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Customs And Border Protection Clarifies: You Have No Rights While Traveling

The government is like a poorly trained dog. If you let one bad behavior go, it just escalates until they bite.

The government has been searching electronics like cell phones and laptops at the border since early in the Bush administration. But because the 9/11 attacks were fresh, and because the practice was not widespread, it went largely unnoticed.

Fast forward to fiscal year 2015 and the Customs and Border Protection searched 8,503 airline passengers’ electronic devices. In FY 2016 they searched 19,033. And in FY 2017 CBP searched the devices of 30,200 travelers.

The CBP obtained no warrants for these searches. Many people searched were foreign travelers to the U.S. but last year over 6,000 were American citizens.

In response to growing complaints Customs and Border Protection revised their policy. Last week they issued a new directive. But in some ways, it is worse.

For starters, their guidance claims the authority to search a traveler’s electronic devices “with or without suspicion.”

The guidance now claims passengers are “obligated” to turn over their devices as well as passcodes for examination. If they fail to do so, agents can seize the device.

That is all considered a “basic search.” Agents must have suspicion in order to conduct an “advanced search.” This includes copying information from devices, or analyzing them with other equipment.

Finally, CBP agents can not “intentionally” search information stored on the cloud, versus on the device’s hard drive.

What this means:

It actually adds insult to injury that the new guidance starts: “CBP will protect the rights of individuals against unreasonable search and seizure and ensure privacy protection while accomplishing its enforcement mission.”

Nothing could be further from the truth. This is clearly a violation of the Fourth Amendment protections against unreasonable search and seizure. This violates the privacy of everyone searched.

…click on the above link to read the rest of the article…

Why the next stock market crash will be faster and bigger than ever before

Why the next stock market crash will be faster and bigger than ever before

US stock markets hit another all-time high on Friday.

The S&P 500 is nearing 2,600 and the Dow is over 23,300.

In fact, US stocks have only been more expensive two times since 1881.

According to Yale economist Robert Shiller’s Cyclically Adjusted Price to Earnings (CAPE) ratio – which is the market price divided by ten years’ average earnings – the S&P 500 is above 31. The last two times the market reached such a high valuation were just before the Great Depression in 1929 and the tech bubble in 1999-2000.

Some of the blame for high valuation goes to the so-called “FANG” stocks (Facebook, Amazon, Netflix and Google), whose average P/E is now around 130.

But there’s something different about today’s bull market…

Simply put, everything is going up at once.

Leading up to the tech bubble bursting, investors would dump defensive stocks (thereby pushing down their valuations) to buy high-flying tech stocks like Intel and Cisco – the result was a valuation dispersion.

The S&P cap-weighted index (which was influenced by the high valuations of the S&P’s most expensive tech stocks) traded at 30.6 times earnings. The equal-weighted S&P index (which, as the name implies, weights each constituent stock equally, regardless of size) traded at 20.7 times.

Today, despite sky-high FANG valuations, the S&P market-cap weighted and equal-weighted indexes both trade at around 22 times earnings.

Thanks to the trillions of dollars printed by the Federal Reserve (and the popularity of passive investing, which we’ll discuss in a moment), investors are buying everything.

In a recent report, investment bank Morgan Stanley wrote:

We say this not as hyperbole, but based on a quantitative perspective… Dispersions in valuations and growth rates are among the lowest in the last 40 years; stocks are at their most idiosyncratic since 2001.

…click on the above link to read the rest of the article…

Science tells us this is all true

Science tells us this is all true

On April 30, 1934, under pressure from Italian-American lobby groups, the United States Congress passed a law enshrining Columbus Day as a national holiday.

President Franklin Roosevelt quickly signed the bill into law, and the very first Columbus Day was celebrated in October of that year.

Undoubtedly people had a different view of the world back then… and a different set of values.

Few cared about the plight of the indigenous who were wiped out as a result of European conquest.

Even just a few decades ago when I was a kid in elementary school, I remember learning that ‘Columbus discovered America’. There was no discussion of genocide.

