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Commentary on The Capital Markets- Category [Corruption]

So here we are..... you know I've written on Bezos using The Washington Post as a "mouthpiece" to push a political agenda that he believes will benefit him, and which extracts value from you.

This is particularly evil.  Let me remind you that business exists to make a profit.  Lobbying is of course part and parcel of what businesses sometimes do; they make their opinions known to lawmakers, among others.  Free speech is a right, not a privilege.

But lying, on purpose, isn't free speech.  It's deception, it's fraud, it harms real people, that is, you, and when done through a perverse attack launched under the guise of "The Press" it must be met with an unrelenting response in which the person or organization that does it is DESTROYED in every possible and legal way, including all firms and interests said entity or person holds.


Because if you don't do that then the only other alternative will eventually be the very unlawful use of violence to stop the predation that said person and organizations have organized against you.

Recently I got into a "Twitter Debate" with Dennis Kneale.  You may remember him from the time when he was on CNBS, and he and I went back and forth a number of times, including on the air, which I found amusing.  We have pretty-significant differences of opinion but personally I like the guy.

The recent issue was one of monopolies.  His argument was that my piece of same, and Bezos/Amazon in particular, was well-reasoned, insightful (in other words he agreed with my analysis) and yet, in his opinion, wrong.  The reason he claimed it was "wrong" was that there was no evidence Amazon had caused prices for products they sell to go up, and therefore there was no monopoly problem.

Dennis' view is common, including among politicians and Attorneys General.

The problem is that it's both legally and ethically bankrupt.

Let me quote the entirety of 15 USC Chapter 1, Section 1 and 2:

Sec 1:

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.

Sec 2:

Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.

Do you see anything, anywhere, in that section that says prices must rise in order for there to be a violation?  Do you see anything that says you must succeed in driving out all of your competitors?


The mere attempt -- any such contract, combination, conspiracy or similar to restrain trade or commerce is a felony.  It does not matter if you succeed and it does not matter if prices go up in the areas where you are attempting to destroy competition -- none of that matters.

Why did the drafters of this law write it this way?

The drafters knew that one of the most-pernicious ways to create a monopoly is to cost-shift.  That is, to give the perception that the consumer is getting a better deal through size and driving out competitors instead of a worse deal.  If you can take a business in which you hold a "first mover" advantage, or worse, in which you have excess capacity that would otherwise go to waste, sell it and use that unrelated service or product's profit to sell something else below cost the consumer thinks he's getting a great deal on said thing you sold below cost!

The problem of course is that someone is getting screwed; a competitive market will never allow this sort of cross-subsidization because the subsidizing service or product is also subject to competition, so without the monopoly effect cross-subsidization cannot work since you won't have any excess profits to use for this purpose.

Therefore the mere existence of such a cross-subsidy channel is evidence of monopoly power.

John Stossel says that there's nothing wrong with being a rich bastard so long as you don't collude with government to get special deals.  I agree.  The problem is that as soon as cross-subsidy shows up and especially when it shows up across periods of years you have proof of said collusion -- because without it there would be no excess money with which to do it.

In short there's a very simple reason that 15 USC Chapter 1 Sections 1 and 2 don't require prices to rise in the monopolized business as part of the predicate for those who try to do so to be guilty of a crime: It is almost always possible for those who monopolize to hide the negative impact that would otherwise show up directly in consumer price by forcing someone else to pay it, by extracting it from the government or by screwing someone, somewhere -- whether it be getting screwed out of a job, getting screwed by the taxpayer funding the subsidizing service or product or something else.

Indeed this morning's "announcement" on Amazon's "new businesses" with Disney and others for content storage and delivery on AWS is outrageously idiotic except to leverage Amazon's monopoly power.

The reason is simple -- it is ridiculously more-expensive to store bulk data on a "cloud" than on your own infrastructure.  Always.  Not a little more expensive, more-so by orders of magnitude.

Video content is the very definition of "bulk data"!

And now we have this which is exactly why those laws must be enforced right damn now!

Entous says:

“But we really haven’t addressed… Our reporting has not taken us to a place where I would be able to say with any confidence that the result of it is going to be the president being guilty of being in cahoots with the Russians. There’s no evidence of that that I’ve seen so far.

“We’ve seen a lot of flirtation, if you will, between them but nothing that, in my opinion, would rank as actual collusion. Now that doesn’t mean that it doesn’t exist, it just means we haven’t found it yet. Or maybe it doesn’t exist.”

Melissa McCullough, the Director of Newsroom Operations, expresses her bias against Trump, admitting “let’s just hope he doesn’t get re-elected in another three years.”

