Truth is Stranger than Fiction
by ilene - May 20th, 2018 1:07 am
Truth is Stranger than Fiction
Courtesy of Michael Batnick
Imagine Jamie Dimon made a killing shorting J.P. Morgan stock during the Great Financial Recession? And imagine he didn’t get in any trouble for it?
This actually happened 90 years ago at Chase Manhattan Bank, while Albert Wiggin was at the helm. This story was marvelously told in Once in Golconda, by John Brooks.
Beginning in July, 1929, Wiggin- as astute as ever- began to see the prospects for the stock market in general and Chase stock in particular as dim. Accordingly, through one of his personal companies he sold over 42,000 shares of Chase stock short. He was then in the curious position of having a vested interest, and a huge one, in the deterioration of the institution he headed. Just as corporate officers are usually encouraged to own stock so that they will have added incentive to put out their best efforts, so Wiggin, with his short position in Chase stock, had provided himself with incentive to produce his worst efforts. This was legal; the audacity of his action was such that the question of forfending it by law had apparently never come up. Moreover, it was perfectly timed. When the account was closed that November, the whole market had collapsed as Wiggin had foreseen, and the profit to his personal company came to just over four million dollars. And no one- for several years- was the wiser; when Wiggin retired in 1932, the Chase’s executive committee thanked him fulsomely for his uncounted services to the bank and unanimously voted him a life pension of $100,000 per year.
The kicker is Wiggin used a Canadian shell company to short the stock so he didn’t pay taxes on any of his gains. When the Securities and Exchange act was enacted a few years later, section 16 was written to prevent such abuses of power by corporate directors. They called this the anti “anti-Wiggin” proposal.
One more wild story that happened during the Great Depression.
We joke about manipulation in the market, but when Roosevelt took us off the gold standard in 1933, there’s no other word to describe…
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Three Uncelebrated Edges
by ilene - May 19th, 2018 12:53 am
Three Uncelebrated Edges
Courtesy of Joshua M Brown
There are many edges for the modern money manager or financial advisor who is willing to unlearn the way things had been done in the olden days, the time before information was ubiquitous and investors had grown terminally skeptical of the industry.
The three uncelebrated edges I’m going to mention below are all immediately adoptable and ready to put into practice right away. They are not edges you’ll hear celebrated in the media because their benefits take a long time to accrue to the practitioner and their employ does not involve the kind of acrobatic feats of alpha generation that captivates a large crowd of clickers and viewers.
But, I have found, incorporating them into one’s practice and philosophy can lead to a great deal of job satisfaction and lifestyle improvement. This is because a) they are truly helpful to the recipients of your advice and b) they are promises that can actually be delivered upon, in a business where the term “guarantee” is practically a four-letter word.
1. Be boring
I did a post about how a major bank was going to open up hedge funds, private equity and venture capital to the masses with a new minimum buy-in of $100,000 for these strategies – down from the original $10 million. One of the stated purposes of this was to “increase engagement” between the wealth manager and the clients. Which is roughly translated to “keep things interesting and give people stuff to talk about.” Another way of putting it: Asset management as a form of recreation.
This will work for a little while, until the annual results of this sort of entertainment start to pile up. We call these accounts cocktail chatter portfolios and they always look worse the morning after.
An advisor or money manager in search of an edge can simply avoid building up an expectation within his or her clients’ hearts that the work they’re doing for them will be exciting, stimulating or worthy of daily discussion. I don’t have a specific academic study to site here so you’ll have to take my word for this – it strikes me…
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Wildfire risks are high again this year – here’s what travelers need to know
by ilene - May 18th, 2018 11:26 pm
Wildfire risks are high again this year – here's what travelers need to know
The Berry Fire burns in Grand Teton National Park, Wyoming, August 27, 2016. AP Photo/Brennan Linsley, File
Courtesy of Ragan Adams, Colorado State University
Memorial Day marks the traditional opening of the summer travel season. This year the American Automobile Association projects that more than 41.5 million Americans will hit the road over Memorial Day weekend, nearly 5 percent more than last year and the most in a dozen years.
For many years, AAA has urged drivers to prepare for trips through steps such as testing their car batteries, checking for engine coolant leaks, and making sure their tires are in good shape. The group also recommends packing a mobile phone and car charger, a flashlight with extra batteries, a first-aid kit, a basic toolkit, and drinking water and snacks for all passengers.
But travelers should also think about conditions beyond their cars. As coordinator of Colorado State University’s Veterinary Extension programs, I help people in rural and urban communities manage all kinds of threats that can affect them and their animals, from disease to disasters. When people travel in unfamiliar places, far from their social safety nets, they should know what challenging conditions exist and prepare appropriately. In particular, anyone visiting the western United States this summer should understand risks associated with wildfires, since once again the risk of fires is high in many areas.
