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2018-07-17 13:00 by Karl Denninger
in POTD , 63 references
 

 

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2018-07-17 12:19 by Karl Denninger
in Monetary , 124 references
[Comments enabled]  

Powell said something very interesting in his Q&A -- that addressing the lack of wage growth is "outside of what monetary policy can do -- but is within what Congress can do."

He's right.

Then there are the grand-standers -- such as the Indiana Senator (unworthy of being named other than "sack of crap") who went after Powell with a screed about soybean prices being very low by historical standards.

There was also much grandstanding about opioids.

But essentially zero discussion was offered on exactly what Congress has done to cause both of those problems.

Specifically, it's been the "open and free trade abuse" which was specifically engendered by Congress that has led to both issues, and that is something we cannot address without resolving trade and economic policy.  Monetary policy is not only unable to materially change the trajectory in a positive way the side effects, all of which would be bad, would certainly outweigh the intended effects.

I have brought the fundamental reality of all of this up myriad times: The intentional distortions that come from enabling the exploitation of slave labor and environmental destruction through alleged "free trade" policy destroys the job market for everyone on the left side of the bell curve of intelligence and ability.

This is the intended effect of such policies.  Our Congress and our Administrations on both sides of the aisle have intentionally screwed half the population.  That the screwed have yet to find their pitchfork and torch, but some have turned to opioids and other means of distraction, should not surprise.

But that this in turn destroys local, state and federal budgets due to the presence of a welfare state shouldn't surprise either; that outcome is ordained by arithmetic when you screw half the population out of a job yet at the same time promise government "help" to all who need it.

Indeed there's a fairly decent (but cynical) argument to be made that the entire purpose of such a welfare state is to prevent the 50% on the left side of the bell curve from deciding to show up in DC and erect a gallows on the National Mall to water the grass with -- an outcome that would otherwise be rather likely when you hose 150 million people!  You don't really think that a mere million cops and available military folks would be able to put down a revolt comprised of 150 million, do you, especially when a decent percentage of those folks would likely side with those doing the revolting!

There has been exactly zero evidence thus far that anyone in Congress has or will do a damn thing about any of this; indeed all they've done is demand more screwing for those on the left of that bell curve!  Trump's trade policy changes are actually serving as a corrective force in this regard, in that they both can and will drive some of that formerly-slave labor back to the United States which will employ some of the people on the left side of the curve.  It will also, however, reset internal demand for some commodities that have had artificial boosts in the previous 20 years that never should have existed in the first place, specifically for soy and corn.  Erasing the subsidies and insanity of corn-based ethanol would help reset that back as well.  You can argue that this is "bad" from the lens of today's perspective but exactly how is it "bad" to remove artificial stimulus and demand that never should have existed and which resulted in other people getting screwed?

Now the corn or soy farmer screams, but who put him in that place originally and who did he screw on the way up?  Does that person get any sort of recompense?  Of course not; he or she doesn't count, right?

Folks, it is a fundamental truth that if you kill the so-called "global supply chain" games that on any dispassionate analysis simply amount to seeking slave labor and environmental destruction for profit you will wind up with the shipping costs of doing things "over there" overwhelming the real (not abuse-based) savings you could have through such a system.  Moving things costs money and thus the less of that you can do the less overhead you have, all other things being equal.

This will inevitably mean that production will move closer to consumption.

This is a good thing, not a bad one.  Shortening supply lines in all directions means less delay, a more-responsive market in terms of supply:demand balance, better and more-accurate price discovery, more competition and jobs for those on the left side of the bell curve right here in America.

It also means that for those products to be sold somewhere else (e.g. in China) the best option will be to build them there.  Ditto for Mexico, Europe, Canada and elsewhere.  What's wrong with that?   Do they not have people on the left side of the bell curve too?  Is cost efficiency not important to manufacturers and suppliers in other than the United States?

Let's cut the crap folks -- the garbage foisted on Americans over the last 30 years needs to end.

I'm astonished that those on the left side of the genetic lottery have not risen up and literally sacked both State and Federal Governments by this point along with the so-called "industry titans", especially given the smug, in-your-face pronouncements from people like Zuckerpig about how we all need to be prepared to pay a "universal basic income" due to AI.

Utter nonsense; what these people champion and exploit is in fact slavery and, when making things, intentional environmental destruction.

Given demographic realities within the United States and our refusal to enforce immigration laws along with so-called "free trade" it is also racism in that in the US it is brown and black people who are disproportionately (by a wide margin) screwed, and among other nations those who get screwed via the slave labor systems and environmental destruction are almost to an individual of brown or black skin.

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2018-07-17 09:18 by Karl Denninger
in Market Musings , 119 references
[Comments enabled]  

So Netfux stock got hammered overnight on a subscriber-growth miss -- in which they added basically zero in the United States.  This is called saturation and it was utterly inevitable, as it always is for any firm that is experiencing exponential growth.

