• How Will the EU Deal With Brexit?

    25.05.2017 • Great BritainComments Off on How Will the EU Deal With Brexit?

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    Nick Hubble – Capital and Conflict (Great Britain) –

    If neighbourhood cats keep fighting, then putting them in a bag seems like a bad idea. Unless you’re an EU politician. They want to keep pulling the strings even tighter.

    Europe’s various countries all have a history of wars. They don’t really have a consistent history of countries in the first place, but Europe was definitely a violent place. Probably since the dawn of man, which recent discoveries place in Europe instead of Africa thanks to some very old jaws found in Bulgaria.

    Anyway, the EU’s much touted cause is to put a stop to conflicts in Europe. We much prefer them elsewhere, like in the Middle East. But binding countries together in a union is surely more likely to have the opposite effect from promoting peace, just as it would with cats in a bag. Brexit has created vehemence that Europe hasn’t seen since the last Euro football cup of 2016.

    Will Britain even be invited in 2020? Will a Commonwealth football cup have the same feel? Perhaps we could win!

    Back to serious issues. These days countries still have different visions for Europe. Some want to unify it. Like Napoleon and Hitler did. Some want trade and harmony but independence of various nation states. And some want to leave altogether.

    The problem is you can’t have all three at the same time. The EU has forced integration at each step of the way. Brexit is the first time a country has rejected this in the only way you can – leave the union altogether. Some refused to join. They seem better off.

    The union’s supposed aims of cooperation and openness will now be tested. What’s more important, the EU’s integrity or its values? Will the EU allow Britain to leave in a way that continues cooperation and openness, or will it punish us and turn its back on what it supposedly stands for?

    We have to answer different questions first.

    What’s the EU’s nature? Does ever closer union follow inherently from the EU’s existence? Or is the nation state still a compatible concept? What is the EU’s equilibrium? Does it include shared debts, a unified defence force, international taxes and an EU finance minister?

    If ever closer union will inherently happen, will that be with the consent of all EU countries, or just some? What proportion of voters across the EU and within each nation must agree?

    The problem with the EU is that none of these questions have a stable answer. They evolve in whatever way is needed to expand EU powers. You vote “no” to a proposed constitution, you have to vote again. You vote to leave, you will be punished. Unlike free markets, the evolution of politics is not a steady improvement.

    The situations of Brexit, Greece, Turkey, refugees and the many other problems that the EU face remind me of a scene from the first Star Wars movie: “The more you tighten your grip, the more star systems will slip through your fingers.”

    Let’s take a look at the state of the conflict on the ground…

     

    The powers that be are tied together but disagree

    Strangely enough, Europe’s dominant power Germany is the one pushing for a weaker union. At least its current governing party is. Chancellor Angela Merkel’s biggest reason is rather typical – eurobonds. She doesn’t want to share Germany’s credit rating with nations who haven’t earned it.

    To be clear, as a half German myself this seems self-evident. Greece is struggling for a reason. If you don’t address the reason, you only paper over the consequences.

    That’s what’s causing the rift with Greece. The German influence in debt relief and bailout talks is trying to push Greece into economic policies before debt relief is approved. The International Monetary Fund wants debt relief as part of the agreement. Germans see this as accepting an already broken promise.

    The recent talks with Greece failed and are beginning anew soon.

    Back to eurobonds. Merkel’s key ally in Europe is unfortunately not actually an ally on EU matters. The German newspaper Der Spiegel called the new French president Emmanuel Macron a “frenemy”. He is pushing for the eurozone to integrate at a far higher level.

    Jointly issued eurobonds, a shared finance minister and many more expansions of EU powers are on the French agenda. They aren’t on the German one. Unless there is a change of government in coming elections, which is looking very unlikely. Merkel’s challenger is a former EU parliament president, but he isn’t making much way. My birthplace voted against his party for the second time in more than 50 years.

    You’d think that Macron would keep quiet about the EU’s ambitions given his rival was the anti-EU Marine Le Pen and Macron still faces a parliamentary battle. But in a surprising twist, Le Pen reversed her manifesto promise to challenge French membership in the EU and the euro. She doesn’t want her party’s fate to be that of Ukip shortly.

    So what is Macron playing at? He wants France to have access to Germany’s credit rating too.

    One of the wild cards in all this is Merkel’s supposed successor Wolfgang Schaeuble. The German finance minister is notoriously hard-hearted if you ask a Greek. If Schaeuble remains successor and if Merkel bows out at some stage, Germany’s EU policy could become even more anti-EU integration.

    Suddenly the Germans will find themselves wishing they had Britain alongside them inside the EU.

    What does Brexit mean for Europe?

    Europe’s divergent understandings of reality explain why Brexit is such an odd issue. Many Europeans can’t understand why the British want to leave. It’s not in their capacity to value what the EU has encroached because they never had it in the first place.

    Europe sees Brexit as a vindictive hissy fit. It thinks it’s a political protest movement like foreigners see Donald Trump’s election.

    Eurosceptics see Brexit as a vindication of their philosophical positions. That puts the two negotiating sides on a completely different plane.

    The British want a deal. They don’t realise the animosity they’ve created. The Europeans want to counter what they see as a political stunt, not realising that there are serious matters at hand. When two sides meet with completely different understandings of what’s going on, it always begins badly.

    The British are in an outrageously strong negotiating position. Europe cannot punish Britain without going against its own principles. And Britain can easily be patient, as well as walk away. The two-year deadline is a ruse. It can be extended. And if Britain is already threatening to quit talks, time is obviously in our favour. Britain’s negotiator simply needs to stake a reasonable position and wait for EU politicians to become reasonable.

    What effect is Brexit having inside Europe?

    In an academic paper from the London School of Economics, academics Aleks Szczerbiak and Paul Taggart analysed a recent survey on the effects of Brexit on Europe’s politics. There aren’t any big ones. At least not compared to the debt crisis of 2012 and the migration crisis.

    In fact, that’s the best way to think about the EU. It is a union of crises. The idea that unsustainable Greek government debt would cause such a hullabaloo across Europe must have seemed laughable just a few decades ago. Spanish unemployment above 20% making international lines is strange too – it’s a return to pre-EU levels.

    Eventually Europe’s voters will realise they have been flung into a bag with people they don’t agree with on the things that make politics happen. The three freedoms of Europe were fine. Trying to create political unity where there isn’t any is doomed to failure.

    Yesterday we took a look at how you can use bitcoin to trade geopolitical tension. Imagine if a new crisis took hold in Europe now. It would make bitcoin soar.

    This is one of the key reasons my colleague Sam Volkering calls bitcoin and other cryptocurrencies “the smartest speculation in the world today”. The flight into cryptocurrencies on the back of global political unrest has been a huge catalyst. And if you’ve been paying attention, you’ll already know that the whole cryptocurrency market is on an absolute tear at the minute. Sam has been analysing this market almost since its birth. He invested in bitcoin as early as 2011 – when one coin cost about US$12. Today one coin would set you back more than $2,000. This is the fastest-rising market in the world, bar none.

    Sam believes he has uncovered one digital currency capable of turning a small stake of £200 into almost £70k. You read that right. That is 34,000% growth potential. This market is unbound. Incredibly, Sam would like to offer you a £200 stake for you to dip your toe in the market. He can only offering this “grub stake” to 500 people. If you fancy taking him up on it – everything you need to know is here.

    Until next time,

    Nick Hubble
    Editor, Capital & Conflict

    -Read more at www.capitalandconflict.com-

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  • Robot Pets Expected to Reap Record Returns

    25.05.2017 • Great BritainComments Off on Robot Pets Expected to Reap Record Returns

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    Guest Contributor – Exponential Investor (Great Britain) –

    There are hundreds of millions of pets around the world. Pet owners typically tend to exercise more – and enjoy lower stress and better mental health. However, animals require expensive food and veterinary care. Additionally, accommodation rules, and commuter lifes, make pet care impossible for many. One alternative is a robot pet.

    But does anyone really want a robotic companion? The craze for Tamagotchi showed that this surprising market may have real potential. The coming artificial intelligence revolution means that such experiences are likely to become far more rewarding in future.

    Today, we’ll meet two people who think that robotics could be a future alternative to pet ownership. What’s more, their empathic technology approach could provide a new type of user experience – in fields as diverse as toys, and business computing.

    Konpanion is founded by Alexandre Colle and Swen Gaudl. It’s a very new project, specialising in emotional and life robotics. The team has a radical vision – to change the way we view consumer robotics and home entertainment.

    AL: It’s an unusual field. Can you tell me about your vision?

    AC: The industry’s goal is to blur the lines between material and immaterial. Groundbreaking applications like Pokémon Go demonstrate the undeniable success of augmented reality. This has shown consumer appetite, as well as rare approval by health group advocates. All major entertainment companies are investing massively in the field, from Nintendo to Disney. They are looking for a holistic experience.

    AL: What do you mean by holistic?

    SG: By holistic we mean that the brand should not try to fulfill only one need for the consumer, but try to give more value to the user by addressing different needs at the same time. Digital platforms immerse the consumer in branded content. A couple of good examples are Hello Barbie and Barbie Hologram or the Skylanders brand. This gives the consumer a real impression of interaction with the brand and benefits the larger range of related products. This is what we call holistic.

    AC: If brands become meaningful content providers may not need advertising anymore. Consumers happily digest the brand storytelling, making them loyal and engaged. Disney and Star Wars are good examples.

    AL: Why did you focus on this? Did you notice a change in people’s tastes?

    SG: If you look at the video game industry and the prime-time show business model, both have been proving for the last ten years that originality and brand sell more than anything. However, the indie game model demonstrates a more sensible approach to gaming and design, which is flourishing in the UK. The major companies are still incredibly successful. However, the small indie video game studios – and project-based, kickstarted companies – have proven the need for a creative platform for more curious and demanding players. These are the ones which require a novel approach – and who are open to new and innovative products.

    AL: Let’s talk about your immediate market. What is happening in the consumer robotics world? 

    AC: Recently the public was presented with a lot of new concepts. These include Jibo, a minimalist non-humanoid, stationary assistant; Pepper, a humanoid roaming information system and robot; and Buddy, a humanoid toy robot.

    These are the main social robots released (or about to be released) in the market. They have the most media coverage – especially Pepper, whose parent company Aldebaran was acquired by SoftBank a few years back. But if you look at all of them you can see that it has proven very difficult to transform a robotic appliance into a life product. Jibo, with its move away from a humanoid shape and its distinctive minimalist , has probably been better at that than the other two – but there’s loads of untapped potential.

    A home or social robot is not just an electronic appliance: it’s a pleasing artifact, a service provider, and a proper autonomous companion. In our belief, meeting this challenge is the main hurdle for the non-toy home robotics industry.

    AL: What are these robots actually useful for? Can I check my emails on my robot dog? 

    AC: Redundancy is a product killer. Why would you need another appliance to show you email or video – when a phone does that equally well? Furthermore, there’s strong competition from Amazon Echo. It’s difficult for companion products to compete technically, and stay relevant. Currently, the really successful products are a union of form and function. If you look at successful home robots, you see the vacuum cleaners and lawn mowers. Automating vacuum cleaners only replaces a tool. The resulting products are decent, but they are non-ambiguous engineered machines. If you want more, we are back to idea of the holistic robot.

    We need to create an entire brand ecosystem around the robots – in the same as we create life brands. We put too much focus on the technical aspects of the robot, when what we need to deliver at the end of the day is a social home companion. Most companies seem to miss the companion part entirely while focusing on the novelty of the robotic appliance. Brands are able to create a compelling story, a vision of the home of tomorrow, and a sense of what is wellbeing for people. What do they truly need to make their life better? We believe in autonomous robots with a heart, and simple but meaningful functionalities – all powered by our revolutionary emotional AI system.

    AL: How big is the domestic robotic market? 

    AC: The service robot field is booming – but the social market is still in its infancy. We think that consumer robots, and their market and role, are not properly understood, yet. Social robots are life appliances existing in a human-centered ecosystem. They must earn their own place, next to the TV, your favorite sofa, and also house your pets.

    AL: Do you see home robots competing directly with pets? 

    AC: We don’t want to create a competition with pets, as they can provide great value. But sometimes it is not possible or desirable to have a real pet – due to allergies, age, space, free time, etc. Our products are meant to be integrated into people’s lives in a meaningful way, and offer a holistic experience. We aim to add value beyond simple convenience – such as checking your email. The competition – such as Pepper, Jibo, and Amazon’s Alexa assistant – look like a series of utilitarian personal assistants. They are mere tools, without any added value. This is something we want to change.

    AL: What is the main challenge for the industry? 

    SG: As life products, social robots should be created by designers and marketers, rather than by engineers. They should be inspired by fashion trends. We do not want to create a brand of products that each solves a specific problem, such as cleaning your home. We want to fill people’s lives with a new entity, whose role is to be a companion – an independent entity, which people like to engage with.

    AC: People like pets, not because they are useful: because they give unconditional love, require care and enjoy our presence. This is what Konpanion is aiming for.

    AL: Can you tell us more about your project? 

    AC: We are in the process of building a life luxury brand, with a new species of artificial creatures. Our approach is dedicated to modern homes, complete with a creative brand identity and a strong story behind each product. As for our ultimate goal – we believe in robotic autonomy and the impact artificial emotions can have on the consumer. Our robots are to be more independent than previous robots. They are also intended to show more natural and emotional responses – but they are ultimately still machines and are designed by us.

    SG: Our proprietary artificial intelligence gives us the opportunity to create unique characters. They will not behave like repetitive machines, but be more life-like and independent, with their own artificial feelings and emotional responses. In some sense they will be the same as your cat or dog. However, they are still machines, so there is a way of resetting them. Their responses are constructed out of a rich set of basic responses. These combine to create a more lifelike impression, making them feel more natural.

    AL: What about your vision of the future of robotics? 

    AC: As robotics becomes more and more publicly accepted and discussed, it raises very important ethical and political questions. Now, more than ever, it’s time improve the industry’s image.

    SG: People are getting afraid of robotics, and this threatens progress. There is so much to do to change the perception of the public towards futuristic tech, such as AI. A lot of players in the industry don’t even seem to care – ie, Boston Dynamics with their robots for example.

    AC: We are inventing a radically new approach to robotic design, where not only the function is celebrated, but also the image. We think that it will enrich people’s lives. How we perceive this very intimate – and soon-to-be intelligent – collaborator will shape the future of mankind.


    That’s one of the more unusual visions for the future, which we’ve heard at Exponential Investor. Do you fancy interacting with a robot dog? Let us know at: andrew@southbankresearch.com.

    Best,

    Andrew Lockley
    Exponential Investor

    -Read more at www.exponentialinvestor.com-

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  • Which Timeless Asset Just Outperformed Buffett?

    25.05.2017 • United StatesComments Off on Which Timeless Asset Just Outperformed Buffett?

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    Bill Bonner – Bill Bonner’s Diary (United States) –

    GUALFIN, ARGENTINA – We’re taking the doctor’s orders; 9,000 feet above sea level just doesn’t seem to work for us.

    So we moved down to the tiny casita we built near the vineyard, 1,000 feet lower.

    We spend the night there and commute back to the main house in the morning.

    New Adventure

    The casita is an adventure in itself.

    It was meant to test the limits of minimalism in domestic architecture. Handmade with local materials by your editor and two sons, there is no wood used except in doors and windows.

    Bill’s casita near the vineyard

    And the only power comes from a car battery. It powers two lights… and pumps water up to a reservoir. From there, the water flows into a small, black tank, the simplest water heater ever built.

    We have cold water in the morning and warm water in the evening. We cook over an open fire.

    It’s a delightful little holiday… in its own quirky way.

    Dead Before Arrival

    But work goes on! Our job is to keep an eye on the world of money and try to make sense of it.

    Two big stories dominated the financial news yesterday – both meaningless.

    First, the S&P 500 hit an all-time high… after the Fed made its usual muffled noises about reducing its balance sheet (unwinding quantitative easing [QE]).

    It will “soon be appropriate” to tighten up a bit, said the Fed.

    Or maybe not. GDP growth fell in the first quarter. And inflation fell last month, suggesting that it may not be appropriate after all.

