The Market Ticker
Commentary on The Capital Markets
2017-06-21 07:00 by Karl Denninger
in Editorial , 1438 references
[Comments enabled]  

Go ahead folks, read this one.

Accordingly, I must communicate to you at this time the full extent of our dire fiscal straits and the potential disruptions that we face in addressing even our most critical core responsibilities going forward into the new fiscal year.  My Office has very serious concerns that, in the coming weeks, the State of Illinois will no longer be able to guarantee timely and predictable payments in a number of areas that we have to date managed (albeit with extreme difficulty) despite an unpaid bill backlog in excess of $15 billion and growing rapidly.

We are effectively hemorrhaging money as the state’s spending obligations have exceeded receipts by an average of over $600 million per month over the past year. (ed: That's $7.2 billion/year)

My cause for alarm is rooted in the increasing deficit spending combined with new and ongoing cash management demands stemming from decisions from state and federal courts, the latest being the class action lawsuit filed by advocates representing the Medicaid service population served by the state’s Managed Care Organizations (MCOs). As of June 15, the MCOs, and their provider networks, are owed a total of more than $2.8 billion in overdue bills at the Comptroller’s Office. There is no question that these obligations should be paid in a more timely manner and that the payment delays caused by the state’s financial condition negatively impact the state’s healthcare infrastructure. We are currently in court directed discussions to reach a workable and responsive payment schedule going forward, but any acceleration of the timing of those payments under the current circumstances will almost certainly affect the scheduling of other payments, regardless of other competing court orders and Illinois statutory mandates.

Now folks, you can call this a "one off" if you wish.

It's not.

It is also not a surprise where the problem is centered.  It's in health care.

I've only been yelling about this since the 1990s, when I saw the impact on my firm's balance sheet and cash flow statement on a year-over-year basis for a few years running.  You don't need to see it for more than a couple of years to grasp the gravity of the problem if you have a brain and are not politically poisoned to wave it off.

Anyone with a $3 WalMart calculator can figure it out, given 5 minutes and an IQ greater than their shoe size.  You merely need to run the exponential series out 5, 10, 20 years and what happens becomes obvious.

At ~9% expansion the rule of 72 gives you a close-enough approximation: Costs double every 8 years; in 24 years you spend eight times as much money as you did originally.

There isn't 8x as much money and you can't raise it.

You can't increase taxes by 800%.  You can't expand the economy by 800% over 24 years; at a 3% GDP expansion rate (which we haven't had in the last two decades for any sort of time period, I remind you) the economic output expands by 200%.  This means that you'd have to quadruple taxes compared against economic output, and if you try to do that GDP will collapse because you will consume all of the expansion in economic output and then some.

There is only one answer to this problem and that is to take the entire medical system, which is where the entire problem resides, and dismantle it.  Prosecute every single hospital administrator, owner of an imaging center, drug company executive and physician that has ever, even once, stuck his head in a hospital room and then billed someone $1,000 for a "drive by" consultation -- or anything like it, such as charging $90,000 for a drug here that's $2,000 in another nation, or billing one person $100,000 for a procedure where another is billed $5,000 or $10,000.

Bankrupt them all by imprisoning every last ******ned one of these people and fining their firms out of existence using the 100+ year old and still valid body of law found in 15 United States Code, Chapter 1.

Force every single one of these institutions out of business now.

Let the courts administer bankruptcy sales on every single ******ned hospital and diagnostic center in the nation along with every single pharma business in the United States.  Sell them all off at 2, 5 or 10 cents on the dollar and make damn sure you tell everyone who bids that any repeat of the previous owners performances over the last 30 years will lead to instant indictment and imprisonment -- period, full stop, no exceptions.

Tell all the remaining doctors and medical centers of any sort that (1) they will publish a price on everything, (2) they will charge everyone the same price for the same good or service and (3) any attempt to cheat or perform any anti-competitive act will lead to immediate indictment, trial and imprisonment of everyone involved using perfectly-valid 100+ year old law that has twice been confirmed as valid in the US Supreme Court during the last 30 years.

No bail, no kidding, no mansion, no Porsche, no exceptions -- and no bull****.

