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Commentary on The Capital Markets- Category [Corruption]
2017-06-26 09:39 by Karl Denninger
in Corruption , 451 references
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You'll have to look to find it, and the articles are behind paywalls.

They're not being trumpeted all over financial media -- but they should be.

What article?  That Unilever is threatening to pull online ad campaigns stating that they believe half or more of the "clicks" are fraud. It was in the UK media -- quietly -- this weekend.

In other words, robots click them -- not humans, who actually watch the ads.

This story ought to be front-page news.  It's not, and the financial media will not cover it the way it should.

Here's why it should be:

1. This is not new.  These issues have been known and talked about for more than a year.  It was news last year, and then it quietly "went away."  Gee, you don't think Zuckerpig laid into the financial media, do you?  Naw, nobody would ever to do that when if their little ad game blew up in their face the stock price of Facepig would be zero.  Consider that if half of the online advertising revenue is false then the actual value of said platforms is nil since their cost of operation exceeds the true human-generated revenue.  That makes all of these so-called "businesses" worthless.

2. Nobody has an incentive on a platform like Facebook, where posters do not get a cut of the revenue, to stick an army of robots out there and click the ads, except for Facebook itself.  This is decidedly not true for Google's "Adsense" platform of course, or Youtubes, or whoever else where publishers get a piece of pie.  There, if your traffic is high enough, there's an economic incentive to cheat.  For someone like me it's not because the amount of money involved is too small, but for someone with a site that's garnering tens or hundreds of thousands a month in payouts you can easily cover the cost of a robot or three (hundred) to generate some false traffic.

The problem of course is that there aren't that many people with a big enough take to be worth employing robots, other than those who deliberately set up sites to do this and have no organic traffic at all.  Those people ought to be easily identified and shut down within days, making such a strategy worthless since you won't get paid, if the sites in question cared to do so.

The problem is that all the incentives run the wrong way for the so-called "online advertising industry", unless they get caught and all of their businesses are destroyed.  Otherwise the incentive is to cheat or at least look the other way on purpose while others cheat especially if, as is being alleged and has been alleged for over a year the "cheats" are half or more of all of the clicks.

In that case the incentive to cheat is not just clear it's an imperative because without the "false" clicks none of these firms have a viable business at all, except for possibly Google, and even Google is selling at 3x any sort of rational valuation.

The others, if there's any truth to this, are literal zeros.


Ask your friends -- how many "real" ads do they view and click on any of these sites?  Can you find one person among your friends who actually does so and finds value in these ads?  Tell me folks -- isn't it true that essentially all of the ads you see are for things you already bought and thus don't need again?

"Machine learning" my ass.

You know what the truth is, but by God the "industry" and media will do their level damndest best to hide it, especially given the bubble valuations of everyone in this "business."

Before you say "oh, you can't be right about this; it would never go on that long" let me remind you about the late 1990s.  In 1997 multiple "DSL" providers were leasing "dry loops" from the telcos, putting in DSLAMs, and pulling backhauls from there to enable DSL to companies and homes.  Every single one of them wanted to "partner" with us, of course, with my company getting a cut of the revenue and providing the Internet service.  They all came in and made their pitches and I threw every one of them out after examining the numbers.  Why?  Because every single one of them had no prayer in Hell of ever making a profit and when they blew up it was going to blow back on my company since the customer would associate their loss of service with us, not them.  Every one of them, a few years later, blew up.  Every. Single. One.  It was instantly obvious on any sort of analysis of their businesses and cash flow that it was impossible for them to make a profit.  Yet not one was called out in the financial media or anywhere else and all were "strong buys" in the stock market.

And gee, look at the "online ad revenue based" stocks this morning -- all up, as is the market.  Isn't that fancy..... I wonder how they'd be doing this morning if CentralNevertruthBullCrap was to run a quick pencil-and-whiteboard analysis on the fact that if you cancel half the ad revenue all these so-called "ad revenue driven businesses" have negative operating cash flow and thus are zeros?

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2017-06-23 10:40 by Karl Denninger
in Corruption , 169 references
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Here's the real nutshell issue with so-called "business today":

Now, Uber has for the first time has acknowledged that Levandowski informed its now-departed CEO, Travis Kalanick, that he had five disks filled with Google's information five months before joining Uber. 

In other words the company recruited and hired this guy knowing he had stolen trade secret information from Google.

If you think this sort of event is isolated, it's not.

Witness nearly one in four Medicaid recipients being prescribed opiods in the last 12 months.  I remind you that a large percentage of Medicaid recipients are kids so the percentage of opiod abuse among adults funded through Medicaid is probably within spitting distance of half of all adult recipients.  Do you really think the pharma companies and doctors don't know this?  Of course they do, but they worked mightily to conceal it because they also know damn well that their lives will be upended if it comes to light.  Then the truth eventually does come out and what is the reaction?  A few lawsuits aimed at some pharmaceutical companies instead of indictments for drug pushing, 20,000 dead people a year be damned.

