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Commentary on The Capital Markets- Category [Editorial]
2017-09-06 10:52 by Karl Denninger
in Editorial , 632 references
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Yesterday the local WalMart was completely sold out of bottled water.

Irma has not had more than 5% chance of getting this far west -- ever.  There was exactly one model with any sort of support for even tropical storm force winds here, the CMC -- and that took the storm into Appalachicola, which would mean that we'd get..... a rainstorm.

Really.  Not flooding, not wind damage, not surge (we'd be on the wrong side) -- a rainstorm.  Never mind that the CMC is one of the less-reliable long-term models and has been left behind by more-recent evolution in hurricane path modeling.

Nonetheless the one thing that's literally the most-stupid to buy was stripped out of the local stores instantly: Bottled water.

Folks, what's wrong with your tap?  Fill up a cooler or any other clean container.  That's nearly free instead of standing in line and carting around bottles which, I remind you, then turn into trash you must dispose of in the middle of a storm when services (like garbage collection and recycling) might be disrupted.

Never mind that most houses have tank-style water heaters.  They typically have 50 gallons of drinkable water in them even if the water pumps are dead.  They also have a nice draincock on the bottom to which one can either attach a hose or simply put a glass under and open (if it's on a platform.)  Turn off the breaker or shut off the pilot (so you don't dry-fire and damage it) when the storm comes and you have 50 gallons (enough to last a family of four nearly two weeks in drinking water!) of clean, drinkable water.  Just open a hot-water tap so as to break the vacuum when you need to drain some for drinking.  When water comes back on fill it back up completely before turning it back on.  Easy, free, and already in your house or apartment.

real problem is that lift stations typically go down with the power which means you can't flush the toilet or take a shower or you will flood.  Worse, your neighbors can't either or they may flood you (if you're lower than they are.)  This means you need to figure out how you'd going to use the bathroom when you can't flush for however long the lift stations are out of service.  Know where the cleanout plug is in your drain line and/or figure out how to plug that line to block reverse flow (e.g. with an inflatable device); while it's illegal to open the plug I'll take the fine for doing it if caught if I can't block the line over the alternative of a house full of raw sewage which is going to wind up in the environment anyway if your neighbors do a stupid thing during or after a storm.

When it comes to places like Houston, Miami and elsewhere the federal government has cheered on utterly stupid things.  So have the state, local and county governments, by the way, all in the name of "economic growth."  Houston is a particularly-glaring example in that damn near the entire city is flood-prone and always has been; the early settlers that came to the area literally found a swamp and turned around, deeming it unfit for settlement.  Miami is built largely on reclaimed swampland that has and will continue to subside; that's not from global warming, it's from stupidity.  This means that both ought to be full of literally-disposable buildings along with those built on high enough pilings and 200mph wind ratings so that over their economically-useful life they won't get wet or destroyed.  But that costs more money and doesn't look as "cool", never mind the code madness cities impose that prohibit low-cost disposable structures for those who either don't want to or can't afford such stout construction but are expected to be destroyed in a major storm and thus are deliberately not insured.  Why no, instead we must build edifices and palaces in places known to be prone to inundation and then expect the taxpayer to cover it when they get trashed while the profits from building same have gone to private parties.

This is madness.

Everyone wants to say that Irma is the "strongest hurricane ever in the Atlantic."  Nonsense.  We didn't have weather satellites until the '60s and thus the only way to know one was coming was when the weather went to crap or a ship went through it (by accident) as ships sure didn't go through the eye of a hurricane on purpose!  Second, anemometers (windspeed indicators) don't generally survive 150+mph winds even today (several government-bought and thus high-quality ones failed at ~130mph last night as Irma came in), and 50-100 years ago they never did, so we have no accurate records with regard to hurricanes that are older than the last 50-75 years since flying through them is pretty-much how you clock maximum windspeeds; ground-based equipment tends to get destroyed.  What we do know is that two really nasty hurricanes came through Florida just prior to the '29 crash; the 1926 Miami 'cane caused a hell of a lot of damage and it then hit Pensacola, causing heavy damage, after re-emerging into the Gulf.  Two years later almost to the day a monster storm came in between Jupiter and Boca Raton known as the Okeechobee hurricane.  Between the two they trashed what was at the time a monstrous real estate bubble and in fact set off a property market crash in the state that has been memorialized in the famous (and true) saying "selling swampland in Florida."