At the same time tell the AMA and all the Colleges that if they collude to (1) drive up the cost of learning to be a doctor or (2) limit the number of people who can go through school to be a doctor in an attempt to fix prices and restrain trade, including attempting to continue or enforce state-specific licensing you will lock all of them up too and give the people the controls of CAT D8 bulldozers so they can take out their frustration on the ivory towers of said schools -- after we chain the administrators and AMA board members to the columns.

After all, a D8 beats the destruction of our cities and state governments, along with 100+ million dead Americans, which is exactly where we're headed over the next couple of decades if we don't cut this crap out right now.

Go ahead and believe if you wish that "owning" property in one of these cities -- any of them -- is real.  Go right ahead.  You have a nice piece of land and house there.  It's maybe worth what -- $500,000?  If it carries a property tax levy of $12,500 a year you paid for it again in 40 years but got nothing of value for the money spent the second time.

By the way, how do you afford that $12,500 property tax bill on a middle-class -- or even upper middle-class income, say $80,000 or $100,000 a  year?  You can't.

It would be bad enough if it stopped there but it won't.  My former house near Chicago has seen its property tax levy double in 10 years time.  What makes you think yours won't have the same thing happen?  It not only will it has; I've seen it on other properties I've been watching including property my family members own in such places.

Why would I provide services to the state of Illinois if they can't pay my invoices Net 30?  I would not -- period.  I saw a tiny bit of this with Chicago in the 1990s when they started trying to "stretch" my invoices.  I went into the computer room and yanked the line card out of the cage that fed the Washington Public Library and tagged it off with a warning that any tech that put the card back in would be fired.  The caterwauling could be heard all the way to Waukegan (and came within minutes of my action) but that card didn't go back in the cage until I had a check in-hand.  I don't get to pay my parking ticket when I feel like it and thus neither does the city -- or state get to pull that crap on me.  That was the end of the discussion.

Will someone "factor" their invoice and thus allow people to provide services to the state?  Probably, for a while, but the factoring cost will get added to the bill. That'll work right up until the credit risk gets to the point that the discount rate on those factored invoices is 20% or more at which point there's no chlorine for the water plant that keeps your drinking water safe.

How far are we from that folks?  How long does Chicago, Milwaukee, Detroit, St. Louis, Atlanta, New York, Newark or Philadelphia remain standing upright and operating when there is no sanitary water to drink, the pumps don't work at the sewage plant so there is literal **** coming up out of the sewer manholes, the cops and firefighters don't get paid and there's no food distribution in the city either because the city and state try to tax the businesses at a rate they cannot pay and a pound of coffee winds up costing $20 and a gallon of milk is $10, which nobody can afford on a welfare check?

You think this is a joke or hyperbole eh?

It's not.

This was much-more easily resolved 20 years ago when I started raising hell about it.

It was rationally resolvable in the 2007/2009 time frame when I started writing The Market Ticker.

Now it's a real bitch, but we still have to do it.

I've laid it all out here, on the air multiple times, and in Leverage.

I've been to Washington DC in the 2011 timeframe and spoke to Senate staffers who confirmed they understand the math and what will happen if this crap doesn't stop.

But they also told me they're unwilling to act because you are more-concerned about abortion, gays, boys pissing in the girl's room and how much you can get in welfare checks than whether your state and ultimately the federal government is going to be bankrupted by a bunch of jackasses in white coats who first told you to eat **** that makes you sick with government sanction, prescribed pills that gave you diabetes, loved the trillions of dollars they stole to treat the diseases they caused at mark-ups of 1,000% or more against a market price -- and all of that after they tossed your health in the ****ter on purpose.

Exactly when you do pull your head out of your ass, America?

Is it before or after our cities lay in ruin and a third of you are dead?

Oh, and if you're dumb enough to think that Trump gives a flying **** about any of this?

You're wrong.

He knows good and ******ned well exactly what's going on.  He has to since he's run a company in this very environment for the last 30 years and he's seen all of it and knows the math, just as I do.  I'm not the smartest man in the room by a wide margin but I sure as hell can use a ******ned calculator and so can both Trump and you, if you choose to.