Thinking of lighting a campfire? Here are some quick tips on what you must consider before and after.
Understanding fire conditions
The 2017 wildfire season was one of the most challenging years on record. More than 71,000 wildfires burnt over 10 million acres. Federal agencies spent nearly US$3 billion on fire suppression, and 14 firefighters were killed in action.
This year the U.S. Forest Service expects another above-average fire season. Many parts of the Southwest that depend on winter precipitation for moisture are dry. Coupled with above-average growth of grasses last year, conditions are ripe to turn a harmless spark into flames. Wildland fire potential…
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Venezuelans are boycotting their presidential election
by ilene - May 18th, 2018 10:51 pm
Venezuelans are boycotting their presidential election
Despite his 20 percent approval rate, President Nicolas Maduro is almost assured a win in Venezuela’s May 20 election. The opposition says the vote is a “farce.” REUTERS/Carlos Garcia Rawlins
Courtesy of Marco Aponte-Moreno, St Mary's College of California
Venezuela’s May 20 presidential election may be an election in name only.
Nicolás Maduro is widely expected to be reelected as Venezuela’s president despite his 20 percent approval rating and profound mismanagement of the country’s humanitarian and economic crisis.
Maduro’s strongest competitor is Henri Falcón, a former state governor once associated with the Venezuelan opposition. But he broke ranks with opposition parties over their decision in February to boycott a presidential election they consider fraudulent.
The government has grown increasingly authoritarian since Maduro was narrowly elected in 2013 to succeed Hugo Chávez, Venezuela’s popular leftist leader and Maduro’s mentor. The Socialist regime is now deploying all its amassed powers to ensure that this disliked president wins reelection.
As a Venezuelan academic who has followed the country’s politics for two decades, I believe that voter participation on Sunday will merely legitimize Maduro’s regime by making it appear democratic.
Reasons not to vote
Mimicking democracy is a classic trick of authoritarian leaders worldwide.
Since announcing it would hold a 2018 presidential election, Maduro’s government has severely limited who can appear on the ballot. Four of the five most prominent opposition leaders have been either jailed or barred from office – a main reason for the boycott.
And since many Venezuelans view Falcón as a traitor whose bid for the presidency helps Maduro, millions of voters are without a viable candidate.
Legally, the election may be unconstitutional because it was called by the Constituent Assembly. The Socialist Party created and installed this legislative super body in 2017 to undermine the opposition-dominated Venezuelan National Assembly.
Many Venezuelans generally distrust their electoral system – for good reason.
Smartmatic, the London-based company that long provided Venezuela’s voting machines, announced that the turnout to vote for Maduro’s Constituent Assembly in 2017…
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The Long Death Of America’s Middle Class
by Zero Hedge - May 18th, 2018 10:00 pm
Courtesy of Nick Giambruno, Casey Research
In America, what separates the “haves” and the “have nots” has never been wider. It’s a genuine crisis. And yet, few people know why this is happening…
The American middle class is dying.
In 2015, it dipped below 50% of the population for the first time since data collection started on the issue. It’s now an official minority group.
Meanwhile, nearly half of Americans don’t have enough money to cover a surprise $400 expense. Many are living paycheck to paycheck, with little to no cushion. And US homes are less affordable than they’ve been in decades—possibly ever.
I’ll tell you why this is happening and how to secure your spot among the “haves” in a moment. But first, let’s take a look at the America that was.
The Largest Middle Class in World History
The late 1950s was the golden age of America’s middle class.
This isn’t nostalgia talking. The US really did have robust Main Streets and thriving small businesses.
Back then, the US produced three-quarters of the world’s cars and airplanes. Americans produced most of the world’s steel and built the majority of the world’s skyscrapers.
Plus, the US stock market held the bulk of the world’s total stock market capitalization.
All this productivity gave the average American an unusually high standard of living.
Around then, a husband could support his family on an average income. He and his wife likely owned their own home, as well as their car. They had multiple children—and didn’t think much of the cost of having more. Plus, they had money to save.
The Bleak Situation Today
Compare that to the average family today. Both spouses likely have to work—whether they want to or not—just to afford the same basic lifestyle.
Plus, it now costs well over $200,000 to raise a child, on average. And that doesn’t even include college costs. Back in 1960, it cost roughly $25,000.
This hefty price tag is one of the main reasons middle-class families are having fewer children… or none at all.