It wasn’t until I was a sophomore at West Point that I picked up Howard Zinn’s People’s History of the United States (and then Columbus’s own diaries) and started reading about the mass-extermination of entire tribes.

Columbus himself wrote about his first encounter with the extremely peaceful and welcoming Arawak Indians of the Bahama Islands:

“They do not bear arms, and do not know them, for I showed them a sword, they took it by the edge and cut themselves out of ignorance. They have no iron… They would make fine servants… With fifty men we could subjugate them all and make them do whatever we want.”

And so he did.

“I took some of the natives by force in order that they might learn and might give me information of whatever there is in these parts.”

Columbus had already written back to his investors in Spain, Ferdinand and Isabella, that the Caribbean islands possessed “great mines of gold.”

It was all lies. Columbus was desperately attempting to justify their investment.

In Haiti, Columbus ordered the natives to bring him all of their gold. But there was hardly an ounce of gold anywhere on the island. So Columbus had them slaughtered. Within two years, 250,000 were dead.

…click on the above link to read the rest of the article…

Today the music stops

Today the music stops

Today’s the day.

After months of preparing financial markets for this news, the Federal Reserve is widely expected to announce that it will finally begin shrinking its $4.5 trillion balance sheet.

I know, that probably sound reeeeally boring. A bunch of central bankers talking about their balance sheet.

But it’s phenomenally important. And I’ll explain why-

When the Global Financial Crisis started in 2008, the Federal Reserve (along with just about every central bank in the world) took the unprecedented step of conjuring trillions of dollars out of thin air.

In the Fed’s case, it was roughly $3.5 trillion, about 25% of the size of the entire US economy at the time.

That’s a lot of money.

And after nearly a decade of this free money policy, there is more money in the financial system than ever before.

Economists have a measure for money supply called “M2”. And M2 is at a record high — nearly $9 trillion higher than at the start of the 2008 crisis.

Now, one might expect that, over time, as the population and economy grow, the amount of money in the system would increase.

But even on a per-capita basis, and relative to the size of US GDP, there is more money in the system than there has ever been, at least in the history of modern central banking.

And that has consequences.

One of those consequences is that asset prices have exploded.

Stocks are at all-time highs. Bonds are at all-time highs. Many property markets are at all-time highs. Even the prices of alternative assets like private equity and artwork are at all-time highs.

But isn’t that a good thing?

Well, let’s look at stocks as an example.

As investors, we trade our hard-earned savings for shares of a [hopefully] successful, well-managed business.

…click on the above link to read the rest of the article…

The real story behind America’s new $20 trillion debt

The real story behind America’s new $20 trillion debt

Late yesterday afternoon the federal government of the United States announced that the national debt had finally breached the inevitable $20 trillion mark.

This was a long time coming. It should have happened back in March, except that a new debt ceiling was put in place, freezing the national debt.

For the last six months it was essentially illegal for the government to increase the debt.

This is pretty brutal for Uncle Sam. The US government hasn’t run a budget surplus in two decades; they depend on debt in order to keep everything running.

And without the ability to ‘officially’ borrow money, they’ve basically spent the last six months ‘unofficially’ borrowing money by plundering federal pension funds and resorting to what the Treasury Department itself calls “extraordinary measures” to keep the government running.

Late last week the debt ceiling crisis came to a temporary armistice as the government agreed once again to temporarily suspend the debt limit.

Overnight, the national debt soared hundreds of billions of dollars as months of ‘unofficial’ borrowing made its way on to the official books.

The national debt is now $20.1 trillion. That’s larger than the size of the entire US economy.

You’d think this would be front page news with warnings being shouted from the rooftops of America.

Yet curiously the story has scarcely been covered.

Today’s front page of the New York Times tells us about Hurricane Irma, North Korea, and alcoholism in Iran.

Even the Wall Street Journal’s front page has zero mention of this story.

In fairness, the number itself is irrelevant. $20 trillion is merely a big, round, psychologically significant number… but in reality no more important than $19.999 trillion.