The very day Trump was elected every bit of the bullet points on "health care" found on his campaign site that actually bore on the real issues disappeared from public view and not one word of it has been seen since anywhere -- not on his transition site and not in a single policy pronouncement since.  There were multiple entreaties made to his transition team on this exact point during those months including by people I've cited here and who were "supposedly" part of the group he was going to consult with.  Those meetings were canceled folks and they have not been rescheduled six months later.

Trump is an actual, willing and intentional co-conspirator in all of this -- and that's a FACT

View this entry with comments (opens new window)

2017-06-20 15:46 by Karl Denninger
in Federal Government , 480 references
[Comments enabled]  

This is outrageous:

The State Department has opened a formal inquiry into whether former Secretary of State Hillary Clinton and her aides mishandled classified information while she was the nation’s top diplomat, Fox News has learned. Despite being under investigation, Clinton and her staffers still have security clearances to access sensitive government information.

How and why?

Let me point out something for you: Clearances are not given to people without cause and they do not survive when the need for them expires.

If you leave your post at a government contractor, for example, your clearance expires automatically in a very short period of time unless someone else picks you up for a job that requires the clearance.

If you're a politician and lose your seat, any clearance you once held expires because your job expired.

So explain to me why Hillary and her "aides", who no longer work for the State Department nor any other government agency in which she would require a clearance, still has one.

I'm waiting....

And by the way, Trump can blow me on his claim of being a "Rule of Law" guy in this regard as well because the rules on clearances are very clear and they exist for damn good reason.  That your last name is "Clinton" is not a reason for you to be exempt from them.

View this entry with comments (opens new window)

2017-06-20 07:00 by Karl Denninger
in Health Reform , 441 references
[Comments enabled]  

This man needs to be mooned -- then ostracized and everyone associated with his administration shunned.

To solve the crisis of high drug prices, the group discussed strengthening the monopoly rights of pharmaceuticals overseas, ending discounts for low-income hospitals and accelerating drug approvals by the Food and Drug Administration. The White House declined to comment on the working group.

One proposal will increase prices, the second will probably increase prices and third is likely to increase profits but not decrease prices.

In other words everything you thought Trump was going to do to fix the medical system turns out to be a lie.

So you didn't want to believe me when I blew the whistle on this before inauguration eh?

You're ****ed, you sit and cheered for this douchebag -- and thus deserve what you're going to get.

Oh, and I was right.


View this entry with comments (opens new window)

2017-06-19 07:00 by Karl Denninger
in Product Reviews , 455 references
[Comments enabled]  

No, I didn't buy one.  Yet.

But one of the "regulars" around the Ticker sent me his to review.

If you want the 30-second review it's this, assuming you're looking for a new phone: Buy it and get a case for it.

Now on to the details.... for comparison I am using my DTEK60, which I've had since launch -- and like a lot, six+ months into owning it.

The first thing that jumps out is the multi-color LED on the front.  Boy, do I miss that from my Priv on the DTEK60.

The next thing that jumps out at you is size and mass -- it's basically the same size and mass as the DTEK60.  A bit thicker and heavier, but almost exactly the same physical size.  It feels good in the hand and has a somewhat-grippy back, but more on that in a few minutes.  Note: The DTEK60 is slimmer.  With a case, it's roughly the same as the K1.  So if you add a case, the K1 will be thicker than the DTEK60.

I set it up initially without a SIM in it, but as soon as I stuck my T-Mobile SIM in the device it found it and immediately connected -- including for VoLTE and WiFi calling.  No muss, no fuss, no screwing around.

In-hand I had one immediate complaint -- it's very easy to accidentally hit the convenience key.  Fortunately I don't find it very useful, so I don't have it set to anything. IMHO they should have put the SIM tray where the convenience key is, moved the volume rocker up and the convenience key right under it.  Other than that, no complaints with physical button locations and similar.  The build quality is excellent -- no complaints there at all.

The fingerprint scanner is insane.  It's fast, it's accurate and it's right where your thumb falls.  Grab the phone "as you would to use it" and it unlocks. Nice.  Of course fingerprints are nowhere near as secure as a password or even a picture password (which the phone also supports), but they're faster and more-convenient.  You choose.