    Second, President Trump’s budget proposal got some attention.

    “Dead before arrival,” says our friend David Stockman, who served as President Reagan’s budget chief. David:

    There’s no way Trump will be able to ram any meaningful cuts through the congressional meat grinder, no matter how fiscally sound. The Dems and their media accomplices are already denouncing the Trump budget for shredding the safety net and attacking the poor.

    Congress, including most Republicans, will not go along with cuts in Social Security disability or over $600 billion in Medicaid cuts over the next 10 years, just to name some of the proposed reductions.

    But what did you expect?

    The Donald’s budget has some good ideas… some bad ideas… and some ideas that make you wonder. But it doesn’t matter. The Deep State, not the White House, controls the budget process.

    Since the election of George W. Bush, insiders make sure that all major constituents of the Imperial Establishment get their money.

    No crony left behind!

    So let’s move on…

    Two and Twenty

    Yesterday, we looked at how expensive mutual fund management fees can be.

    Two percent doesn’t seem like much. But if you’re making only 4% a year, you’re giving up half your gains to the manager.

    Hedge funds – which are free to use various strategies such as betting stocks will fall – are even worse. They charge 2% on the principle plus 20% of the profits.

    Imagine you begin with $100,000 and the fund loses 50% one year and makes 50% the next. You’re even, right?

    Very wrong.

    The manager took $2,000 for his fee. Plus, you lost $50,000. So you end the first year with $48,000.

    The following year, you see a gain of $24,000. But you give 20% of that to the manager… plus the 2% management fee.

    You end up down more than $40,000… after paying nearly $8,000 to the manager.

    Stick with that deal long enough and the manager will have 100% of your money.

    Superinvestor Warren Buffett says most people would be better off avoiding these costs… and the risk that the fund manager is a dud… by buying a low-cost ETF that tracks the performance of the S&P 500.

    You could also avoid the management fees by simply buying shares in Buffett’s investment firm, Berkshire Hathaway. You get to invest alongside the world’s greatest investor… at zero cost.

    Gold Shines

    But that doesn’t mean you’ll make money with Buffett. Over the past 20 years, Berkshire Hathaway failed to beat the return from 30-year U.S. Treasurys.

    What? How could that be?

    Following the 2008 crisis, the Fed bought long-term Treasurys as part of its QE program, driving up prices. Even Buffett couldn’t keep up.

    But wait, there’s more.

    Guess what beat BOTH long-term Treasurys and Buffett… with zero management fees… and near-zero risk.

    And before we open the envelope, consider that this was a period in which every major central bank was pushing up bond prices directly with $12 trillion in newly created money.

    …a period in which the Dow tripled…

    What beat stocks and bonds? Can you guess?

    Gold, with an annual return of 7.6%. Go figure.

    Autopilot

    Our guess is that however well stocks have done in the last 20 years, they won’t do anywhere near as well in the next 20 years.

    ETFs account for about $2.15 trillion worth of U.S. stocks. And 27% of stock market trades are now done by “quant” hedge funds – that is, funds run by computer algorithms.

    Both are more or less on “autopilot”… and both are subject to violent downdrafts. In other words, neither of these are patient, long-term, value-oriented investors.

    ETF buyers are gambling on “the stock market,” not investing in the businesses that happen to be traded in a market.

    Similarly, quant funds are indifferent to the underlying companies and the values they represent. And typically, they work on formulae that call for rapid sales when stock prices fall below certain thresholds.

    Rapid selling could be a problem, too, for index-tracking ETFs. Because everyone is investing in the same index funds at the same time.

    When those indexes fall hard enough, everyone is going to be panicking at the same time. This will increase selling pressure… and cause even steeper declines.

    So the difference between an ETF and a hedge fund may only be time. With the latter, you lose money little by little; with the former, you could lose it all at once.

    Regards,

    Bill

    -Read more at bonnerandpartners.com-

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  • A French Perspective on Market Health

    24.05.2017 • United StatesComments Off on A French Perspective on Market Health

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    Henry Bonner – Strategy and Council Letter (United States) –

    No major change today … we remain in conference … we try to rest … and we see old acquaintances …

    Here, with our colleagues, we may spend too much time repeating old problems, repeating information that is too vague … Everyone wants to put forward what he thinks … without necessarily making the best use of time …

    In any case, we are happy to be in the middle of the French countryside …

    Near the castle is a small country village …

    Of course, we enjoy being fed and housed … and whitened … without having to lift a finger.

    On the other hand, outside, the clouds covered the blue sky of yesterday …

    A message about the markets …

    We were saying yesterday that an indicator was “red …” Short-term interest rates in the United States have risen in relation to long-term debt … which could signal a recession or an economic slowdown.

    Yesterday, the French market nevertheless finished up (the CAC 40 climbed 0.47%) … what analysts attribute to some reassuring statistics …

    On the one hand, an index of economic growth, “the flash indicator of purchasing managers,” remained stable in May at 56.8, while analysts predicted a drop to 56.6 …

    A little news … but that was enough to give back a little optimism ..

    At the same time, the indicator “Ifo” of the business climate in Germany climbed in May …

    According to Clemens Füst, director of Ifo, “This evolution of the Ifo index as well as other key economic indicators suggest a growth of 0.6% in the second quarter …”

    We said yesterday that markets were waiting for good news to rise higher … and yesterday the markets received this reassurance …

    On the other hand, this increase seems to be of short duration …

    Today (May 24), we see the Paris stock market down 0.12% … indicating that this slight rebound has not changed the slightly bearish trend since the beginning of the month …

    What to do…?

    We are still waiting for the market to slow down … we have seen a big surge in the last 6 months (the CAC 40 has climbed by more than 20% in 6 months) … and we should know a more pronounced decline before rising higher …

    Of course, we live in strange times … and our governments want to push the actions up …

    After deciding to buy back the shares of private companies, the Bank of Japan seems to have managed to produce a rise in its shares …

    The Nikkei 225 has climbed one-third since the summer of 2015 … from about 15,000 to 20,000.

    If ever our shares on the stock market go down, we should see the intervention of the authorities in Europe …

    We will probably have a new economic stimulus program by the ECB, aimed at …

    As a reminder, the ECB is already buying bonds from private companies, at the same time buying the debts of the states …

    Indirectly, it already allows these companies to issue more debt, which allows them to redeem their shares …

    Indirectly, the ECB already supports stock prices … but our directors could easily decide to intervene more directly.

    To be continued…

    Truly,

    Henri Bonner

    -Read more at www.lettre-strategie-conseil.com (French)-

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  • Politics, Polls, and the Parasitocracy

    24.05.2017 • FranceComments Off on Politics, Polls, and the Parasitocracy

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    Simone Wapler – La Chronique Agora (France) –

    Yesterday, I spoke to you about the establishment of thecash, Dreamed by the political and financial Parasitocracy.

    The Parasitocracy is a caste which lives on a rent, a recurring profit which is due to a privilege acquired by distorting competition. It sets up complicated design systems that promote and control it. If a government is supposed to be in the service of its citizens, the Parasitocracy is not. She is at the service of herself. It is not a group of conspirators, it is simply a group of privileged people who share the same education, have gone to the same schools and universities, believe in the same things and have the same global vision of what is good for other.

    Recall that the share of our economy that is managed by the State exceeds 57%.

    In other words, the control of more than half of what we produce escapes us but does not escape the parasitocrats.

    To impose its win-lose interactions, the Parasitocracy uses constraint: regulations, directives, norms, law, etc. The complication is one of his favorite weapons.

    However, the ideal, for approval of its rules, gravity and complexity, is to obtain the consent of the victims. This is the condition of “social peace”.

    Let’s take a recent example. The ALUR law obliges the co-owners to block each year 5% of the budget of their joint ownership in an account for major works. The legislator felt that the co-owners were unfit to plan and claimed to protect them against their own impunity. The bank lobby gains a source of captive deposits and you lose control of the amount of money you pour into this account.

    This legal provision is on the agenda of your general meeting and you are asked to vote for the constitution of the said account. Your individual consent to an inept law is thus duly registered.

    canabiscanabis

    Do you have a 50 euro note in your pocket?

    Then you might well have all you need to become a millionaire! The only condition to take advantage of thisUnprecedented wave of profitsWhich is about to surge?

    All information is waiting for you here:Read quickly …

    For some important subjects, obtaining this consent requires a prior work of shaping public opinion.

    Regulating an inherently fraudulent monetary system

    The current monetary system is very complex. It is controlled by the IMF, the US Federal Reserve and the European Central Bank. With this system, commercial banks have the monopoly of monetary creation, in the form of credit creation.

    The general public is very unaware of the fact that banking regulation claims are in fact a stack of standards designed to make this intrinsically fraudulent system acceptable.

    Indeed, when you deposit money in a bank, the bank uses it to make loans. So the money is booked in two places at the same time: on your account and on that of the borrower.

    You could theoretically both – depositing you and the other borrower – spending that money at the same time … unless you’re trying to actually do it. If two people claim the same money at the same time, it can only end badly. (1)

    This complex financial system allows the Parasitocracy to feed itself through complex mechanisms of taxation, allocations, subsidies and redistributions. Bankers protected from bankruptcy lend to incompetent governments and docile taxpayers are the guarantors of last resort (and not a central bank as it is often heard).

    This machine is well-honed but it is still necessary that some create real wealth before it is captured and that no penny escapes the circuit …

    Hence thecash

    No more escape possible.

    Yes, modern payment methods are very convenient but you still have the choice of using them or not. If your bank seems to be in danger you can still empty your account and, by ordering your money in advance, storecash

    Of course, drastic limits are already in place: payment limits, withdrawal limits, depositcash. Sophisticated software put in place by your bank communicate to Tracfin (2) and thus Bercy any “anomaly”, suspicious movement. Cash payment limits are regularly lowered into general indifference since card payments are so convenient.

    But this very framed freedom is still too great, it seems. Since 2008, the level of debt and bogus money has increased dramatically. At the next financial crisis, the public is likely to become suspicious and likely to want its money.

    So to impose the company on youcash, Major maneuvers are in progress.

    Phase 1: mental preparation of public opinion. ThecashIs for criminals, terrorists, fraudsters resistant to tax, uncivil and not solidarity.

    Phase 2: survey survey, confirming that the Phase 1 message is well received. Back to phase 1 and shaping in case of “bad opinion”, if not …

    Phase 3: regulation, legislation

    To conclude, I quote excerpts from the essay by Jacques Bourdieu:Public opinion does not exist

    “Any opinion poll assumes that everyone can have an opinion; Or, in other words, that the production of an opinion is within the reach of all.

    The politician is the one who says: ‘God is with us’. The equivalent of ‘God is with us’ is today ‘public opinion is with us’.

    One of the most pernicious effects of the public opinion survey is precisely to put people on notice to answer questions they have not asked themselves. “

    Thank you for signing our petition “Not to society withoutcashIf you feel that the preservation of the small area of ​​financial freedom that remains to us the merit.

    Let us look closely at the results of the ECB’s investigation and the comments made by the major media.

    Not only are governments waging war on thecashBut also war against any form of competitive currency like gold, silver or bitcoin.

    (1) More info about:http://la-chronique-agora.com/comment-reguler-fraude-bancaire/(2) Intelligence processing and action against clandestine financial circuits, an agency of the Ministry of the Economy and Finance, in charge of the fight against money laundering)

    -Read more at la-chronique-agora.com (French)-

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  • Why You Should Bet on Bitcoin

    24.05.2017 • Great BritainComments Off on Why You Should Bet on Bitcoin

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    Nick Hubble – Capital and Conflict (Great Britain) –

    On behalf of the Southbank Investment Research team, we hope you and your family are well in the aftermath of events in Manchester.

    If there is any relevant analysis about terrorism to come, it’s not yet an appropriate time.

    There are plenty of other issues to take a look at though. And today’s favourite is China.

    Did you know farmers still can’t own land in China? They’re allocated plots by a collective. The result is a tiny average farming plot size. Combine that with labour intensive farming techniques and you get an average plot size per worker around 0.32% of Australia’s, which is at the opposite extreme.

    Why should you care about China’s tiny inefficient farms? Because vast amounts of rural workers are set to be out of a job in coming years as China looks to commercialise farming.

    With half the population still living rurally, it’s important that British investors remember China still has plenty of changing to do. The “Made in China” phenomenon is far from done. There is a heck of a lot of cheap labour waiting to be freed up. Only odd Chinese agricultural policy is preventing the change.

    But the government has signalled it wants corporates in the farming business because inefficient use of land is harming Chinese food security. Communists love food security slightly more than they love collectivism. And so the world needs to prepare for a few hundred million more workers lining up outside Chinese factories.

    Meanwhile, China’s financial sector is still filling the gloomy section of the media’s reports. For the first time ever, banks are having to borrow money at a higher cost than they lend to their corporate customers. Borrowing at a higher rate than you lend is not exactly a good business model. It can’t last.

    The government’s finances are in trouble too

    The ratings agency Moody’s downgraded China’s bonds to A1 from Aa3 and the outlook is now negative. Dramatic increases in debt are to blame according to the release.

    Chinese stocks and the yuan fell on all the bad news. The question is how it all resolves itself. Will the government replace the shadow banking sector as a source of funding? It just cracked down on the industry, hence the funding crisis in China’s mainstream banks. Any support for a failing banking sector could worsen the government’s financial position even more – something Moody’s is predicting.

    The trouble with debt booms is that it’s hard to keep them going. But if you don’t, a financial crisis takes hold. These days, central banks have so much power and influence that debt booms don’t need to end, apparently. At least that’s the theory we’re all testing.

    Politics is left as the main source of a potential crisis. And there’s no shortage of politics.

    Greece’s benefactors failed to agree on further financial support. The EU and International Monetary Fund are arguing about whether to reduce Greece’s debt to put it on a sustainable path, or to keep the country reliant on international support so that policy pressure can continue.

    India announced the conclusion of raids into Pakistani-controlled regions of Kashmir, while Pakistan claimed the raids never took place. The aim was to destroy terrorist camps, which Pakistan claims don’t exist.

    South Korea fired warning shots at what might’ve been a drone from North Korea after the country tested another missile.

    And the spat between the Philippine president Rodrigo Duterte and Chinese president Xi Jinping over oil in the South China Sea continues.

    The good news is, there’s a straightforward way to benefit from all these geopolitical risks…

    Is bitcoin better than gold?

    One of the reasons to invest in gold is as a geopolitical hedge. When there’s some sort of political mess which endangers the harmonious workings of the world’s financial and economic system, the gold price spikes. That’s because it’s a non-financial asset. It’s an opt out from the financialised world which relies on international cooperation.

    At least it was a good hedge. These days the price of gold is toyed with in financial markets to the point where the actual metal doesn’t play much of a role in determining prices. In a rush to meet margin calls on their other punts during a crash, traders might sell their gold positions, for example. Then the price of gold falls alongside other assets.

    So where can you turn to instead? How can you make a good gain while your other assets slump thanks to Donald Trump, Xi, Kim Jong-un and whoever else is causing trouble?

    Bitcoin seems to be an excellent choice.

    Each time geopolitical turmoil pops up somewhere, the price of bitcoin spikes. Recent trouble in Venezuela and China are two examples. Each financial shock, crackdown or poor economic release has sent the bitcoin price higher. When things calmed down again it falls.

    The reason this happens is very straightforward. Just like gold, bitcoin is a non-financial asset. It’s designed to operate outside the government’s legal system and the financial world’s infrastructure.

    But it’s a lot less arcane than gold and far more convenient to actually use. Venezuelans are using bitcoin to buy everyday goods on Amazon in the US and then having them smuggled into the country. The Chinese are evading strict capital controls to get their money out of the country. Even terrorists use bitcoin in arms deals, and that industry seems to be in quite a bull market…

    Zero Hedge published this chart showing the bitcoin price next to the Global Policy Uncertainty Index. The index measures the levels of unpredictable and surprising government policy. You can see the two have been moving together.