The real story isn’t the number or the size of the debt itself. It’s the trend. And it’s not good.

…click on the above link to read the rest of the article…

The real story behind America’s new $20 trillion debt

The real story behind America’s new $20 trillion debt

Late yesterday afternoon the federal government of the United States announced that the national debt had finally breached the inevitable $20 trillion mark.

This was a long time coming. It should have happened back in March, except that a new debt ceiling was put in place, freezing the national debt.

For the last six months it was essentially illegal for the government to increase the debt.

This is pretty brutal for Uncle Sam. The US government hasn’t run a budget surplus in two decades; they depend on debt in order to keep everything running.

And without the ability to ‘officially’ borrow money, they’ve basically spent the last six months ‘unofficially’ borrowing money by plundering federal pension funds and resorting to what the Treasury Department itself calls “extraordinary measures” to keep the government running.

Late last week the debt ceiling crisis came to a temporary armistice as the government agreed once again to temporarily suspend the debt limit.

Overnight, the national debt soared hundreds of billions of dollars as months of ‘unofficial’ borrowing made its way on to the official books.

The national debt is now $20.1 trillion. That’s larger than the size of the entire US economy.

You’d think this would be front page news with warnings being shouted from the rooftops of America.

Yet curiously the story has scarcely been covered.

Today’s front page of the New York Times tells us about Hurricane Irma, North Korea, and alcoholism in Iran.

Even the Wall Street Journal’s front page has zero mention of this story.

In fairness, the number itself is irrelevant. $20 trillion is merely a big, round, psychologically significant number… but in reality no more important than $19.999 trillion.

The real story isn’t the number or the size of the debt itself. It’s the trend. And it’s not good.

…click on the above link to read the rest of the article…

The world’s most powerful bank issues a major warning

The world’s most powerful bank issues a major warning

In 1869, a 48-year old Jewish immigrant from the tiny village of Trappstadt in Germany’s Bavaria region hung a shingle outside of his small office in lower Manhattan to officially launch his new business.

His name was Marcus Goldman, and the business he started, what’s now known as Goldman Sachs, has become the preeminent investment bank in the world with nearly $1 trillion in assets.

They didn’t get there by winning any popularity contests.

Goldman Sachs has been at the heart of nearly every major banking scandal in recent history.

The company has settled lawsuits on countless charges, ranging from exchange rate manipulation, stock price manipulation, demanding bribes from their own clients, front-running retail customers, and just about every shady business practice that would put money in their pockets.

Yet throughout it all, Goldman Sachs has been protected from any serious punishment by its friends in highest offices of government.

Four out of the last eight US Treasury Secretaries, including the current one, have formerly been on the payroll of Goldman Sachs.

Three current Federal Reserve Bank presidents are Goldman Sachs alumni.

The current president of the European Central Bank and the current head of the Bank of England are both former Goldman Sachs employees.

You get the idea.

On its face, there’s nothing wrong with government staffing its departments with top executives from the private sector; taxpayers would probably rather have someone who knows what s/he’s doing behind the desk rather than some random guy off the street.

But the consequent favoritism that results from this revolving door is blatant and repulsive.

Case in point: in 2008 when the financial system was going up in flames and most banks were suffering enormous losses, the government orchestrated a sweetheart bailout deal, of which Goldman was the primary beneficiary.

…click on the above link to read the rest of the article…

Why you might as well paint a giant bulls-eye on your bank account

Why you might as well paint a giant bulls-eye on your bank account

Vegetarians be forewarned… you won’t like what follows.

We slaughtered a pig yesterday at the farm. I have two freezers full of pork now, and countless strips of bacon curing in the kitchen.

I’ve written about this before– out here at the farm I’m able to organically produce almost everything that I eat… meat, eggs, rice, nuts, and just about every kind of fruit and vegetable imaginable. A lot of it gets canned and stored.

We even grow wheat which we turn into organic flour, plus oats and all sorts of other grains.

