At War with the Truth
Countering free speech
Dow 40,000
Took twenty-five years (and $7 Trillion in Fed Fun Coupons didn’t hurt either)!
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Best commentary I’ve heard in a long time, and I listen to a lot of commentary.
Melody Wright with Mike Farris
Countering Free Speech
The "advocacy group" mentioned below (Center for Countering Digital Hate) is closely tied to Keir Starmer's Labour Party, the ones currently doing the ridiculous fascist crackdown on British citizens.
I expect criticism of Kamala Harris to be called "hate speech" soon. More on this shady group here.
This is not journalism, or even reporting, or clickbait. This likely a psy-op. But then again, CNBC is an infomercial.
“This is not the first rodeo of British and U.S. intelligence services creating a cutout for the purpose of influencing the online news economy, to rig public debate in favor of political speech that supports agency agendas.” - Mike Benz
Today in Gaslighting
What’s wrong with this headline?
CNBC is truly awful. And, at times, funny.
Rate Cut?
So the CORE CPI model, year-over-year, has been ABOVE THREE-PERCENT since April 2021, yet the Fed has tapered their anemic QT, and are talking a rate cut in September?
Don’t Forget That The Fed Wanted High Inflation
CNBS had an article on Wednesday, "Consumer sentiment tumbles as ‘recession-like’ symptoms spread among Americans."
There's a line that says, "The major reason is stubborn inflation cutting into people’s paychecks."
I'd just like to again remind everyone of this:
A win for the shorts
I’m not a short-seller (since 2009 at least), but I think they often provide a valuable service. Shout out to friend of the show Marc Cohodes, who has been railing against B. Riley ($RILY) for a long time.
The Credit Strategist has a nice B. Riley summary here: “The sooner this company is shut down by regulators - who should have acted sooner - the better.”
”Swiss central bank will struggle to break its interventionist habit”
Thoughts and prayers.
“The SNB creates Swiss francs out of thin Alpine air...they go and call their broker and go on a tour of the US stock exchange. They get involved in important companies from the S&P which create real profits, and they do that with money which has been created out of nothing”
Jim Grant, 2017
Free subscribers stop here. Go watch Seven Samurai.
“By protecting others, you save yourself. If you only think of yourself,
you’ll only destroy yourself.”
Kambei Shimada (excellent movie review by the way)
Meanwhile…
James Aitken
“The idea that financial conditions, by the way, are actually tight is absolutely laughable. I mean, I say to some clients, “If you’re telling me financial conditions are tight, how come Bitcoin is still somewhere between 50 and 70? If financial conditions are tight, how come Josh Kushner has just raised his ninth venture fund at Thrive Capital with 5 billion of commitments? And if financial conditions are tight, how come Ares just raised 37 billion in private credit?””
”It’s not just all these people that have come to market since COVID, and I was flabbergasted by a statistic I read the other day, and I should have known this, but something like 40 million, maybe 45 million new investment accounts, which actually means trading accounts, have been opened since COVID. And of course some of those have done all right, but you wonder about the collective expertise because let’s face it, with a little bit of a bump here and there, it’s basically been one way for four years because we try to influence future consumption and perceptions of permanent income. Let’s blow another bubble so we muddle through and that’s why we’ve got this far…
So let’s say 30 million new trading accounts, now, not all of them may be active, so let’s be conservative and say 30 million new accounts have been opened, of which 10 million are active. What the hell? 10 million active trading accounts all day long? Golly gosh, that’s not a healthy situation. Think about that as 10 million units of productive capital that could be better allocated to starting a business or helping invent things, or whatever. No, no, no, we’re going to trade on that. Okay, well, the casino is open every day, but it’s an unhealthy state of affairs.”
We saw just last week how a single day of historically trivial declines (besides Japan) was treated as a disaster akin to October 1987, when the Dow 30 fell 22.6%. Now, a 2% decline is a national disaster that must be met with even more of what led us here!
Today’s investors - and this includes some billionaires too - by and large, are wimps with no historical perspective. They view the stock market as if it’s a high-yield money market fund.
Jeremy Grantham
When I post someone like Jeremy Grantham, I usually get a few replies like, ‘Oh, he was bearish 5,000 points ago,’ or ‘he was bearish for the last 3 years’, or whatever.
Grantham (like Jim Grant, or William White, or Ed Chancellor etc.) is not a stock tout. He’s a historian, with a perspective that goes beyond next quarter. If you want stock touts, stick with Jim Cramer and Jeremy Siegel.
Those who remember history are condemned by those who repeat it.
“This is the most vulnerable market there has ever been, and given the incredible record of the past - that the highest multiples do not predict good times, but have historically predicted the worst times - it should give you cause for some concern, and some caution, and of course the market does not feel concerned or cautious.”
“It didn't change the outcome, it changed the timing of the outcome.”