In short, the average American’s standard of living has taken a huge…
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4 Reasons Why Markets Will Crash Again
by Zero Hedge - May 18th, 2018 2:13 pm
Courtesy of Zero Hedge
By Stephen Guilfoyle, TheStreet.com
Blackest Of Fridays
The closing bell had just stopped ringing. The phones certainly had not. It had been obvious to all of us for several hours now that equity markets had crashed. There were no circuit breakers in place. There were no algorithms. There were no methods of immediate electronic order execution in place. Bids and offers still had to be publicly (and verbally) announced at the point of sale.
My spot was just under the podium where television viewers now watch that already mentioned closing bell ring every day. The financial media still was not permitted on the trading floor. That was still several years in the future. They waited for us out on Broad Street… in hordes. They would wait for a while. Most of us would not leave the floor that night until close to midnight. Most of us would be in round the clock meetings… for a week.
The date was October 19th, 1987. As a group, traders were physically depleted due to the labor intensive nature of the job in those days. We have experienced several market "crashes" across the decades that have passed since. Of course nothing even comes close in terms of what can be lost over a single trading session. Still, the money disappears… but, quietly. Maybe, just maybe that's even more dangerous. Maybe.
Markets Will Crash Again
When? Tough question. One thing we do know though, is that highs and lows do happen, and the further down the road we go, there seems to be greater reliance upon speed, and less upon sentient price discovery at a centralized point of sale. You and I, and every honest person who watches the marketplace know that this is dangerous.
If we are unable to ascertain the when, are we able to determine the why? Why will markets crash next time? Four obvious reasons are:
1) Policy Error
Eventual policy error is almost written in stone. The Federal Reserve is in a tough spot. No joke. The economy is growing. Q2 GDP, if you follow the Atlanta Fed, is running at an annualized…
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Scott Pruitt’s approach to pollution control will make the air dirtier and Americans less healthy
by ilene - May 18th, 2018 1:20 pm
Scott Pruitt's approach to pollution control will make the air dirtier and Americans less healthy
Smog alert in Cleveland, Ohio, July 20, 1973. USEPA
Courtesy of Robert Percival, University of Maryland
Environmental Protection Agency Administrator Scott Pruitt’s ethical lapses and extravagant spending habits have distracted the public from what he is doing to roll back important environmental protections.
Pruitt helped persuade President Donald Trump to withdraw from the Paris climate accord, making the United States the only country in the world to reject the pact. At Trump’s urging, Pruitt has moved to repeal the Obama administration’s Clean Power Plan and EPA rules clarifying federal jurisdiction to protect wetlands.
He also plans to scrap national fuel economy standards the auto industry once embraced. And he sought to suspend regulation of methane leaks from new oil and gas wells, but was overruled by a federal court.
And Pruitt’s agenda extends far beyond simply rolling back Obama administration initiatives. In a memo to EPA staff on May 9, 2018, Pruitt ordered significant changes in the process for setting air quality standards under the Clean Air Act, in the name of “cooperative federalism and the rule of law.”
These standards are the heart of what has been the most successful environmental law in history. According to the EPA’s own estimates, the Clean Air Act saves thousands of lives every year and generates net benefits to society that are vastly larger than the costs of complying with it.
But the law is now under attack from the very agency charged with implementing it. Pruitt seeks to undermine the scientific basis for the EPA’s national air quality standards by changing who advises the EPA, restricting the data they can use, and requiring them to shift their focus away from protecting public health.
EPA’s estimated benefits and costs of the Clean Air Act from 1990-2020. About 85 percent of benefits are attributable to avoided premature deaths associated with reductions in particle pollution. USEPA
Science-based regulation
The Clean Air Act…
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Why the EPA’s ‘secret science’ proposal alarms public health experts
by ilene - May 18th, 2018 1:06 pm
Why the EPA's 'secret science' proposal alarms public health experts
The landmark Harvard Six Cities study found a strong link between air pollution and health risks. Pixabay
Courtesy of Bernard Goldstein, University of Pittsburgh
Later this month, the EPA could finalize a controversial rule to limit what scientific research the agency can use in writing environmental regulations.
I write as an academic who has been involved in air pollution issues for over 50 years and a former EPA assistant administrator for research and development, a political appointment position, under President Reagan. To understand why this proposed change is so controversial in the scientific community, including the EPA’s own Science Advisory Board, one needs to understand a landmark study in the history of air pollution control and science policy.
Done by Harvard researchers, the 1993 Six Cities study identified fine particulate pollution that goes deeply into the lungs, largely produced from fossil fuel combustion, as being harmful to health. This core finding, along with other studies, led to new standards that saved thousands of lives.
But under the current proposal, data from that study could not be used to inform EPA policy because the underlying data was not made publicly available.
