May 2015 – The Burning Platform

STOCKS ARE FAIRLY VALUED IN A ZERO RETURN WORLD

Here are the highlights from Hussman’s weekly letter. I’ve picked out the key points:

Present market conditions join the second most extreme valuations in U.S. history (on measures most reliably correlated with actual subsequent 10-year S&P 500 total returns) with increasing divergences and dispersion in market internals. On that front, market conditions presently (and in recent quarters) support a hard-defensive outlook that’s largely identical to those we took in 2000 and 2007. The same return/risk profile has been associated with vertical market losses in market cycles across history. The chart below shows the cumulative total return of the S&P 500, restricted to the 8% of historical periods with an estimated return/risk profile matching what we presently observe.

Presently, the valuation of the S&P 500 is within about 16% of the 2000 peak, on the most historically reliable measures we identify. Moreover, valuation extremes were only greater in 2000 on capitalization-weighted indices. Today, the median stock is more richly valued than at any point in U.S. history, including 2000.

The Federal Reserve hasn’t created a perpetual money machine. No, no, no, no, no. What the Fed has done is to encourage investors to chase yields and to speculate, to the point where stocks are now so overvalued that they can be expected to enjoy no further return at all over the coming decade. That’s how security pricing works. The higher the price an investor pays for a given stream of future expected cash flows, the lower the subsequent return an investor can expect to enjoy. The gains have already been had, at least on paper, though the holders who successfully realize these paper gains will do so through a needle’s eye.

The past few quarters appear to be part of that distribution process. Volume picks up as holders attempt to sell and those shares are absorbed by dip-buyers, followed by low-volume short squeezes as sellers back off, and then return after those rallies with additional rounds of distribution. As long as only a few investors attempt to do so, any individual can cash out, but only by successfully selling their shares to some other investor at current levels. In aggregate, investors can’t exit, because somebody has to hold the stuff. For most investors, the majority of the paper gains that have emerged during the advancing half-cycle since 2009 will simply vanish over the completion of the cycle.

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SINGING ABOUT HISTORY

I STILL can’t get that “Battle Of New Orleans” song out of my head. The chorus section keep rolling over in an endless loop. I especially like the part “we fired our guns and the British kept a coming, there wasn’t nigh as many as there was a while ago”.

Anyway, Horton has some other historical songs … so, for shits and giggles, and to help give Admin a break, here they are. Some good stuff, educational …. really.

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JOHNNY REB —- (live performance)

https://www.youtube.com/watch?v=r_I9Y76Yb20&feature=player_detailpage

SINK THE BISMARK

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The Patriot Act May Be Dead Forever

If it dies, thank Rand Paul. His filibuster kept this from being passed under the cover of darkness. He shone a light on this un-Constitutional travesty that violates the Fourth Amendment. I still don’t trust the slimy politicians who will get bought off at the last second and change their votes. Tonight could be a great day in U.S. history, or another disgusting display of corruption and politicians committing traitorous acts against the American people.

Guest Post by Shane Harris

The most controversial elements of the spying bill may never be coming back, lawmakers from both parties tell The Daily Beast. Here’s why.

Barring any last-minute compromises, powerful government surveillance authorities under the Patriot Act will expire at the stroke of midnight Monday. And they may never return.This week, senators have been negotiating over whether to pass a House bill that would renew and tweak existing provisions in the long-controversial law, rather than let them “sunset” on June 1. But if the sunset comes and the provisions are off the books, lawmakers in both chambers would be facing a vote to reinstate controversial surveillance authorities, which is an entirely different political calculation.

Lawmakers may be unwilling to vote affirmatively for surveillance powers that many of them already dislike and have tried to rein in. “I think it is a real risk that if the provisions do expire, they would be more difficult to reinstate than to reform,” Representative Adam Schiff, the senior Democrat on the House Intelligence Committee, told The Daily Beast.

Schiff supports the USA Freedom Act, which overwhelmingly passed the House but failed to muster enough votes in a midnight Senate session last Saturday. The bill would end the NSA’s collection of phone records in bulk, but leave intact other surveillance tools that, while not broadly popular, are less controversial.