Hurricanes are part of the natural phenomena in nature and redistribute energy from the oceans into the atmosphere.  While Irma has already done a lot of damage in the Leeward Islands and will undoubtedly do more intentionally stupid decisions by humans are responsible for far more economic damage and loss of life than the weather itself.

While you and I can probably not do much about the idiocy of city planners and politicians we do have the choice to not do dumb things that destroy our own financial lives, or even worse, get people we love hurt or killed.

Use your heads folks.

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2017-09-05 07:00 by Karl Denninger
in Editorial , 1736 references
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Whether it comes from the left, right, CEOs (who love cheap labor damn the law to Hell) or others, just spare me the tears, ok?

I'm not swayed by the claim that the kids involved are blameless.  That doesn't matter; the fact is that they have accessed and consumed services in this nation to which they were not entitled over the previous years, and nobody is demanding that they pay the cost of said services back.

Theft by conversion is still theft.  Yes, if you have no ability to reason at the time (because you're a young child) then you cannot be held criminally liable for said theft, but the fact of the matter is that you still got the benefit and paid nothing for it.

That it was your parents that worked under the table (and thus evaded said taxes) or worse, stole someone's identity (and thus committed both a criminal act and imposed direct cost on someone else) isn't material.  You were the beneficiary of that conduct -- both directly in your home and indirectly in your access to schools, infrastructure, medical care and more that you wouldn't have had.  You've benefited greatly over these years.

What DACA supporters are attempting to argue for is that if someone's parents were successful robbers, and managed to steal $500,000 over some period of years, giving 20% of it to their kids and then got caught that the kids ought to be able to keep the loot.  This position is both morally and legally bankrupt.

May I remind you that President Obama, when he announced this program, admitted he had no legal authority to do so.  Congress could have changed the law over the intervening time, and indeed prior to that time, but did not and has not.

Speaker Ryan's mealy-mouthed nonsense is even worse, as the person who could have brought said bill to the floor of the House and hasn't done so.  He is the worst sort of hypocrite and jackass, in that he's made a nice name for himself by claiming to be for the Rule of Law -- right up until it is proposed to be enforced.

Then he turns into someone who condones said theft instead.

DACA is illegal folks.  This is not about compassion, it's about the rule of law.  If someone manages to break into a bank every day and steal $20 without being caught for years or even decades that does not change the fundamental nature of their act, nor the fact that's illegal.  Getting away with an illegal act does not make it lawful; it just means, especially when it's done openly and notoriously, that you managed to sufficiently bribe the cops.

The latter, may I remind you, is a second and more-serious offense, because corruption of the rule of law is usually considered more-serious than simply ignoring or breaking the law.

No, holding cute babies up to the camera won't change my mind.  Nor will appeals to my alleged "better side."  The fact of the matter is that our nation's immigration laws are what they are and those who intentionally broke said laws and/or profited from same must not be rewarded for doing so by giving them the ability to stay, permanent residency or even worse, citizenship.

Nope, nope and nope.  All of the DACA folks have a nation -- but it's not the United States.  They're citizens of some other country, to which they must return.  Once they've done so if they so choose they may petition to enter the United States for the purpose of residency via the established and lawful basis, and should be expected to repay, with interest, all of their previously ill-gotten gains.

If they have acquired skills and education while here then on a score-based system they'd actually have an advantage in requesting legal status -- from their nation of citizenship.

But not while here -- while here they are illegal invaders, whether they knowingly broke the law or not, whether carried by their parent(s) or wildcatting on their own.

The law either must be applied evenly or it is meaningless.  Congress neither has a right or an obligation to retroactively change these facts -- only prospectively.  The administration, for its part, has an obligation to enforce the law -- not an option to do so or not, as President Obama asserted.  That obligation stands as one of the primary pillars of our Constitution and in fact is an explicit component in the oath that the President, and those who serve in the executive or legislature where oaths are required, take before ascending to the office in question.

DACA must end and those who promote otherwise must be driven from public office and the boardrooms in which they sit.  Those firms who profit from and advocate for the intentional violation of Federal immigration law must find the firm and all responsible executives charged under said law as accessories before and after the fact and their companies must have their charters revoked and be disbanded.

Enough.

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2017-09-04 09:55 by Karl Denninger
in Editorial , 657 references
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The first is to grind at the wheel, take small amounts of money as you acquire them and risk everything, fail early, fail hard, and fail often.

