Property taxes are but one consideration.
You should look at foreign real estate less as a vehicle for a quick return and more as a diversified long-term store of wealth. Wherever you decide to buy, it should also be in a place that you would actually want to spend some significant time in. That way, the property has value to you, regardless of whether it proves to be a good investment.
One expert on foreign real estate whom I’d highly recommend is none other than Doug Casey, the original International Man and my mentor. Doug’s been to over 175 countries and invested in real estate in a number them. He wrote a thick and detailed chapter on foreign real estate, including his favorite markets, for our Going Global publication, which is a must-read for those interested in this extremely important topic.

Gold – Fertile Ground for Sarcastic Analysis


(The following does not represent an accurate and true representation of my thinking.) I believe gold prices will fall hard between now and the US election in November 2016.
  • The US congress has shown remarkable progress in reducing both the annual deficit and the total national debt and may balance the budget in 2016. Consequently, gold prices will fall much further as we approach the election in 2016. Their fiscal accountability and balanced budgets are NOT supportive of higher gold prices.
  • China has imported a massive quantity of gold, both for private individuals and their central bank, but they will probably dump most of that gold when the price gets back above $1,500. Look out below!
  • The European Union has sworn off “printing money,” bailouts, bail-ins, and increased sovereign debts. Fiscal responsibility, reduced debt, and political integrity are all hazardous to gold prices.
  • The Japanese economy has turned around, their massive debt is NOT a problem, and everything looks like cherry blossoms for the next 20 years. Expect Japanese bonds, stocks, and the Yen to remain strong, and that should force gold to weaken considerably.
  • The “land of milk and honey” is just “over the hill.” Good times are coming again. The politicians on several continents have told us so, and they have a long track record of accountability and veracity. The more we trust politicians the more we know gold prices will fall.
  • Goldman Sxxx research says that gold is likely to go down in price, and we all know Goldman is fair and objective. We can trust what they publish.

  • All the gold in Fort Knox is still there. Audits once per century are like totally enough to confirm no gold is missing, leased, sold, hypothecated, otherwise encumbered, or imaginary. When will people stop beating this dead horse? People will eventually get the point – all the gold is really, truly, absolutely, for sure there – and then gold prices will plunge. Really!
  • Germany requested the return of 300 of their 1,500 tons officially stored at the NY Federal Reserve. They were promised the 300 tons would be delivered right away – as in seven years. So far Germany has received about 5 tons. So far, so good! No problem here! The remaining 295 tons are being loaded onto transport planes as we speak…… When the news is announced that German gold has been returned, the price of gold will probably plummet.
  • Russia and the US are moving troops, toppling governments, killing people, and playing war games as a political distraction from the real issue – Putin and Obama don’t want people to realize they are actually friends. All this Ukraine nonsense is just a diversion. Nothing to see here folks, move on and watch the newest episode of “Dancing with The Eurocrats.” When it becomes widely known that Putin and Obama are mutual admirers, I expect gold prices will fall hard. If somebody bombs something in the meantime, JP Morgxxx will sell a few hundred tons of paper gold in 12 seconds overnight on the COMEX and slam the price of paper gold down.
  • The unemployment rate in the US dropped again, per assurances from the BLS. Even though fewer Americans seem to be employed each month, the unemployment rate drops because of statistical magic. I think tax revenues will increase, entitlement benefits will decrease, and budget deficits will vanish, all thanks to statistical magic. I heard that Harry Potter works at the BLS! Fortunately, declining unemployment, reduced benefits for Social Security and Medicare, smaller deficits, and decreasing government pensions are all supportive of lower gold prices.
  • News Alert! Just in – the White House announced a new retirement plan for average Americans. You send money, we spend it, congress guarantees you’ll like it. What could go wrong? Oops, more bearish news for gold prices.
And so, ladies and gentlemen, it is perfectly clear that gold prices are headed south – and in a big way. For those of you who trust pictures, I have included a graph of gold prices since 1975. As you can see – it is perfectly clear – repeat – PERFECTLY CLEAR – gold prices have NOWHERE to go but down, down, down.
Click on image to enlarge.
Let me repeat two important points:
  • You can trust Goldman, our governments, and this analysis.
  • Gold prices must go down for all the above reasons.
I rest my case! Things are good, actually improving, and gold is headed down to about $400 per ounce. Of course, gasoline and food prices have been steadily increasing for the last 15 years, well actually for 100 years, but they are almost certain to go back down next month – or 2nd half at the latest.
You can take that to the bank!
Most insincerely,
GE Christenson
aka Deviant Investor