Wall Street's Best Minds

Expect 5 Years of Slow Growth, Tepid Returns

Northern Trust reveals its long-term investment outlook for stocks, bonds, alternatives, and commodities.

By Jim McDonald and Daniel Phillips     

Updated July 31, 2015 2:25 p.m. ET

Editor’s Note: This is an excerpt of a longer piece with charts which can be found on the Northern Trust Website.

Every year, Northern Trust’s Capital Market Assumptions Working Group (CMA) gathers to develop long-term forecasts for economic activity and financial market returns. These forecasts are designed to be “forward looking, historically aware.” This means we seek to understand historical relationships between and across asset classes, while we also attempt to predict how and why these relationships may differ from historical trends in the years ahead. We encapsulate these forward-looking views in our annual list of CMA themes.

In addition to formulating five-year return expectations, the CMA exercise includes specific risks identified by our investment teams. The return and risk expectations are combined with other portfolio construction tools (standard deviation, correlation, etc.) to annually review and/or update the recommended strategic asset allocations for all Northern Trust managed portfolios.


Gravitational forces have finally started to take hold in financial markets. The approximate 5% return of global equity markets over the past 12 months is more in line with the slow global growth environment than the back-to-back 20% year-over-year returns that preceded it.
Jim McDonald
In our annual Capital Market Assumptions (CMA) deliberations, we concluded that the slow global growth environment will continue — a product of current debt levels, anticipated deleveraging, aging developed markets and transitioning emerging economies. The question, of course, is how directly the laws of physics can be applied to financial markets over the next five years. Put another way: How much life is left in the cyclical force of rising asset price valuations and profit margins to offset the structural expectation for continued slow growth?

We believe the transition from cyclical to structural will occur at a modest pace over the next five years, as identified in our Cyclical Meets Structural theme. Helping to ease the transition is our expectation for Low and Slow Monetary Policy. The Federal Reserve is expected to initiate “liftoff” early in the five-year horizon, but the trajectory of rate hikes thereafter is expected to be shallow, with the Bank of England (BoE) following a similar path. Meanwhile, zero interest-rate policy is expected to persist at the European Central Bank (ECB) and the Bank of Japan (BoJ). Low productivity, as “official” numbers suggest, would challenge central bankers’ ability to maintain current monetary policy without some type of upward pricing pressures, either in the real economy (inflation) or financial markets (asset price bubbles).

We believe we are witnessing a Productivity Paradox whereby true productivity is not being appropriately captured and is merely a reflection of the low-demand environment. Given that view, we do not anticipate inflationary problems despite continued accommodative monetary policy over the forecast time horizon. We do see, however, increased risk of financial asset bubbles as investors increasingly accept the fact that we are Living in a Low-Yield World and possibly take inappropriate risks in response. Accommodative monetary policy, alongside globalization and technological advancements, has also been blamed, in part, for rising inequality. But we anticipate Inequality Inaction as redistributionist remedies fall below other priorities on the political docket — both in importance and ease of implementation. All said, we expect The Slow Burn of Low Growth to define the next five years — assigning a low risk to a typical “central banks take away the punchbowl” end to the current expansion, but subject to the “slow burn” of falling demand momentum and without much cushion against potential exogenous economic shocks.

Consistent with the past two years, we generally lowered our risk asset forecasts as valuations have caught up with — and surpassed — underlying growth fundamentals post-financial crisis. However, we still expect mid-single-digit returns for most risk assets, as we anticipate a slow transition from “cyclical to structural” will allow valuations and profit margins to remain elevated. Risk-control asset forecasts, in general, also fell alongside reduced interest rate levels year-over-year.

Five-Year Asset Class Outlooks

Fixed Income Cash return forecasts have risen ever so slightly as one year of zero interest rates on the front end is replaced with one year of below-average rates on the back end. Investment-grade fixed income forecasts remain low given their starting point and have less cushion in the market’s forward rate expectations. High yield’s energy sector-related selloff has provided an opportunity given solid fundamentals.
Equities Developed market equity forecasts continue to come down as valuations march upward in the face of an expected slow-growth environment over the next five years. Although not our base case, the statistical probability of negative equity returns has risen given where valuations currently sit. Emerging market equities continue to have a modest equity premium — below long-term averages.
Real Assets Natural resource/commodity return forecasts continue to face the headwinds of low global demand and transitioning emerging economies, but recent price declines have adjusted to the new environment. Global real estate and listed infrastructure benefit from their diversified risk exposures; their sensitivity to interest rates — which we expect to remain low — helps support return forecasts.
Alternatives We maintained our forecasted private equity illiquidity premium over public equities; purchase prices have increased in aggregate, but financing costs will remain low and opportunities for increased efficiencies remain high. Hedge funds can benefit from nontraditional beta and alpha (in the form of manager skill), but manager selection is essential given the wide dispersion of strategy returns.


The Slow Burn of Low Growth

Global economic demand will be impaired by high aggregate debt levels, unsupportive demographics and transitioning emerging market economies. The debt and demographic issues are inextricably linked, with an aging global population needing to save more — possibly providing funding for profitable projects (e.g., infrastructure). But already-high debt levels and concerns over future demand will serve as a headwind to investment. Financial markets are at low risk of an inflation/central bank tightening policy-induced end to the current expansion over the five-year horizon, but they are exposed to the “slow burn” of falling demand momentum and smaller cushions against economic shocks.
Productivity Paradox
The “official” measures suggest that productivity has fallen to levels not seen in decades across many major developed economies. Meanwhile, developed economy price inflation remains stubbornly low, and corporate profit margins remain persistently high. Falling productivity, as the official numbers suggest, would undermine the continuation of these trends. We believe falling productivity is being incorrectly measured in the official statistics, driven by subdued demand that is artificially pushing productivity lower despite the increased capacity from technological advances. We expect low inflation and elevated profit margins to persist, with a view that any pickup in demand can be sufficiently met by increased supply.