    Graphic showing the Global Policy Uncertainty and the Bitcoin price. 2013-2017

    Meanwhile, gold is languishing. That’s partly because the US dollar is considered a safe haven for money too. When people rush their money back to the US, it bids up the dollar. Because gold is priced in dollars, the US dollar price falls.

    As a UK investor you aren’t subject to this. At least not to the same extent. That means gold is still a decent option. But it hasn’t exactly doubled like bitcoin did already this year.

    Until next time,

    Nick Hubble
    Editor, Capital & Conflict

    -Read more at www.capitalandconflict.com-

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  • Expect Profit from Personal Genomics

    24.05.2017 • Great BritainComments Off on Expect Profit from Personal Genomics

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    Andrew Lockley – Exponential Investor (Great Britain) –

    The US Food and Drug Administration recently gave 23andMe the green light to restart its consumer health genetic testing service. It’s “chocks away” for personal genomics’ next flight – and a good time to take a look at how this radical new future is unfolding.

    Previously, the US FDA has been rather down on the idea of consumers getting genetic information – to some extent reasonably. Its view has been that these little snippets of genetic information don’t give a full picture. Consequently, such tests can worry the well – and give false confidence to the reckless.

    Today I’ll have a quick look at how the future unlocked by 23andMe, and its ilk, will change healthcare in the 21st century.

    I was an early adopter for 23andMe technology. I wanted to make sure that I was planning my life around the “inconvenient truth” embedded in my genes.

    One cheek swab later – and my genome was online

    Note for nerds: 23andMe actually only looks at single nucleotide polymorphisms (SNPs). There’s a lot of the genome that falls outside its standard tests.

    Seeing my genes gave me a plethora of useful information on my health risks, and characteristics. One of the most useful things I learned was that I have an above-average chance of Alzheimer’s disease. Another was that I’m a carrier for alpha-1 antitrypsin disorder – meaning I’m particularly vulnerable to ill health if I smoke or drink heavily. (Note for nerds: this disorder is partially dominant, and partially recessive – so if you’re a carrier, you likely get some symptoms.)

    The impact of this technology starts before conception

    Already, it’s possible for parents to get DNA-tested before trying to conceive. Members of distinct populations, who frequently marry into their own communities, are now routinely tested for genetic disorders. For example, Tay-Sachs disease is more common among Ashkenazi Jews than in the general population. Cheaper testing, and increasing knowledge of the range of possible conditions, means this approach is likely to become far more prevalent in future. It may even be a useful approach for dealing with the appalling suffering caused by the practice of first-cousin marriage. Shockingly, this is still legal in the UK – despite being responsible for as many as one in five infant deaths in some London boroughs.

    Then, it’s on to the baby-making bit

    If you are trying to conceive by IVF, as an increasing number of people are, then it’s perfectly possible to analyse the baby’s genome before the embryo is even implanted. We may therefore start to have babies in a completely different way. If we learn to make eggs outside the , it’s possible that we could routinely produce large numbers of embryos – potentially thousands – and then select the one with the characteristics we want. It works a little like genetic engineering, but without the insertion of any new genes. A benign way of looking at this is that it lets you have the best possible child – free of any illness or trait that might hold it back. A more cynical perspective is that it lets parents make all their prejudices flesh – having a child who was guaranteed to be straight, studious and chaste.

    Of course, genetic engineering unlocks a whole raft of possibilities. Now we have CRISPR gene editing, we can insert new genes to replace those that are broken. This gives hope to families that carry genetic diseases. Even after birth, the ability to conduct gene therapy is still present. Conditions such as cystic fibrosis can now be treated this way – giving lasting relief to otherwise life-limiting conditions.

    But you don’t have to change genes to make use of genetic technology. Much of the future for DNA tech will be based around personal medicine. When you go to the doctor in the future, it is likely that your preion – be that for drugs, surgery, or life changes – will be adjusted to take account of your genetic makeup. For example, 23andMe showed that I’m sensitive to warfarin – so I need a lower-than-normal dose. That’s very useful information – as a fatal hemorrhage or stroke can be a side-effect of this medicine.

    23andMe is an interesting firm. It’s currently aiming to be the lead in consumer genetics – owning the knowledge that results. We can see from the rise of Facebook that such dominance leads to a minefield of legal and ethical issues.

    From an investment point of view, this is the beginning of a revolution. Just like every major business now has some form of social media strategy, it’s likely that personal genetics will become just as embedded into our lives. Of course, medicine is an obvious sector, where the effects may be felt first. Beyond that, food supplements are a logical next-step. I now routinely take Macushield, to reduce the risk of age-related macular degeneration that 23andMe uncovered. In time, we might end up with food and consumer products, matched to our genetic makeup. You might laugh, but uptake of folic acid is genetically-determined – and that’s a common fortification for breakfast cereals.

    Personalised Sugar Puffs? You heard it here, first.

    Which genetically-controlled disease would you most like to know your risks for? We’d love to hear: andrew@southbankresearch.com.

    Best,

    Andrew Lockley
    Exponential Investor

    -Read more at www.exponentialinvestor.com-

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  • Bad Debt Rears Its Ugly Head

    23.05.2017 • IndiaComments Off on Bad Debt Rears Its Ugly Head

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    Vivek Kaul – Vivek Kaul’s Diary (India) –

    The government and the Reserve Bank of India (RBI) have taken multiple steps over the years to solve the bad loans problem of public sector banks. This has been without much success, with bad loans continuing to pile up.

    One area that seems to have constantly been ignored is the recovery bad loans. Bad loans are essentially loans on which repayment the repayment from a borrower has been due for 90 days or more.

    Banks give out most loans against a collateral. Hence, to that extent the loans are secured and in case of a default from a borrower, the collateral can be sold and the loan amount can be recovered. Now, only if it was as simple as that.

    As the total amount of bad loans has burgeoned over the years, the rate of recovery of bad loans has gone down dramatically. In Table 1, let’s first look at this parameter for the five biggest public sector banks in 2016-2017. As of March 31, 2016, these banks owned 52.5 per cent of the total assets owned by the public sector banks. Hence, they give a good indication of the overall scenario with public sector banks.

    Table 1: Rate of recovery in 2016-2017
    Name of the bank Bad loans at the beginning of the year Bad loans recovered during the year Rate of recovery
    State Bank of India 98,173 5,197 5.29%
    Bank of Baroda 40,521 4,088 10.09%
    Punjab National Bank 55,818 10,677 19.13%
    Bank of India 49,879 4,598 9.22%
    Canara Bank 31,638 4,162 13.16%
    Total 276,029 28,722 10.41%

    Source: websites of banks.What does Table 1 tell us? It shows us that the rate of recovery of bad loans for the top five public sector banks in 2016-2017 had stood at 10.4 per cent. This basically means that for every Rs 100 of bad loans at the beginning of the year, these banks were able to recover a little over Rs 10. This is an abysmal rate of recovery.

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    In fact, let’s take a look at Table 2, which shows us the rate of recovery for the top 5 public sector banks in 2015-2016.

    Table 2: Rate of recovery in 2015-2016
    Name of the bank Bad loans at the beginning of the year Bad loans recovered during the year Rate of recovery
    State Bank of India 56,725 4,389 7.74%
    Bank of Baroda 16,261 1,481 9.11%
    Punjab National Bank 25,695 4,262 16.59%
    Bank of India 22,193 3,555 16.02%
    Canara Bank 13,040 3,976 30.49%
    Total 133,914 17,663 13.19%

    Source: Websites of various banks.What does Table 2 tell us? It tells us that in 2015-2016, the rate of recovery of the top 5 public sector banks had stood at around 13.2 per cent. This basically meant that for every Rs 100 of bad loans at the beginning of the year, these banks were able to recover a little over Rs 13.

    A comparison of Table 2 and Table 1 tells us that the rate of recovery of bad loans for the top 5 public sector banks has fallen by around 280 basis points between the years. One basis point is one hundredth of a percentage. The situation has only gone from bad to worse.

    Unless the government takes steps towards improving this rate of recovery of bad loans, no serious achievements can be made on this front. One particular point that the lawyers who deal with such things have been making is the lack of debt recovery tribunals and the fact that the ones that are there are not adequately staffed. This is something that can easily be set right.

    Without addressing this point, any other moves to clean up the bad loans of public sector banks, will not achieve much. These other moves will basically end up postponing the resolution of the problem, which is pretty much what they have done up until now.

    As the Economic Survey points out: “The stressed debt is heavily concentrated in large companies… The stressed debt is heavily concentrated in large companies. Cash flows in the large stressed companies have been deteriorating over the past few years, to the point where debt reductions of more than 50 percent will often be needed to restore viability. The only alternative would be to convert debt to equity, take over the companies, and then sell them at a loss.”

    This basically means that the government will have to bailout public sector banks big time (something that it has been doing quietly over the last eight years). Given that public sector banks are government owned, the government should work towards avoiding the situation envisioned by the Economic Survey as much as possible. Large corporates who have taken on the loans and defaulted on it, should not be allowed to get away scot free. Given this, it is very important that the institutional mechanisms required to improve the rate of recovery of bad loans are firmed up and banks are allowed to do whatever it takes to recover bad loans from large corporates in general and crony capitalists in particular.

     

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  • Are You Entitled to the Income of Others?

    23.05.2017 • Great BritainComments Off on Are You Entitled to the Income of Others?

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    Nick O’Connor – Capital and Conflict (Great Britain) –

    Thinking like an economist can be terribly frustrating. Every day people insist that moving water to one side of a bathtub will raise the water level on that side. At least they argue the economic equivalent.

    Because economic understanding is so closely tied to sociological beliefs, it’s impossible to sway anyone from their views. Trying to explain the basics of economics is pointless if you started by discussing a topical issue.

    It’s best to just enjoy your bath and watch people get reality served to them. Economic law always trumps political policy and good intentions in the end.

    The good news is that all this is predictable. And that means you can profit from it.

    The bathtub analogy was illustrated nicely this week, this time on the topic of pensions. The Financial Times summarised a new study and an older survey which show how private pension money must actually come from somewhere. It’s water being moved around the bathtub. It leaves someone, somewhere, out of pocket.

    This is a deep shock to those who thought paying for promises is always someone else’s problem, or not a problem at all. But now we’re feeling the consequences of pension promises in all sorts of ways.

    An average 10 per cent of the money that has been paid into defined-benefit schemes over the past 16 years has been funded by suppressing wages, according to new research. On average, workers are paid £200 a year, or 0.6 per cent, less than employees in similar companies which have not had to plug pension deficits, the Resolution Foundation said.

    Dr Bell’s findings are also consistent with survey evidence released at the end of last year which suggested that one in ten companies had dealt with increased pension costs since 2013 by restricting pay rises for staff. One in 20 companies said they had reduced staff numbers.

    “With average earnings still £16 a week below their pre-crisis peak and prospects for a return to strong pay growth looking shaky, it’s important that younger and low-paid workers don’t take a hit to their pay because of deficit payments to pension schemes that they’re not even entitled to,” Mr Whittaker said.

    Yes, it turns out that money must come from somewhere. Just like water in a bathtub, you can’t move it around without creating a void. The void is workers’ pockets. And investors’, as we’ll see in a moment.

    But first we’ll double check if you’re thinking like an economist yet.

    Do people who are legally entitled to a company pension really have a claim on the income of workers?

    If you’re trying to answer that question based on ethics, legalities or some sort of social theory, you’re not thinking like an economist. You’re arguing about moving water around the bathtub. Good luck to you.

    The correct answer is that company pensions only work as long as the people actually paying for them tolerate it. We do have a choice over where we work and how we spend our money, for now. And companies can fail.

    Paying workers less and having to fire people certainly doesn’t bode well for the future of a company, nor its pension plan. Raising prices on whatever the company sells is asking for the competition to show them the door.

    Stuck between a rock and a hard place, companies will have to decide what’s more important – their employees, their business’ survival, their investors or their pension promises. Unless someone decides for them, as the FT reported last week:

    The UK pensions regulator has warned it will take a tougher line on companies that prioritise shareholder dividends over reducing pension deficits. In a statement on Monday, the regulator said it would focus on “fair treatment” when it reviewed funding plans from schemes undergoing pension valuations this year. “We are likely to intervene where we believe schemes are not being treated fairly,” it said.

    In the UK, about 11m people are members of private sector “defined benefit” pensions schemes. In retirement, they will be dependent on their employer for income. But pressures on the 5,800 companies that have this type of scheme have increased as pension deficits have grown to £530bn, largely because low interest rates have inflated liabilities.

    As always, it’s the central bank that’s to blame. At least partially.

    The consultancy JLT did the maths and discovered that half of the FTSE 100 companies could clear their pension deficit if they hand over their annual dividends.

    It’s ironic to think of how pension funds’ investments in companies are underperforming because the same pension funds are preventing those companies from doing well by imposing an enormous liability on their balance sheets. The lack of pensions’ investment income will only get worse if companies aren’t allowed to pay out dividends to the same pension funds that are preventing them from doing it.

    This is how water in the bathtub refills the void. The money flows back.

    But think about what’s going on here. Are companies designed to serve their pension plans or their owners? What is “fair”? Do you think employees and investors like to hand over money to an underwater pension fund? Do you think they will do so?

    The water level in this bathtub is getting low, no matter how you rearrange it.

    Here in Japan they have the very same problems. Mighty corporations are struggling under their private pension plans and demographic change. Last year the Nikkei Asian Review put up the figures:

    The value of listed Japanese companies’ future obligations to retiring workers reached a record 91.21 trillion yen ($860 billion) at the end of fiscal 2015, with the unfunded chunk growing to nearly 26 trillion yen amid depressed interest rates.

    Explaining all this to the potential Japanese in-laws probably won’t go down well. The last of a long and illustrious line of Ishikawa Prefecture dentists is nearing retirement with no male dental heir. The three daughters don’t plan to marry any aspiring dentists. And I probably wouldn’t be suitable, even if I wanted to be one…

    Polite inquiries as to my financial preparations for retirement have already been asked. Please purchase a newsletter to help me make the case.

     

    Gagging the gig economy

    The gig economy refers to people who get paid for the work they do rather than the hours they spend at work. This is a truly novel concept to British politicians who are of course looking to crack down on the concept.

    Uber drivers, Deliveroo riders and freelancers are in the firing line.

    Prime minister Theresa May says she wants to “properly protect” workers in the gig economy. Which completely ignores why people work there in the first place. They value the freedom of not being protected over the constraints of being protected. Should they be allowed to?

    May says gig economy workers shouldn’t take the UK’s low unemployment rate for granted. But she has the cause and effect backwards. The economy is doing well because Britain allows more flexibility than other nations. She shouldn’t take gig economy workers for granted.

    Forcing protection on your own people is the job of the Mafia and the government should stay well away.

    Until next time,

    Nick Hubble
    Editor, Capital & Conflict

    -Read more at www.capitalandconflict.com-

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  • The “Personality First” Approach to Investing in Startups.

    23.05.2017 • Great BritainComments Off on The “Personality First” Approach to Investing in Startups.

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    Guest Contributor – Exponential Investor (Great Britain) –

    Last week, I spoke on investing in crowdfunding, at our “Tech Symposium”. I was looking forward to giving my talk. However, my expectations for the rest of the day weren’t high – as I’m no fan of watching keynotes. But frankly, I was amazed. The whole experience was far better than I had expected. I learned some really good investment ideas, which I’d probably never have encountered otherwise.

    If you’d like to see all the talks (and exclusive interview footage) you can get the videos here.

    I wanted to expand on my talk in today’s article, because there was some important material I just didn’t have time for. (There was a lot going on!) So today, we’ll drill down into the detail of how to invest in top-quality founding teams.

    I always recommend meeting the managers of companies, before investing. It’s generally one of the best ways to gain an insight into the way the company’s run today – and how it will be run in future.

    One story always reminds me of the power of this “personality first” approach.

    A while ago, I consulted for a firm that sold home medical products to the general public. Much of my work was conducting in-depth, one-on-one user interviews. I’d spend several hours with each of the customers, and got a really good insight into how they each thought and felt. At the end of these sessions, I always asked the users to describe what they thought the firm’s CEO was like. To be clear: this was someone they’d never met, seen, or heard from. Almost invariably, users were able to accurately describe his personality.