How about the market generally?  "Technology" will lead?  Is it "technology" or scams?

The biggest scam of all is found in medicine where somewhere around $3 trillion a year is spent in the United States and 80% of that is either stolen or wasted.

The largest act of theft on a daily, continual basis ever in history and yet not one indictment pops out of that conduct.

In fact our own Congress wants to pass laws to make the scam greater rather than lesser, utterly ignoring 100+ year old law that says that the entirety of these schemes are illegal -- and not just civilly illegal either, felony criminally illegal.

We have a sitting Senator, Rand Paul, who has propounded that medical providers should be explicitly exempt from said lawwhich is a blatant and outrageous admission that today they are not and should all be in prison!  Never mind that there is not one but two Supreme Court decisions which confirmed that medical-related firms are not exempt from anti-trust law.  This is what Rand wants and has expressed in his legislative blueprint:

Provides an exemption from Federal antitrust laws for health care professionals engaged in negotiations with a health plan regarding the terms of a contract under which the professionals provide health care items or services.

Of course being a doctor he ought to know, right?  Or perhaps he can simply read the US Supreme Court cases dating to the early 1980s and knows that all existing physicians and medical practices, including hospital administrators, should be rotting in prison right now and would be but for our government's 30+ year long intentional refusal to enforce said 100+ year old law?

How about Amazon?  Robinson-Patman makes illegal price discrimination in goods where the effect is to exert market power to lessen competition.  Do you really believe all that so-called "artificial intelligence" doesn't result in different prices for different people buying the exact same item in the exact same quantity?  This is outrageously illegal if you have market power -- and Amazon, in the online space, most-certainly does.  The record with regard to brick and mortar retailers is clear in this regard.

How much of so-called "innovation" today is in fact simply a means of finding a way to break a law that you are quite confident the government will not enforce?  That companies once in a while get the "oh they won't enforce the law" part wrong (e.g. Volkswagen) doesn't change the general tone one bit, especially when you manage to steal trillions annually in one industry (health care) alone!

And why, may I ask, do we the people put up with the lack of enforcement when your much less-serious lawbreaking, such as speeding, results in an immediate citation, insurance surcharges and similar -- without apology or forgiveness?

Where is the outrage aimed at these jackals, both within and beyond the beltway?

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2017-06-16 07:00 by Karl Denninger
in Corruption , 196 references
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The WHO says that glyphosate is "probably" carcinogenic.

But, when it made that determination, scientific evidence existed that in fact there was no association between common industrial (e.g. farm worker, etc) exposure to weedkillers containing the chemical and cancer.


The WHO failed to consider this evidence because it was unpublished.  The scientists who didn't publish it claim there was no nefarious intent; that the evidence and study in question was so large (as it covered much more than just glyphosate) that it would not fit in an individual paper.

Note that the National Cancer Institute also knew of the paper, and yet did not disclose separately -- claiming, again, that "space constraints" were why the research was not published.

This was not a small study and in fact was prospective, not simply observational or retrospective.  Further, it was aimed at and studied agricultural workers, who are exposed routinely to this and other chemicals.  That it was sensitive enough to pick up correlations is known since other chemicals, specifically some pesticides, that were also in the study did show links.

There has been a lot of screaming by people over glypohsate and Monsanto in particular when it comes to safety, and now there are a handful of lawsuits claiming that the weedkiller causes lymphoma. The fact is that the scientific evidence says it does not -- agricultural workers take body exposures much higher than residue levels found in food and water, not to mention those who use these weedkillers around their homes and gardens.

I remind you that while observational studies can never prove that something causes an effect they can and do prove that said causal link does not exist.

In other words these studies are only sufficient to support suspicion on the positive side but when they fail to find any correlation they are dispositive on the negative side.

There you have it folks -- while you can argue over glyphosate for various reasons you no longer can make any sort of argument over it being a human carcinogen until and unless you can void these results.

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2017-05-31 07:00 by Karl Denninger
in Corruption , 579 references
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The punchline:

Among healthy physically active individuals, statin use was associated with doubled the odds of diabetes and diabetic complications without countervailing cardiovascular benefits.

Got that folks?

12.5% of the "healthy" users of statins contracted diabetes .vs. 5.8% of non-users.  1.7% of users contracted diabetes with one or more complications .vs. 0.7% of those who were not users.

For this risk there was no decrease in cardiovascular events.

In other words taking the drug conferred no benefit but doubled the risk of life-altering and very expensive disease.