McCullough then backpedals and says, “I shouldn’t be saying these things because we don’t… We’re not supposed to really talk about that kind of stuff.”

You got this folks?  This is the Washington Post's National Security Reporter who is admitting they have exactly zero evidence of actual Trump-Russia collusion.  None.  They have been digging and digging since well before the election and haven't been able to find any evidence yet they "report" a knowing lie -- they claim said collusion exists in their "newspaper" and that such collusion occurred as a claimed fact.

Then you have the director of their news operations who openly wants to see a sitting President lose, and I think it's fair to assume wanted to see him lose in the first place and essentially admits this is reflected in the job she does.

It is because of precisely this sort of manipulation and the abuse of one's wealth to create monopolies and shift the cost onto you, the consumer in ways you cannot identify and may not even be tangible that the authors of 15 USC made sure that the law does not require prices to rise in the "attempted-to-be-monopolized" business for the conduct to be a felony.



The first is trivial; it's stated every single day in the media on CNBC and elsewhere.

In fact right now, as I post this, CNBC has another analyst from Canacord so-stating once again!

The latter is also trivial as it's clearly documented in an official document filed with the SEC every quarter.

And no, this isn't limited to Amazon and Bezos.  Minutes after this article posted AT&T's CEO showed up on CNBS again claiming the anti-trust argument raised by the government requires showing that prices to the consumer will rise.  He's lying, he knows it, and CNBull**** knows it too yet they refuse to challenge him on that point; the law requires no such thing as I proved by citing it in full up above.

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2017-11-25 15:39 by Karl Denninger
in Corruption , 904 references
[Comments enabled]  

There's no reason Elon Musk shouldn't be under indictment right now.

Let's look at the latest monstrosity claim from him: His "truck".

The truck can drive 500 miles on a single charge, which was higher than some analysts had expected. That may mean that, in terms of range, the vehicle could meet the needs of long haul truck drivers.


Tesla will also build a network of Tesla "Megachargers" that will charge the trucks' batteries to a 400 mile range in 30 minutes.

Ok, let's talk about this.

There apparently were eight charging ports, and with a 100kw battery behind each that would be 800Kw.  To deliver 90% of capacity in 30 minutes you'd have to deliver approximately 1.5 Megawatts plus losses; batteries are 80-85% charge efficient during the bulk phase until they reach about 80% of capacity (at which point their efficiency goes down materially) and the electronics to control the charge have loss too -- probably in the neighborhood of 10%.  So we have a 76%, more or less, efficiency on the charge rate which means we must deliver almost exactly 2 Megawatts to the truck for that 30 minutes.

I note that 500 kilowatts has to be dissipated somewhere for that entire period in the truck or the batteries, controller equipment or both catch on fire.  This is a serious problem all on its own that I am not convinced Musk can solve.

Then there is the economic issue.  Musk claims he's going to "guarantee" a 7c/kwh price for all that power.  How he thinks he can do this in a commercial environment where demand meters are used by law is beyond me; the first time a trucker needs to be charged at 4:00 PM on a 95 degree day there will be a very large surprise delivered in the form of the bill.  Never mind that the trucker (or company) will be paying for the 25% losses too; you get to pay for the entire megawatt-hour even though you only keep 75% of it; the rest heats the air.  Apparently Musk thinks that he can simply build "battery packs" to store energy and thus charge them when the power is cheaper.  Ok, that's fine and well, except (1) now you have another 25% loss, stacked (you take one when you charge the pack when "cheaper" and then when the truck is charged) and for each truck's worth of capacity in said battery bank he gets to buy another battery that would otherwise go in the truck, plus another 25% to cover the losses when the truck is charged, plus the electronics to charge, discharge and control that "banked" pack.  Somehow this all is going to "work out" to 7 cents/kwh.

Let me make this clear: No it won't.  If Tesla guarantees that rate to the buyer then Tesla will absorb billions in losses and the more trucks are on the road and the more miles they drive the more money the company loses.

But it pales beside what Musk claims to be able to do when it comes to charging these trucks in the first place.  The average house in the United States consumes about 12 megawatt/hours of energy over the entire year, or about a megawatt-hour per month.  Musk intends to suck twice as much energy from the electrical grid as your house consumes in a month in 30 minutes.

To put some perspective on this that means that one such truck charging will place approximately the same load on the grid as 1,400 houses.  One truck.

What happens when 20 of them show up at the truck stop?  You know they do that today -- they fill their diesel tanks and they're on their way, although they typically only fill said tanks half as often as these batteries will require charging.