    This shows just how important a management team is; it’s almost impossible to escape its influence. A company is simply the external expression of the founders’ personality. Think of the leadership s of famous men, and how their firms came to express their own characters: the personable Richard Branson, reflected in Virgin’s customer service; the Machiavellian Murdoch, whose media empire infiltrates so many corridors of power; and the gargantuan sci-fi dreams of Tesla’s Elon Musk.

     

    How can you spot a good founding team?

    First, you need to make sure the people in front of you are actually entrepreneurs – and there’s a key difference between an entrepreneur and a manager.

    An entrepreneur is some who has open-ended tasks – and too little time, and money, to achieve them. The entrepreneur’s skill is in achieving the seemingly-impossible. A manager, by contrast, has defined tasks – and adequate time, and money, to achieve them. Someone who is employed to run a branch of a chain restaurant is a manager. Some who is trying to set up a whole new restaurant chain is an entrepreneur. The difference in the scale of the challenge is obvious.

    These two characters have fundamentally-different skill sets. It can be very difficult for managers to make entrepreneurial businesses succeed. There’s no rulebook, and never enough resources – and this puts them well outside their comfort zone. Likewise, entrepreneurs quickly get bored when a business merely requires competent day-to-day management. Without impossible challenges, entrepreneurs quickly find themselves footloose.

    Musk puts it thus: “As much as possible, avoid hiring MBAs. MBA programs don’t teach people how to create companies.”

    Having been to business school, I have to agree – it doesn’t teach entrepreneurs much that’s of any use. In fact, business teaching often gets in the way – by encouraging false confidence. The management school culture is slowly changing – and there are now some practical, entrepreneurially-focused courses available.

    I’ll expand on this, by quoting from an online discussion I was involved in:

    Reminds me of a story I heard years ago about a lawyer, from a top firm – who quit and went back to New Zealand to run a small coffee shop. A few years later, he decided to go back to the corporate world – and interviewed successfully with McKinsey. All they wanted to know about was the coffee shop: how did he market; how did he manage staff, stock, etc.; what did he learn. Whatever else he did was irrelevant to them.

    This shows that, no matter where you learn these entrepreneurial skills, they are invaluable. I often advise would-be entrepreneurs to learn by setting up an offline business – such as a market stall. Personally, I learned entrepreneurship by running a cleaning company. It was the opposite of glamorous – but I learned more in six months than in four years of business school.

    Beyond real-world entrepreneurial ability, what defines a winning team?

    Surprisingly, you need two opposing characteristics – and balancing these is crucial.

    The first one is diversity. This doesn’t necessarily mean ethnic diversity – but it can contribute. What I’m seeking is a diversity of perspectives and skill sets. For example, an introverted technologist often complements an extroverted cheerleader. Likewise, an ivory-tower academic often complements a streetwise partner. You need to look for teams that have the full suite of necessary skills. When I ran my first company, my partner was excellent at operations, and I was pretty good at sales. However, no did the admin. Unsurprisingly, the venture didn’t last very long.

    The second thing you should look for in a management team is cohesion. Regardless of diversity, everyone must be able to work as a coherent unit. An example of this kind of synergy can easily be found in sports teams or musical bands. Not everyone in Manchester United is a goalie, and not everyone in Coldplay is a drummer – but together, they work towards a collective aim.

    Diversity of skill set is crucial for performance – but a shared passion and vision is critical. This helps maintain effort and persistence. If the management team owes more to Game of Thrones than Band of Brothers, the venture may flounder – as a startup can’t be locked in a continual power struggle. Furthermore, founders are working on a project for almost their entire waking life. Consequently, there has to be deep commitment to a shared vision, if individuals are to stay the course. When a founder’s heart lies elsewhere, they’ll likely fail. You really can’t be a nine-to-five person, in a new firm.

    I’m not denying the value of looking at chart patterns and business plans, but startups often have neither. To succeed in investing, you therefore need to get to know the team. This means you can evaluate how they work – both as individuals, and as a group.

    You’ll probably want the rest of the info I’ve got on this subject – because we’ve only covered a small part in this article. So, please do grab the videos for my talk – before access is closed off.

    Feedback, as always to: andrew@southbankresearch.com.

    Best,

    Andrew Lockley
    Exponential Investor

    -Read more at www.exponentialinvestor.com-

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  • The CAC is Stalling – Will It Lead to a Freefall?

    23.05.2017 • United StatesComments Off on The CAC is Stalling – Will It Lead to a Freefall?

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    Henry Bonner – Strategy and Council Letter (United States) –

    We are currently in Courtomer … we are meeting to meet various people from our group spread around the world …

    Gathered in a castle from the end of the 18th century … we are French, Americans, Germans, Brazilians, Spaniards …

    What are we trying to do …?

    We start with a simple conversation … about the value of ideas.

    We try to give ideas to our readers, not just pure data, or information they can find in the newspapers. You do not have anything there that has great value: All this information is available free on the internet.

    Why then offer them to our readers?

    Instead, we want to offer something that is unique … that our readers can not find elsewhere.

    In other words, we need to find things to say that you do not find in the media or in the newspapers …

    You understand why this daily message sometimes seems “out of the ordinary.” You may think that we may be going offbeat … or you think we do not follow the news like everyone else …

    We could repeat the same opinions that you read in the newspapers … or that you listen on the newspaper …

    We could explain how Macron plans to “strengthen” Europe … or “support” industry … or “fight” terrorism.

    As you know, you will find such interventions in almost all newspapers and magazines that are interested in politics …

    Here, in this daily letter, we do something different …

    We try to tell you what we really think … we try first to understand what we really think … we will not run as quickly as possible towards the conclusion that seems to us the most “correct” or the most “political.”

    Maybe the end of the rally in the shares …

    According to an indicator revealed by MarketWatch , the rise of the French stock market since the election of Trump could well be finished …

    As a reminder, the CAC 40 has climbed 22.4% since November 2016 … taking advantage of the upward movement on Wall Street …

    However, this rise has been stalled since the beginning of May … As we explained last week, the markets have already digested the results published by companies in the first quarter, as well as the election of Macron … Hence Would come then the next news to push them up?

    According to one particular indicator, this bull market really has reached its peak … and could be ready to drop in the weeks to come.

    MarketWatch publishes the following graph from the Federal Reserve:

    What you see is the difference between rates on US bonds maturing in 10 years and rates at maturity in 2 years.

    In other words, short-term rates go up. Long-term rates decline, relatively.

    This can signal that investors are afraid, because they prefer less short-term bonds …

    In other words, markets are above all looking for security, not easy access to funds.

    This may even signal an anticipated economic contraction …

    We will be watching this trend … We explained in our last e-mail last week that we were rather reserved on stocks at the moment … because we thought that equities could easily fall lower, especially in the short term.

    We also talked about buying, or having gold to protect ourselves …

    Next steps…

    We have said before that Marcon will not be able to restart the French economy … nor to facilitate the industry …

    In fact, we believe that our country could stand near a period of destabilization … with more demonstrations … more political actions … more laws of last resort …

    Why…?

    Because our system is built on easy and unlimited access to debt … backed by rising stocks …

    But our economy is beginning to show signs of unrest … and our actions are not climbing anymore …

    More to suvire …

    Truly,

    Henri Bonner

    -Read more at www.lettre-strategie-conseil.com (French)-

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  • “A Cashless Society, Desirable for Some, Formidable for Others.”

    23.05.2017 • FranceComments Off on “A Cashless Society, Desirable for Some, Formidable for Others.”

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    Simone Wapler – La Chronique Agora (France) –

    An Investigation by the European Central Bank Whose results will be given this summer, an editorial inLe Figaro: The subject of the final abolition ofcashIs returning to the front of the media scene and the work of modeling public opinion begins.

    The paper version of theFigaro

    The “cash “, Desirable for some, formidable for others, also presupposes political will

    Let us put it bluntly, we rank among the “others”, those who believe that the establishment of such a society would be a formidable drift liberticide. It would give power to an “empowered agent” to cut off somebody’s money at any time.

    It is dangerous, even when you have nothing to fear from the government of the moment. Let him who has never suffered an “administrative error” contradict me.

    In a world whereliesandmisinformation…When modern propaganda replaced the analysis …

    Philippe Béchade presentsHis first bookFake News, Post-Truths and other smoke screens

    When the media are at the mercy of powerful oligarchs … that the investigations are biased, that the truth is hidden because of private interests …

    … that connivance between politicians and journalists is commonplace …

    … And that the political discourse is calibrated by professionals of thestorytelling

    … WHO TO BELIEVE?

    InFake News, Post-Truths and other smoke screens, Philippe Béchade explains how international relations really work … how we manipulateMacroeconomic figuresTo make them say what you want … how certain countries are demonized for the benefit ofWestern historyWell-thinking … howCentral banksLaminate your savings … how the worldBubble phase …And puts all your savings at risk.

    To download Philippe’s book,Leave us your e-mail here

    This is obviously much more dangerous when you disagree with the government of the moment. Those who claim to have a hand on their heart “it’s okay, I have nothing to hide” would say, I suppose, in case of censorship: “it does not matter, I have nothing to say “.

    All the security arguments advanced to promote society withoutcashAre easily removable.

    Le Figaro :Printing, handling, circulation, secure transport … the species generate a significant cost.

    Of course, but the securing of networks incashless, What would it cost? A societycashlessWould be destabilized by a simple cyber attack. The recent attack onransomwareProves to us that governments and larger companies are unable to provide absolute security, even with considerable financial effort.

    Le Figaro :ThecashIs obviously a vehicle for tax evasion, tax evasion, gray or black market, corruption, but also for serious criminality and even for the financing of terrorism.

    Yes. All traffickers and criminals use thecash. They also use roads, telephone networks, weapons. When they get sick, they take medicines, I was told … But we do not talk about banning road networks, telephone, suppressing armaments and restricting access to medicines.

    Let us be serious: the real subject that the authorities have at heart is tax evasion.

    The Germans and the Swiss use thecash, Are very attached to it, hold the € 500 and SF 1,000 notes, and yet the tax evasion is less in these countries than in Greece.

    The reality is that the more taxes and levies are imposed, the more corrupt and mismanaged the country is, the more tempting the tax evasion. ThecashIs the back door of the “little ones”. Sophisticated montages, screens companies, etc. Are the secret and padded doors of the “gros”.

    The real arguments for setting up acashHave nothing to do with the safe. They are :

    – The power of taxation which will then confine itself to arbitrariness;- The total control of government over our lives;- The elimination of savings in order to achieve it.

    The dream of Parasitocracy is the establishment of the welfare state that takes you in hand from the crib to the grave. No more personal savings: a system of taxation, redistribution, allocation provides all your needs from the moment you trust the State. Do you not have a “solidarity” soul?

    The downward manipulation of interest rates is the beginning of the process of destruction of savings. Only those who want to “store” money and capital for personal projects are victims. Those who live on allowances, grants, money from others are not affected.

    As I told you yesterday:

    • To get € 1,000 per month with a return of 5%, you need a capital of € 260,000
    • To obtain € 1,000 per month with a yield of 0.873%, you need a capital of € 1.37 million
    • But to get a return of 1,000 € per month with a zero rate, you need a capital … infinite!

    What if the rates are negative? Well, you withdraw your money from the bank and there the system collapses: serial bankruptcies and hyperinflation. Except, of course, if you can not withdraw your money from the bank.

    Parasitocracy has no need to spare. When it needs money, a central banker creates it and opens a line of credit to zero. A bank does not go bankrupt. A well-rated multinational agency has access to almost free credit. An international civil servant does not pay tax and receives salary paid by taxpayers who do not vote the amount.

    On average, a member’s pension in France is € 2,700 a month, which corresponds to a saved (fictitious) capital of € 648,000, assuming that he is paid at 5%. But even if the rates are zero, our MP does not care. It is the system of distribution that pays him his retirement.

    Parasitocracy has every interest in society withoutCash –Even if it is not your interest.

    Le Figaro :“The disappearance of species is also a thesis conveyed by pressure groups,” notes one expert. Because electronic payments are not free. Their development presupposes a massification generating commissions paid by the traders. They also facilitate the generation of commercially exploitable data, which is the gold of the 21st century.

    But the modernization of the universe of payment is also the pledge of […] greater competition by favoring the emergence of new players in a market where it is difficult to find a place.

    The European Union is therefore playing a leading role. “The new European Payment Services Directive (PSD2) will speed up the movement of cash substitution by digital means of payment “, Says Christophe Vergne at Capgemini.

    Of course, you do not have to endure. First, you can sign our petition “Not to society withoutcash“.

    Second, gold remains to store value. Not any gold however.

    Do you know that a very common piece, internationally recognized, hit in quantity every year, has a very soft tax system?Discover it here

    -Read more at la-chronique-agora.com (French)-

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  • How to Boil a Frog

    23.05.2017 • Gold and Natural ResourcesComments Off on How to Boil a Frog

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    Alexandre Mastrocinque – Market in Five Minutes (Brazil) –

    .: The Everlasting Speech
    .: Bubbling Cauldron
    .: Strange country with weird people
    .: My home, my life
    .: Providing Accounts
    .: By the way…
    “If you want, knock me over” – Michel Temer

    Track of the day
    The Killers – Hot Fuss

    Now you can listen to the M5M track on Spotify – check it out here!

    00:05 – The Everlasting Speech

    Every now and then we receive e-mails or comments on Twitter asking Empiricus to focus on economic analysis and stop talking about politics.

    I would love to come here and talk about the behavior of retail, the quarterly results of companies and the evolution of the Brazilian real estate market.

    But the truth is that, since mid-2014, it is impossible to talk about economics in Brazil without evaluating the different political scenarios. And, let’s face it, Brasilia does not give a break!

    Fear clings to the forum Charge and if it says victim of conspiracy – PSDB and DEM await the decision of the STF in the fourth on suspending the investigation to position itself.

    As much as the whole story of the manipulated audio is very suspicious – yes, it’s all very suspicious in this whole story – the president’s situation is unsustainable.

    To say that he did not know Joesley was being investigated was ridiculous. It will have to improve the speech, Temer – “I did not know” and “I am the victim of a conspiracy” have already been tested.

    It did not work before.

    Even if it does not fall, the entire reform agenda and governance are compromised. Knowing this, today the stock market falls, interest (especially the longest ones) rise and the Real depreciates.

    If the market loves the term “waiting time,” there is no longer a waiting time.

    01:10 – Bubbling Cauldron

    Who is not waiting is the North American market. Chicago Fed report pointed out that industrial activity offset the fall in household consumption and the overall level of activity in the US is the highest in the last three years.

    American stock markets do well, while Europe is more concerned about Brexit’s future, and its stock markets are down.

    America is already great and just can not see who does not – it has much more downside than upside down there.

    Meanwhile, Trump, on his first official trip as POTUS, is trying to deflect the focus of internal political turmoil and North Korea announces that it has done yet another successful launch test.

    Anyone familiar with the toad’s anecdote in the pot?

    As you raise the water temperature gradually, the frog is there, adjusting to the new temperatures. When the frog perceives the water ready to boil, it is too late and he dances.

    There are people who think that what killed the frog was the hot water – for me, it was complacency.

    We are in a giant geopolitical cauldron and, each day, the water gets warmer.

    Volatility downstairs, active up there.

    No one knows when the water will boil, but an hour it will.

    Insurance.

    Today and always!

    02:30 – Strange country with weird people

    If you pick up Veja this week, you’ll see a nice propaganda from the Federal Government announcing structural reforms and improving the country for the long term. Turning the page, he faces a huge two-page advertisement of Vigor (from the JBS group) and, upon turning again, the beginning of a long story calling for the president’s resignation.

    This sequence of few pages is emblematic to illustrate how Brazil is a strange country and how things change rapidly here.

    It is also a lesson on independence and exemption from the media in general – how to rely on newspapers and magazines whose main source of income is the announcement and publication of balance sheets of state and private companies?

    I honestly do not have anything against Veja, I’m just concerned that, in the limit, business relationships can (and does in PODEM) guide the editorial content of newsrooms around the world.