When it showed up the battery was at 90%.  I intentionally did not plug it in -- not for setup, not for anything else -- to see how long it would go.  The next morning it was at 22%, and I was not kind to the battery, using it as I "usually do" plus doing all the setup and download things that come with a new phone.  There's no way I would have gotten away with that on any other device I've ever owned.  The second day, with extremely heavy use including some video streaming and a short (less than one hour) charge session left me with 77% (!) at 5:00 PM (8 hours of "off-charge" time and ~2 hours of SOT), for some points of comparison.  I then ran a race, with (bluetooth) music, played as usual with it (including pictures) afterwards, used it the rest of the evening and went to bed without plugging it in.  The next morning it was at 55%!  I ran all day with it, came home around 3:30 PM and it was at 26%.

Yeah, it's that insane when it comes to battery life.

There's been some garfing about signal strength on the 'net, so I went to some trouble to check that out.  Here's the deal folks, in short: buy a case.

The phone has a metal exterior and direct contact in the "wrong way" with certain parts of it (including the bottom bezels, which is how you have to hold it to talk on it!) does impact signal strength.  Grab the phone with a paper bag wrapped around it (so there's no electrical contact with your fingers) and the problem instantly disappears.

Remember the iPhone4?  Yep.  Get a case. You probably want one anyway both for screen and main camera cover glass protection.  I recommend the Incipio DualPro.  No, I don't have one, but I bet that completely resolves the signal complaints, if you have them.  Driving around I saw no problems with signal in my carphone holder, but I can easily force the phone off LTE in my house or in a bar I frequent (and onto HSPA+) with nothing more than hand placement.  I'd love to scream about this but the fact is that metal case phones are subject to this sort of problem -- all of them -- because your hand materially changes the resonant frequency of the metal and can thus cause the antenna to be "detuned."

Incidentally when it comes to damage risk remember this device is not water resistant.  Don't get it wet.  And don't let it fall on the screen or camera cover; both risks every phone has and no, neither is a warranty issue.  With the screen going basically right to the side rails if you drop it and it falls so the screen gets hit the odds of it breaking are very high -- almost exactly as is true for every other device on the market today.  Thus, get a case is not just an RF thing, it's a "don't break your $500 phone" thing.

Since I never run a phone "naked" anyway I don't care.  You might, but IMHO if you do you're a fool.  Just buy a case and be done with it.

To put objective context on this I put both my DTEK60 and the KeyOne in the exact same location on my desk and used the same SIM card sequentially.  Then I turned on the app LTE Discovery, which shows you signal in dBM.  Here it is; see if you can tell which is which -- both are on the same tower and band, with readings taken a couple of minutes apart. (there's a giveaway if you know what to look for -- oh well ;-)) (Note the TAC: 33363 in both cases -- same tower)

For what its worth the signal in my house sucks and always has.  We don't have Band 12 here due to problems with Eglin AFB (they've got stuff in the same frequency area so T-Mobile can't turn it up) and I'm right along a shoreline where of course they don't care much for signal power.  Step outside and it's better, go up the road and I have full bars.  In the house?  Meh.  Our LTE around here is on a mix of Band 2 and 4 (PCS and AWS bands) which are notorious for having building penetration problems, especially if the building is made out of brick or (materially worse) any sort of metal cladding.

How about driving around and just using it in daily life?  It gets better reception than my DTEK60.  In particular there's a location near the local air-force base that is a true torture-test for phones, with every device I've ever owned having trouble. The DTEK60 can hold a call and data signal there, but it's not great.  The KeyOne consistently outperforms it by 4-5db in that immediate area -- in a car clip, in the same location, on the same road.

So yes, you do need a case on this thing, if for no other reason than it prevents you from changing the antenna resonance and hurting your RF.  Will you be grossly unhappy without one?  Maybe, maybe not -- but with a case from my experience it will be fine.

The vibrator motor isn't real strong; about the same as every newer phone I've had.  The days of the Z30 and Passport are over, but it's comparable to the Priv or DTEK60.  I miss my "rock your world" vibrator motors, but to get that you need bigger, and, well, that takes up space that is occupied by other things.  Like the battery.  Oh well, tradeoffs are what they are and I'll take this one and not bitch.

