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2018-08-16 11:21 by Karl Denninger
in Editorial , 128 references
[Comments enabled]  

So Brennan is all bent out of shape that his clearance was revoked by President Trump.

Brennan was the former head of the CIA, and as such he had to have a TS/SCI (SAP) clearance to do his job.  There are plenty of people who have TS/SCI (or SAP) clearances, many more who have ordinary TS clearances, and a lot of people who have "Secret" or "Confidential" level clearances.

USA today says that this is a "dangerous" thing; that Trump will pull your clearance if you "speak truth to power."  They're hardly alone; CNN is all over this of course, along with other so-called "mainstream media" properties.

They should all be destroyed for this outrageous and factual lie they are running.

Here's the truth when it comes to clearances: When you leave a position that requires one, whether in government or private industry (e.g. for a DOD contractor) you are "read out" of whatever programs you were in, reminded (strongly, requiring your written acknowledgement) of your continuing requirement to keep your damn mouth shut and your clearance is deactivated at that moment in time.

It remains "current" but is not active and thus your ability to access and possess classified information ends at that instant.

Two years later it expires and requires a re-investigation (unless it was going to come up for re-investigation sooner, in which case that shorter time frame controls.)

You cannot have access to classified information without (1) a need to know, which isn't your decision to make; that comes from the sponsoring organization whether some part of the government or a contractor authorized to work with such information and (2) an active, not "current", clearance of the same or higher level and, in the case of SCI or SAP programs, a specific read-in on the program in question.

There is utterly no reason for a person who has a formerly-active clearance in a former administration, and no reasonable expectation of working with classified information in the present administration (because he or she has been enough of a dick, whether in public or private, that said administration would never employ them) to keep said clearance "active."

Why?

Because the current administration will be in office for four years even in the unlikely event the President was to be impeached, and the "current" status expires in two.

Therefore upon such a departure the clearance should always be immediately expired in each and every case since there is utterly zero reason to believe that it will be transitioned back from "current" to "active" during the window in which it can be.

The only reason for someone in such a position to want to maintain a clearance as "current" is for the person in question to use it as a marketing tool for their own personal aggrandizement or profit.

Both such acts would be, by definition, a violation of the terms on which said clearance was granted in the first place.

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2018-08-16 07:00 by Karl Denninger
in Market Musings , 106 references
[Comments enabled]  

The US needs to get off the pot, so to speak, and at minimum de-schedule and thus effectively decriminalize marijuana (and all of its derivative forms, such as hemp.)

There is some evidence that cannabidols, which do not get you high, have medicinal qualities.  There is evidence that they're useful for controlling inflammation, blood pressure and migraines, among other maladies.  There's scant controlled-trial proof of any of those claims but the good news is that CBD is inexpensive to produce, has no known harm profile and thus while medicinal proof is yet to be found there's no reason to prohibit people from using it, even if the only benefit comes from a placebo effect.

On the other hand there is scientific evidence from controlled trials for a handful of other serious maladies for cannabis preparations that do include THC, including vomiting and nausea associated with cancer treatment, glaucoma and chronic pain.  In all of these cases the safety profile, cost or both is dramatically superior to the available alternatives.

"Schedule 1" drugs are by law those that have no medical purpose.  This is not an "optional" feature of a substance under the schedule, it is actually called out in the enabling law.  The DEA and other agencies have no power to override statute, nor can the courts except by finding a law contravenes a Constitutional protection.

Only Congress can change said law.  It has declined to do so.

Under law cannabis in all of its forms cannot be a Schedule I drug.  Period.  Any person charged and convicted of same has been convicted under a fraudulent charge as the substance in question does not meet the legal description required to be on that schedule, irrespective of what any court may otherwise claim.  They thus have no obligation to accede to any such alleged enforcement and in fact any attempt to arrest or prosecute a person for same is no different than an armed thug threatening to, or actually, shooting or kidnapping someone.

That we as Americans refuse to rise up and demand this be stopped simply means none of us deserve to call ourselves Americans, nor to claim that we live in a Constitutional Republic, for it is clear that we do not as we refuse to defend same.

With that said slowly public opinion, and lawmaker opinion, is moving toward de-scheduling that which never could have been scheduled in the first place under Schedule I (and arguably cannot be under Schedule II either.)

This, along with Canada's national legalization of recreational cannabis and those states here that have legalized it for either recreational or medical use, has led to a hell of a lot of money flying around in the markets and many, arguably insane, projections for business prospects.

To put some scale on this all alcoholic beverage sales in the United States total approximately $220 billion dollars a year, roughly half of that on wine consumed at home alone.  Medical cannabis is already available in some form in many US states and other nations, including Canada.  Therefore the question becomes what is the expected delta from today's consumption -- not from a zero baseline.

Further, we have evidence from some areas of Colorado which has had legal recreational cannabis for some time, on the impact both in terms of tax receipts from those sales and their impact on alcohol.  Aspen, for example, has shown no decrease in alcohol taxes.  Since alcohol taxes are on a "per unit of sale" basis this provides good evidence that those who choose to use cannabis products on a social (as opposed to medical) basis either do not also consume alcohol or if they do it doesn't impact their consumption.