This usually works, but exactly how many times you will fail, and at what cost, is another matter.  Personally, my number was "three"; that is, the third time I wound up with something durable (in terms of a large multiple of what I put in originally.)

But there's a problem with this path -- it takes a hell of lot out of you and if you "crack" before you hit your personal number of failures then you're utterly screwed.

It forces you to be a bastard in some fashion, because the world is not a nice place.  The people in it aren't nice either, and a huge percentage of them not only will cheat, lie and steal, if they're in a larger business than you are they'll do it and the government won't stomp on them even if what they're doing is illegal.

If you try the same thing, on the other hand, you will be bankrupted and will probably go to prison.

This means you need to get real creative.  You can get lucky, of course, but in truth that's a bad strategy.  Oh sure, there are those who do it in every business cycle and "win", but the "out of business" signs massively outnumber the lucky ones.  For everyone who makes a million or ten with a large component of luck there are fifty who wind up with nothing at all.  This leaves the alternative as a strategy to adopt: (1) be a five alarm bastard so that nobody dares **** with you hard and (2) stay on the right side of the law so that if someone tries (especially on the criminal side) they get nowhere with their allegations because everyone who actually cares has already looked at you and figured out that you're almost-certainly not cheating.  The hard part is doing both while watching those larger than you lie, cheat, steal and commit crimes which nobody does a damn thing about.  You damn well better have your head on straight going down this road because if you don't you'll either join them (and get caught) or worse, go postal.

But let's say that for whatever reason this isn't you.  Maybe you're just not cut out that way.  Maybe you know you can't keep the steely-eyed stare when severely provoked and will descend into either some sort of self-destructive cycle (e.g. booze, etc) leading to a blow-up or you just aren't willing to do it. Putting in 100-hour weeks for years is something many people just can't do without emotionally or physically breaking in some way, and one of the worst things to do is to undertake such a path while knowing it's simply not in you.

How do you deal with reality if what you want to do and be leads you somewhere like this, but you just don't have that 100+ hour a week drive in you?

I’m not someone who really likes to sit still for forever and I find most jobs to be boring and repetitive. I may not be amazing at everything I do but I enjoy all the hobbies and traveling that I go take on. Traveling has changed my life and seeing myself as a traveler and finding out whom I am supposed to be in this world has been so eye opening.

There is an alternative: Need little and it's a hell of a lot easier.

In other words structure your life so you don't have debt.  You don't drive expensive cars; you drive cheap-to-operate ones that go a hell of a long way on a little fuel, are older and thus cost almost-nothing to insure.  Don't acquire a lot of "stuff", acquire memories instead -- they take up no space.  Be happy sleeping in a tent instead of a hotel (and God Forbid, if you need a hotel for a night or two it's Motel 6 as you can ****, shower and shave just as well there as you can at the Sheraton!)  Have a reserve and keep it in case things go to hell and carry no balance on any credit card -- ever.  Have a friend or two somewhere and an address you can bail to if things really go to **** on you (it happens), and keep enough in funds available to buy a bus ticket there -- just in case -- along with a bag that will carry all the things you really can't lose.  And finally, pay attention to your health when it comes to the precursors to chronic disease that are under your control -- specifically, how much and what goes down your pie hole.

I see far too many people who need the manicured lawn, the Lexus, BMW or Mercedes (or worse, two or more!) in the driveway, the big house that costs a metric ****-ton to insure, heat and cool, never mind being in hock up to their nuts in order to "have" all of it.  More than 75% of Americans are one missed paycheck away from being on the street; they literally live paycheck-to-paycheck with zero savings and zero real equity -- in anything.  Of that 75% nearly seven in ten are carrying more than half the median income in non-housing debt and half are carrying that on credit cards. Worse, three-quarters of American over 40 along with close to half of those over 20 (and nearly all of the above 75%) can't manage to run one mile or hike three without being winded or worse; the average American is consuming multiple prescription drugs and is headed for Type II diabetes, a heart attack or both with a large percentage 50 or more pounds overweight -- that is, they're fat and it's all a result of choices they make each and every day.

How do you get out of that box?  I'll tell you what people think they can do to get out of it -- play Powerball.  Here's the math on that folks -- it's roughly 1 in 300 million you'll pick the right numbers.  You need to pay $2 for a ticket, however, which means the money odds require $600 million in the jackpot, not 300.  It only gets worse from there since that "Jackpot" amount is a 20 year annuity and the cash value of said jackpot is much less, so now we're up close to a billion before the money odds work for you.  And then we must account for taxes, which of course you don't get rebated on with your ticket purchase but must pay to the tune of 40% immediately if you win.  Of course all of this works only if you're the only one who gets the right numbers; if someone else also picks them you must split the prize.  This means that even when the Powerball has a $600 million jackpot buying a ticket is still a losing bet to the tune of at least 2:1 against you before accounting for the risk of multiple winners.