So it won't be 20 of them it will be 40 since their range-before-refueling is about half of common OTR trucks now.  Now we're talking about the load of roughly 57,000 additional houses that will be instantly presented to the grid and which the grid must be able to support -- per truck stop or terminal!

Who's going to pay to build all that out and with what will they do so?

It won't be Elon Musk.

I don't believe Musk can deliver this thing at all, nor do I believe he can deliver the Roadster either as the double-size battery pack required to do so (against today's Model S and X) won't fit in the chassis.  So that problem exists too, and it's not an easy one to solve.

Finally, when it comes to the truck there are some other interesting issues related to efficiency.  See, this thing is supposed to be able to couple to any existing trailer.  Ok, fine, but existing trailers are flat-backed and thus have fairly nasty aerodynamics.  You've seen the "trailer tail" things on some of them, I'm sure -- a flip-out contraption that cuts -- somewhat -- the aerodynamic drag generated by the turbulence at the rear of the vehicle. I'm not at all confident the sort of highway range Musk is talking about can be achieved without material improvement in the aerodynamics at the rear and bottom of the vehicle, which means "no standard trailers for you sir!"

That leads to a very large problem; you see flat-back trailers are that way so they can be backed into a loading dock and both loaded and unloaded.  It also makes intermodal (container) shipping possible since a container can be dropped onto a skeleton trailer that locks into the corners of the rectangular container box.  How do you do that if you apply real and effective aerodynamics to the rear and bottom/sides of the trailer?  You don't.  While there are answers to this problem they likely involve a complete renovation of how loading docks are designed and work today, never mind container ships, and that design is literally everywhere from the corner grocery store to the large manufacturing center.  Good luck with shoving that change down every receiving and shipping dock in the nation's budget, never mind the expected gross increase in size such changes would require (e.g. for "side loading" or similar.)  Oh, and since there are length limits on combination vehicles (tractor/trailers, etc) as well you either get to forfeit quite a bit of usable cargo volume or the laws have to be changed to accommodate the materially-longer aerodynamic section of said trailer!

All of the foregoing assumes you believe 800kw of battery is enough.  I'm not so sure.  The math doesn't pencil today on that and I don't see how Tesla can overcome the deficit under any plausible scenario.  Today's diesel truck gets ~8.5mpg, roughly, fully loaded @ 80,000lbs gross (maximum 50-state legal limit.)  Diesel contains ~136,000 btu/gal, so if we take 500 miles (maximum range of said EV truck) we would need ~60 gallons of fuel containing ~8.2 million BTUs if that was a conventional diesel-powered tractor. A modern diesel (with all of its computer controls and transmission) can achieve very close to 40% thermal efficiency in steady-state on-road operation (assuming ~5% gearbox and parasitic loss), which means 3.264 million BTUs have come out the business (driveshaft) end of the engine and transmission when it finishes burning that 60 gallons of fuel.

Musk's 800kw battery only has 2.7 million BTUs of energy in it.  That's 18% short, roughly, but in fact it's worse than that because neither his motors or the PWM controllers for them are lossless, and remember, we've accounted for the diesel's engine and transmission/accessory inefficiency.  If we assume Tesla's electric motors are 90% efficient (possible but unlikely; 85% is more-likely but I'll give him the other 5) and the controller is also 90% efficient (possible) the stacked loss there is 19% so now he only delivers 648kw over that same period of time to the driveshaft(s).

In other words he's not short 18% on energy content he's short a whopping 32%!

I call smiley immediately on him being able to improve the total loss budget by 32% ex engine and transmission -- which basically means through aerodynamics since his truck still needs to roll on tires and the trailers are identical -- so he can't get much if anything on rolling resistance.  That leaves aero and to obtain that sort of gain even on the freeway, say much less in combined-cycle use, would be enormous.

Oh, and the batteries?  They come off the useful load of the truck as well, so on a dollars per pound-mile moved for cargo the electric truck has a further deficiency to overcome.  In short his claimed range and parity level for power is a big stretch right up front!

In the end what we have here is Musk promising to deliver what he can't today, and he's counting on two things to bail him out:

  • Wall Street will continue to give him money on the come in the hope that the technology in batteries advances fast enough for him to be able to actually build the packs and fit them in the vehicles, along with solving the heat dissipation problem during charging that would otherwise cause the vehicle to catch on fire and be destroyed.  Given the relatively short timeline he has set for himself I rate the odds of this happening as perhaps one in a thousand since none of this can be done today.