“The problem with being too early is when it when it gets to a historical level, I tend to blow the whistle and say, look, this is historically very dangerous, and this is what's happened historically several times, and there's no rule against the market going up more, and Japan is the mother and father as I said, and a warning to anyone - you've never been over 25 times earnings, you go to 65 - you have to be ready with some part of your brain for the market to keep going.
Having said that, bear in mind that it didn't change the outcome, it changed the timing of the outcome. Japan went all the way back. It gave up every inch of ground that it had made. Just because it kept going for three extra years changed nothing.”
I suppose Irving Fisher was a bit like the Jeremy Siegel of 1929, but smarter.
Guy Adami: “The fact that respected(?) professors like a Jeremy Siegel, for example, went on CNBC Monday morning and was opining how the Fed should be cutting - an emergency rate cut of 75 basis points - the absurdity of that to me was I lost a lot of respect for him because the lack of understanding what it really means.”
Dan Nathan: “Why would anyone listen to an academic anyway about this stuff? I always wonder why [Siegel] spends so much time on CNBC, because, again, the guy hasn't spent too much time other than on some like ETF commercials on CNBC when he's not lecturing students.”
Nine days later Siegel was back on - AGAIN - on CNBC, with a weak mea culpa (now that the market had spiked back up)…
John Hathaway: “I really don't understand the reverence for the Fed that you see in the general financial media. Maybe it's because there are a lot of guys that make a living just talking about it. I'm ready to see the Fed do a face plant on their current stance, and I think that will just generate interest in what we've talked about.”
Ed Coyne: “Fred, I'm seeing some head nodding there - what's your thought on the Fed?
Fred Hickey: “Well, I agree with everything that John said. In addition to that, though, you know they've been intervening in the markets constantly now for years, and each time the intervention has to get greater and the last one was five or six trillion dollars, and that doesn't count the five trillion from Europe, the ECB, either, and at some point here the Fed’s going to lose control. They're having trouble. The Treasury Department is having trouble with these auctions, and people are starting to get more concerned about inflation. it's going to get very interesting as we go forward. There may not be a tolerance for the kind of quantitative easing, the massive money printing, the debasement that's that gone on, that's been going on. Each time we have a crisis it creates a worse crisis, because they never let the markets correct completely, they don't let the excesses completely clear. We end up with more malinvestment.”
“The Fed has a huge bias in favor of errors that benefit powerful, moneyed groups...leading us to guess that its next error will be, once again, to under-price credit for privileged borrowers. This will help solve the problems of recession/job slowdown/bear market on Wall Street/funding federal deficits...and so forth. It will also give rise to even bigger debt and inflation problems in the future. Like the Romans, the feds will be ‘forced to debase the currency.’”
"The risk is the fact that most people believe that they enjoy a real yield on US dollar denominated deposits."
Rick Rule
“Japanese individuals had much higher per capita savings than the Americans do, and hence they could afford to be stupid for longer.”
US Store Closings Outstrip Openings in Break From Past Two Years
“U.S. store closings have surpassed openings for the first time this year, the result of a surge of bankruptcy filings by struggling retailers that has extended into the back half of 2024.
Year to date, the 4,548 stores shutting their doors have outpaced the 4,426 announced openings, resulting in 122 net store closings, according to a Coresight Research report dated Aug. 9. The data marks a shift from the previous two years’ annual totals where openings edged closings.”
The market got excited Thursday because of “the big retail sales beat”. So retail sales increased 2.7% year-on-year in July 2024. That's a nominal number, right?
However…
Office
“It seems like every time we see an appraisal reduction story, in the office sector, the value change between securitization and current day is somewhere to the tune of 50% to 75% in so many cases, and the year-over-year declines are coming in about 10%, give or take.”
A Plethora of New Apartments
“The U.S. is on track to add over 500K new apartments in 2024, 9% more than 2023 and 30% more than 2022. New York, Dallas, and Austin are top markets for new apartment deliveries, accounting for nearly 10% of all new units. Slower construction is expected in 2025, with more than half of 370 studied markets predicted to cool down.”
“While it is well understood that many offices are a lost cause, apartment loans are in surprisingly bad shape, too.”