How about the camera?  It has much better low-light performance than the DTEK60.  In other respects its similar, but if you're unhappy with the imaging on this thing IMHO you need something better than a phone camera -- which I usually do have with me if I think shooting pictures is part of whatever I intend. The KeyOne is able to shoot passable pictures in near darkness; yes, they will be (maybe very) grainy, but it can shoot in light you can barely see in.  It focuses quickly and accurately and in any sort of rational lighting the shots are fantastic.

This is easily the nicest camera on a BlackBerry simply on the available light performance.  Think Priv + excellent low-light, limited by sensor noise rather than inability to get an exposure.  You won't be unhappy.

The internal speaker is ok; it's on the bottom right.  Volume-wise it's approximately the same as my DTEK60.  It will not win awards but it is serviceable for its intended purpose; speakerphone calls and sounding alerts (e.g. incoming calls, texts, etc.) BTW unlike the DTEK60 it has no "overdrive" problems on calls (which can, and does, lead to "broken up" speech on the DTEK60 -- absent on the K1.  Thank you TCL.)

Call quality on the handset itself is good; no muffling or audibility problems worthy of note, and it connects without trouble to my car Bluetooth.

The charge rate on a QC3.0 charger is jaw-dropping; easily the fastest I've encountered.  Gc says it's able to pull and stash right near 3,000ma out of the cord for the "bulk" phase of the charge, and it doesn't get materially warm doing so either; battery temp never goes over 100F.  Basically to go from almost-dead to ~65% (at which point the power draw and thus heating start to cut back) is a roughly half-hour exercise.  The DTEK60 is good at picking up charge but the KeyOne is better by a decent margin, and since it sips power to start with the winner on this is clear.

On standby GC's battery status shows single digit milliamp drain figures on WiFi and numbers in the mid 20ma range on LTE.  That's dramatically less than the DTEK or Priv series phones which typically idle in the ~20-30ma range on WiFi and ~40-50ma on LTE.  Some of this may be due to Nougat, and thus over time filter into other handsets, but it's a dramatic difference and thus worthy of note.  I suspect most of it is due to the low-power SOC (chipset) in there.  Whatever is responsible it makes a hell of a difference.

Between the battery life (nutty good; if you can kill it in a day of actual use you're way more aggressive than I've ever been, and I'm aggressive with my use) and insanely-fast charging this is the first smartphone I've ever had that can be charged "ad-hoc", without carrying a portable power bank, without risk of a flat battery at a bad time.  In other words rather than charging it "nightly" while you sleep, or "whenever I'm near a cord" as is necessary for most phones so long as you are in your car (or at your desk, etc) for ~20-30 minutes every day or so plugging it in on an ad-hoc basis is more than good enough since it burns power very slowly but picks it up at a crazy-fast rate.  This translates into using far less than a full cycle on the battery in a given day and that should translate into much better battery life before a decrease in usable capacity on the battery requires replacement.  Oh, and you can replace it reasonably-easily, if you saw my previous article on this point.

Performance?  Up the middle.  Can I make it "stutter" or be less-than-smooth?  Yep.  There were a few times I hit something on the screen and nothing appeared to happen.  A second or three later, it does.  This is part of the lower-power processor but also the missing gb of RAM against my DTEK60 - 3Gb instead of 4.  Is the trade-off for the battery life worth it? I think so.  It streams media just fine; I watched Youtube videos, some MLB baseball and a few other things and never had an issue with any of them.  But if the question is "can you get ahead of it", the answer is definitely yes, you can.

I like the screen; it's IPS, and that contributes (mightily!) to the lower power consumption.  OLED has a material edge in saturation (although not color accuracy) but the more of it is lit the more power it draws, and what's worse every pixel lit contributes heat to the phone too. IPS screens are backlit with an array of LEDs and the power drain (and heating) is controlled by the brightness, which sounds like the same thing but it's not -- it's a constant and most of the time this means the IPS screen wins large on the power burn budget.  Thus, if you care about power consumption, that's what you use, and you sacrifice the modest (but real) increase in deep blacks.  There were no problems viewing it outdoors either -- it beat my DTEK60 in that regard, which simply runs out of illumination (being OLED) in bright outdoor conditions.

