The Market Ticker
Commentary on The Capital Markets
2017-12-15 12:44 by Karl Denninger
in Editorial , 157 references
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Corporate balance sheets have never been in the condition they are now, but most of this is a fraud.

Virtually all of the so-called "growth" has been in buybacks and (to a lesser extent) dividends.  The problem with buybacks is that into ramping prices they are a terrible long-term deal.  They make some sense in the depths of a crash, but of course nobody has the cash to do it during a crash.

When debt financed it's even worse because history says that corporate debt is never paid off, only rolled over.  In point of fact non-financial companies did not decrease their total debt levels (as measured by the Fed Z1) even during the depth of the financial crisis of 2007-2009.  This of course means that debt:equity levels go vertical as soon as the ramp in equity price stops.

I remind you that while buybacks increase earnings during good years (by reducing the divisor) they also increase losses during bad ones.  People forget this because, well, there haven't been any bad ones recently.  That will end and when it does it will provide a gross amount of acceleration for the decline in equity prices.  In fact, it's not going to be gasoline poured on that fire, it's going to a mixture of diesel fuel and ammonium nitrate.... See Galveston for what will come of that.

But on top of this we now have the real screw job in the tax bill.

Hedge fund managers will get a roughly $20-25 billion a year (that's about $250 billion over the budget period) in additional tax breaks through the so-called "Carried Interest" loophole.

This is raw theft.  This "loophole" is really no such thing.  The capital gains rate exists for those who put their own capital on the line and risk it.  If you manage someone else's money then it's their money at risk and you are performing a service.  This is clearly a W2 employee or 1099-contractor act and thus is wage income.

But, no, it's not in the tax code due to gamesmanship and the so-called tax reform does not stop this.  It would have been very simple to add the following to the tax code on capital gains: In order to take a capital gains tax rate your own personal capital must be at risk in the transaction.

Americans, except for the 0.01%, have every reason to find their pitchfork and use it over this.  That particular provision, may I remind you, would almost close the gap in funding that the bill creates by repealing the "individual mandate."

The "individual mandate" is and always has been a fraud.  But getting rid of one fraud only to enhance a second is not a net positive -- at best it's neutral and in this case it will cost-shift over $20 billion a year from working-class people to the ultra-rich with 8-digit+ annual incomes.

What's worse is that the money-printing (by Treasury, which I remind you is where it all traces back to -- always -- not The Fed) will further destroy ordinary Americans when it comes to their so-called "zero inflation" lives.  Asset price, medical and educational cost inflation will continue to advance and you cannot outrun the second and third with the first unless you are already in the 0.1%.  While I remind you that the medical cost-ramp problem is one that I've analyzed now since the 1990s and my latest projection is just around the time of the 2020 elections this may in fact move the day forward by another year or so.

$10 says not one American gets off their ass and finds their pitchfork over this act of raw theft.

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2017-12-15 07:00 by Karl Denninger
in Editorial , 328 references
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This letter is something everyone in the US ought to read, understand and act upon.

Some of these texts appear to go beyond merely expressing a private political opinion, and appear to cross the line into taking some official action to create an “insurance policy” against a Trump presidency.

Get this through your head, America.  You have people within the FBI who, it appears, had some sort of "insurance" arrangement they were actively working on to change a political outcome.

The document goes on to talk about the fact that there apparently was an active conspiracy to keep the contents of the conversations between these people private as well despite the fact that they were acting within their official capacities at the time.  In other words they perverted their public employment for the purpose of expressing and acting upon personal political animus.

We're all entitled to our political opinions and First Amendment protections are very broad.  However there is also the matter of long-standing federal law (The Hatch Act, principally) and policy, which bars partisan political activity by a wide swath of executive branch employees.

The FBI, as a law enforcement agency, is part of the Executive Branch.

Further, and much more seriously, an active attempt to subvert the electoral process by clandestinely using the resources of the Executive to damage one political party or candidate and favor another is an act that I believe constitutes election tampering and is a rank violation of the US Constitution (never mind violating 18 USC 242 and possible obstruction of justice charges if part of the activity was shielding Hillary from being indicted for mishandling classified information.)  The fact that the people involved appear to have engaged in this conduct using a "burner phone" (one that they believe could not be traced and was explicitly used in an attempt to prevent discovery of the content of communication) is stand-alone evidence of corrupt intent on their part.

If this is in fact what it appears to be then there are a whole host of people including top level FBI leadership both former and current that badly need to be staring down criminal indictments -- now.

As with all the other outrages standing today, however, I have no faith whatsoever that anyone will care and rise to demand that justice prevail.

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2017-12-14 10:15 by Karl Denninger
in Health Reform , 416 references
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This is the sort of article that ought to get you digging around in the garage for what the American people seem to forget they have: Pitchforks, torches and rope.

There is one simple and easily actionable approach that each of us could take to try to wrest control over health policy decisions away from the lobbyists who now control it with little effective counterbalance and put it back in the hands of our patients, who should be powerful shapers of such decision making.

This is a short excerpt from an article in JAMA (Journal of the American Medical Association) on a conversation they urge doctors to have with you.  The gist of it?  Obamacare and forced cost-shifting in general is something you should demand more of from politicians.

Now let me note something for the record:  The AMA, which of course is the last three words of the title of that journal, has just 15% of practicing physicians as members today.  This was 75% in the 1950s.  Yet the "association" has never had it better when it comes to its finances.

How is this possible?

The AMA makes most of its money today on the forced subscription to the ICD and CPT codebook sales that both change every year and become more complex.  The association has created for itself a monopoly with the force of law in that government-funded health care providers must use it, and yet they're a private organization.

