The Catastrophe of #MH17: BBC in the Search of the “#BUK” – The Video Report Censored by BBC

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Posted on 25th July 2014 by Administrator in Economy |Politics |Social Issues

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Via Vineyard of the Saker
Translated from Russian by Gleb Bazov
Note: Videos & a PDF of the Google Web-cache Have Been Preserved and Are Available Upon Request
Preamble: Why did the BBC delete this report by Olga Ivshina? Is it because the BBC team was unable to find any evidence that a rocket was launched in the area that the Ukrainian Security Service (“SBU”) alleges to be the place from which the Novorossiya Militia launched a “BUK” missile?Or is it because every eyewitness interviewed by the BBC team specifically indicated the presence of Ukrainian military aircraft right beside the Malaysian Airlines Boeing MH17 at the time that it was shot down?Or is it because of eyewitness accounts (like the one posted following the transcript of the BBC report) confirming that the Ukrainian air force regularly used civilian aircraft flying over Novorossiya as human shields to protect its military aircraft conducting strikes against civilian population from the Militia’s anti-aircraft units?

I reserve the final judgment to the readers of this blog. This entry is broken down into:

  1. introductory paragraphs to the BBC video report;
  2. English-language transcript of the BBC video report; and,
  3. a video interview with Elena, a Militia fighter, recorded in Slavyansk on or about June 18, 2014, or one month prior to the MH17 catastrophe, wherein she states that, even then, the Ukrainian military aircraft would customarily hide behind civilian aircraft to bomb civilian targets on the ground.

In the last part of this entry Elena predicts that the Ukrainian military will stage the horrible catastrophe like the MH17 crash – she makes this prediction one whole month prior to the disaster.
Video: The Catastrophe of #MH17: #BBC in the Search of the “#BUK”

https://www.youtube.com/watch?v=RZ8sjMWhl-4

Original BBC Video Report: Preserved by Google Web-cache
Introductory Paragraphs to the BBC Video Report

The “black boxes” of the crashed Malaysian Boeing have finally been transferred into the hands of the experts. However, how much can they tell us?

The recorders logged the coordinates and the heading of the aircraft at the time of the incident and may have recorded the sound of the explosion. However, they will not tell us what exactly caused the explosion.

The inhabitants of the nearby villages are certain that they saw military aircraft in the sky shortly prior to the catastrophe. According to them, it actually was the jet fighters that brought down the Boeing.

The Ukrainian government rejects this version of events. They believe that the Boeing was shot down using a missile from a “BUK” complex that came in from Russia.

The Ukrainian Security Service has published photographs and a video, which, in its opinion, prove that the Boeing was shot down with a “BUK” missile.

BBC reporter Olga Ivshina and producer Oksana Vozhdayeva decided to find the place from which the missile was allegedly launched.
Transcript of the BBC Video Report

DPR Representative: Here it is.

Olga Ivshina, BBC: The black boxes from the crashed Boeing are finally being transferred into the hands of the experts. However, how much can they tell us?

The recorders logged the coordinates and the heading of the aircraft at the time of the incident and may have recorded the sound of the explosion. However, they will not tell us what exactly caused the explosion.

The inhabitants of the nearby villages are certain that they saw military aircraft in the sky shortly prior to the catastrophe. According to them, it actually was the jet fighters that brought down the Boeing.

Eyewitness #1: There were two explosions in the air. And this is how it broke apart. And [the fragments] blew apart like this, to the sides. And when …

Eyewitness #2: … And there was another aircraft, a military one, beside it. Everybody saw it.

Eyewitness #1: Yes, yes. It was flying under it, because it could be seen. It was proceeding underneath, below the civilian one.

Eyewitness #3: There were sounds of an explosion. But they were in the sky. They came from the sky. Then this plane made a sharp turn-around like this. It changed its trajectory and headed in that direction [indicating the direction with her hands].

Olga Ivshina, BBC: The Ukrainian government rejects this version of events. They believe that the Boeing was shot down using a missile from a “BUK” complex that came in from the direction of Russia.

Vitaliy Naida, Department of Counterintelligence of SBU [Ukrainian Security Service]: This was a BUK M1 system from which the aircraft was shot down. It came to Ukraine early in the morning on the 17th of July. It was delivered by a tow truck to the city of Donetsk. After that, it was redeployed from Donetsk, as part of a column of military equipment, to the area of the city of Torez, to the area of Snezhnoye, to the area of Pervomaisk.

Olga Ivshina, BBC: The Ukrainian Security Service has published photographs and a video, which, in its opinion, prove that the Boeing was shot down with a “BUK” missile. We attempted to verify these photographs and information at the location.

One of the photographs showed a landscape not far from the city of Torez, on which smoke could be seen coming from the presumed location of the missile’s launch. We attempted to find this location, and it appears that we were successful.

We are now on the outskirts of the city of Torez. Behind me, approximately five kilometres away, is the city of Snezhnoye. And the landscape here matches the landscape that we can see on the photograph published by the Ukrainian Security Service.