Let's say you start with 100,000 customers.  You add 10% to that.  Now you have 110,000 customers.  10% of that is 11,000 adds next quarter, not 10,000.  And so it continues, which is a problem because to maintain the same rate of growth the numerical number of adds must always go up.

But it can't because there are a finite number of people.

Nobody -- literally nobody -- ever brings this up in the media and yet it is inevitable for all "growth" firms.  I knew this when I ran MCSNet; exactly where that inflection point was is always a matter of some debate but that it exists is an absolute certainty.  God help you if you fail to recognize and plan for that day.

The problem with that inflection point is that when you reach it the revenue growth rate will slow or even go to zero.  You had better not be in a position where you need ever-increasing revenue to stay alive at that point in time, such as for debt service that you've been adding to during the so-called "growth" or forward commitments in the form of orders from suppliers you cannot cancel or modify.  If you have put yourself in that position it's entirely possible to wind up bankrupt in a big hurry, especially if you have been financing into a generally-decreasing rate environment over either a cyclical or (in which case not even God can help you) secular decrease in interest rates.

Netfux has done exactly that with their "commitment" to spend on new shows, but now they're spending more and returning less for each new dollar they put forward.  It is just a matter of time now before the debt gets them.

They're not the only ones to rely on such idiocy.  So has Facesucker and Spamazon.

Never mind that Spamazon didn't learn a thing from the last debacles with their so-called "auto-adjusting" infrastructure.  They've had issues with not being able to scale supply quickly on the back end when it comes to product search and ordering, and more-stupidly, they linked fulfillment on the ground, that is, by their drivers, to the same system.  The result was that all the "cute puppy" displays yesterday (which incidentally they did not fix even late into the evening) also decimated their on-time delivery stats for yesterday as their logistics people couldn't do their jobs either.  That hasn't been reported in the mainslime media that is all so interested in propping up stock prices -- big shock.

Speaking of Spamazon if you want the one decent deal they have, and you do not need to spend the money on a Prime sub to get it, and you need a cellphone go look at the Essential PH-1.  They have one color at $249, which is half the price of the others.  At the original asking price it was ridiculous.  At the "new normal" price a few months later, $499, it was a "meh" sort of thing.  At $249 it's actually a good deal and will work on any of the US carriers.  It's "pure" Android without any carrier garbage, has flagship-level specs and due to its near-no-bezel design is reasonable in size in the hand while having a decent screen size to view.  Just buy a case for it; the back is ceramic and while beautiful, if you drop it you'll find out why you wanted a case.  That's the only actual deal Spamazon has; beyond that there's utterly no reason to buy anything from the king of the American Small-business Destroyer class.

Facesucker has the very same issue with sub growth -- it's been basically zero in the US for quite some time, and so has revenue growth from the US.  Yet the market doesn't care.  It damn well ought to since the US consumer is the one with all the money they can collect from advertising; in the EU they now have GDPR that limits the data mining and in the rest of the world the average consumer is dead flat broke compared against the US.  Does the market care?  Nope.  Not yet.

Is this the early March Moment from 2000?  Probably not; indeed it won't surprise me a bit if Netfux is back over $400 within days.  But it's a serious warning.  It's not that most of these firms are zeros, but it is that their margins are going to come in a lot, especially with the trade situation.  That in turn makes the "projection" of a "reasonable" stock price, given what it does to P/E/G, look like utter fantasy-land nonsense.  It is just a matter of time before the market figures that out and when it does you can easily expect the broader indices to be cut in half or more as basically all of the "expansion" in price has come from these high-flying tech stocks and when they crash by 90% or more -- and they will -- so will the market.

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2018-07-17 07:00 by Karl Denninger
in Corruption , 1236 references
[Comments enabled]  

It's amusing to watch the screamfest from both sides of the aisle -- including on Drudge which claimed that "Puntn Dominates in Hel".

Oh please; I watched the presser, as did everyone else who wanted some fodder to slam the President.

I find it especially amusing that former CIA people claim that this rises to "Treason".  May I remind everyone that treason is a very specific criminal offense and requires certain specific predicates (e.g. a declared war for instance) that simply do not exist?

McCain, for his part, ought to shut the **** up -- or take his last nap -- already.  That miserable son of a bitch knows more about committing actual treason (since in his case there was at least a shooting "conflict" going on) than any sitting Senator or House member.

As for comments about autocrats, perhaps these jackasses could all go get up, look in the mirror, and then they'd see one; Putin at least admits it.  It's pretty easy to deal with someone who admits what and who they are, as there's very little to leave to the imagination when it comes to what their viewpoint on the world is.