This sort of racket should lead to them being charged for violating 15 USC Chapter 1, which I note does not have an immunity for "non-profit associations" -- including the AMA.  Indeed there is a pretty-clean argument to be made that the AMA's forced subscription model is to a material degree responsible for the ramping cost of health care and the 10:1 or greater (in many cases as high as 30:1 if some statistics are to be believed!) administrator hiring rate .vs. nurses and doctors.  I note that said administrators never provide one second of care to an actual person during their entire career.

There is not one word in that JAMA article about health care cost. The fact of the matter is that we overpay by at least 80% in this country for health care and it is directly due to these scams and outrageous actions, all of which ought to be investigated and prosecuted that are responsible for it.

Yet the army of lobbyists deployed by the likes of the AMA and pharmaceutical industries continue to argue for more and more to be taken from you and given not to actually provide care but to prop up pricing and fund overhead that is utterly unnecessary and does not give one second of actual medical help to one person.

It's not just them either.  Now we've got two Catholic "non-profits" that want to merge hospital management and create the largest US hospital chain in the country.  This too is clearly a matter for 15 USC Chapter 1 but again you can bet there will be zero attention from Jeff Sessions or Donald Trump to it just as there was not from Obama's administration either.  These so-called "Catholic" organizations are Satan on earth and perfectly happy to asset-strip you to your underwear while waving religion around as a shield.

Never mind Congress which is all set to play along.  Rather than demand that Jeff Sessions find his balls (and handcuffs) Ryan is claimed to be looking to screw retirees.  I remind you that were we to fix the medical monopolies nobody but the abject poor would require Medicare at all since with an 80% reduction in cost the 20% you pay now would cover the whole thing!  Instead we get this sort of screed and screech fest from the media -- this time from Faux Snooz.

Finally, if you're a Trump supporter you've been had I told you that was going to happen, it did happen and thus you are the worst of the lot, especially those of you who are literally on your knees performing fellatio on Twitter and elsewhere.  This President promised to put a stop to all of this crap in the medical industry during the entire Presidential campaign and yet literally the day after the election that promise disappeared.  Instead of holding him to that promise under threat of impeachment or worse, which in the case of a threat to the nation's economy that will trash same is clearly called for, you are instead pleasuring that President daily.  Those of you in this camp either need to get off your damn knees and hold Trump accountable now for his satanic lie or you deserve the worst of what is to come and I fully expect that you will get it long, hard and dry.  As I've pointed out a one sentence bill would instantly stop a huge percentage of the abuses and meet Trump's campaign promise.  Why are you blowing the President instead of shoving a pitchfork in his face and demanding that he take the position that Congress either pass this one-sentence fix now -- which I remind you he promised to do if you elected him President -- or he's going to veto everything that comes across his desk until it does? 

In short the question is will Americans find their pitchforks, torches and rope or will they go along with this latest scamfest and be rendered not only broke but dead besides?

Time's up on thinking about it; you now need to act or suffer the consequences.

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2017-12-13 12:35 by Karl Denninger
in Small Business , 163 references
[Comments enabled]  

Sorry, but no.

Dec 13 11:30:25 HD-MCP HD-MCP[46870]: SSL Handshake failed at protocol level on []
Dec 13 11:30:25 HD-MCP HD-MCP[46870]: SSL ACCEPT Error [http request] on []
Dec 13 11:30:57 HD-MCP last message repeated 40 times

Nice try *******.

No, you can't break into my HomeDaemon-MCP server.

No, you can't break into my home control system.

No, it doesn't have a cloud connection, no, it won't talk to you without signing in, and no, you can't get in without first negotiating HTTPS either.

And no, attempting to hammer it won't******it off.

Psst.... the codebase continues to improve and the opportunity is still there, if someone wants it.

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2017-12-13 07:00 by Karl Denninger
in Company Specific , 267 references
[Comments enabled]  

Gee, how many founders who tell you that you're being psychologically exploited and abused do you need?



When do you wake up America and destroy these firms, reducing their stock price to ash?

There are legal ways to do it.  You can delete your profile and stop using it.  You can ban your kids from using it under pain of losing their Internet access, computer or cellphone.  You can target anyone who advertises on these sites and boycott them.  You can shun, refuse to associate with and even picket anyone's home who works at these companies -- which is now incidentally a very large number of people, and extend the same sanction to all their family members who are existing on the back of said exploitation.

All of these things are both peaceful and legal forms of protest.  You can raise the cost of operating such a firm and destroy its revenue because it relies on you being a drug-addled sheep in order to survive.

If you and others push back in any material quantity then these firms will cease to exist and their abuse of the public will end.

Now we have another founder who has reinforced what was said before about Facebook intentionally targeting psychological addiction and knew at the time that it was destructive, not positive for anyone other than those making a profit from same:

"The short-term, dopamine-driven feedback loops that we have created are destroying how society works. No civil discourse. No cooperation. Misinformation. Mistruth. And it's not an American problem. This is not about Russian ads. This is a global problem. So we are in a really bad state of affairs right now, in my opinion. It is eroding the core foundations of how people behave by and between each other."

He said that he rarely, if ever uses Facebook, posting maybe twice in seven years, something that has caused "huge problems" in his own social circles. He also added he would not let his own children use it. 

This guy helped cause the problem.  If he had a hint of actual personal responsibility for the destruction he himself brought upon society he would commit seppuku in the middle of Times Square.

So does this guy really feel "tremendous guilt" or is he worried that the people might literally eat him?

Good question.

But in the meantime perhaps you should consider whether you wish to feed a beast that will eat you, as he states very clearly will be the case, or whether you will do your damndest to unplug from said beast and then destroy it and all who work to continue to build, feed and make their living by and through it.

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