How about the keyboard itself?  It's not the Passport.  I wish it was, but it simply isn't; it's smaller. It is materially better than the Priv.  I love the scrolling and the fingerprint scanner is great.  BlackBerry included the "sym" key (thank you!) which pops up the virtual keyboard with symbols in most places, and when it pops up it can be quickly switched to on-screen letters if you wish, but of course then it takes up part of the screen.  I adapted back to the physical keyboard quite quickly, but I'm torn -- it really is much faster and more accurate most of the time than a virtual keyboard, but is it enough to make the sale standing alone?  For some people absolutely yes, but for me, I'm not sure.  I do like it -- don't get me wrong -- but it's not the "must buy for this feature" trigger that some people have.

What I can tell you from using it now for a bit is that I could actually write Tickers on this phone.  More to the point, if I have to use a remote shell into something, I can.  That's a big deal; it's VERY hard to do this accurately on a VKB because the screen consumption issue becomes very real and nasty very fast, along with the risk of a false press which, in some circumstances, is catastrophic.  I literally tore my hair out in the backcountry, on a trail, a couple of months ago when I needed to do some maintenance work on a box, on an emergency basis, right here, right now.  The KeyOne would have made that same event a non-issue.  If you have any use case where something like an accidentally-pressed "return" key is an instant disaster -- and that is always a risk with a VKB -- then the KeyOne is the only phone now on the market that you should consider owning.  Period.

Oh, and the shortcuts... oh my.  Want to run a completely blank home screen?  You can.  Or one full of widgets.  The keyboard makes shortcut callups of any app or function you want trivial.  I loved this on the Passport and it's back, in spades.  The Priv had it but it was useless as you had to flip up the keyboard first.  Not here.  Short and long press, two functions.  Damn, I missed that and it's great to have it.  (e.g. press the "e" key, get EMAIL.  Press "B", get BBM.  Etc.)

There are two versions of note if you're in the United States.  One is compatible with Verizon, the other not.  The one compatible with Verizon is allegedly missing one of AT&T's bands (17), but Band 17 is actually Band 12 minus the lowest frequency subset, and 12 is in there.  What this means is that theoretically the Verizon-compatible phone should be fully compatible with T-Mobile and AT&T as well.  You do give up some outside-US bands on the Verizon-compatible device you'd otherwise have, so if you travel outside the US check the bands in the device carefully to see which unit is "more compatible" with where you travel.  Likewise, if you're on AT&T you might have trouble with their extended-range (low frequency) LTE on the Verizon device -- or you might not.  The unit I have is the GSM (not-Verizon) one, so I can't verify whether there's a potential compatibility issue with the Verizon-capable unit, but if not the ability to "hop" between all three primary US carriers is definitely worth consideration.

So will I buy one, now that I have to send this one back to its owner?


I want to know first if the Verizon-compatible one is fully operational on T-Mobile -- including VoLTE and WiFi calling.  I assume yes, but you know what they say about assuming, right?  So I want someone to play guinea pig, or I want to buy it somewhere I can try it and, if it doesn't come up immediately for both, say "no" and not pay.  That's one of my big things here, because I believe network mobility is important and thus being able to to buy a true "any carrier" phone has real value to me.  There aren't many in the marketplace (a couple of Motorola models) today but if the CDMA-capable KeyOne is one of those devices it's an instant and monstrous selling point.

Second, I don't need a new phone right now.  Do the KeyOne's advantages make it worthwhile to buy one given that my DTEK60 is perfectly serviceable?  IMHO, not really.  The one really big deal is the battery life - there's nothing on the market that gets anywhere close in my experience.  Next up is the keyboard and camera improvements.  They're all real but are they $550 worth of improvement over a very nice device I like now?  IMHO, no.  