    Read More at www.empiricus.com.br (Portuguese)

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  • How to Profit Off Geopolitics

    22.05.2017 • Great BritainComments Off on How to Profit Off Geopolitics

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    Nick Hubble – Capital and Conflict (Great Britain) –

    Can you make money from geography? What about politics? How do demographics affect financial markets?

    This guide will show you how geopolitics create investment trends and profit opportunities. They’re predictable, convenient to invest in and far more interesting than any other type of investing.

    The only downside is that you usually have to have a little patience for things to play out. As with all types of investing, the outcome is never certain. But let’s take a look at some examples from the past where geopolitical trends created profitable investments. And some future opportunities this of investing offers now.

    1. Policy profiteering – how to profit from politics

    Most people are so busy arguing about politics they miss the opportunity to profit from it. Political trends and the results of political policies are predictable. And it’s often easy to invest in the assets that benefit. I call this policy profiteering.

    For example, modern central bankers are charged by law to use interest rates to manipulate the economy. Interest rates affect mortgages first and foremost. So it’s entirely predictable that we have housing booms when interest rates are unnaturally low (2002-2006) and housing busts when interest rates go up (2007).

    Zoning laws add on to this effect. They restrict the supply of property from adjusting to the higher prices. It’s just like the coal and electricity shortages we had when the government controlled the price of those resources.

    The legalisation of cannabis is another prime example you can profit from today. When the US government ended prohibition of alcohol, it created an enormous investment opportunity. Today, the same is happening in cannabis. Are you aligned to profit?

    2.Brexit and the end of the EU

    Brexit was a wonderful investment opportunity. The fall of the pound meant the FTSE 100 would surge because many of its companies earn their money overseas. As Brexit begins to take shape, optimism for Britain will see the pound rebound and companies with imports will benefit. But the FTSE 100 overall is less likely to gain.

    Brexit is just the beginning of the end of the EU. Euroscepticism is on a steady march inside Europe. If Brexit is a success, the decision to leave the EU becomes undeniably realistic for other countries too. For now, it’s still considered extremist in places like France and the Netherlands.

    If the EU falls apart, stronger countries like Germany are set to benefit while weaker countries lose their economic backers. The tumult in the meantime is your opportunity to invest.

    Perhaps the most important geopolitical opportunity within the EU is that the eurozone shares a single monetary policy. If you think about it, the idea that Greece, Germany and Ireland should have the same interest rate is absurd. Since the inclusion of the euro, they’ve all faced completely different economic prospects at any given time. But the political necessity of the euro’s rates means it’s a one-size-fits-all monetary policy.

    The result is an investable trend. Countries doing well will experience an unnatural boom thanks to low rates, while countries doing badly won’t get the monetary accommodation they need. In the lead up to the financial crisis, Germany was the laggard burdened with high rates while Ireland and Greece boomed without the increase in interest rates that would’ve kept them in check. Now the worm has turned and Germany is experiencing a property boom. (My inheritance is growing nicely as a result.)

    3.Demographics of boom and doom

    Demographics are my favourite geopolitical issue to profit from. The argument is very simple. The supply and demand for investment assets is primarily determined by the number of people buying and selling. And age is the biggest factor in that calculation.

    It’s called the life-cycle hypothesis. In their 30s, people buy property and then go on to invest in the stock and bond market. In their retirement, say after 60, people begin to sell property and their investments to pay for retirement. So you can determine a good proportion of the supply and demand for investments in a reliable way. Just look at the demographics.

    Japan is the textbook example of all this. The demographic analysis above would’ve sounded the alarm for Japan in the 1990s, just when its investment markets peaked. How about now? The number of working-age people in China is declining while the number of old is exploding. That’s why the Chinese stockmarket is lagging in the face of decent economic growth.

    In Europe it’s much the same. Eastern Europe is in for a particularly bad shock. But where can you be optimistic about? US demographics are reasonable. But it’s Southeast Asia that’s expanding fast. Investing in exchange-traded funds (ETFs) from Indonesia, Philippines and Vietnam are great opportunities if you believe demographics are destiny.

    4.Peak oil, oil shocks and Opec

    Oil has been a geopolitical drama story for a long time. Major oil-producing nations are some of the least stable. Many believe US foreign policy is driven by the need for oil. And oil price shocks can bring economies to a standstill. Not to mention triggering huge inflation.

    But how do you profit? Most of the oil market’s rumblings are well known. And that means they’re priced in. Where do you have an edge? By calling Opec’s big bluff. According to some insiders and WikiLeaks revelations, Opec countries don’t have half the oil they claim they do. And that means a bonanza for companies with proven reserves if word ever gets out. I lay it all out here.

    5.Free-markets boom, collectivism dooms

    Perhaps the easiest political trend to grasp and invest in is a simple proposition. Free markets allow countries to grow, while collectivism in any form prevents growth. It doesn’t matter whether it’s communism, socialism, nationalism, fascism or corporatism. Allowing people freedoms delivers the goods, literally and figuratively.

    The examples are endless. East and West Germany, North and South Korea, the Soviet Union and Western Europe, China and Taiwan, Singapore and Malaysia. Each and every time we’ve had similar nations take a different road between free markets and collectivism, you get the same result.

    The best example is in fact the early Puritan settlement of America. Until they abandoned their extreme form of communism, the settlers starved and relied on the kindness of the Native Americans. The story of Thanksgiving should be about what happened next – when capitalism came to America.

    But a word of caution. It doesn’t matter so much how free market a country is. It’s the direction of reform that’s the key. And how far it can go. Take for example China’s boom of the past few decades. It’s still a nominally communist country. But that changed dramatically since Deng Xiaoping uttered “to get rich is glorious”. Meanwhile, the supposedly capitalist US is becoming more and more collectivist.

    Brexit will hopefully mean that the UK breaks free from the EU’s collectivism and experiences a surprising economic boom.

    6.Bitcoin – a unique geopolitical profit opportunity

    You don’t need to understand the cryptocurrency bitcoin to notice something special about it. It’s a barometer of geopolitical strife. Whenever there’s a crisis, the price of bitcoin spikes. China’s capital controls, Venezuela’s toilet paper and food shortage, Iran’s sanctions and WikiLeaks revelations all move the bitcoin price. That’s because bitcoin is the ultimate antidote to government control. And its price is determined by the demand for the government-evading currency.

    Each time a government tries to crack down on its citizens and their financial dealings, bitcoin becomes a more and more popular solution. And so the price goes up as they buy in.

    If you want to make a bet on geopolitical problems in the long term, buying and holding bitcoin is a great option. Gold used to be the way to go for the same bet, but it can be confiscated by governments and the gold price is heavily manipulated by banks. You can learn more about bitcoin here.

    These are just some of the ways to profit from geopolitics in the world. The formula is always the same. Identify a change happening in the world and figure out how it will move investment markets. It’s very different to the usual way of investing, but far more interesting and potentially far more rewarding.

     

     

    -Read more at www.capitalandconflict.com-

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  • Venezuela’s Future – Doomier by the Day

    22.05.2017 • United StatesComments Off on Venezuela’s Future – Doomier by the Day

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    Bill Bonner – Bill Bonner’s Diary (United States) –

    GUALFIN, ARGENTINA – Today, we look at what is going on in Venezuela. For amusement as well as for instruction.

    As long-term Diary readers know, we are connoisseurs of financial disaster. In Venezuela in 2017, we think we see an especially good vintage.

    But before we get to that, we introduce our Doom Index.

    Not So Doomy

    The idea is to try to measure the tension in the system… and get a better idea of when the rubber band is going to snap.

    Our research department, ed by Nick Rokke, looked at 11 indicators that – when aggregated – have coincided with the last two major blowups:

    1. Bank loan growth
    2. Credit downgrades
    3. Junk bond prices
    4. Stock market valuations
    5. Margin debt
    6. Investor sentiment (contrary indicator)
    7. Manufacturing sentiment
    8. Railcar traffic
    9. Nonfarm payrolls
    10. Household debt to disposable income
    11. Quarterly building permits

    We were surprised by the results. As you can see from the chart below, despite all our gloom and doom in these pages, our index shows we are not yet in the danger zone.

    You can find more details about the Doom Index here.

    Killing the Pigeons

    But let’s turn to an economy where doom is already well underway… and getting doomier by the day: Venezuela.

    Actions have consequences. In public policy, it is impossible to say what the consequences will be. There are too many delusions and too much smoke.

    Take a policy said to eradicate city rats. Its real purpose is to reward a large political donor who owns a pest control firm. It ends up killing the pigeons.

    Often, policies with clear and obvious purposes end up producing outcomes completely at odds with the stated objectives.

    Prohibition, for example, increased the number of drunks. The War on Drugs fattened drug dealers’ profits.

    The War on Poverty has made poverty respectable… even attractive… to poor people.

    The War on Terror has probably made a million otherwise sane and sensible Muslims yearn to blow up something with a U.S. flag on it.

    Most often, these outcomes are not exactly surprises. Look more closely and you will often find, hidden behind the promises… a pest control firm!

    News reports, for example, tell us that U.S. arms dealers are about to get a $110 billion payday. President Trump announced a weapons deal with the Saudis – the biggest in history.

    Into the Abyss

    Although the exact consequences of public policies are obscure, the patterns are familiar.

    As we’ve already explored, win-lose deals always reduce total human satisfaction.

    Win-lose deals – unless they are imposed by petty criminals or local bullies – require government insistence. Otherwise, no one would take the losing side.

    So the more government there is… the more active, ambitious, and overbearing it is… the more win-lose deals subtract from the sum of human happiness.

    A month ago, as many as a million of these disappointed people demonstrated against the government of Nicolás Maduro in Venezuela. It was the “Mother of All Protests,” they said.

    What was their beef?

    Inflation is running at about 700% a year. Last year, GDP plunged 19%. Food staples – beans, rice, bread – are disappearing. Families cross the border into Colombia to buy toilet paper.

    Hospitals have no medicine, no equipment, not even rubber gloves and disinfectants. Sometimes, they have no electricity. Deaths of premature babies have increased 10,000% in the last five years.

    How did a country make such a mess of itself?

    Win-Lose

    In a sense, the country was a victim of its own good luck… and then a victim of its own bad judgment.

    The good luck happened in 1914 when the first oilfield was drilled. The money followed.

    By the 1950s, with a basically market-oriented government, Venezuela rose to become the world’s fourth-richest country in terms of GDP per capita.

    Today, the country has the largest proven oil reserves in the world – 297 billion barrels of the stuff compared to 267 billion barrels in Saudi Arabia.

    But good luck allows you to make bad judgments. With the oil wealth flowing, Hugo Chávez – who described himself as a Trotskyist two days before his inauguration as president in 2007 – could impose win-lose deals on the whole economy.

    Key industries were nationalized. Price controls were put in place. Wealth was redistributed.

    Win-lose deals can redistribute wealth but only to the extent win-win deals create it. Take away the win-win deals, and the wealth soon runs out… as it did in Cuba and the Soviet Union.

    Now the tank is about empty in Venezuela, too.

    Banana Republic

    It doesn’t matter what you call it – government is always a means for the few to exploit the many.

    The few use every resource available to them to keep the hustle going, with special attention given to manipulating the gullible mob.

    The typical citizen rarely has any idea of what is going on… and doesn’t have much curiosity about it. As long as he has credit for a new pickup and a champion who promises to smite his enemies, the common man will go along with almost anything.

    But the Venezuelan auto industry has been ruined. And there’s no credit available. So there are few new pickups on the streets, and much of the public has turned against the government.

    Not surprisingly, the policies that destroyed Venezuela delighted U.S. economists and politicians – who were eager to impose win-lose deals of their own.

    In 2007, Nobel Prize-winning economist Joseph Stiglitz praised the “positive policies” in health and education of the Chávez government.

    And in 2011, Bernie Sanders wrote:

    These days, the American dream is more apt to be realized in South America, in places such as Ecuador, Venezuela and Argentina, where incomes are actually more equal today than they are in the land of Horatio Alger. Who’s the banana republic now?

    Sanders had no idea what was really going on in Venezuela. But he was right about what was going on in the U.S. It was on its way to becoming a banana republic.

    Only without the bananas. Or the republic.

    Regards,

    Bill

    -Read more at bonnerandpartners.com-

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  • Vern’s Guide to Making a Budget Surplus a Reality

    22.05.2017 • AustraliaComments Off on Vern’s Guide to Making a Budget Surplus a Reality

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    Vern Gowdie – Markets and Money (Australia) –

    Ever since the hapless Wayne Swan deputised as Treasurer, budget surpluses have remained elusive. Like the Scarlet Pimpernel, they seek them here, and they seek them there, but they cannot be found anywhere.

    Every year we’re told that just over the horizon is the promise of a wafer-thin surplus.

    Really, truly, it is coming…pinky promise.

    But the devil is always in the detail. The surplus promise is always conditional upon ‘pie in the sky’ forecasts.

    The Treasury has a problem. Revenue is (highly) variable. Spending is fixed and escalating. A buffer needs to be built…lower spending.

    Here’s my solution to achieving a surplus in 2050.

    The subject of ‘government is the problem and not the solution’ should be a compulsory addition to the educational curriculum.

    The sooner we start weaning society off its dependency on government, the better for everyone.

    Personal responsibility and independence of thought are going the way of the dinosaur.

    Government is not the solver of problems.

    Bureaucratic interference always has unintended and expensive consequences.

    People need to be taught that the market is the most efficient and least-costly solution.

    You may not like the market-delivered verdict, but that’s life. Suck it up. Every kid cannot be a winner.

    Sometimes you’re given the short end of the stick and you have to make the best of it.

    Educating the youth of today to be less reliant on government might, in decades to come, ease the pressure on budget expenditure.

    The system has conditioned people to Pavlovian responses.

    Not enough money for a house? Government will provide assistance.

    Not enough money to have children? Government will provide maternity leave.

    Not enough money to pay for childcare? Government will provide further benefits.

    Not enough for retirement? Government needs to pay more in welfare and other subsidies.

    Not enough money for medical expenses? Government will provide more funding for healthcare.

    Not enough money for education? Government will throw another few billion at schools.

    Not enough money to maintain a good life? The RBA will provide lower interest rates.

    The list of ‘not enoughs’, while far from exhaustive, has probably touched a raw nerve with some readers.

    No doubt a valid argument can be made as to why a particular ‘not enough’ warrants special treatment.

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    And therein lies the problem.

    Everyone’s ‘not enough’ is the one that shouldn’t be subject to budget restraint.

    The fact I’ve dared to touch on some ‘sacred cows’ indicates how protective we’ve become of our particular share of the government pie.

    Politicians are well aware that, when it comes to votes, it’s ‘entitlements or else’.

    The fear of ‘ballot box’ retribution is why spending cuts are off-limits.

    Hoping we can change this mentality with education is, in reality, a pipe dream.

    The truth is that government does not have a problem with revenue.

    The budget forecast tax receipts of nearly $440 billion.

    That’s a serious amount of money. And yet the Treasurer still can’t find anything to put aside for a rainy day. Pathetic.

    What we have is a spending problem…want, want, want.

    Ask and you are all but assured to receive…on the proviso it generates votes.

    The more that’s given, the more that’s demanded. Enough is never enough when it comes to government spending.

    In a recent report released by KPMG, it was found that (emphasis mine):

    …60 percent of [Australian] households pay the same or lower amounts of income tax compared to the payments they receive from the government — in essence, 40 percent of households are subsidising income for 60 percent of households

    This is patently ridiculous and clearly not sustainable.

    What does the Treasurer do about this absurdity? Rein in benefits and subsidies?

    No. He decides to up the tax take…more revenue is needed.

    Treasurer Morrison has given us his version of Swanny’s ‘Resource Super Profits Tax’ (RSPT).

    It’s been a few years since Swanny’s brainwave, so here’s a quick recap.

    The initials RSPT actually stood for ‘Really Stupid Policy, Treasurer’.

    Swanny’s ‘genius’ tax grab was replaced (in the blink of an eye) with the ‘Minerals Resource Rent Tax’ (MRRT).