Schiff said it was easier to get lawmakers to support the Freedom Act with its changes to existing law than it would be to vote to re-enact law that had gone away.

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The Delusional World Of Imperial Washington

Guest Post by TomDispatch.com

Think of this as a little imperial folly update — and here’s the backstory. In the years after invading Iraq and disbanding Saddam Hussein’s military, the U.S. sunk about $25 billion into “standing up” a new Iraqi army. By June 2014, however, that army, filled with at least 50,000 “ghost soldiers,” was only standing in the imaginations of its generals and perhaps Washington. When relatively small numbers of Islamic State (IS) militants swept into northern Iraq, it collapsed, abandoning four cities — including Mosul, the country’s second largest — and leaving behind enormous stores of U.S. weaponry, ranging from tanks and Humvees to artillery and rifles. In essence, the U.S. was now standing up its future enemy in a style to which it was unaccustomed and, unlike the imploded Iraqi military, the forces of the Islamic State proved quite capable of using that weaponry without a foreign trainer or adviser in sight.

In response, the Obama administration dispatched thousands of new advisers and trainers and began shipping in piles of new weaponry to re-equip the Iraqi army. It also filled Iraqi skies with U.S. planes armed with their own munitions to destroy, among other things, some of that captured U.S. weaponry. Then it set to work standing up a smaller version of the Iraqi army. Now, skip nearly a year ahead and on a somewhat lesser scale the whole process has just happened again. Less than two weeks ago, Islamic State militants took Ramadi, the capital of Anbar Province. Iraqi army units, including the elite American-trained Golden Division, broke and fled, leaving behind — you’ll undoubtedly be shocked to hear — yet another huge cache of weaponry and equipment, including tanks, more than 100 Humvees and other vehicles, artillery, and so on.

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I DON’T BELONG AT ARLINGTON

And while I am eligible, as a retired member of the armed forces, to be buried in Arlington as my final resting place, I won’t choose that option.

Let me be clear, while I served my country with honor that included two combat tours, I survived. Those who didn’t and perished in the many, and sometimes foolish, wars my country has waged, it is THOSE people who belong there. I do not deserve to share their hallowed ground. Period.

Leave it to the US government to fuck up what should be the easiest decision ever and create rules to degrade what should be one of the most sacred plots of land in the U.S.

The Prepper’s Water Survival Guide: Are You Ready for a Long-Term Water Emergency?

Guest Post by Daisy Luther

Are you truly prepared for a water emergency?

How long could your family survive if the water stopped flowing from the municipal supply and none was available at the store? If the answer is not “indefinitely” then you need to check out my new book, The Prepper’s Water Survival Guide: Harvest, Treat, and Store Your Most Vital Resource.

This comprehensive book contains life-saving information about how to:

Store fresh water
Collect rainwater
Purify water from lakes and rivers
Dig a well for groundwater

In addition to harvesting water, you’ll gain the tools to keep large stores untainted for long periods of time, test the water you collect for dangerous toxins, and treat water-related illnesses that are commonly contracted during a disaster.

This book is very research heavy, with the latest in-depth information about the contaminants lurking in our water supplies and water-borne illnesses, as well as tips for conservation and sanitation during times when your lifestyle is decidedly off-grid.

I hope you enjoy this excerpt from the book.

The Prepper’s Water Survival Guide

If you’ve been prepping for a while, you’ve probably heard of the survivalist’s “Rule of Three.” You can survive:

Three minutes without air.

Three days without water.

Three weeks without food.

If a disaster has hit and you’re still breathing, then your next concern has got to be water.

Have you ever watched any of those survival shows on the Discovery Channel where people are dropped off in the middle of nowhere and left to survive with limited tools and supplies? In nearly every single episode, the biggest issue is finding and purifying water. Often, they wait so long that they become desperate and engage in risky behavior, like drinking water from a stagnant pool. In one particularly notable episode, the contestants had to be rescued because they became too weak from dehydration to seek water.

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