As I’ve described in the past, this is a pretty powerful feeling. I know that, no matter what happens in the world, I’ll always have a source of food.

And even if it’s all rainbows and buttercups from here on out, I get to eat clean, organic food. There’s hardly any downside.

Invariably as I meet people throughout my travels around the world, I’m always asked why I spend so much time in Chile.

I usually tell them about my business ventures here and that I founded a company that’s rapidly becoming one of the largest blueberry producers in the world.

But when I talk about the farm and growing my own food, people often respond with furrowed eyebrows and a hint of derision– “Oh, so you’re, like, preparing for the end of the world…”

It’s as if embracing a little bit of independence and self-reliance requires paranoid delusion and chronic pessimism.

Fortunately I’m no longer in middle school, so my decisions aren’t based on what the cool kids might think.

In truth I’m wildly optimistic about the future.

Yes, there will come a time when bankrupt western governments will have to suffer the consequences of their reckless financial decisions.

…click on the above link to read the rest of the article…

Italy’s newest bank bailout cost as much as its annual defense budget

Italy’s newest bank bailout cost as much as its annual defense budget

Two more Italian banks failed over the weekend– Banco Popolare di Vicenza and Veneto Banca.

(In other news, the sky is blue.)

The Italian Prime Minister himself stated that depositors’ funds were at risk, so the government stepped in with a bailout and guarantee package that could cost taxpayers as much as 17 billion euros.

That’s a lot of money in Italy– around 1% of GDP. In fact it’s basically as much as the 17.1 billion euros they spent on national defense last year (according to an estimate by Italian think tank IAI).

You don’t have to have a PhD in economics to figure out that NO government can afford to spend its entire defense budget every time a couple of medium-sized banks need a bailout.

That goes especially for Italy, whose public debt level is already 132% of GDP… and rising. They simply don’t have the money.

Moreover, the European Union actually has a series of new rules collectively known as the “Bank Recovery and Resolution Directive” which is supposed to prevent failing banks from being bailed out with taxpayer funds.

Here’s the thing– Italy has LOTS of banks that are on the ropes.

So with taxpayer resources exhausted (and technically prohibited), who’s going to be on the hook next time a bank goes under?

Easy. By process of elimination, the only other party left to fleece is the depositor.

Here’s how it works:

Let’s say a bank takes in $1 billion in deposits.

Naturally the bank doesn’t just keep $1 billion in cash sitting in its vault. They invest the money. They make loans. They buy assets.

So the bank’s balance sheet shows $1 billion worth of assets, and $1 billion worth of deposits that they owe to their customers.

But sometimes banks screw up when they invest their customers’ funds. Loans go bad. Borrowers default.

 

…click on the above link to read the rest of the article…

It’s time to become your own banker. Here’s how–

It’s time to become your own banker. Here’s how–

Sometimes I wonder why most of the giant mega-banks are based in New York.

They should be here in Las Vegas, the gambling capital of the world. Because that’s precisely what they’re doing with your money.

Actually it’s not even your money.

From a legal perspective, every single penny you deposit at the bank becomes THEIR money. You’re nothing more than an unsecured creditor of the bank.

And now that they legally own what used to be your money, the bank can gamble it away on whatever crazy investment fad best serves their interests.

Here’s an easy way to understand it:

Imagine you were moving and needed to rent a storage facility for a few months to store your stuff.

You rent a U-Haul and move everything into the storage unit.

The way banking works, the second you drive away, the storage company now owns your furniture. Not you.

And as the brand new owners of what used to be your furniture, the storage company can do whatever they want with it.

They can rent out the furniture to another customer, charging steep fees to let a complete stranger sit on your sofa and watch your TV.

(Naturally you’ll never see a penny of that money.)

Of course, that complete stranger might not treat your furniture all that well. He might even destroy it. No more furniture.

Often the facilities get in on the business together; one storage company will rent your furniture to another company, which rents it to another, and then another.

After a while no one actually knows where your sofa is. But it doesn’t matter because the storage companies are all making lots of money, and few people ever really ask.