    And we all know that MRRT ended up being an abbreviation for ‘Miners Ran Rings around Treasurer’.

    Treasurer Morrison, in an attempt to compensate for being too gutless to tackle our runaway spending, has decided on a bank levy.

    Hitting the Big Four banks and Macquarie with a sort of ‘Banking Super Profits Tax’ (BSPT).

    According to SBS News: ‘Mr Morrison insists the banks can absorb the new tax, which is set to raise $6.2 billion over four years.

    Earth to Scotty, the banks are not going to absorb the new tax.

    Yes, the optics are great politically. People love to hate the banks.

    The executives earn far too much. Accounts are gouged for fees. Deposit holders are screwed on rates. Wealth-management divisions are mired in scandal. Cuts in cash rates are never passed on in full to borrowers.

    The banks’ public image is one of money first and customers coming a very distant second.

    In playing to the crowd, Morrison looks to be on a winner. Clip a few dollars off the big end of town…they can afford to pay it.

    The reality is the banks won’t pay it.

    Scotty is getting into our pockets via the banks.

    Deposit rates will be clipped. Loan rates raised. Account-keeping fees pushed up a few dollars.

    Little by little the banks will slice and dice accounts to pay Scotty his BSPT.

    But, as always, nothing is ever one-dimensional. For every action, expect a reaction.

    The Australian reports (emphasis mine):

    The government’s new bank levy will raise far less than the forecast $6.2 billion if lenders pass on the costs through higher interest rates to property investors, thanks to negative gearing rules that allow interest charges to be claimed back through the tax system.

    Investment loans are the softest target to hit with increased interest rates.

    Negative gearing means the higher interest costs are tax-deductible.

    This is from The Australian article:

    UBS analyst Jonathan Mott said a 40-basis-point interest rate rise on investment-property loans would recover the annual cost of the levy for the banks, recouping about $1.56bn a year from investors in extra interest payments.

    Got that? Raise interest rates on investment loans by 0.4% and the levy is fully funded.

    And here’s the twist (emphasis mine):

    But according to prominent economist Saul Eslake, such interest rate increases would mean about a third to a half of the cost of the bank levy would be borne not by the banks but by taxpayers, due to the government’s generous tax breaks for property investors through negative gearing rules.

    Here’s the circle of stupidity created by Treasurer Morrison’s attempted tax grab.

    The banks are forced to do the government’s dirty work and collect the extra $1.56 billion in revenue by charging investment loans a higher interest rate.

    Investors claim the higher loan charges as a tax deduction. Of the $1.56 billion raised by the bank levy, the tax office refunds between $500–700 million back to investors.

    Politically brilliant, Scotty. But financially dumb.

    Seriously, what hope do we ever have of achieving a budget surplus…let alone addressing our ballooning debt levels?

    Our collective selfishness means there is only one outcome to address our spending problem.

    The imbalances cannot continue. Something is going to give, and it won’t be pleasant.

    The market is going to provide the solution to the government’s problem.

    It’ll be brutal. It won’t be fair. And the lessons will last for a generation or more.

    By the way, a lesson our Treasurer is going to learn is that BSPT actually stood for ‘Banks Sidestep Paying Tax’.

    Regards,

    Vern Gowdie,
    Editor, Markets & Money

    -Read more at www.marketsandmoney.com.au-

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  • Meet the Man Who Draws Money Out of Hot Air

    22.05.2017 • Gold and Natural ResourcesComments Off on Meet the Man Who Draws Money Out of Hot Air

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    Andrew Lockley – Exponential Investor (Great Britain)-

     

    You might think of heat as something you’d like to keep hold of. After all, that’s why you insulate your house. But in many other settings, we’re only too keen to reject heat. Air conditioning, cooling towers and refrigerators all need to dump heat. Fundamentally, that’s all energy going to waste. Globally, the losses are gargantuan. If only we could find a way to use this energy, it would be a licence to print money.

    Now, I’ve found a man who can capture the money that’s locked up in hot air and water.

    Today, I’m interviewing Alan Healy, CEO of Exergyn. I originally met him at the Great Private Investor Summit – which I’m visiting again, this Thursday. His firm has developed a cutting-edge power technology, which runs on waste heat.

    AL: Hi Alan. Can you start off by telling me a bit about Exergyn?

    AH: Hi Andrew. Exergyn is developing an engine – the Exergyn Drive that runs on hot water. It’s a simple but innovative technology. This will enable us to make the product cost-effective. It will facilitate the sustainable use of waste hot water for the first time.

    AL: You say your engine runs on hot water. How much hot water is available?

    AH: We estimate that the amount of energy lost each year as low-grade waste heat is equivalent to twice the oil and gas output from Saudi Arabia. In the US, the Department of Energy reckons the utility sector wastes enough heat to power Japan.

    AL: You’ve previously discussed an “energy trilemma” as being at the heart of this. Can you explain what this means?

    AH: As consumers at home or at work, we expect to be able to keep our lights on. We complain if bills are too high – but we also want to have clean power, which doesn’t contribute to climate change. This is a challenge facing the utilities industry – and existing systems cannot deliver on all three. The current investments in renewables are beginning to solve the cost and resource issues. In order to meet our needs, utility companies need access to power which is reliable and available. This must be power we can afford, and which has low (or ideally zero) carbon emissions. Taken together, this isn’t an easy problem to solve. Exergyn can deliver on all three fronts.

    AL: Why is this such a big issue now?

    AH: Traditional fuel industries, such as coal, are in decline. Within a decade, all the UK’s coal-fired power stations will be closed. Many of our nuclear power stations are old, and proposals for new ones are proving highly controversial.

    Many countries are increasing solar and wind capacity. Consequently, costs of these technologies are falling. However, these technologies increase our need for energy storage, which in turn bumps up the cost of our electricity. On cold, calm nights, we are going to be very short of capacity. This means we may struggle to keep the lights on!

    AL: So who would stand to benefit from using an Exergyn Drive?

    AH: Exergyn delivers on all aspects of the energy trilemma: the Exergyn Drive will deliver reliable, clean, low-cost electricity. We’ll all ultimately benefit.

    Disposing of waste heat through the radiators on engines can cost money. Exergyn can turn this cost into revenue, which is highly attractive. There is also increasingly stringent legislation on emissions emerging in many markets all over the globe. The Exergyn Drive can help companies achieve compliance – but without a significant overhaul of their current machinery. We can use the waste heat that goes into the radiator on large engines. Instead of rejecting this heat to the atmosphere, we can put it to good use. Our plant takes this waste heat and uses it to generate electricity. Biogas sites are a good example wherein facilities are remote and often have little use for heat. You’ll often find these biogas plants at landfill sites.

    AL: How does your technology work?

    AH: We have a developed a very simple machine which uses special wires. These are made from a material called shape memory alloy (“SMA”). Most materials expand when heated. SMA is one of the very few materials which contract – and so forcibly – when heated. It then relaxes to its original size when cooled. If made of SMA, 1m of coat hanger wire could lift four grown adults over 3cm off the ground. The Exergyn Drive relies on a thick bundle of these wires. Together, these could lift a sperm whale.

    AL: How many aardvarks could it lift?

    AH: About a thousand.

    AL: What about opossums?

    AH: 13,500 – but that’s a fairly crude estimate, as there’s a fairly broad distribution of sizes in opossums.

    AL: Thanks for clearing that up. Your knowledge of animal masses is encyclopedic. As I’m sure you can appreciate, opossum-lifting is a rare use case – although I wouldn’t want to detract from its importance. Can you explain how you obtain useable energy from the system?

    AH: When an SMA wire is heated it contracts; when cooled, it relaxes back to its original length. We fix one end of the wire bundle to a piston and the heating/cooling cycles causes the piston to move in and out. We use this to drive a generator via a transmission. It’s not unlike a two-stroke chainsaw engine – but with very low speed, and very high torque.

    AL: You mention the SMA used for the wires. Can you tell us more about it?

    AH: We use shape memory alloy for our wire. This has applications in medical products and actuators. It’s also used as the underwire in bras; and for novelty products, like self-bending spoons. We use nitinol, which is a unique blend of nickel and titanium. This was first discovered in the 1950s. In our application, we need the wire to expand and contract millions of times, without breaking. When we started, this had never been achieved by anyone – so we are pushing the frontier of the science.

    We have had great success in this area, and we have exceeded our original design target of five million cycles. Ironically, our biggest problem is the testing machinery breaking – we have had no problems with the wire.

    AL: Aren’t there plenty of other technologies that can utilise waste heat?

    AH: Competing processes work best with high-grade heat. These are technologies like steam turbines, thermo-electric generators, turbo expanders and organic Rankine cycle (ORC) generators. Working with low-grade waste heat, at less than 100°C, is a challenge. The Exergyn Drive is the only product that can give a commercially attractive payback at less than 100°C.

    AL: What size of engine do you require?

    AH: The Exergyn design is modular in 10kWe units. On a 1MWe biogas engine, we could add up to 90kWe. We originally targeted engines with outputs between 200kWe and 10MWe. We have found that there are sites with large amounts of waste heat that could be interested in much larger systems. Some of these sites get their heat from other sources (eg, geothermal or solar) so we are not limited to engines.

    AL: So is it practical to use the Exergyn Drive?

    AH: Oh yes. We want our units to be as quick and simple to install as possible. They can easily be retrofitted. Installation can be a simple plumbing job – simply connecting the radiator pipes to our engine, and wiring it into the electrical supply. Then, it just sits there – running whenever heat is available. You don’t have to think about it at all. We’ll check it each year, and carry out maintenance every few years.

    AL: Can you really get enough cycles out of the wire to make it reliable and cost-effective?

    AH: Wire life is the key factor for our development. We have got world-class teams, in Dublin and Prague, who are dedicated to improving this. We reached the original target for number of cycles before the end of last year. This is ahead of our original plans – so our confidence is increasing rapidly. Our partners now agree, and think we will exceed our original target by quite some margin.

    AL: That’s interesting. Do people want to use their waste heat?

    AH: All the easy energy efficiency measures have already been implemented. It is getting harder and harder to improve efficiency, and reduce carbon emissions. Waste heat is one of the few untapped resources left. Nearly everyone we talk to wants to use their waste heat – some are desperate, and under significant pressure from their customers.

    AL: So is Exergyn’s engine cheaper than other forms of power generation?

    AH: If the source of waste heat is free, then the cost of electricity is very attractive, potentially at around 3p/kWh. Compare this to another generator which can run 24 hours a day, such as Hinkley Point. Hinkley is expected to cost around 12p/kWh – so Exergyn’s solution looks very attractive in this light. The Exergyn Drive will also generate on a continuous basis. It will be more cost-effective than a similar system, with solar PV and batteries. Any fossil fuel plant is sensitive to the fuel price. There was little investment in the oil and gas industry whilst the oil price was low. It is expected that oil will be back at $100/barrel within three to four years. At this point it can be very attractive to use the waste heat from engines, fuelled using oil derivatives.

    AL: How do you ensure reliability?

    AH: We need a robust product. To achieve our low maintenance costs, we have to deliver on the number of cycles. One of the key challenges is proving the wire quality meets our needs. We have had to develop accelerated testing methods to enable us to get this right. We expect to manufacture in high volumes – so we are using expertise and practices from the automotive sector to get this right. Reliability and quality are fundamental when launching a new technology. We have seen other new products suffer major reputational damage from the failure of one component. Samsung’s exploding phones are a great example! It is really important to us to avoid this – as we’re launching a completely new technology.

    AL: What’s your business model?

    AH: This is an interesting question, Exergyn is highly customer-centric in its approach. Some customers want to buy outright, to maximise their benefit. Others want to minimise their outlay. Some firms want their existing engine supplier to install and maintain the equipment. So, we’ll offer multiple packages to meet all our customer requirements. Flexibility is the key for us here.

    AL: Do you think that we will routinely deploy waste heat recovery in future?

    AH: The market is changing rapidly. People know they have a problem – and we are seeing huge interest from all over the world. Once the technology is commercially proven and accepted, we expect it to be deployed wherever the returns are attractive. We think it has the potential to increase in popularity very rapidly. Watch this space…

    AL: Can you tell me about the firm itself – your future plans, fundraising, that sort of thing?

    AH: Of course. Exergyn was formed in 2012, and since that time, we have built the business up to 21 people. We are about two years from commercial sales – with plans to run industrial trials on several sites before then. To date we have raised over €3.5m in equity and won a Horizon2020 SME grant worth €2.5m. We will need more equity funding to commercialise.

    AL: Have you got a lot of competitors?

    AH: No real direct competitors that concern us. We keep an eye on new technologies – but they typically have characteristics which will favour certain niche applications. We haven’t seen one that significantly impacts our plans. We’ve got a lot of half-competitors who are solving problems in related markets in different ways to us. For example: there are several products which can recover high-grade waste heat from steam. Others are suited to very large or very small applications. These aren’t necessarily direct competitors – but they are an alternative way of solving somewhat similar problems. There are also technologies under development which propose to utilise hot water, and these could become competitors.

    Competition is natural, we expect it. But ultimately we expect to be the best commercial solution to low-grade waste heat. A bigger threat to us is being copied. To counter this, we have developed a strong portfolio of IP, covering all the key aspects of the engine’s design.

    AL: I see. So is what you’re doing pretty unique?

    AH: We believe this is a unique approach – but we’re certainly not the only way to recover energy from heat. And we’re quite glad of that – because there is an enormous market here. We are talking to many of our “competitors”. We want to work together to break down the barriers and get the issue on the political agenda. Most competitors have a good niche which doesn’t really overlap with us, and our own niche is huge. We will potentially partner with them. None of these firms are targeting the hot water resource – so this approach could be good for all of us.

    AL: What drew you to working on this project?

    AH: I had written a children’s book set in 2096 that featured climate change. This is the world that our grandchildren, or great-grandchildren, will inherit from us. It is set in a world where sea levels have risen to the extent that everyone lives in floating cities. With our hero, “Tommy Storm”, set to save the world, the book is great fun.

    It set me thinking – and I decided I wanted to make an impact. I didn’t want to tell my daughter or my grandkids in the future that I had done nothing to help prevent catastrophic climate change. I met up with some similarly-minded colleagues. They had other parts of the jigsaw (such as PhDs in thermodynamics, and in the material we are using), and we put the pieces together. I had set up and run businesses in the past – so I brought my business acumen to the table. I saw that this had real commercial potential. It’s so rewarding to feel that you have the potential to make a significant impact on a global scale.

    It’s not the complete solution – but it will contribute to the overall result that should mean we don’t have to rely on Tommy Storm to sort it out! How could you fail to be excited by that?

    AL: Moving on from your own firm specifically, you’re working in the clean energy sector. What do you think the future holds for this?

    AH: I daren’t predict the future for the energy sector, it’s in such a state of change.

    Look at the big six utilities here, some were valued in the hundreds of billions of pounds a decade ago. They crashed to a few tens of billions – because they are not adapting to change. Now renewables are attracting two-thirds of all energy investment – and most investors are demanding rapid paybacks with decent returns. Costs of wind turbines, solar panels, and batteries are coming down. Nobody predicted this rapid change – so forecasting the future will be similarly difficult.

    We can see that developed countries are moving towards distributed energy, and away from centralised power. Opec is trying to push oil prices up – but the US shale market is not helping their case. Coal is on the way out. Finland and France have made recent announcements to cut coal from their power mix, and even China is scaling down production. The Paris Agreement has come into force – but Trump is president, so will he have an impact? Tesla wants us all driving electric cars, but Toyota says the all-electric is not the way to go. I would love for the planet to put a real inescapable price on carbon. Predicting the future is impossible, but I do predict that we will continue to move in the right direction – and that the speed of change will only increase. Exergyn will be ready to adapt to any opportunity the future offers.

    AL: How do you think your service might develop, over time?

    AH: For the first two years we will sit the Exergyn Drive modules on land-based engines. After that we will explore other applications. Energy markets are changing so quickly that we plan to remain flexible about the future. The shipping industry has legislation driving change. Being able to generate small-scale power from 90°C water could change the geothermal industry. Longer term, we can look at developing much larger drives, with megawatt-scale outputs. We can also think about energy storage systems, or renewable energy systems without the need for batteries. The opportunity is so huge, it is more about getting the other aspects right – such as simplifying installation, and offering the types of solutions our customers require.