To find the place from which the smoke was allegedly coming from, we adopted as markers these three poplars and the group of trees. Presumably, this is the place that can be seen on the photograph published by the SBU. And here are our markers: the three solitary poplars and the small group of trees in the distance.

The smoke that can be seen on the photograph came from somewhere over there [pointing behind her], behind my back. The SBU believes that this is a trace coming from the launch of a “BUK” missile.

However, it must be noted that there are here, approximately in the same place, the Saur-Mogila memorial, near which the fighting continues almost unabated, and a coalmine. It turns out that the smoke with the same degree of probability could have been coming from any of these locations.

Having circled around the nearby fields, we were unable to find any traces of a missile launch. Nor did the local inhabitants that we encountered see any “BUK” either.

At the ruins of an apartment building in the city of Snezhnoye, the topic of the jet fighters that may have been escorting civilian aircraft comes up again. A bomb dropped from above took away the lives of eleven civilians here.

Sergey Godovanets, Commander of the Militia of the city of Snezhnoye: They use these civilian aircraft to hide behind them. It is only now that they stopped flying over us – but, usually, civilian aircraft would always fly above us. And they hide [behind them]. [The experience in] Slavyansk had demonstrated that they would fly out from behind a civilian aircraft, bomb away, and then hide, once again, behind the civilian aircraft and fly away.

Olga Ivshina, BBC: The commander of the local militia emphasizes that they have no weaponry capable of shooting down a jet fighter [flying] at a significant height. However, he says that if such weaponry were to appear, they would have tried to.

Sergey Godovanets: If we know that it is not a civilian aircraft, but a military one, then – yes.

Olga Ivshina, BBC: So, could the Boeing have been shot down by the militias that had mistaken it for a military aircraft? There is as yet no unequivocal confirmation of either this or any other version [of what took place]. The international experts are just beginning their work with the information obtained from the crashed airliner. It now appears that it is difficult to overstate the importance of this investigation. Olga Ivshina, BBC.
Militia Elena: Ukrainian Military Planes Hide Behind Civilian Airliners

Video: Recorded at least one month prior to MH17 Crash, published with ENG subs on June 18, 2014
Note: Pay close attention starting at 01:10

https://www.youtube.com/watch?v=aKKoKmUtQXE

Beloved CEO Fired By Board For Being Insufficiently Ruthless: Employees Walk Off Their Jobs In Protest

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Posted on 25th July 2014 by Administrator in Economy |Politics |Social Issues

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Guest Post by Jesse
“Just remember this, Mr. Potter, that this rabble you’re talking about,  they do most of the working and paying and living and dying in this community. Well, is it too much to have them work and pay and live and die in a couple of decent rooms and a bath?
Anyway, my father didn’t think so. People were human beings to him. But to you, a warped, frustrated old man, they’re cattle. Well in my book, my father died a much richer man than you’ll ever be!”
George Baily in It’s a Wonderful Life
This is by far the most remarkable story I have seen in a while.
In the latest development, Mr. Demoulas has made an offer to buy his company back.
If only more of us would put people before power and greed, and insist that our leaders live up to their duties to the people first, and not wallow in money and privileges for themselves and their cronies, while spreading fear and hatred to keep the people compliant.
Then that really might be ‘a wonderful life.’
Meet America’s Most Beloved CEO—Too Bad He Just Got Fired
Brad Tuttle
July 23, 2014
After the wealthy CEO of a supermarket chain was fired, thousands of workers walked off the job in protest—some getting fired themselves. What’s up with that?
Workers understandably tend to go on strike or protest for selfish reasons—more pay, better benefits, improved working conditions. Over the last week in New England, however, thousands of employees at Market Basket, a supermarket chain with 71 stores in New Hampshire and Massachusetts, have been sticking their necks out (and in some cases putting their jobs on the line) in support of Arthur T. Demoulas, who was the company CEO until he was fired in June.
Rallies pushing for “Arthur T.” to be given his job back were held at the Market Basket headquarters in Tewksbury, Mass., on Friday and Monday, drawing upwards of 5,000 protestors. Meanwhile, the shelves of many Market Basket locations have gone barren, as there are too few employees still on the job to stock them. At least eight employees were fired over the weekend related to the protests…
“He’s George Bailey,” Trainor explained to the Washington Post, comparing Arthur T. Demoulas to the beloved savings-and-loan manager played by Jimmy Stewart in It’s a Wonderful Life. “He cares more about people than he does about money….”
Read the entire story here.

WORD CRIMES

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Posted on 24th July 2014 by Administrator in Economy |Politics |Social Issues

His album is #1 on the charts.

AMAZON LOSES $126 MILLION & STOCK IS AT $320

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Posted on 25th July 2014 by Administrator in Economy |Politics |Social Issues

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Amazon lost $7 million in this quarter last year. Their master plan resulted in a loss of $126 million this year. Do you notice how hard it is to make money when your business model is dependent upon selling products at a loss? Maybe their drone delivery service will turn the tide. Oh yeah. That 60 Minutes puff piece was nothing but bullshit. The FAA will never allow it. Their loss was only 80% higher than the Wall Street shysters anticipated. I’m sure they’ll make it up on volume.