“…the pool of apartment mortgages that could get into difficulty in the future is larger—$80.95 billion are at risk of distress, compared with $66.87 billion for offices. These loans are flashing amber because occupancy rates are falling or the income generated by the buildings is barely enough to meet interest payments”
“Speculative property investors borrowed heavily from this part of the market during the pandemic to buy tired apartment blocks, particularly in the Sunbelt. Their plan was to fix them up, raise the rents and quickly flip the buildings for profit…Rent growth forecasts were too optimistic, and operating costs such as insurance have shot up. The apartment market has also become oversupplied…Few apartment properties have gone into foreclosure yet, which is disappointing for opportunistic investors that hoped to pick up cheap assets in fire sales. Lenders are proving more flexible with apartment loans than offices…A recession would be the final straw for some landlords…
The heaviest issuers of CRE CLOs in recent years include private lenders MF1 and Benefit Street Partners. Listed players Ready Capital and Arbor Realty Trust also lent billions”
Ready Capital Sells Distressed Multifamily Loans at Deep Discounts “Ready Capital sold $20M in loans at $0.70 on the dollar and has $450M more in contract, expected to sell at even steeper discounts. Multifamily properties, particularly those bought during the 2020–2022 boom, are driving the discount as values plunge and delinquencies rise.”
Asking Rents Fall Across All Bedroom Counts for First Time in 4 Years “Median asking rents for 0-1 bedroom apartments fell 0.1% (to $1,498 a month), 2 bedroom apartments fell 0.3% (to $1,730) and 3+ bedroom apartments fell 2.4% (to $2,010). All three categories are down at least $50 from all-time highs posted in the last two years.”
Fifty-bucks off after massive spikes. Deflation!
Despite concessions, affordability remains a challenge, with typical rents in July at $2,070, up 3.4% YoY. That’s $25k a year. About one-third of U.S. wage-earners make less than that in a year.
Tech Bros Create A New Real Estate Business Model
”You can buy a share of Raven Tyrell’s townhouse for $5.40.”
This article encapsulates so much of what has gone wrong with our real estate markets.
“Landa was formed with a simple mission, allowing everyone to build their real estate portfolio, share by share,” a March post on the company's blog says. “Transforming properties to shares is game-changing. It creates broader access, new levels of liquidity, better price discovery, and allows more individuals to invest.”
Reality hasn't come close to matching that vision.”
“[Landa] appears to fall into the category of ‘let’s pretend the real estate business is a video game’”
“Like many of the most aggressive acquirers of residential properties in 2021 and early 2022, Landa bought properties in states with the lowest levels of tenant protections, like Georgia. It has 230 properties in the Atlanta area and another 41 scattered across New York, Florida and Alabama, according to its online portfolio.
It borrowed heavily against those purchases, banking that selling shares in the properties on the internet would provide enough equity to hold on to them.
Most of those bets haven't paid off.”
…Landa's venture capital backers funded its purchases of these homes, the majority of which cost less than $300K, well below the average price of a U.S. single-family house — and the kind of for-sale housing that is in desperately short supply.
Just disgusting and shameful. Read the entire article.
“The clever, ambitious young guys that come up with this stuff likely grew up in front of screens while watching others make all kinds of money with software and technology,” Knight said. “Finding a way to efficiently raise money $5 at a time in no way qualifies one to run a real estate rental business…”At some point, you have to deal with problem tenants, unpaid rent, code violations and broken toilets. All the programs and AI in the world don’t help with this.””
…Landa describes 7781 Mountain Creek Way as a “cozy” three-bedroom home with a “spacious front yard.” It hasn't collected rent since January or made a mortgage payment since February.
When a reporter visited last month, the home appeared empty, and there was a lockbox on the front door. A neighbor said the home has been abandoned for four months.
Its facade was deteriorating, and the spacious yard was overgrown. Kudzu vines were invading the cracked driveway, where clothes, boxes, Uno cards, shoes, a Super Mario lunchbox and an electric hand vacuum had been strewn about. A black Dodge Challenger sat abandoned, covered in a layer of dirt, dead leaves and pollen, its trunk left open to the elements. At the foot of the driveway, a mailbox barely hung on to its wood post…
The Landa investor who works in energy said he owns $1K worth of shares across 20 properties. He said he was unaware of the condition of some of Landa's houses. After Bisnow told him that renters had complained of vermin, health risks and neglect, he said he felt deceived.
“I was under the impression that these properties were being maintained,” he said. “I feel gross investing in them right now.”"
There is a subreddit devoted to Landa, if you’re looking for tragicomedy.
The Yen!
So the crowd was short the Yen…
And, over the past month, at least against the dollar, the Yen has risen. I’m going to take a wild guess and say there was also a lot of leverage involved in these genius trades…
Stable Prices, The Fed’s Forgotten First Mandate
This is a great point below. The Fed should have ONE mandate - a stable currency. Their ridiculous mission creep exponentially expanded in 1977, and I'd argue that was about when the American middle-class really began getting destroyed, as wealth-inequality exploded over the next decades.
1) Remove the Fed’s labor mandate entirely. That is what gives the Fed too much power to engineer the economy. Let labor and the economy take care of themselves. If they need help, leave that to the government to clear the obstacles or refine regulations on the playing field to be more effective and less cumbersome, etc.; but keep the Fed entirely out. Dethrone it. That would be a much bigger drop in Fed power than most realize because “maintaining a strong and stable labor market” seems so benign but it grants huge overreach into the economy to accomplish that.