    AND (not or)

  • The Government will force you to pay for his charging systems by having a gun shoved up your nose and the money extracted from you both for the additional generating capacity necessary and infrastructure upgrades to get that generating and power-delivery capacity to the truck stops and terminals effectively none of which currently have anywhere near that sort of capacity available to them.   Oh by the way many of these terminals are a long way away from existing generating capacity and high-voltage transmission equipment so the build-out cost will be even worse -- by a lot -- than it first appears.  As a conservative guess this is likely to put a 15-30% increase on your home electric bill should any material percentage of the OTR fleet convert.  There are roughly 1.9 million heavy and tractor-trailer drivers employed today; consider what would happen if 500,000 trucks were to attempt to convert to electric drive each of which would require a 2 Megawatt charge for 30 minutes every six operating hours.  There is no possible way to support any material percentage of the current OTR trucks converting to electric power on the existing grid and this build-out will not be paid for by Tesla or the trucking companies if it is attempted -- it will be paid for by you.

Theft as a business model is a crime.  Promising that which you can only deliver via speculative advances in technology and by stealing a large part of your operating cost from others who do not use it ought to land your ass in prison and reduce your company to a smoldering pile of ash.

Then again Hastings did exactly that to America with Netflix and Net Neutrality and Amazon's Bezos does it daily with cross-subsidizing product sales with AWS, including to the Federal Government (which means he steals from every taxpayer to do so), so why shouldn't Musk rob everyone of tens of thousands of dollars in his plan to "build" these trucks right up front, since you didn't lynch Hastings or Bezos when they did it and in fact rewarded both with billions.

This **** has to stop, the firms doing it must be destroyed and their executives imprisoned.

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2017-11-20 14:39 by Karl Denninger
in Corruption , 353 references
[Comments enabled]  

Sweet Baby Jesus, how does this **** pass in our nation today?

"Women who are abused end up having long-term physical and physiological problems," Biden said on Monday at Glamour's Women of the Year Summit. "I’m working with Lady Gaga now... we want to set up trauma centers where women can go to get the long-term help they need to deal with these crises. We finally are recognizing the long-term impacts on the health of women and men who’ve been abused. It’s the next great frontier I want to be part of."

Biden has widely been reported as one of the worst offenders among Senators (and former VP candidates) when it comes to sexual harassment and abusive behavior toward women.

The only possible reason I can come up with for him to do this is to groom himself more victims now that he's out of the political realm and off the public stage where women were readily-available for him to grope.

If someone "ordinary" tried to pull this crap they'd be run out of town on a rail -- if they weren't arrested and charged outright.

Want to preach about abusive behavior by men in power toward women?

Start by locking that mother****er up and barring him from having anything to do with abused women.  Ever.

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2017-11-15 13:25 by Karl Denninger
in Corruption , 5093 references
[Comments enabled]  

Jesus, it's that obvious and CNN ran this crap?

People need to go to ****ing prison for this.  NOW.

Yes, including Gloria Allred.  The yearbook is an obvious forgery and she peddled it on national television; that needs to be good for disbarment and prosecution.

The original tweet from CNN can still be looked at.  We'll see how long it is before they try to take it down.  (Update: It appears one of Getty's photographers shot the original photo; it's been linked in the comments, and I checked it.  It's pretty-clearly the image CNN used and it was also clearly shot in color as it includes portions of the people holding it in the picture....)

I took the image on the right side of their tweet, brought it into Photoshop and increased the size.

I will swear under oath that I did nothing to tamper with the color or tone and in fact did nothing other than increasing its zoom level to 400% because it would be impossible to tamper with the image at said greatly enhanced zoom level without causing visible artifacts in the background and periphery of the letters.  There is also a gradient in the paper caused by a B&W photo being in part of the area where the signature is, which again will cause visible artifacts if I were to try to tamper with it.  In other words I did this to add irrefutable proof that I did not in any way tamper with the image itself.  I also saved the extract from the tweet as a "PNG" which is lossless from my desktop to yours; no compression so there are no artifacts added in my process either; whatever CNN put forward, that's what I (and you) have.

Those are clearly different inks for everything after the first name.

Was the original signature Roy or was it Ray?

Whatever it was, someone added "Moore DA", the date and "Olde Hickory House" in a different ink color.

By the way, the claimant says that Moore knew she had a boyfriend "and offered to give her a ride home" when he assaulted her.  Was the boyfriend's name RAY?

This must be criminally investigated right ****ing now as attempted federal election tampering.  Jeff Sessions, you claim to be "for the rule of law", let's see a search warrant for that yearbook to perform forensic testing of the ink, and if the latter part of the "signature" is not 40 years old indictments must issue right now for everyone involved in this crap or you are a lying, sniveling sack of ****.

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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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