The stock is down from its high of $400 earlier this year. Of course there is no Fed induced stock market bubble. Companies that lose money year after year after year certainly should be trading north of $300 per share based on a storyline. PE ratios and price to book values and free cash flow are for old fogies. This is the internet age when profits aren’t required. Take advantage of  today’s 10% drop and buy Amazon on the cheap. It’s a can’t miss opportunity. Just ask Denninger.

 

First, revenues are rising as reported but expenses are going up even faster.  Notable places where expenses are exceeding revenue growth rates include:

Stock-based compensation up 31% (!) y/o/y

PPE purchases are up 50% (yikes!) compared against same-quarter last year, and capital lease additions doubled.

Shipping expenses are up 30%.

Marketing is up 40%.

Tech and content is up 40%.

In short – sweet Jesus, these guys are burning money like it’s newspaper in the fireplace!

The only good news is that the cost of goods sold is up 20%, but revenue was up a bit more, so they’re driving cost.  Of course that’s bad for their vendors; they’re getting squeezed.

Now here’s the kinda-ugly on the sales side.

International is slowing — it’s up 18% on sales while domestic is up 26%.  But, remember, we were told international was going to save the day!  Uh, that’s the same change y/o/y from last quarter – no improvement in either domestic or international.

If you remember my previous reporting one of the places I watched very, very carefully was media.  The reason is this – media is a high-margin business, electronics and general merchandise is a very low margin business.

So how’s that working out?

Well, domestically media is growing 13%, while merchandise was up 29%.  Internationally it’s much worse; media is only up 7%, and those are y/o/y comparisons on the quarter.

The bad news is that media decreased both domestically and internationally on the quarter!  In fact, it was down 13% domestically and 10% internationally.  OUCH.

The electronics business was also down internationally by 5%.  What made up for it was a 7% increate in (zero or even negative margin!) electronics and merchandise sales in North America.

This is crap performance, in short; media sales, which is where the margin is, in fact contracted on the quarter both in North America and internationally, and general merchandise was down sequentially internationally as well!  Of goods sold only merchandise in North America advanced on a quarterly basis.

It’s worse when you remove the effect of exchange rates (which helped internationally.)

Operating margin has gone in the toilet as well and is in fact negative — no surprise given the monster cost ramps compared against revenue.

Amazon is a huge firm that despite all the claims they would turn the corner, smash their competition and make an unbelievable amount of money they have failed to deliver on that promise for more than 10 years serially.  Costs continue to rise in several areas at rates exceeding sales and there is no margin improvement in sight.  In addition their AWS services, which they have touted as one of their saving graces, has become embroiled in a price war and they’re spending on PPE (probably for that service although I’m sure distribution is part of it) like a drunken sailor while having to continually slash pricing to obtain customers.

We’ve heard for years that Amazon was “investing” and that investment would reap rewards.  I see no improvements on an annualized basis in terms of growth rates against 2013, the company has its strongest unit growth in sales in areas where they make little, nothing or actually lose money when fulfillment costs are included and worse, their “cloud” service has become embroiled in a commodity style “race to zero” pricing paradigm and yet they’re still committing to spend like crazy on it.

I know what we’ll do!  We’ll lose money on every sale but make it up on volume!

This is a company with no justification for a stock price anywhere near where it sits, even given the well-justified implosion after hours.  If there was any reason to believe they could stem the price:cost problem with AWS that is spiraling out of control and stop fulfillment and marketing expense from rising faster than revenues there might be an argument for the stock to sell around $100, which would give it a forward P/E of about 30.

Unfortunately as it stands, given what is now a multi-year series of false dawns and promises that are never fulfilled to actually find a return on all this cash plowed back into the business, along with the apparent detonation of their cloud service cost:price structure due to massive slashing of prices (which one can presume is necessary to attract and retain customers) the stock is not worth $30/share.

Good luck if you’re long.

Tap in to Your Inner Feminist-R​eal Estate Mogul Without Holding Real Property

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Posted on 25th July 2014 by Administrator in Economy |Politics |Social Issues

Tap in to Your Inner Feminist-Real Estate Mogul Without Holding Real Property

By Dennis Miller

The new book titled #GIRLBOSS by Sophia Amoruso—reformed petty thief and CEO of a $100 million online clothing store—is the latest “live and work as I do if you want to succeed” book from a string of brand-building female executives. Facebook COO Sheryl Sandberg has women “leaning in,” while Arianna Huffington’s sleep crusade marches on in her latest book, Thrive. Now, I should confess that I haven’t actually read any of these books; one of my colleagues gave me the recap. However, I have had another female executive on my mind: Ms. C.

Ms. C heads up a certain real estate investment trust (REIT)—I’ll call it “Company V”—which Miller’s Money Forever chief analyst Andrey Dashkov and I featured in the latest edition of our monthly newsletter. So while she might not have a cult following or million-dollar book deal, she’s our gal—and for good reason:

  • As Company V’s CEO for the last 15 years, Ms. C has boosted its market capitalization from $200 million to $19 billion.
  • Under her leadership, Company V’s compound annual total shareholder return topped 28% for 14 years running, and it was named one of the top performing, publicly traded financial companies during the first decade of this century.
  • As Andrey puts it, Ms. C has molded Company V into a “rock-solid business with an investment-grade credit rating, robust balance sheet, and reliable dividend history.”