Attacking the Harvard Six Cities study as “secret science” has been central to a long and fierce onslaught in the much broader battle over the role of science in protecting the environment. This attack is now poised for success under industry-friendly EPA Administrator Scott Pruitt.
Industry pushback
When the EPA was formed in 1970, among its major challenges was controlling smoke from coal-fired power plants and industries as demanded by the Clean Air Act. The CAA requires that science, not economics, determines enforceable outdoor standards.
The gold standard for epidemiology, or the study of diseases and its causes, is the double-blind randomized control trial. In these trials half of an affected volunteer group is given the potential therapy and the other half a placebo – and neither the researcher nor the patient knows which until the code is broken.
But that is an impossible standard for environmental epidemiology. Imagine the outcry…
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Vatican Assails Wall Street for Creating an “Amoral Culture”
by ilene - May 18th, 2018 7:18 am
Courtesy of Pam Martens.
Pope Francis, Who Advocates Against Materialism, Arrives at the White House on September 23, 2015 in a Humble Little Fiat
The Vatican released a lengthy report yesterday on how the drive for accumulating money at any cost has turned Wall Street and much of the global financial system into an “amoral culture,” noting that the idea that markets will be self-policing is pure bunk. The Vatican has apparently decided to keep the debate alive that Senator Bernie Sanders started during the presidential campaign of 2016 when he repeatedly railed against Wall Street for having a “business model of fraud.” The Vatican’s entry into this critical conversation would be much more meaningful if each time it or the Pope lectures the world on the meaning of morality they would acknowledge the Catholic Church’s own moral failings over decades in protecting sexual predators of children, refusing to report the assaults to law enforcement and moving the predators from parish to parish — not all that dissimilar to the private justice system run by Wall Street as predator brokers move from firm to firm. (See our related article on the Pope here.)
That being said, there were some interesting and profound nuggets in both the press conference held by the Vatican to release the report and in the report itself, which was titled: “Considerations for an Ethical Discernment Regarding Some Aspects of the Present Economic-Financial System.” H.E. Msgr. Luis Francisco Ladaria Ferrer, S.J., prefect of the Congregation for the Doctrine of the Faith had this to say at the press conference:
“The purpose of these Considerations is to state clearly that, at the root of the spread of dishonest and predatory financial practices, there are first of all an anthropological myopia and a progressive crisis of the human that have been achieved. Man, today, no longer knowing who he is, and what he is doing in the world, does not even know how to act well, ending up remaining at the mercy of the convenience of the moment and of the interests that dominate the market.
“The profit of the strongest has taken over from the authentic good and has become the real dominant factor in economic and social relations. In this way, the common good has disappeared in many environments from the horizons…
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An Empire Of Nothing At All – A Staggeringly Well-Funded Blowback Machine
by Zero Hedge - May 17th, 2018 11:25 pm
Courtesy of Tom Engelhardt, TomDispatch.com
[This essay is the introduction to Tom Engelhardt’s new book, A Nation Unmade by War, a Dispatch Book published by Haymarket Books.]
As I was putting the finishing touches on my new book, the Costs of War Project at Brown University’s Watson Institute published an estimate of the taxpayer dollars that will have gone into America’s war on terror from September 12, 2001, through fiscal year 2018. That figure: a cool $5.6 trillion (including the future costs of caring for our war vets).
On average, that’s at least $23,386 per taxpayer.
Keep in mind that such figures, however eye-popping, are only the dollar costs of our wars. They don’t, for instance, include the psychic costs to the Americans mangled in one way or another in those never-ending conflicts. They don’t include the costs to this country’s infrastructure, which has been crumbling while taxpayer dollars flow copiously and in a remarkably — in these years, almost uniquely — bipartisan fashion into what’s still laughably called “national security.” That’s not, of course, what would make most of us more secure, but what would make them — the denizens of the national security state — ever more secure in Washington and elsewhere. We’re talking about the Pentagon, the Department of Homeland Security, the U.S. nuclear complex, and the rest of that state-within-a-state, including its many intelligence agencies and the warrior corporations that have, by now, been fused into that vast and vastly profitable interlocking structure.
In reality, the costs of America’s wars, still spreading in the Trump era, are incalculable. Just look at photos of the cities of Ramadi or Mosul in Iraq, Raqqa or Aleppo in Syria, Sirte in Libya, or Marawi in the southern Philippines, all in ruins in the wake of the conflicts Washington set off in the post–9/11 years, and try to put a price on them. Those views of mile upon mile of rubble, often without a building still standing untouched, should take anyone’s breath away. Some of those cities may never be fully rebuilt.
And how could you even begin to put a dollars-and-cents value on the larger human costs of those wars: the hundreds of thousands of dead? The tens of millions of people displaced in…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site