     

    Best,

    Andrew Lockley
    Exponential Investor

     

    -Read more at exponentialinvestor.com-

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  • Don’t Buy Japanese: Watch the Widowmaker

    19.05.2017 • Great BritainComments Off on Don’t Buy Japanese: Watch the Widowmaker

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    Nick O’Connor – Capital and Conflict (Great Britain) –

    Predicting the Japanese bond market will crash is known as the Widowmaker trade.

    If you take a look at the fundamentals, the conclusion is obvious. A bond market crash in Japan has to happen. But it should’ve happened a very long time ago. But it hasn’t happened. So what’s going on?

    The fact that it never seems to happen is what makes this trade the Widowmaker. People who take a punt on the inevitable discover it is illusive.

    The famous hedge fund manager Kyle Bass is one of the Widowmaker trade’s victims. Here’s his rather simple analysis for why the Japanese bond market is in trouble:

    [Bernie] Madoff’s [ponzi] scheme collapsed for one primary reason – he had more investors exiting his scheme than entering. As soon as this happened it was over. According to this most recent census, the Japanese population peaked within the last few years at 127.9 million and has since lost 3 million.

    This trend is set to continue as the Japanese population shrinks, fast.

    The basic idea is that retirees sell bonds to fund their retirement while middle-age workers buy them for their prospective retirement. If you have a lot of people retiring and not many working, the proportion of buyers to sellers begins to fall. This is known as the M/O ratio – the ratio of middle-age to old-age people.

    If you chart the M/O ratio of a country over time, it tells you the number of investment buyers per seller based on their age group. Academic research has shown this predicts price/earnings (P/E) ratios in the stockmarket. That’s a complicated way of saying it predicts stockmarket performance, adjusted for how much companies earn in profits.

    Here’s a chart of several countries’ M/O ratios from the Federal Reserve Bank of San Francisco’s Economic Research Department:

    chart of several countries’ M/O ratios from the Federal Reserve Bank of San Francisco’s Economic Research Department

    As you can see, Japan’s demographic decline really accelerated in the late 1980s. The ratio of middle-aged buyers fell from 2 to 1. The stockmarket followed suit and crashed before going sideways.

    As the projected M/O ratio shows, there’s an upturn in 2012, followed by another downturn in 2020. Again, the stockmarket is following suit with a recent rally.

    The M/O ratio was clearly an accurate predictor of Japan’s stockmarket. A wave of retired people sold out and there weren’t enough young buyers to take their place. The brief reversal in the trend shows up nicely in the stockmarket too.

    But why didn’t the bond market face the same fate? Japanese investors love Japanese government bonds (JGBs). More on that in a second.

    What else does the M/O chart show you? The US M/O ratio hit its peak in 2000, at the height of the tech bubble. That’s not a bad call either for stockmarket investors. Italy peaked in 2012, when the European sovereign debt crisis was at its height.

    The UK’s ratio is more stable. But everyone is on the way down long term. That means there are less and less people of investment-buying age per person of selling age. More sellers and less buyers.

    You can guess what that means for stockmarket prices.

    But not so fast.

    I think stockmarkets clearly show the influence of the M/O ratio and the theory behind it. But there are two key questions to ask if you’re still with me:

    Why didn’t Japanese bonds crash?

    Why has the US stockmarket recovered so strongly while its M/O ratio hasn’t?

    The new Widowmaker

    The answer to those questions is the same as ever – central banks. The Bank of Japan (BoJ) only intervened in the bond market until 2010. That’s why stocks crashed and bonds didn’t. Bonds had a buyer with an infinite budget, stocks didn’t.

    These days the BoJ buys exchange-traded funds (ETFs) full of stocks, and the Japanese Nikkei index has surged.

    Meanwhile, in the US the story is similar. For now the Federal Reserve isn’t buying stocks. But the Swiss central bank owns more than $60 billion in US stocks alone, for example. And the Fed has intervened by lending to banks which do buy stocks and by buying other assets like mad.

    Here’s a survey of what central bankers expected to buy at the beginning of this year compared to last year, from The Wall Street Journal:

    Chart showing the net percentage points of central banks increasing or decreasing future allocations

    This is brand new funny money flowing into stocks and bonds from central banks. It also explains the languishing price of gold.

    In other words, central bankers dominate the markets everywhere. You probably already knew that if you’ve read any Capital & Conflict in the last few months.

    In 2012, Kyle Bass predicted that Europe’s sovereign debt crisis would trigger Japan’s. But it didn’t. So what set apart Portugal, Ireland, Italy, Greece and Spain from Japan? Indeed, Japan’s sovereign debt position is far worse than any of the PIIGS.

    Hint – it’s all to do with central banks once more.

    The BoJ serves Japan. Who does the European Central Bank (ECB) serve? The eurozone, not its individual member governments or their peripheral stockmarkets.

    Compare the ECB’s efforts as part of the austerity-imposing Troika to the BoJ’s enthusiastic quantitative easing efforts and you can see how important central banks politics is.

    Gideon Gono’s revenge

    Japan probably isn’t very interesting to you. It wasn’t to me until recently.

    The reason I highlight Japan to you is simple. We’re turning Japanese. Demographics in Western countries closely resemble the way Japan turned in 1990. But that means we can see our own fate many years in advance.

    It’s been many years since Bass took his position on a Japanese bond crash. The quote above is from 2012, long into his bet. And many punters came before him.

    Perhaps the lesson you can draw from Japan is that central bankers and governments can kick the can down the road incredibly long. If you give them the power to do the kicking in the stockmarket, they will. Especially now that the markets expect them to. That explains the revival in the US and Japan.

    Japan’s central bankers were slow to catch up. They didn’t realise they could get away with the likes of the policies they pursue today until other central banks tried it.

    Who would’ve thought central banks could buy stocks each month? Not even the Oxford educated Gideon Gono, Zimbabwe’s former central banker. And he presided over one of the most successful stockmarkets in history. If you ignore inflation.

    In this environment, you might be able to see an inevitable crash around every corner. But it might just be a new Widowmaker.

    Until next time,

    Nick Hubble
    Capital & Conflict

    -Read more at www.capitalandconflict.com-

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  • Earn Big by Investing Small

    19.05.2017 • Great BritainComments Off on Earn Big by Investing Small

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    Guest Contributor – Exponential Investor (Great Britain) –

    Pity Warren Buffett…

    He has billions in the bank. World leaders flying to Nebraska to ask him for advice. And his live comedy show fills a stadium.

    But he misses the old days. Before he was the sage of omaha and the world’s most loveable billionaire, Buffett was the king of “backdoor stocks”.

    Backdoor stocks gave Buffett his big break in investing. They’re a small niche in the market, which can only be accessed by a tiny percentage of investors.

    These stocks are a bit riskier than other types of investing, yes. But don’t get me wrong – they’re nothing to do with using options, spread betting or anything like that. They’re basically like investing in regular stocks – except turbocharged.

    So what are these backdoor stocks?

    Well backdoor stocks are shares in the smallest listed companies on the stockmarkets.

    Think of any company at all that you’d read about in the paper or on the news. Backdoor stocks might be 100th or 1000th the size of those companies.

    Investing in the big public companies is like investing “through the front door”. Every knows about them, every has the opportunity to invest in them, and as a result you can’t expect to make much money from them.

    Investing through the backdoor is about investing in companies other investors don’t hear about… companies you won’t see even in the Financial Times or Investors Chronicle.

    How backdoor stocks work

    Here’s Warren Buffett talking about backdoor stocks:

    “The highest rates of return I’ve ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It’s a huge structural advantage not to have a lot of money.”

    He’s saying it’s much easier to be a private investor managing thousands than professional investor managing billions. Why? Because it’s basically impossible for professional investors to stick their money into small companies.

    Buffett manages hundreds of billions of dollars for Berkshire Hathaway. If Buffett were to spot a cracking company on Aim – a retailer worth £20m, say – and if that company were to double in value, it would only increase the size of Berkshire Hathaway’s portfolio by 0.004%.

    When you think of the time and effort that goes into finding great companies, it’s not worth it for Buffett to even look at companies that small.

    That explains why Buffett can’t buy small companies. But why would he want to?

    You surely know this by now, but it bears repeating: small companies grow faster than big ones! Over the last 100 years or so small companies have grown faster than any other asset class.

    Why is that? Well, a lot of it comes back to that size thing I just mentioned.

    In an efficient stockmarket, it’s impossible for an investor to get an edge on the market. In an efficient market, stock prices reflect all available information about companies.

    Markets get efficient when gangs of hedge fund managers, professional investors and algorithms scour the markets all day every day, looking for the tiniest edge. Professional investors wring the inefficiency out of the big markets like water from a cloth. Even Warren Buffett prefers not to go up against those guys.

    Investing through the front door, in other words.

    But, as we’ve seen, professional investors have to stay away from small companies. They’re too small to invest in, which means that private investors get the run of the place. There are opportunities just lying around on Aim that you’d never find on the main market.

    Here’s Buffett again, talking about his small company glory days:

    When I got out of Columbia the first place I went to work was a five-person brokerage firm with operations in Omaha. It subscribed to Moody’s industrial manual, banks and finance manual and public utilities manual. I went through all those page by page.

    I found a little company called Genesee Valley Gas near Rochester . It had 22,000 shares out. It was a public utility that was earning about $5 per share, and the nice thing about it was you could buy it at $5 per share.

    I found Western Insurance in Fort Scott, Kansas. The price range in Moody’s financial manual…was $12-$20. Earnings were $16 a share. I ran an ad in the Fort Scott paper to buy that stock.

    I found the Union Street Railway, in New Bedford, a bus company. At that time it was selling at about $45 and, as I remember, had $120 a share in cash and no liabilities.”

    I want to help you get involved in this little corner of the market. That’s why I’ve been working with a specialist on our new “backdoor stocks” project.

    The only catch with this is due to the nature of these backdoor stocks, we have to strictly limit the number of people we can reveal them to.

    That’s why we’re only looking for 160 readers to join us today.

    Hit this link to get the full story and see how you can become one of the 160 people who’ll get to test-run this approach to the market.

    Until next time,

    Sean Keyes
    Exponential Investor

    -Read more at www.exponentialinvestor.com-

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  • How You Can Avoid Polluted Markets

    19.05.2017 • FranceComments Off on How You Can Avoid Polluted Markets

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    Simone Wapler – La Chronique Agora (France) –

    This poses a problem for us ordinary investors who are not part of the Parasitocracy: movements are difficult to anticipate rationally.

    For a long time, we have been referring to the excessive valuation of companies in terms of all historical standards.

    In the United States, a mere critical review of the statistics showed that the economic outlook was far from flourishing and that corporate profits were stagnating (at best).

    What is the common thread between François Hollande, Emmanuel Macron and Marine Le Pen?The answer could save you 20% of taxes – and this is just the beginning:Click here to find out more

    Among the subjects of concern that we address in a recurring way:

    The very low rate of participation in employment, the alarming level of student loans,subprimeThe failure of the purchasing power of the workers, the difficulties of the gas and shale oil industries developed on credit while the barrel was at a high price …

    Despite these realities, the indexes are breaking record on record.

    Simply because the profits of the big companies that compose them do not depend on these facts, on a real purchasing power, on investments that can increase wealth.

    These large companies depend either on state contracts (health, armament, infrastructure …) financed by the borrowing or the taxes, or of financial engineering. Apple’s case that borrows to buy back its own shares and pay dividends to its shareholders that we often talk about is emblematic.

    Le total des emprunts d'Apple dépasse les montants détenus par les plus grands fonds obligataires

    Le total des emprunts d'Apple dépasse les montants détenus par les plus grands fonds obligatairesApple prefers to borrow to pay dividends instead of investing its $ 256 billioncash

    The lever of stock market hikes and profits is not the creative investment of new wealth, but politics and cheap credit driven by politicians and central banks.

    From then on, all political uncertainty frightens and triggers panic sales.

    Under these conditions, as an individual, if you want to invest your money in the shelter of these irrational and unpredictable movements, your choice is limited:

    • You remain on the stock market but you must favor companies that are not under political influence and operate in the most competitive sectors possible. This eliminates the very large companies in the health, environment, energy, weapons … You have to buy cheap but most of the big values ​​are too expensive because of the infinite and free credit that allows the institutional ones to place themselves by borrowing.
    • Or you invest directly in lending or capitalizing small businesses profitably in competitive markets … without going through the polluted “financial markets”. This will be the focus of our new serviceReal ProfitsWhich will be launched on 8 June.

    You may not know:Most capital gains are now realized before the initial public offering in the United StatesBut alsola France. However, the entrepreneurial financing sector is no longerBusiness angelsPrivileged or funds managing the assets of large wealthy families. It is also accessible to you and from June 8th we will help you sort out this market.

    -Read more at la-chronique-agora.com (French)-

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  • What You Can Learn from Greece

    19.05.2017 • United StatesComments Off on What You Can Learn from Greece

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    Henry Bonner – Strategy and Council Letter (United States) –

    Still in the “dirty weather” here in Lausanne … We always have the same questions in mind: What do we do? What are we trying to do? Which decisions deserve time … and which ones are best left to the entropy …

    All around you, you will find hundreds or thousands of things to improve … rules to respect that you did not know … things that you “should do …” or that you should repair.

    Yet for most people, almost all of these ideas are distractions … except for a very small range of things, you can not make a positive impact …

    Almost all the productive things you can do are small … make a smile … say a nice word … say hello … or lie down on time …

    Ultimately, this kind of little thing makes an incredible difference in your life … and even in the life of your surroundings … but you will not have the feeling to “control” your future and your destiny … which displeases many people .

    You can not plan the outcome of things … nor can you plan love … nor “logically” create a language … Almost all events in human life produce on the one hand through action … and Of another by the good will of events.

    The Truth About Aristotle

    Look at, for example, the greatest philosophers and scientists, all over the world … from Aristotle, Isaac Newton, Einstein … what do they all have in common?

    Almost always, these great thinkers arise when the environment is propitious …

    Ancient Greece in the time of Aristotle, for example, was an environment of efflorescence of commerce, communication, and economic stability. Many well-known philosophers and mathematicians, such as Socrates, Plato, and Archimedes, lived around this period.

    You seem to have a much better chance of being a recognized mathematician or “great philosopher” during the golden age of Greece than at most other periods before the ” Modern era.

    Why?

    According to many historians, Greece had an economic expansion beginning at least in 800 BC, which continued for 500 years.

    According to the research of Josiah Heller of Stanford University, between the 9th century and the 4th century BC, the population of Greece climbed 10 times. The size of an average dwelling rose 3.5 times. Household wealth increased by 5 to 10 times, and consumption increased 1.5 to 2 times.

    According to the archaeologist Ian Morris, lifetimes have increased by about 10% during this period (see graph).

    Why this economic growth?

    Primarily, it would seem, a virtuous circle … because Greece was well positioned for maritime trade, their commercial capacities developed … creating better ships for trade, as well as trading desks ( emporia ). To cross the Isthmus of Corinth, the Greeks had built a special way, the Diolkos, to make the boats pass over land.

    At the same time, in Central Europe, the use of iron became widespread, an innovation facilitating agriculture and creating new goods to be exchanged.

    With trade, the Greeks started using gold and silver currencies … leading to the creation of a financial sector providing loans to traders … paying interest ( nautikos tokos ) from 12.5% ​​to 30%.

    In short, you may not be able to find a specific “reason” to explain all this effervescence …

    We know that our economy tends to produce innovations that complement and grow.

    These external circumstances of course have a major effect on our lives … and on our personal prosperity.

    And today, where are we?

    Are we in a “golden age?”

    Or do we begin to roll down the slope?

    According to some thinkers, we are only in the beginning … and our pace of innovation and improvements will continue to accelerate …

    We have spent about 200 years perfecting and spreading the use of the fuel engine … Some experts now believe that we will have an equivalent of this “Industrial Revolution” every 10 years … or even months.