On top of that, Ms. C has received countless accolades from the Wall Street Journal, the Financial Times, and a parade of other institutions. Plus, she practiced real estate, corporate and finance law, and sits on the Board of Trustees for the University of Chicago.

When asked about her professional achievements in an interview with the Chicago Tribune, Ms. C attributed her drive to her working-class Pittsburg upbringing. As the daughter of immigrant parents—a mailman and housewife—Ms. C said, “[T]here was always so much more for me to aspire to: in terms of education, in terms of seeing the world, in terms of working hard and achieving things. And so that drive comes from the kind of upbringing that I had.”

After announcing she wanted to be a lawyer, Ms. C’s father took her to watch a trial headed by one of the few lawyers he knew, a criminal defense lawyer whose son later became her husband. Ms. C praised her Italian father in the Chicago Tribune article, saying, “It was very unusual in that time, in that socioeconomic environment, very working-class and ethnic, that he would be what I would call a feminist. He would never call it that, but he was so supportive of my sister and me, and that was really rare.”

Sounds like my kind of dad.

OK, you get the point: this is an up-by-her-bootstraps, highly qualified CEO who puts shareholders first—a woman I imagine my wife and daughters would be happy to know.

Profiting from an Aging Population

People age 65 and over are expected to make up 19% of the US population by 2030—up from 12.4% in 2000. And it’s no secret that this demographic will demand more and more access to health care. Company V is tapping into this expanding need: It operates healthcare-related facilities, including hospitals, skilled nursing facilities, senior housing, and medical office buildings at over 1,500 properties in the US, Canada, and the United Kingdom.

Let me back up, though, and review REITs in general. Publicly traded REITs, which are traded just like any other stock, allow people like you and me to invest in large-scale, income-producing real estate without the headache of actually holding illiquid physical property. To be considered a REIT, 75% of a corporation’s income must come from real estate in some form or another.

Company V’s portfolio, for example, includes medical office building operations, senior living operations, and triple-net lease operations, whereby tenants cover taxes, insurance payments, maintenance, and repairs in addition to the rent. Ms. C has a proven track record of managing these holdings profitably over the last 15 years.

A word of caution is also in order here: not all REITs are investment worthy. Their profits depend on selecting and managing their properties well and keeping costs under control. Andrey and I culled a long list before landing on Company V. If you are considering buying in to a REIT, you should research it thoroughly as well.

The Rule of 90

One happy quirk of REITs is that they are required to distribute at least 90% of the taxable income to shareholders each year via dividends. On the flip side, they can also deduct these payouts from their corporate-level taxes.

We’re happy to report that Company V has a stellar dividend history: 9% compound annual dividend growth over the past 14 years. Andrey put together the chart below to show its dividend growth since 2Q11.

Now, you’re probably wondering why I don’t just come out with it. Who is Ms. C and what is Company V? And of course I’m chomping at the bit to tell you, but we value our relationship with the thousands of Money Forever subscribers too much to do that. So we have a seamless way for you to count yourself among them: Sign up for a 3-month, no-risk trial subscription and read Andrey’s in-depth write-up on Company V. You’ll gain immediate access to our complete portfolio curated for seniors and conservative investors alike, our full library of special reports, and all of our back issues.

Read through the material, and if our breed of high-yield-meets-low-risk investing isn’t for you, just call or write within 90 days, and we’ll return every penny you paid. Click here to subscribe to Money Forever now.

IT’S TIME FOR THE FARCE TO END

9 comments

Posted on 25th July 2014 by AWD in Economy

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Poll: One-third say impeach Obama

By JONATHAN TOPAZ | 7/25/14 7:09 AM EDT Updated: 7/25/14 9:40 AM EDT

One third of Americans think President Barack Obama should be impeached, a new poll says.

According to a CNN/ORC International poll released Friday, 33 percent of Americans think the president should be impeached and removed from office, compared with 65 percent who say they don’t support impeachment. Fifty-seven percent of Republicans say they support impeaching Obama, compared with just 35 percent of independent voters and 13 percent of Democrats.

When asked about when Congress should attempt to impeach a president, 79 percent of Americans said it should be used only if there is evidence of a serious crime — such as treason or bribery. Eighteen percent said impeachment could appropriately be used to registered dissatisfaction with White House policies.

A plurality of Americans — 45 percent — believe Obama has gone too far in expanding his presidential powers. Thirty percent said the president has been about right in terms of presidential powers, while 22 percent he has not gone far enough.

The numbers generally fall in line with CNN results from the past two presidencies — 30 percent of Americans support impeachment for former President George W. Bush in 2006 and 29 percent support impeachment for former President Bill Clinton in 1998.

(Also on POLITICO: Obama’s immigration rhetoric: Then and now)

In 2006, 48 percent of Americans said Bush had gone too far in expanding the powers of the presidency, compared with 34 percent who said he was about right and 14 percent who said he hadn’t gone far enough.