One of the "fears" (and points of opposition) has come from vendors and manufacturers of various forms of booze; this opposition will eventually melt away as the data confirms that no violence is being done to their business by weed smokers and brownie eaters.

But to the point, in the US market, it is essentially a given that recreational weed will be less of a market in gross product sales than will be alcohol -- simply due to the fact that a majority of people do consume at least some alcohol and yet only a small fraction of the population has any desire to consume recreational cannabis.  To expect that such is a less than $100 billion opportunity in the United States at the gross sales level, and ratably less than that in Canada, is therefore a likely upper boundary on the market size.

This is not to throw cold water on the tax revenue implications; if 25% of that $100 billion is tax revenue that's a nice crank to state budgets.  $25 billion is not a huge number but neither is it chicken feed.  As an example Chicago's entire budget is about $9 billion -- for everything -- so we could fund about three Chicagos, in their entirety, with that tax money.  That's not chump change!

But for those pumping firms in this industry as a "good investment" it ought to dampen your ardor quite a bit.  Never mind the fact that there's zero moat on cannabis production for recreational purposes; literally anyone can build a little "grow chamber" that will produce more weed than they can personally smoke at near-zero cost and, for small-scale production for personal use the power consumed won't even be able to be found on your electric bill.  This is a natural limit on the so-called "pricing power" producers have; raise prices or taxes too high to the point that the hassle and effort are exceeded by the asking price for commercially-produced weed and people simply grow their own.

My best guess is that the entire US market under a fully legal recreational paradigm, where all 50 States have legalized possession and recreational use by 21-and-over adults, is likely around $75 billion gross, before imposed sales and "sin" taxes.  That's end-to-end and remember that out of that money you must pay for the land used to grow the weed, the power and irrigation necessary to do so when done in a factory environment, the harvesting, curing, grading, sorting, packaging and transport of same and the entire retail environment (e.g. places to sell it, security, employees, etc.)  The margin on this product, as a commodity with zero moat around someone choosing to grow their own is going to be somewhere around 10% just as it is for any other commodity product and service.

So among all these firms you have a profit stream of about $7-8 billion in the US, and maybe another billion or so in Canada.

Now try to square that with all the scream-fest "investment opportunity" nonsense flying around.

$9 billion or so in annual profits is a nice little industry -- but the key word here is "little."  For perspective in 2016 GM had gross revenues of over $140 billion, or roughly double the entire reasonable guess at the size of the recreational cannabis market, and about $9 billion in profits -- as one company, not an entire industry.

Don't demonstrate that you've been smoking too much weed by buying into the hype.  The numbers claimed for this "opportunity" simply do not add up.

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2018-08-15 14:53 by Karl Denninger
in Stupidity , 52 references
[Comments enabled]  

Just saw a clip on CNsmiley with a local/regional news organization whining about aggregators (e.g. Google, etc) "taking content without paying for it."

There's a simple solution to that -- only allow the first paragraph or whatever tease you wish to be grabbed by their robots without being signed on.  This prevents the "Googlebot" (and others) from grabbing the full article.

Now if someone wants the entire article they go through your system and either are exposed to your advertising (and thus you get paid) or your paywall (and thus you get paid.)

If the coders who do your site can't handle this they're terminally stupid and utterly incompetent; in either case your alleged "injury" is self-inflicted, in that you're literally giving the material away.  That's a choice, and one you can choose not to make.

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2018-08-15 14:06 by Karl Denninger
in Market Musings , 148 references
[Comments enabled]  

Elizabeth Warren wants to pass a law to "regulate" any company over $1 billion in revenue.

As usual she's out of her mind.

There is a much easier way to make a real impact on the issue, and it requires just one simple change: Ban stock buybacks by declaring them inherent frauds; you need no new law as fraud is already illegal.  We already do this with Ponzi schemes; buybacks are no different in point of fact.

Inevitably executives and other valuable employees have part of their compensation structure include either restricted stock or options with an exercise price.  The problem is that the value of same is inherently tied to the divisor -- that is, the number of shares outstanding when they are issued.

If you allow a firm to buy back shares then all such grants are inherent frauds upon the public investor because the value of such grants mathematically rises if the divisor goes down.

Yet the investor is told what the value allegedly is, and that the future value of the grants will track company value which in turn depends on the performance of the people who received the grants.  The latter claim (the enterprise value of the firm) is true but the value of the stock granted is no longer tied to the value of the firm as it mathematically increases with a buyback irrespective of corporate performance.  This makes the alleged stated value of said compensation an intentional lie that harms others -- the name for that in the law is "fraud."

Further, the executives who hold said options or stock are the ones who put forward, vote on in board meetings and execute said buybacks which is the very definition of insider dealing.  That is also supposed to be illegal.

So let's cut it out -- ban buybacks entirely.  If the stock price goes up with a constant divisor then actual value was accrued.  Nothing wrong with that.  If the company wants to pay out capital then it can do so on a completely-ratable basis via dividends, which does not change the divisor.

It's time to put a stop to the rampant market fraud called "stock buybacks."

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