Please explain to me why these "physicians" are not under indictment right here and now for literally doling out poison, and why the pharmaceutical companies that have "advanced" these drugs for people who are currently healthy should not all be prosecuted for assault and grand theft.

I'm waiting.....

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Oh, so the banks don't just bilk investors and rip off municipalities, they also help Mexican Gangs run drugs?

This was no isolated incident. Wachovia, it turns out, had made a habit of helping move money for Mexican drug smugglers. Wells Fargo & Co., which bought Wachovia in 2008, has admitted in court that its unit failed to monitor and report suspected money laundering by narcotics traffickers -- including the cash used to buy four planes that shipped a total of 22 tons of cocaine.

The admission came in an agreement that Charlotte, North Carolina-based Wachovia struck with federal prosecutors in March, and it sheds light on the largely undocumented role of U.S. banks in contributing to the violent drug trade that has convulsed Mexico for the past four years.

That's nice.  Guns and ammunition cost money - lots of it.  Getting that money requires some means of transporting it and "laundering" it.  For that, we turn to the largest financial institutions in the world, who, it turns out, have never been prosecuted for these felonious acts.

Wachovias blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations, says Jeffrey Sloman, the federal prosecutor who handled the case.

Blatant disregard?  Sounds like something you'd say at a sentencing hearing, right?  Well, no....

No big U.S. bank -- Wells Fargo included -- has ever been indicted for violating the Bank Secrecy Act or any other federal law. Instead, the Justice Department settles criminal charges by using deferred-prosecution agreements, in which a bank pays a fine and promises not to break the law again.

No Capacity to Regulate

Large banks are protected from indictments by a variant of the too-big-to-fail theory.

Indicting a big bank could trigger a mad dash by investors to dump shares and cause panic in financial markets, says Jack Blum, a U.S. Senate investigator for 14 years and a consultant to international banks and brokerage firms on money laundering.

The theory is like a get-out-of-jail-free card for big banks, Blum says.

Theres no capacity to regulate or punish them because theyre too big to be threatened with failure, Blum says. They seem to be willing to do anything that improves their bottom line, until theyre caught.


Facilitating drug-running is just one small part of it.  There's also ripping off municipal governments, such as the Jefferson County sewer deal in Alabama.  There's bid-rigging in the GIC market.  And, of course, there's laundering money for violent Mexican drug cartels, who used that money to buy automatic weapons (no, not from America - from China, Venezuela and even from corrupt Mexican law enforcement officials!) with which they then shoot civilians and government officials who refuse to be corrupted.

Oh, and it's not just Wachovia accused in this story.  It's also Western Union and Bank of America.

Workers in more than 20 Western Union offices allowed the customers to use multiple names, pass fictitious identifications and smudge their fingerprints on documents, investigators say in court records.

In all the time we did undercover operations, we never once had a bribe turned down, says Holmes, citing court affidavits.

Very impressive.

To make their criminal enterprises work, the drug cartels of Mexico need to move billions of dollars across borders. Thats how they finance the purchase of drugs, planes, weapons and safe houses, Senator Gonzalez says.

They are multinational businesses, after all, says Gonzalez, as he slowly loads his revolver at his desk in his Mexico City office. And they cannot work without a bank.


And we have a banking system that, in the United States, has insulated itself from having to obey the law or be prosecuted for violating the law by threatening the government.

Henry Paulson and Ben Bernanke in 2008, remember?  "Tanks in the streets, martial law"?

Dateline September 21, 2008

Gee, it's not enough to steal from ordinary Americans, it's not enough to rip off state and city governments, it's not enough to rig bids in the municipal bond markets, we must sit still while these institutions literally make possible funding criminal gangs that are committing murder.

There's a name for this folks.

Formally this sort of thing is supposed to be called "Operating A Continuing Criminal Enterprise", or "OCCE":

The FBI defines a criminal enterprise as a group of individuals with an identified hierarchy, or comparable structure, engaged in significant criminal activity. These organizations often engage in multiple criminal activities and have extensive supporting networks. The terms Organized Crime and Criminal Enterprise are similar and often used synonymously. However, various federal criminal statutes specifically define the elements of an enterprise that need to be proven in order to convict individuals or groups of individuals under those statutes.

The Racketeer Influenced and Corrupt Organizations (RICO) statute, or Title 18 of the United States Code, Section 1961(4), defines an enterprise as "any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity."

The Continuing Criminal Enterprise statute, or Title 21 of the United States Code, Section 848(c)(2), defines a criminal enterprise as any group of six or more people, where one of the six occupies a position of organizer, a supervisory position, or any other position of management with respect to the other five, and which generates substantial income or resources, and is engaged in a continuing series of violations of subchapters I and II of Chapter 13 of Title 21 of the United States Code.


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