A Fox News poll released earlier this week reported that 36 percent of Americans favored impeaching Obama, compared with 61 percent who said they opposed impeachment.

The Democratic National Committee said Friday’s results show that the American are against both impeachment and the speaker’s lawsuit against Obama.

“As the CNN poll finds, the majority of Americans support the President taking action if Congress will not and they oppose the GOP’s sham lawsuit and talk of impeachment,” DNC national press secretary Michael Czin said in an email to POLITICO. “The American people want the President, and Congress, to tackle important issues, like commonsense immigration reform, equal pay and raising the minimum wage – so while Republicans waste time on political stunts, those are the issues the President and Democrats will continue to fight for.”

The CNN survey was conducted July 18-20 with 1,012 adults on landlines and cellphones. The margin for error is plus-or-minus 3 points.

Read more: http://www.politico.com/story/2014/07/poll-impeach-obama-support-33-percent-109369.html#ixzz38UdZ3lvn

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Israel: Palestinians Given Ample Time To Evacuate To Nearby Bombing Sites

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Posted on 25th July 2014 by Administrator in Economy |Politics |Social Issues

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News in BriefWorldwarworld leadersNews ISSUE 50•29 Jul 23, 2014

JERUSALEM—In response to criticism surrounding the death toll during its ongoing incursion into Gaza, representatives from the Israeli government Wednesday emphasized that warnings sent to Palestinian civilians provided them with ample time to evacuate to nearby bombing sites. “We are being very careful and thorough as we carry out our targeted strikes, and I can say, without question, that Palestinians are given more than enough time to leave their residences and find shelter in a future bombardment target,” said Israeli Defense Minister Moshe Ya’alon, adding that whether alerted by phone, text message, or leaflet, Palestinians have sufficient opportunity to relocate to any number of locations marked for imminent aerial strikes. “Giving Palestinian civilians the chance to seek safety in the home of a family member or friend that will be shelled to rubble in the next 48 hours is a gesture we deserve praise for, not condemnation. In fact, this initiative has been a major success in this campaign.” Ya’alon added that since there were numerous bombing sites Palestinians could take shelter in, he was not responsible for whatever happened to people who chose to stay home.

Via The Onion

Who Is Vladimir Putin?

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Posted on 25th July 2014 by Administrator in Economy |Politics |Social Issues

InfographicWorldworld leadersNews ISSUE 50•29 Jul 22, 2014

After troops from his country forcibly seized Crimea earlier this year, Russian president Vladimir Putin is back in the news for allegedly arming separatists in eastern Ukraine with the missiles that are believed to have taken down Malaysia Airlines Flight 17 last week. The Onion breaks down what you need to know about Russia’s leader:

  • Height: 5’7”
  • Statue Height: 6’2”
  • Hobbies: Collecting sovereign territories
  • Interests: Dioxin, polonium 210, thallium
  • Predecessor: Vladimir Putin
  • Successor: Vladimir Putin
  • Membership In KGB: Active
  • Occupation: First and foremost, a dad to two pretty amazing kids
  • Stare: Pitiless
  • Number Of Times A Day Utters Words “With My Bare Hands”: 28
  • Pets: 1.3 million Chechens, black lab
  • Nervous Habit: Bending lead pipes
  • Sleep: Untroubled
  • Number Of Steps Currently Ahead: Two
  • Preferred Solution To Civil Unrest: Permanent

Via The Onion

Geopolitic​s and Markets

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Posted on 25th July 2014 by Administrator in Economy |Politics |Social Issues

Outside the Box: Geopolitics and Markets

By John Mauldin

 

Growing geopolitical risk is on everyone’s mind right now, but in today’s Outside the Box, Michael Cembalest of J.P. Morgan Asset Management leads off with a helpful reminder: the only time since WWII that a violent conflict has had a medium-term negative effect on markets was in 1973, when the Israeli-Arab war led to a Saudi oil embargo against the US and a quadrupling of oil prices. And he backs up that assertion with an interesting table of facts labeled “War zone countries as a percentage of total world… [population, oil production, GDP, etc.].”

Having gotten that worry out of the way, he takes on the dire warnings that have recently been issued by the BIS, the IMF, and even the Fed, about a disconnect between market enthusiasm and the undertow of global economic developments. (He gives this section the cute title “Prophet warnings.”) Let’s look, he says, at actual measures of profits and how markets are valuing them; and then he goes on to give us a “glass half-full” take on prospects for the US economy for the remainder of the year. He throws in some caveats and cautions, but Cembalest thinks we could finally see another 3% growth quarter this year, which could create room for further profit increases.

There are good sections here on Europe and emerging markets here, too. Cembalest gives us a true Outside the Box, with a more optimistic view than some of our other recent guests have had. But that’s the point of OTB, is it not, to think about what might be on the other side of the walls of the box we find ourselves in? I have shared his work before and find it well thought out. He is one of the true bright lights in the major investment bank research world. That’s my take, at least.