Eventually their standards drop so low that they stop performing credit checks altogether when someone wants to rent furniture from them.

…click on the above link to read the rest of the article…

Just a quick reminder of who’s really in charge

This happens several times each year as the central bank’s Federal Open Market Committee gathers to set monetary policy in the Land of the Free.

To be clear, there is no greater power over a nation than having control of its money supply and interest rates.

Think about it: interest rates influence just about EVERYTHING in the economy.

Changes in interest rates influence housing prices, company stock prices, retail sales, food prices, oil prices, and major business purchases.

Interest rates have a significant impact over employment, business investment, inflation, and the currency’s international exchange rate.

Increases in the interest rate even have the power to bring a government to its knees.

This is pretty extraordinary power. And it has been awarded to an unelected committee that has an astonishing track record of getting it wrong.

Former Fed chair Ben Bernanke famously predicted in January 2008 that “the Federal Reserve is currently NOT forecasting a recession.”

It turns out that the recession had officially started one month before in December 2007.

While that’s just one small example, the numbers show that these guys perpetually miss the mark.

In January 2011 the Fed projected 2011 GDP growth would be 3.7%. It turned out to be 2%. So proportionally speaking they were off by 85%.

In January 2012 they predicted 2.5% growth that year. Actual growth in 2012 was 1.6%, so they were ‘only’ off by 56%.

Their 2016 GDP growth forecast was 2.4%, while actual growth was 1.6%, another 50% error.

And just recently for the first quarter of 2017, the Fed’s predictions were 1.2% growth, while actual GDP growth was just 0.7%… a 70%+ overshoot.

Here’s the funny thing– even the Federal Reserve’s own internal study shows that they consistently miss the mark in their projections.

…click on the above link to read the rest of the article…

This bubble finally burst. Which one’s next?

Like so many other high-flying Silicon Valley startups, Clinkle was supposed to ‘make the world a better place’.

Founded in 2011 by a guy barely out of his teens, the company picked up early buzz after proclaiming they would disrupt mobile payments. Or something.

Silicon Valley venture capital firms were apparently so impressed with the idea that they showered the company with an unprecedented level of cash.

(Given that investing in an early stage company is high-risk, investors might provide a few hundred thousand dollars in funding, at most. Clinkle raised $25 million.)

The company went on to burn through just about every penny of its investors’ capital.

There were even photos that surfaced of the 21-year old CEO literally setting bricks of cash on fire.

At the end of the farce, Clinkle never actually managed to build its supposedly ‘world-changing’ product, and the website is now all but defunct.

This is rapidly becoming a familiar story in Silicon Valley.

For the last 6-7 years, Silicon Valley startups have been able to raise unbelievable amounts of cash.

Yet so many of those companies haven’t managed to turn a profit. Ever.

There’s some of the big names like Uber and AirBnb which are supposedly worth tens of billions of dollars despite having racked up enormous losses.

(Last year ride-sharing company Lyft promised investors that it would cap its losses at ‘only’ $600 million per year. . .)

But there are countless other examples of startups being anointed with absurd valuations and continually replenished with fresh capital even though they keep losing money… and have no plan to ever make money.

Snapchat’s investment prospective summed it up best:

“We have incurred operating losses in the past, expect to incur operating losses in the future, and may never achieve or maintain profitability.

…click on the above link to read the rest of the article…

Three reasons why the banking system is rigged against you

Three reasons why the banking system is rigged against you

If there were ever any doubt about how completely RIGGED the banking system is against depositors, allow me to introduce the following:

Exhibit A: Governments are working to make banks LESS safe

Yesterday an unelected bureaucrat that no one has ever heard of made a stunning announcement that has sweeping implications for anyone with a bank account.

Dombrovskis is Europe’s top financial services official, so he controls bank regulations in the European Union.

He issued a stern warning to global bank regulators yesterday that he is prepared to reject any further plans they might have to tighten bank capital requirements.

This might sound rather dry, but it’s incredibly important.