For those who simply ignore the law and allow the screwing blind of the American people through their willful and intentional malfeasance and misfeasance -- but who claim to be for "representative government" and "the rule of law" -- not so much.

I'll remind you that on average every American has one dollar in six of everything they make stolen by these evil **********s, and that's before they pay a penny in taxes!  I'm speaking of course of the medical monopolists first among others where every bit of what goes on in that industry is flat-out illegal under laws passed more than 100 years ago.  Then you add taxes on top of that and the******job gets even worse.

Is Putin an *******?  Yes.

Is John McCain a worse *******?  Absolutely.  I'd rather do a deal with Putin than McCain as Putin might actually keep his word.  With McCain there's no chance of that happening -- ever.

As for spying and hacking, well, gee, we have this thing called the NSA I believe.  Their job is the spy and hack other nations -- including the political processes there.  They're responsible for a huge percentage of all the cyber-attack tools ever written and used against anyone.  We've used them to destroy physical equipment (in Iran, for example), not just steal secrets too.

Then there's the so-called disruption of our 2016 elections.  May I remind everyone that even if Russia was actually officially involved (that is, all the indictments leveled against the GRU are factual and eventually proved) the fact remains that the "damage" occurred, almost-exclusively, due to the release of information from the DNC that documented that they had rigged their primary.

The funny thing about government espionage is that there are two kinds of it -- one particularly ugly and the other that really is not much more than taking advantage of self-inflicted gun-in-mouth incidents.  When some foreign agent cons a person with a clearance or other sensitive information into sleeping with them, for example, or simply hacks in and steals valuable material, the former happens.  That's ugly and, I remind you, as old as governments themselves; it's a time-honored game to stick a cute chick in front of a balding man with power and money and convince him (frequently with a bit of booze involved) that "she really likes him."

The second is another matter entirely; exposing someone who likes to **** little boys may well be espionage in the formal sense but isn't the real problem with the foreign government getting ahold of that information that said politician likes to **** little boys?

In this case Russia exposed that the DNC rigged the Democrat primary.  Now it happens to be true that other than through common-law fraud there's no crime there.  In other words primaries are not actual binding votes; the very name is a Presidential PREFERENCE primary.

But if you represent that it's a fair contest, and it's not, well now that's at least civil and arguably criminal fraud, especially when there are people who spend or give money on that basis.

That's what happened here if you remember - the entire "DNC Hack" narrative is all about the exposure of a fraudulent, and therefore criminal, series of acts taken BY THE DNC against the American people who supported Bernie Sanders!

Was that quite-possibly damaging enough to change the outcome?  Maybe.  But exactly who's fault is that? 

Did Russia corrupt the primaries?  No, the DNC did!  The responsible parties were all Americans who engaged in a series of systematic frauds for the specific purpose of tampering with the election of our President and every one of them was an American citizen acting within one of our two major political parties with said party leadership's explicit consent, complicity and active involvement!

Never mind that the summit also confirmed long-suspected belief that the Clinton Foundation got some $400 million from Russia.  What did they get in return?  If you want to talk about "political interference" where the hell are the indictments against Bill and Hillary for that load of crap?  And if you're wondering who the culprit was in that, Putin says it's Browder -- google that and sit down before reading any of it, because this is a guy who both sides of the aisle have implicated repeatedly (including Feinstein, I might note.)  Oh, and if you really want to get mad, look at Senator Ben Cardin and where his money has come from -- and what legislation he rammed through.

So cry me a river folks.  Espionage is never something one should cheer but let me draw a big fat distinction between a foreign government's spies and intelligence services stealing actual state secrets and the very same foreign government and/or its spies exposing corruption within the existing government structure in the United States.

I'm quite cranked off about the former in every case.

The latter?  Not so much.

Of course I'd be remiss if I didn't mention Crimea.  Now there is a real issue, along with the uprising in Ukraine and, I remind you, the wee matter of Flight 17 that got blown up -- including exactly who shot that missile. There's still disagreement on who fired it after all these years but not its provenance; it was clearly a Russian missile and I reported on that, and why it had to be a Russian missile (the obvious damage pattern visible in the first images of the crash and thus type of warhead involved), shortly after the incident.  But I find it hard to be all that cranked off when Germany, which I might remind you is a part of the EU (the block where the flight originated -- in Amsterdam) is continuing and in fact increasing reliance on Russian natural gas, including building new and larger pipes to carry it!  After all if the EU's formal and informal "seat" of control over the common area government is and has continued to increase reliance on Russian energy supplies after that incident should America carry the water for Europeans who clearly don't give a **** that a civilian airliner full of their people was blown out of the sky?  I think not.

In short, to McCain and others: Stop crying and shut the **** up.  If politicians would just stop corrupting our own elections from within our own political parties you would all have much less to fear from so-called "State sponsored" election-related hacks.

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