I write this introduction from the air in “flyover country,” heading back home from rural Minnesota. I flew to Minneapolis to look at a private company that is actually well down the road to creating hearts and livers and kidneys and skin and other parts of the body that can be grown and then put into place. It will not be too many years before that rather sci-fi vision becomes reality, if what I saw is any indication. This group is focused and has what it takes in terms of management and science.

When you hold the beating, pumping scaffolding for a heart in your hand and know that it will soon be a true heart – albeit for a test animal at this point, though human trials are not that far off – then you can well and truly feel that we are entering a new era. I declined to pick up a rather huge liver, but the chief scientist handled it like it was just another auto part. Match these “parts” with young IPS cells, and we truly will have replacement organs ready for us when we need them, if we can wait another decade or so (or maybe half that time for some organs!). My friend and editor of Transformational Technology Alert, Patrick Cox, toured the place with me and will write about it in a few weeks. (You will be able to see his complete analysis of this company for free in his monthly letter on new technologies. You can subscribe here.)

Ukraine and Gaza are epic tragedies, but gods, what wonders we humans can create when we pursue life rather than death. It just makes you want to take some people by the back of the neck and shake some sense into them.

And now a brief but enlightening tale from … The Road. It’s about the Code of the Road Warrior. The Road can be a lonely place, soul-searing in its weariness, with only brief moments of pleasure. But you have to do it because that is what the job requires. And there are lots of us out there. You see the look, you recognize yourself in the other person. If you can help, you do. It’s the unwritten Code that we all come to realize you must live by. It has nothing to do with race, religion, sexual alignment, or political persuasion. You help fellow Road Warriors on the journey.

As do we all, you seek out your favorite airline club in airports (for me it’s the American Airlines Admirals Club) and know you are “home.” A comfortable chair for your back, a plug for your tools, a drink to quench your thirst, and peace for your soul. But then there are the times when you are in an airport where there is no home for you.

Over the years, I have invited dozens of fellow Road Warriors to be my “guest” in a club. No true cost to me, just a courtesy you give a fellow Roadie. Today, I arrived at the Minneapolis airport, and there Delta and United rule. My companion, Pat Cox, was traveling on Delta back to Florida, so I thought I would see if my platinum card would get us into the Delta lounge. Turns out it would, but only if I was on Delta. I was getting ready to limp away to seek some other place of solace for a few hours when a fellow Road Warrior behind me said, “He is my guest.”

The lady behind the counter said, “That’s fine, but you can only have one guest.” Then the next gentleman looked at Pat in his Hawaiian shirt and flip-flops and said, “He is my guest.” The lady at the counter smiled, knowing she was faced with the Code of the Road Warrior, and let us in.

You have to understand that Pat is nowhere close to being a Road Warrior. He agrees with cyberpunk sci-fi author William Gibson that “Travel is a meat thing.” He indulged me for this trip. I will admit to being meat. I like to meet meat face to face when I can.

So Pat was somewhat puzzled, and he turned to our two benefactors and asked, “Do you know him?” (referring to me). Pat assumed they had recognized me, which sometimes does happen in odd places. But no, they had no idea. I told him I would explain the Code of the Road Warrior to him when we sat down, and everyone grinned at Pat’s astonishment over a random act of kindness. So we said thank you to our Warrior friends, whom we will likely never meet again, and entered into the inner sanctum. With electrical outlets.

The Road can be lonely, but many of us share that space. If you are one of us, then make sure you obey the Code. Someday, it will bring help to you, too. And as I write this, my AA travel companion on the flight back, an exec who runs a large insurance company, who was trying to figure out what the heck today’s court ruling might do to the 70,000 subsidized policies they sold, noticed I did not have the right connection and dug through his bag and found the right plug for me. It’s a Code thing. I knew him only as Ken, and he knew me as John. We then both hunched over our computers and worked.

Have a great week. And maybe commit a random act of kindness, even if you are not on The Road.

Your smiling as he writes analyst,

John Mauldin, Editor
Outside the Box
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Geopolitics and markets; red flags raised by the Fed and the BIS on risk-taking

Michael Cembalest, J.P. Morgan Asset Management

Eye on the Market, July 21, 2014

You can be forgiven for thinking that the world is a pretty terrible place right now: the downing of a Malaysian jetliner in eastern Ukraine and escalating sanctions against Russia, the Israeli invasion of Gaza, renewed fighting in Libya, civil wars in Syria, Afghanistan, Iraq and Somalia, Islamist insurgencies in Nigeria and Mali, ongoing post-election chaos in Kenya, violent conflicts in Pakistan, Sudan and Yemen, assorted mayhem in central Africa, and the situation in North Korea, described in a 2014 United Nations Human Rights report as having no parallel in the contemporary world. Only in Colombia does it look like a multi- decade conflict is finally staggering to its end. For investors, strange as it might seem, such conflicts are not affecting the world’s largest equity markets very much. Perhaps this reflects the small footprint of war zone countries within the global capital markets and global economy, other than through oil production.