    According to futurist Ray Kurzweil, a pioneer in the field of scanners and digital images, “We are not going to have 100 years of progress in the 21st century – we will have the equivalent of 20,000 years of progress (at the rate of today (2001). ”

    You may recognize Moore’s law, expressed by one of Intel’s founders in 1965, that the capacity of computers doubles every year without changing size.

    In other words, the more time goes on, the more rapidly innovation and progress …

    According to some futurists, this tendency is limited by the capabilities of human intelligence … and according to them, “artificial intelligence” will exceed the capacities of the human being in the next decades … calling this event “The Singularity.”

    Here is a table published by Singularityhub.Com showing the approach of this event …

    Of course, as we said yesterday, “the trees do not climb to heaven …”

    And ancient Greece ended up declining, and losing much of the innovations and wealth it had accumulated in 500 years.

    Why?

    Wars? Famines? Diseases?
    We will keep this subject for another time.

    What to do…?

    At this point, almost everyone is convinced that our “golden age” in equity markets will continue … We have not experienced a serious, long-term recession since the 1970s …

    As we said yesterday, we experienced a decline in equity markets between 1965 and 1980.

    As companies flowed, the least “innovative” asset of all, gold, greatly increased in value.

    We spent almost 10 years without any real correction … and almost 40 years without real market fall for more than 18 months …

    In addition, we see a stock market dominated by technology companies … Amazon, Google, Apple, Microsoft …

    We feel we have seen this pattern before …

    As a result, we remain rather reserved on the stock markets for the moment …

    After all this “good weather,” we should have some rain … even if we do not know for now where it will come from …

    Truly,

    Henri Bonner

    -Read more at www.lettre-strategie-conseil.com (French)-

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  • Why You Should Be Suspicious of Portfolio Diversification

    18.05.2017 • Great BritainComments Off on Why You Should Be Suspicious of Portfolio Diversification

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    Nick O’Connor – Capital and Conflict (Great Britain) –

    Konnichi wa from Japan.

    I’m here looking into Japan’s demographic disaster. And trying to solve it by meeting the potential in-laws.

    Japan is 20 years a of the rest of the world when it comes to demographics. Which puts the rest of the world at the cusp of a dangerous demographic slope.

    If you think demographics are important to financial markets and you want to make predictions about our own prospects, then taking a look at Japan is a must. Here’s the Japanese stockmarket for one:

    Graphic showing a decline of 70% in the Japanese stockmarket.

    Could you stomach a steady 70% decline over 20 years?

    More on that in coming days. First, what’s going on in the financial world?

    The US stockmarket seems to be clutching at straws. And yesterday one called Trump snapped.

    The bad news finally caught up with the US president. His former FBI director leaked information, he’s going to be investigated by another former FBI director and the media circus over his release of information reached a furore. Stockmarkets took a hit.

    It’s certainly good entertainment. If only your personal wealth wasn’t at hand. The FTSE 100 dropped too.

    I doubt that Donald Trump is truly the key to the stockmarket. There just isn’t much else going on. That’s why the Volatility Index (Vix) is so low. At least it was until yesterday. Trump’s shenanigans is the only thing worth trading.

    Remember, as the Russian economist Hyman Minsky said, stability breeds instability. If something cracks now, it’ll turn into a rift fast. So what do you do?

    Dangerous diversification

    Diversification is the one thing every financial advisor agrees on. Which should make you suspicious in the first place.

    Apart from being legally mandated to promote diversification, financial advisors benefit from it. It increases the amount of things they need to be doing for you and can charge you for.

    But does it work?

    That depends on what you expect it to do. Higher returns? Nope. Less volatility? Sort of.

    Theoretically, diversification is an ok idea. Sort of like sub-prime mortgages. You can shoot holes in it but the premise isn’t bad. If you ignore the bad aspects, the whole thing can get out of hand. That’s the point we’ve reached today in diversification.

    It’s a bit like the efficient market hypothesis. It only holds true to some extent if people don’t believe it. If everyone fully diversified, there’d be no real thought to what makes an investment good or bad. Stock prices would be determined by buyers and sellers without regard to prices, just allocations. Think about how much pension and savings money is ploughed into markets without a thought except for diversification.

    A lesson from crises

    The real problem with the concept is that it breaks down when you need it. This chart from Two Sigma shows correlation – the tendency of different investments to move together. This is within an asset class, so the correlation between stocks is measured, not the correlation between stocks and bonds or any other combination.

    Grapchi showing a 5-year rolling correlations within asset classes (Currencies, Stocks, Commodities, Bonds)

    The lesson is that correlation spikes during crises. Which is precisely when you don’t want it to spike. Your negatively correlated stocks are supposed to go up to offset the losses in the positively correlated stocks. Instead, they join the rout.

    What about correlation between asset classes – stocks and bonds and commodities and currencies? The story is much the same. Only three factors determine more than 90% of the correlation during a crisis.

    Graphic showing a 5-year correlation across 74 securities by the first three principal components (PCs)This chart from a Forbes columnist shows the rolling five-year correlation between US stocks and five-year Treasury note. There isn’t a textbook theory to explain how it can be positively and negatively correlated about evenly.

    chart from a Forbes columnist shows the rolling five-year correlation between US stocks and five-year Treasury note

    The answer to what’s going on is simple. And it’s the same answer to most other questions in financial markets at the moment – central banks.

    Asset price movements are determined by central banks these days. Both their epic purchases of investments and the potential to do so.

    In a crash, central banks buy everything. As the crash wanes, they try to sell. They’re such huge players in the market that their moves dominate. Japan leads the world here too, by the way.

    The only major question you face as an investor in any asset class is whether central bankers can prevent a crash indefinitely…

    Japan update

    Japan is like the Germany I grew up in. Before the harsh reality of moving to Surrey and attending a posh British school for my first year of education. Tough times…

    Six-year-olds take the train through Osaka alone without a care. Parents leave their kids at the park without a thought because one of the other parents will take care of them. The children share their toys, ride each other’s bikes home because they’ll bring them back tomorrow anyway, and most can do moves on the monkey bars that would make a workplace health and safety inspector pass out. The kids can play in the dirt all they like, but woe betide forgetting to swap your shoes for slippers as you enter the spotless house.

    In other words, this is the perfect environment for raising kids. But there aren’t any. At least not according to the statistics, which clearly don’t apply to the local playground. Japan is set to lose 15% of its population in the next 30 years. And more than 40% will be over 60 by then.

    My best guess as to what’s going on is all about the famous Japanese work-life balance. It doesn’t balance and the last thing people want to add to that is kids. It would tip them over the edge, no matter how well behaved they all seem to be.

    Matanee,

    Nicku-san

    -Read more at www.capitalandconflict.com-

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  • Why This Drop Could Continue (And An Asset To Protect Yourself)

    18.05.2017 • United StatesComments Off on Why This Drop Could Continue (And An Asset To Protect Yourself)

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    Henry Bonner – Strategy and Council Letter (United States) –

    What is going on…? Our beautiful weather of yesterday has once again become rainy … gray … covered … We only have to close the windows and stay with us … Here in Lausanne, we have suspicions of summer … but nothing durable … nothing convincing .

    Of course, as an American … almost everyone wants to know … “What do you think of Donald Trump …?” We assume that the question dictates more or less the answer we are supposed to give … but in general we disappoint Our listeners … we do not give them a few sharp witticisms at the President’s expense …

    In any case, here in Switzerland, Trump fascinates …

    Of course, we too are careful … and we try to guess how this story will end …

    Donald Trump comes out so much from the mold … and rejects so much protocols and conventions of the political milieu … that almost the whole capital seems to want his death … or at least his resignation.

    Perhaps Trump is aware of the dangers … or maybe not.

    In any case, who knows how far the inhabitants of the political world will go to break his back or worse …?

    From the lowest to the highest levels of the state, almost all seem to want to find an intrigue to bring down the leader …

    In the capital of the country, Washington, DC, about 96% of voters voted for Hillary Clinton, Trump’s opponent in the election …

    And all this vast army of bureaucrats and civil servants … lobbyists and activists … all earning their living thanks to the power of the State … is not ready to leave him free …

    Of course, most of our interlocutors are not interested in these details …

    More damage in equity markets …

    Today (May 18), almost all the stock markets around the world are going down … Yesterday, the US markets slipped … the S & P 500 dropping by 1.8%, its strongest plunging in a month. Here in France, the CAC 40 fell by 2.7% in two days …

    We have not seen such a decline since early April … when the market stopped to catch its breath …

    As a reminder, the French equity market, represented by the CAC 40, rose by 22.7% in 6 months. We benefited from the bull market on Wall Street.

    We said in recent days that the markets were “looking …” wanting more reassuring information before climbing higher …

    Even the election of Macron and the publication of positive results by many companies had not been enough to push the actions up …

    We thought the bull market might have lost its breath …

    The latest news from Washington may have finally decided to drop.

    At the White House, Donald Trump is still under attack by his detractors … and many analysts think they smell the blood …

    Perhaps this last attack will eventually be fatal to him?

    Or will it at least block its reforms to the tax code?

    In any case, the stock market seems to have lost its optimism … for now.

    Meanwhile, the Euler Hermes credit insurance box reveals a new way in which the French economy is falling back …

    According to this box, French companies have still not caught up with the “investment delay” created by the 2008 crisis …

    Almost 10 years after this last crisis, our economy is still slow …

    According to their analysis, the French economy will catch up by 2032 …

    Of course, the government of Holland did not help the situation … since they doubled in 2013 the maximum tax on capital gains … bringing it up to 61%.

    So, as an investor, you have much less interest in putting your money in France …

    Could the last “scandal” of the Trump administration really make the markets plunge?

    We have known at least one period in modern history to which we could compare ourselves …

    In the early 1970s, stock markets had rebounded for two and a half years … but in mid-1972, US President Richard Nixon was accused of using the CIA and the FBI to spy on his political opponents … Which was a major offense.

    This scandal grew more and more in the next two years, and Nixon finally resigned in August 1974.

    What have the markets done?

    6 months after the start of the scandal, equity markets began a two-year dive, ending in December following its resignation (see the next Dow Jones macrotrends graph ).

    During these two years, the Dow Jones lost 50% of its value.

    If this last scandal involving Trump continues longer, could the market plunge by 50%?

    Well, look at the following graph (also of macrotrends ):

    You see, the “Nixon crisis” was only a small part of a much larger decline … from November 1965 to July 1982 … and during which the Dow Jones lost about 72% of its value.

    What can we conclude?

    Of course, in the short term, the President’s problems could bring down markets … but markets tend to reflect deeper problems …

    During the 1970s, the value of European and American currencies plummeted … making consumers poorer …

    Meanwhile, most important industries, such as automobiles and electronics, were moving to Asia.

    What to do?

    What asset has held out during this time …?

    You may not be surprised …

    … the gold!

    From 1968 to 1980, the price of gold in dollars made a remarkable journey … climbing 1,379%!

    As we often repeat … having gold will give you a security that you will not have with stocks, or even with a life insurance contract …

    Your gold can not go bankrupt … or refuse to pay you … Your gold is there, in your hands, whatever happens …

    But of course … you may have in mind a deeper question …

    Are we close to a new long-term decline, as we experienced in the 1970s?

    Or, is this reversal the opportunity to increase its position in the markets … hoping that the shares will repeat their performance in recent years ( 75% for the CAC 40 in 5 years).

    Of course, we can not answer it … but we would let things go a little before we jump into the markets …

    Despite the enthusiasm of recent months, the CAC 40 is only 0.2% above its April 2015 levels …

    If you had bought at that time, you would not have experienced real benefits … after more than 2 years waiting!

    Yes, the CAC 40 has just dropped slightly, but we are still “up” in terms of its recent valuations …

    So … even if this market climbs even higher over time … we could easily see further declines in the markets for weeks, see months, coming …

    Truly,

    Henri Bonner

    -Read more at www.lettre-strategie-conseil.com (French)-

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  • Is Trump a Modern-Day Caligula?

    18.05.2017 • United StatesComments Off on Is Trump a Modern-Day Caligula?

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    Bill Bonner – Bill Bonner’s Diary (United States) –

    GUALFIN, ARGENTINA – Yesterday, stocks fell.

    And volatility shot up.

    Reports Bloomberg:

    The Dow Jones Industrial Average tumbled more than 370 points, Treasuries rallied the most since July and volatility spiked higher as the turmoil surrounding the Trump administration roiled financial markets around the globe.

    Major U.S. stock indexes tumbled the most in eight months, while the CBOE Volatility Index [which measures investors’ expectations of price swings on the S&P 500] jumped the most since the U.K. voted to leave the European Union last June, shattering the calm that gripped markets in the past month as the crisis threatened to derail the policy agenda that helped push equities to records as recently as Monday.

    The few speculators who took our suggestion last Friday to buy the VIX – a bet that volatility would go up – should have done well. (More on that below in today’s Market Insight.)

    On the Warpath

    Yesterday, news broke that President Trump’s deputy attorney general, Rod Rosenstein, has appointed former FBI chief Robert Mueller to lead an investigation into possible ties between the Trump campaign and the Russians.

    And with it, the risk of internecine warfare within the Deep State has increased.

    Some factions – the ones that wear Armani suits from Manhattan or gold braid from Northern Virginia – back the commander in chief.

    Other insiders – notably the fake-news media, the universities, and the D.C. establishment – have left the reservation and are on the warpath against the Great White Father in Washington.

    How will it turn out?

    It’s too bad Mr. Trump does not read history. He might get some good ideas. Or some bad ones.

    About what to expect at this stage of the empire’s decline. At least, he might brighten up his conversation with historical references and wink when he pulls our leg, just to let us in on the joke.

    The president is charged with chatting with the former FBI director about ongoing investigations. Maybe he even suggested, sotto voce, that it might be good for Mr. Comey’s career if he eased up on the investigation of Trump’s former national security adviser, Mike Flynn.

    These things hardly seem newsworthy, let alone impeachment worthy. Most people yawn and turn the channel to WWE wraslin’.

    It’s more entertaining. And more authentic.

    Lunacy… and Pizzazz

    At this late, degenerate period of an empire’s development, we need more pizzazz… more lunacy… and more sex.

    The president might better turn the Capitol into a brothel, for example. He might declare his horse a priest. Or our favorite: He might put on that mischievous smile of his and tell us he is to be worshiped… not kicked around like an empty can.

    “Neos Helios” (the new sun), he should call himself; at least Latin scholars and Roman-era history buffs would get a good laugh.

    Roman Emperor Caligula was accused of all these things.

    And as his story shows, as an empire matures and degrades, you need more colorful… and more grotesque… crimes and misdemeanors to keep up with it.

    The old rules and virtues that made it so successful are forgotten.

    Elbows come out… then knives. More and more power ends up in the hands of the chief executive… who often ends up with a knife in his back.

    Poor Caligula

    Poor Caligula.

    Rome had been a republic with democratic traditions that stretched back hundreds of years. But after Julius Caesar and a 20-year civil war, the old system was gone.

    Caligula rose to the purple after his granduncle Tiberius died… and after most of his own family had been murdered.

    At first, he seemed like a good man for the job. Young, attractive… with an easy familiarity with the army. But then, the young emperor fell ill. He recovered. But he started acting funny. Erratic. Strange. Unreliable.

    Dangerous.

    He began having members of his own family exiled or executed. He spent lavishly, running through the fortune left to him by Tiberius in just a few years. Then he took vanity to a whole new level by appearing in public dressed as Hercules or Apollo.

    Roman historian Suetonius tells us that Caligula quarreled with the senate, started wars that made no sense, and slept with his sisters.

    Finally, the insiders had had enough. After he announced he intended to move to Egypt and be worshiped as a living god, members of the Praetorian Guard – an elite unit of the Imperial Roman Army – stabbed Caligula to death.

    They killed the First Lady and the First Daughter, too, for good measure.

    Then they found their Mike Pence – Caligula’s uncle Claudius – hiding behind a curtain.

    And they made him emperor.

    Tomorrow… how the originarios intend to steal our ranch… and how your editor intends to stop them…

    Regards,

    Bill

    -Read more at bonnerandpartners.com-

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