War!
"I think there is ultimately a desire for a great War, not by the Kamala Harris's and Walz's of this world, but by those deep structures of foreign policy which need, if you like, some form of reset for financial reasons, economic reasons essentially. You know the West has created this inverted pyramid of financial instruments, all of these financial structures that sit in derivatives in trillions, and they sit on a tiny base of real collateral of real value, a few bars of gold perhaps here and there, a little bit of real value.
This is why you had Lindsey Graham saying, very clearly, 'Ukraine for America is a gold mine. It it sits on 12 trillion worth of materials of raw materials. We need those to finance ourselves. And we don't want Putin and China to get it.' That's what he was speaking about, saying we need some more actual commodity value at the bottom of our pyramid so we can go on expanding our pyramid— our inverted pyramid that rests on this tiny base of real commodities: oil, gold, rare minerals, lithium, all of the things."
Alastair Crooke Judging Freedom, August 12, 2024 (via Jesse's Café Américain)
One reason the Chinese like gold…
CIA vets Andrew Bustamente and John Kiriakou: "the most talented people leave"
“Former CIA Spies Andrew Bustamente & John Kiriakou debate American politics, the 2024 presidential election, Donald Trump, Israel, Russia, privacy laws, and whistleblowers.”
Highly recommended (and long) discussion.
Check out this anecdote of how "mid-level nobody" John Brennan went from being fired to CIA Director (R.I.P. Martha Kessler)
“On top of Gina Haspel [as CIA director], who does [Trump] name as the National Security Adviser but John Bolton, the most neoconservative, pro-CIA, pro-covert action Republican that was even available for the job, so if Trump wanted to really put his stamp on the intelligence community, he had everybody fooled, because he did exactly the opposite.”
- Kiriakou
Note that Andrew Bustamante - who’s now on the TV series, Beyond Skinwalker Ranch, gave this disturbing answer in a Reddit “Ask Me Anything” session he did in 2018. I’ve asked him about this and never received a reply:
Tulsi Gabbard
“Many of us have known for long time that President Biden has not been the guy calling the shots, he has not been the guy making the decisions, nor has it been Kamala Harris for that matter, nor will it be if she is elected President. It is this cabal of the Democrat Elite, the woke war-mongers made up of the likes of Hillary Clinton and Barack Obama and Tony Blinken and Jake Sullivan and people who are in the military-industrial complex. People who profit from us being in a constant state of war...”
"I have no doubt in my mind [Harris] would immediately feel the need to exert strength and to assert her position and prove that she is a truly strong and powerful commander-in-chief of the United States of America's military, and what better way to do that - what more effective way to do that - than to actually use our military and go out and commit an act of of War? So that sort of need to prove yourself makes you quite easy to manipulate."
“What is called multiculturalism in reality is ideological window-dressing for a policy of mass importing cheap labor to maintain low-wage, high-consumption economies.”
Too Big To Win Excellent summary from Erik Prince (who no doubt has self-interest in his conclusions)
"The Neocon plan for Afghanistan, or at least the story, was to impose a centralized Jeffersonian democracy on a largely illiterate, semi-feudal tribal nation by throwing infinite money at a paper-thin civil society. The result, unsurprisingly, was corruption, not infrastructure…The US response to 9/11 should have resembled a Roman punitive raid, killing all Taliban and Al-Qaeda remnants within reach, including those sheltering in the tribal areas of Pakistan, and then withdrawing. Instead, the Neocons saw a lucrative opportunity to ‘nation build’…
Afghanistan wasn’t even the worst US military failure over the last twenty years. Almost exactly the same Neocon fever dream also played out in Iraq. Here again the fantasy of deposing a dictator in the name of installing democracy in a country with a culture with no history of representative democracy followed its inevitable course. After an initial phase of 24/7 war porn of the US invasion, broadcast by the network media through “embedded journalists,” the Pentagon was quickly dragged into an urban counter-insurgency quagmire involving a Sunni faction rebranded as Al Qaeda in Iraq, Saddam regime holdovers, and Shia insurgents, armed, trained and sometimes led by the Iranian Revolutionary Guard Corps.”
"Bush II was actually the disastrous presidency that current liberals claim that Trump is. The enormity of the Iraq War fiasco alone boggles the mind."
Again, I highly recommend the 2019 article, “At War With The Truth”
I spend my days reading financial pieces like this and political pieces by people like Taibbi, Greenwald etc. I then spend my nights drinking vodka, smoking my pipe, and watching YouTube drivel to clear my brain from the sheer terror of living in an empire on the edge of The Great Abyss.
Tulsi would have been a great VP pick for RFK or even possibly for Trump. She is absolutely correct about the military-industrial complex and she’s a great communicator.