The limited market impact of geopolitics is nothing new. This is a broad generalization, but since 1950, with the exception of the Israeli-Arab war of 1973 (which led to a Saudi oil embargo against the US and a quadrupling of oil prices), military confrontations did not have a lasting medium-term impact on US equity markets. In the charts below, we look at US equities before and after the inception of each conflict in three different eras since 1950. The business cycle has been an overwhelmingly more important factor for investors to follow than war, which is why we spend so much more time on the former (and which is covered in the latter half of this note).

As for the war-zone countries of today, one can only pray that things will eventually improve. Seventy years ago as the invasion of Normandy began, Europe was mired in the most lethal war in human history; the notion of a better day arising out of misery is not outside the realm of possibility.

Soviet invasions of Hungary and Czechoslovakia did not lead to a severe market reaction, nor did the outbreak of the Korean War or the Arab-Israeli Six-Day War.

We did not include the US-Vietnam war, since it’s hard to pinpoint when it began. One could argue that Vietnam-era deficit spending eventually led to rising inflation (from 3% in 1967 to 5% in 1970), a rise in the Fed Funds rate from 5% in 1968 to 9% in 1969, and a US equity market decline in 1969-1970 (this decline shows up at the tail end of the S&P series showing the impact of the Soviet invasion of Czechoslovakia).

The Arab-Israeli war of 1973 led to an oil embargo and an energy crisis in the US, all of which contributed to inflation, a severe recession and a sharp equity market decline. Pre-existing wage and price controls made the situation worse, but the war/embargo played a large role. Separately, markets were not adversely affected by the Falklands War, martial law in Poland, the Soviet war in Afghanistan, or US invasions of Grenada or Panama. The market decline in 1981 was more closely related to a double-dip US recession and the anti-inflation policies of the Volcker Fed.

Equity market reactions to US invasions of Kuwait and Iraq, and the Serbian invasion of Kosovo, were mild. There was a sharp market decline after the September 11th attacks, but it reversed within weeks. The subsequent market decline in 2002 was arguably more about the continued unraveling of the technology bust than about aftershocks from the Sept 11th attacks and Afghan War. As for North Korea, in a Nov 2010 EoTM we outlined how after North Korean missile launches, naval clashes and nuclear tests, South Korean equities typically recover within a few weeks.

Prophet warnings. So far, the year is turning out more or less as we expected in January: almost everything has risen in single digits (US, European and Emerging Markets stocks, fixed-rate and inflation linked government bonds, high grade and high yield corporate bonds, and commodities). What made last week notable: concerns from the Fed and the Bank for International Settlements (a global central banking organization) regarding market valuations. The BIS hit investors with a 2-by-4, stating that “it is hard to avoid the sense of a puzzling disconnect between the market’s buoyancy and underlying economic developments globally”. The Fed also weighed in, referring to “substantially stretched valuations” of biotech and internet stocks in its Monetary Policy Report submitted to Congress. What should one make of these prophet warnings?

Let’s put aside the irony of Central Banks expressing concern about whether their policies are contributing to aggressive risk-taking. They know they do, and relied on such an outcome when crafting monetary policy post-2008. Instead, let’s look at measures of profits and how markets are valuing them.           The first chart shows how P/E multiples have risen in recent months, including in the Emerging Markets. The second chart shows valuations on internet and biotech stocks referred to in the Fed’s Congressional submission. The third chart shows forward and median multiples, an important complement to traditional market-cap based multiples.

Are these valuations too high? Triangulating the various measures, US valuations are close to their peaks of prior mid-cycle periods (ignoring the collective lapse of judgment during the dot-com era). We see the same general pattern in small cap. On internet and biotech, valuations have begun to creep up again after February’s correction, and I would agree that investors are paying a LOT of money for the presumption that internet/biotech revenue growth is “secular” and less explicitly linked to overall economic growth.

As a result, we believe earnings growth is needed to drive equity markets higher from here. On this point, we see the glass half-full, at least in the US. After a poor Q1 and a partial rebound in Q2, US data are improving such that we expect to see the elusive 3% growth quarter this year (only 6 of 20 quarters since Q2 2009 have exceeded 3%). With new orders rising and inventories down, the stage is set for an improvement. Other confirming data: vehicle sales, broad-based employment gains, hours worked, manufacturing surveys, homebuilder surveys, a rise in consumer credit, capital spending, etc. If we get a growth rebound, the profits impact could be meaningful. The second chart shows base and incremental profit margins. Incremental margins measure the degree to which additional top-line sales contribute to profits. After mediocre profits growth of 5%-7% in 2012/2013, we could see faster profits growth later this year. With 83 companies reporting so far, Q2 S&P 500 earnings are up 9% vs. 2013.

Accelerated monetary tightening could derail interest-rate sensitive sectors of the economy, so we’re watching the Fed along with everybody else. Perhaps it’s a reflection of today’s circumstances, but like Bernanke before her, Yellen appears to see the late 1930s as a huge policy fiasco: when premature monetary and fiscal tightening threw the US back into recession. That’s what Yellen’s testimony last week brings to mind: she gave a cautious outlook, cited “mixed signals” and previous “false dawns”, and downplayed the decline in unemployment and recent rise in inflation. In other words, she’s prepared to wait until the US expansion is indisputably in place before tightening.