“Bank capital” is the most critical component of any bank balance sheet.

Capital is like a bank’s rainy day fund; when things start to go bad, a bank’s capital provides a margin of safety to ensure that their depositors’ funds are safe.

Strong banks have ample capital and are able to withstand crises.

Weak banks with low levels of capital collapse. And that’s precisely what happened in 2008.

Most banks across the west had very low levels of capital. They had spent years making appallingly stupid ‘no money down’ loans with 0% teaser interest rates to borrowers with pitiful credit.

When that bubble burst, the banks lost billions of dollars. And it turned out that most of the banks at the time had razor thin levels of capital.

If you’re wondering why, the answer is quite simple: the less capital a bank maintains, the more money it can invest… so poorly capitalized banks tend to make more money.

Lehman Brothers was quite profitable.

…click on the above link to read the rest of the article…

Former Treasury Secretary says banks may be riskier now than in the 2008 crisis

Former Treasury Secretary says banks may be riskier now than in the 2008 crisis

“Sir. SIR! This your bag,” the TSA agent barked at me last week, more as a statement than a question.

“It is.”

“Are you carrying any liquids?”

I knew immediately; I had forgotten about the bottle of water that I had shoved in my briefcase before checking out of my hotel.

They opened my bag and confiscated the water bottle immediately with an extra harrumph to make sure I knew that I had wasted their time.

Yeah, I get it. I broke the rule. But it’s such a ridiculous rule to begin with.

Are we really supposed to pretend that Miami International Airport is any safer because there’s a brand new, unopened Dasani bottle in the TSA wastebin?

You may recall how Istanbul’s Ataturk Airport was attacked on June 28th by men armed with automatic weapons and explosives.

Ataturk was already one of the most security-conscious airports in the world– you actually have to go through a security checkpoint just to enter the building, followed by a second security checkpoint on your way to the gate.

And yet, despite all of this extra security, 41 people were killed and hundreds more wounded in an attack that shows just how ineffective airport security really is.

Airport security isn’t real security. It’s merely the illusion of security– a bunch of busybodies in uniforms enforcing pointless rules to make people believe that they’re safer.

Candidly, our financial system has borrowed the same principle. There’s no real safety in our financial system– merely the illusion of safety.

Leading up to the 2008 financial crisis, most people thought the banks were safe.

After all, we’ve been told our entire lives that the banks are rock solid. What could go wrong?

…click on the above link to read the rest of the article…

Police seize over 5,000 ounces of silver from man’s home

Police seize over 5,000 ounces of silver from man’s home

Last week in the Australian state of Queensland, federal police confiscated a whopping 5,465 ounces of silver (worth roughly $106,000) from a man’s home.

This was part of a larger series of police raids instigated by the Australian Tax Office against individuals suspected of tax evasion.

Two obvious lessons come to mind which bear repeating:

1) As we discussed yesterday, only an idiot commits tax fraud or tax evasion. This goes without saying.

There are far too many completely legitimate ways to reduce or even eliminate what you owe… which means there’s absolutely zero reason to take any chances by wilfully breaking the law.

I know this doesn’t apply to the vast majority of people reading this, but if you are one of the handful of people out there who has been noncompliant with taxes, definitely consider your options to get it fixed.

They will find out eventually.

It’ll be a much better outcome that you step forward and admit a mistake than wait for the inevitable federal agents to kick down your door in the middle of the night.

2) Don’t keep the majority of your assets at home

I’m sure that at least some of the people who were subject to the Australian Tax Authority’s raids probably did commit tax evasion.

But there are probably many who didn’t… people who just happened to end up on the agency’s list through some honest misunderstanding.

Nevertheless, they still had federal police raiding their homes, confiscating anything that looked valuable, including cash and precious metals.

This could happen to anyone. Any of us could end up by mistake on the wrong side of some government agency’s list. It happens to innocent people every single day.

…click on the above link to read the rest of the article…

Olduvai IV: Courage
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Olduvai II: Exodus
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