Why does the Powerball sell any tickets?  The usual claim is that it's a "stupidity tax" but the facts are that plenty of people know damn well that the odds are massively against them but all they have left is luck because they've decided to bury themselves over the space of years in a debt-trapped lifestyle.  So they play anyway, often with money they can't afford to lose.

Don't do it.

Be the one who needs little; optionality is a virtue and leads to nice, calm sleep instead of restless nights, dependence and, for far too many people, insanity.

On this Labor Day consider the option to stop destroying your health, need little, labor less and live more.

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2017-08-31 07:36 by Karl Denninger
in Editorial , 253 references
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Want to know why flood insurance coverage has decreased so much?

WASHINGTON (AP) — Houston’s population is growing quickly, but when Harvey hit last weekend there were far fewer homes and other properties in the area with flood insurance than just five years ago, according to an Associated Press investigation.

The sharp, 9 percent drop in coverage means many residents fleeing Harvey’s floodwaters have no financial backup to fix up their homes and will have to draw on savings or go into debt — or perhaps be forced to sell.

It's not hard to figure out.

It's not like every firm that sells homeowners and renters insurance doesn't know and make a commission selling flood insurance.  Nor that they don't issue warnings -- they do, on the face of every policy.

No, the problem is that if you're in other than a special-hazard area flood insurance is not required to get a mortgage and when more than 70% of the population lives paycheck to paycheck they simply can't afford it.

This is what the health scam has done to people.  It's what offshoring jobs has done to people.  It's what unlimited deficits and doubling of the national debt has done to people.

They simply don't have the damn money which makes the entire argument about whether someone "wants" to buy flood insurance moot -- they don't have the money to pay for it.

Of course it doesn't help that NFIP premiums have been going up -- quite a lot.  That has a lot to do with losses, and unfortunately rather than monkey-hammer those people who built and live in special hazard areas, where those losses are both insured and more-frequent (remember, NFIP doesn't care about uninsured losses as that doesn't hit their accounts) they have "spread the pain" to those who don't live in such special hazard areas and thus have lower risk.

My flood coverage (never flooded, and grandfathered into "no special hazard") has gone up 44% since 2011 alone!

Yes, NFIP runs at a loss today.  But it largely runs at a loss because of people inside special-hazard areas who are insured and take losses, sometimes repeated losses, because most people who are not in special-hazard areas don't buy the insurance.

Now they're whining about people who don't buy it and aren't in special hazard areas, saying they "should have" now that they're facing (probable catastrophic) losses in the greater Houston area.

Well, duh!  The program has forced those not in those special-hazard areas to subsidize those who are!

Just as with so-called "health insurance" when you force well people to pay sick people's bills they will stop if they're legally able to do so, risk be damned, because you are stealing from those who are not taking higher risks to subsidize those who are.

The utter stupidity displayed in the referenced article is astounding.  The answer to this problem is to rate the special-hazard areas appropriately, grandfather those who weren't in special risk areas (but are remapped later) so you don't force someone out of their house after they buy it and for those who do buy or build in a special hazard areas charge premiums commensurate with actuarial risk.

My risk of being flooded did not go up by 44% over the last six years and the $250,000 building / $100,000 contents insurance limit (which is all you can buy through NFIP) has not gone up either.  What has gone up (by 43%) is the forced subsidy of people who are in special-hazard zones and thus are forced to buy flood insurance in order to get a mortgage by those of us (like myself) who intentionally bought a building at or above base flood hazard elevation (in other words, no special risk) but want the coverage anyway.

This forced subsidy by people just like myself along with the repeated financial******served upon everyone for so-called "health insurance" and similar racketeering schemes has made buying NFIP policies for those who do not live in said special risk areas increasingly unaffordable and thus the rate of such insurance coverage has gone down materially.

Welcome to the capital destruction that this has resulted in and the economic impact that will come from this very government policy and forced screwing America -- it's your fault for not demanding that these financial rape-rooms be closed and those who are running them rot in prison.

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2017-08-28 19:24 by Karl Denninger
in Editorial , 331 references
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