An important sub-plot for the Fed: where are all the discouraged workers? For Fed policy to remain easy, as the economy improves, the pace of unemployment declines will have to slow and wage inflation will have to remain in check. The Fed believes discouraged workers will re-enter the labor force in large numbers, holding down wage inflation. Fed skeptics point out that so far, labor participation rates have not risen, creating the risk of inflation sooner than the Fed thinks. It’s all about the “others” in the chart, since disabled and retired persons rarely return to work. If “others” come back, it would show that there hasn’t been a structural decline in the pool of available workers. The Fed believes they will eventually return, and so do we.

Europe

Germany and France are slowing; not catastrophically, but by more than markets were expecting. This has contributed to a decline in European earnings expectations for the year. As shown on page 2, Europe was priced for a return to normalcy, and with inflation across most of the Eurozone converging to 1%, things are decidedly not that normal. Markets are not priced for any negative surprises, which is why an issue with a single Portuguese bank contributed to a sharp decline in banks stocks across the entire region.

Emerging Markets

The surprise of the year, if there is one, is how emerging markets equities have rebounded. As we wrote in March 2014, the history of EM equities shows that after substantial currency declines, industrial activity often stabilizes. Around that same time, we often see equity markets stabilize as well, even before visible improvements in growth, inflation and exports. This pattern appears to be playing itself again: the 4 EM Big Debtor countries (Brazil, India, Indonesia and Turkey) have experienced equity market rallies of 20%+ despite modest improvement in economic data (actually, things are still getting worse in Brazil and Turkey).

There’s also some good news on the EM policy front. In Mexico, it appears that the oil and natural gas sector is being opened up after a 25% decline in oil production since 2004. This would effectively end the 75-year monopoly that Pemex has over oil production. Other energy–related positives: Mexico has shifted the bulk of its electricity reliance from oil to cheaper natural gas over the last decade, giving it low electricity costs along with its competitive labor costs. Factoring in new energy investment, new telecommunications and media projects opened to foreign investment and support from both private and public credit, we can envision a 2% boost to Mexico’s GDP growth rate in the years ahead. This can not come soon enough for Mexico: casualties in its drug war rival some of the war zone countries on page 1.

Now for the challenges. Brazil has bigger problems right now than its mauling at the World Cup. With goods exports, manufacturing and industrial confidence slowing and wage/price inflation rising, Brazil is about to experience a modest bout of stagflation. Markets don’t appear to care (yet).

As for China, growth has stabilized (7%-8% in Q2) but we should be under no illusion as to why: credit growth is rising again. China ranks at the top of list of countries in terms of corporate debt/GDP. I don’t know what the breaking point is, but we’re a long way from pre-crisis China when GDP growth was organically driven and less reliant on expansion of household and corporate debt1. There’s some good news regarding the composition of growth: investment is slowing in manufacturing and real estate, and increasing in infrastructure; and while capital goods imports are flat, consumer goods imports are rising, suggesting a modest transition to more consumer-led growth. But for investors, the debt overhang of state-owned enterprises and its impact on the economy is the dominant story to watch. That explains why Chinese equity valuations are among the lowest of EM countries (only Russia is lower; for more on its re- militarization, economy and natural gas relations with Europe, see “Eye on the Russians”, April 29, 2014).

On a global basis, demand and inventory trends suggest a pick-up in economic activity in the second half of the year. If so, our high single digit forecast for 2014 equity market returns should be able to withstand the onset of (eventually) tighter monetary policy in the US. The ongoing M&A boom probably won’t hurt either.

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Important Disclosures

The article Outside the Box: Geopolitics and Markets was originally published at mauldineconomics.com.

VICE CAPITALS OF THE U.S.

9 comments

Posted on 25th July 2014 by Administrator in Economy |Politics |Social Issues

Here are the top cities to get a fix for your particular vice. I understand that Tucson, Arizona has the highest incidence of Lawrence Welk TV addiction. 

Among infamous Class A drugs, Des Moines, Iowa, was the vice capital for cocaine and Columbus, Ohio, had the dubious honor for heroin, according to an analysis by DrugAbuse.com of words mentioned in more than 450,000 tweets that were “geo-tagged” in cities with a population of at least 200,000. DrugAbuse.com is a site that provides resources and treatment on drug addiction. “People often hear in the news that a particular city has become a capital for certain activities, and more often than not, it’s something that can be viewed as a vice,” says Sam Deford, spokesman for DrugAbuse.com.

Denver, which legalized marijuana for recreational use in January, had the most tweets per capita for that drug, while Buffalo, N.Y., had the most for MDMA — or ecstasy — a drug that was popular at dance parties in the 1990s. Pittsburgh was the vice capital for alcohol, Albuquerque, N.M., was named the vice capital for crystal meth, and New Orleans was the vice capital for both prescription drugs and sex. “It’s an accurate reflection of people who tweet and are willing to talk about these things,” says Rosalie Liccardo Pacula, co-director of the RAND Drug Policy Research Center in Santa Monica, Calif.

http://www.marketwatch.com/story/the-vice-capitals-of-america-2014-07-25