On the other hand if/when the DTEK60 takes a crap, or if I decide I want Verizon compatibility, then the picture changes quite materially.  Then I'm "naturally" in the market and it's very, very hard to make the argument against the KeyOne having the build quality, battery life, performance in the real world (not the "fanboi" spec games, but real world performance) and a package that is worthy of the asking price.  The only real shortcoming I can find with the device is the lack of water resistance, but that would be quite the accomplishment on a device with a PKB -- and the so-called "water resistance" isn't a guarantee anyway.  I've yet to see any manufacturer back their claims of IP-whatever water resistance with their warranty -- in other words, if you drown it they eat it.  Let me know when that happens and I'll consider such claims to be "real"; until then such marketing claims are twaddle, especially if they entice you to be less-than-careful with your phone when it comes to water exposure!

In short: Highly recommended - but get a case for it.  You want one anyway.  Both Best Buy and Spamazon have them but I am very interested in whether the Verizon-capable unit, when it ships, will also work (fully) on T-Mobile.

View this entry with comments (opens new window)

2017-06-18 12:55 by Karl Denninger
in Editorial , 3865 references
[Comments enabled]  

As you've probably heard one of our destroyers suffered an impact with a freighter near Japan.

From where the impact occurred it at first-blush appears that the commander of our destroyer is in serious trouble.  For those unfamiliar with nautical rules of the road if you get hit on the starboard side you probably are at fault because you're the "give way" vessel and the other is stand-on.

That is, the other vessel is supposed to maintain course and speed, you are supposed to alter course to remain clear.

Further, there are two other considerations -- first, that if you're in doubt as to whether the risk of collision exists you're required to assume it does, and second, you're required to maintain an adequate lookout (using whatever you have, including people, radar, etc) so as to be able to assess the safety of proceeding on your current course and speed and, if you can't, you must reduce speed to bare steerageway until you can (e.g. in heavy precip that renders radar and lookouts useless, etc.)

Then there's the "catch-all" which is that you are required to do anything in your power to avoid a collision if you determine that you're at imminent risk, even if it means breaking the rules!

The upshot of the way the navigation rules are written is that if there's a collision it is almost never the case that either master is absolved.  The only real way you avoid some responsibility is if you're properly anchored (and dayshaped/lit) or tied to a pier.

If you're legally underway (moving or not) you're going to get some percentage of the fault, in short.

But then this showed up and calls into question exactly where the split of fault lies.


Boy that looks suspicious.  First, the freighter doubled back at speed and then altered course again just before the impact.

Remember, this happened in clear weather, at night.  There is no reason to believe visibility was impaired or anything of the sort.  The first violent, unsolicited maneuver (doubling back) looks suspicious standing alone given that the vessel's intended path was northeast if it was proceeding as-planned.  The second course adjustment southward just before the impact looks even worse.

I remind you that boats do not have brakes and although a destroyer is very maneuverable "on balance" compared against, say, a container ship you're not stopping one all that quickly.  Nor would the master of said vessel (whoever was on watch at the time; the commander was presumably sleeping) have had any reason to expect a violent maneuver by the stand-on vessel approaching it and which, on its present course and speed immediately prior, would pass well clear without incident.

If this was an intentional act then everything changes.  No, the master of the Fitzgerald is sitll not faultless, but there's a hell of a difference between negligent navigation and failure to avoid the consequences of an intentional act by another vessel.

Was it?

I suspect the investigation will get to the bottom of this.  Modern ships all have automated transponder equipment on them that provides course and speed ("AIS") and thus it's available to anyone who cares to look what that commercial vessel did.

The question now becomes why.

Why was the first near-180 degree turn made and then why was course altered again southward just prior to the impact, given that the second alteration, had it not been made, would have almost-certainly led to safe passage.  Further, do the timelines square with this or do they suggest something else?

In short was the collision the result of negligence or an intentional act?

View this entry with comments (opens new window)

Main Navigation
MUST-READ Selection:
A One-Sentence Bill To Force The Health-Care Issue

Full-Text Search & Archives
Archive Access

Legal Disclaimer

The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.


The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.

Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.

The Market Ticker content may be sent unmodified to lawmakers via print or electronic means or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media, to republish full articles, or for any commercial use (which includes any site where advertising is displayed.)

Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.