Inequality Inaction

Various elements are contributing to greater income inequality in developed economies. Outsourcing of manufacturing and production jobs has been in play for decades, while easy monetary policies put in place after the financial crisis have disproportionately benefited financial asset owners. More recently, technology has started replacing higher-value white collar jobs. Despite these dynamics, those affected appear less in favor of redistributionist policies than they are of pro-growth initiatives that allow them to participate in the gains. Any efforts to employ redistributionist remedies and/or use the inequality issue for political purposes are not expected to bear fruit amid continued headwinds of austerity and competition.

Low and Slow Monetary Policy

Monetary policy “liftoff ” from the Fed is expected within the early part of our five-year time horizon, but its trajectory should be shallow thereafter; we expect the BoE will follow a similar path. The ECB and the BoJ will maintain rates near zero, first making their way through the quantitative easing gauntlet. All of these “low-and-slow” policies are predicated on the expectations for low inflation and modest growth. While interest rates will remain low, volatility will rise as investors attempt to understand policymakers’ comfort with large balance sheets and plans to address them.

Living in a Low-Yield World

After holding out hope for years, financial market participants are increasingly accepting the view that interest rates could remain low indefinitely — driven by slow growth, tepid inflation and lagging debt issuance relative to investor demand. This low-yield environment reduces the yield “cushion” granted investors, versus when most thought global interest rates would normalize to historical levels. It likewise creates significant challenges for financial entities (e.g., insurance companies) burdened with above-market, long-term fixed-rate liabilities.

Cyclical Meets Structural
Global developed-market equity valuations have benefitted immensely from ultra-accommodative monetary policy in the post-financial crisis environment and now sit at levels significantly above long-term historical averages. The cyclical upswing in equity prices still has support from continued accommodative monetary policy, but will eventually meet the reality of the structural low-demand outlook. We believe equity returns will be in the mid-single-digit range as both valuations and profit margins are slow to revert to historical levels. But we are mindful of the increased probability of a cyclical rollover driven by structural forces.
Developed economy real growth has averaged 1.8% annually over the past five years after averaging 2.8% annually prior to the financial crisis (data going back to 1980). We expect more of the same over the next five years and forecast a 1.7% real growth rate. The primary factors preventing acceleration to long-term trend growth levels are the high aggregate debt levels and quickly aging demographics.

These two issues have always been on the long-term horizon (and fairly well understood) but now are increasingly within our five-year window. After rising markedly post-financial crisis, government debt levels as a percent of gross domestic product (GDP) have slowed their increase over the past year as austerity measures have been implemented. However, deficits as a percent of GDP continue to be more or less in-line with nominal economic growth — meaning overall debt levels will continue to remain elevated. Absent stronger organic economic growth (more on that in a bit), fiscal budgets will need to be cut further in order to lower overall debt levels. It will be a difficult process — constituencies are already feeling the pain of recent reductions — made more complicated by mounting entitlement bills.

McDonald is chief investment strategist of Northern Trust and Phillips is the firm’s investment strategist. Sanford Carton, an investment analyst, also contributed to this commentary.

The New Slow-Growth Normal and Where It Leads

On the 800th anniversary of the Magna Carta, an unhinged regulatory state is our doomsday machine.

By Holman W. Jenkins, Jr.               

Updated July 31, 2015 8:33 p.m. ET

                                              Photo: Corbis

AT&T T -0.17 % is a taxpaying corporate citizen in good standing and agreed to a perfectly legal takeover with fellow taxpaying corporate citizen DirecTV. We know it was legal because the Justice Department approved the deal, saying it raised no concerns under the antitrust laws.

And yet to proceed with a consensual, private-market transaction AT&T still had to concede to a long list of demands, without a meaningful recourse—fighting in court would have taken too long and destroyed the value of the deal—presented by another government agency, the Federal Communications Commission.

Who cares about the swelling power of bureaucratic discretion in Washington over big business, since it doesn’t threaten your personal freedom and prosperity too. Or does it? That question lurked in the background of a Hoover Institution discussion on June 25, hosted by economist and podcaster extraordinaire Russ Roberts. The occasion was the 800th anniversary of Britain’s Magna Carta, a landmark in the struggle for a rule of law.

One of the participants, Hoover economist John Cochrane, spoke of fears that America is drifting toward a “corporatist system” with diminished political freedom. Are rules knowable in advance so businesses can avoid becoming targets of enforcement actions? Is there meaningful appeal? Are permissions received in a timely fashion or can bureaucrats arbitrarily decide your case simply by sitting on it?

The answer to these questions increasingly is “no.” Whatever the merits of 1,231 individual waivers issued under ObamaCare, a law implemented largely through waivers and exemptions is not law-like.

In such a system, where even hairdressers and tour guides are subjected to arbitrary licensing requirements, all the advantages accrue to established, politically-connected businesses. Stagnation is the result.

Another participant, Lee Ohanian, a UCLA economist affiliated with Hoover, drew the connection between the regulatory state and today’s depressed growth in labor productivity.

From a long-term average of 2.5% a year, the rate has dropped to 0.7% in the current recovery. Labor productivity is what allows rising incomes. A related factor is a decline in business start-ups. New businesses are the ones that bring new techniques to bear and create new jobs. Big, established companies, in contrast, tend to be net job-shrinkers over time.

“We seem to be heading into a 1.5%-2% new normal [economic] growth forever, versus, say, 4%,” Mr. Ohanian added. “You want to pay back the debt, pay out Social Security, avoid a Greek crisis—that’s the only thing that matters. The emergence of a slow-growth new normal is, I’d say, the greatest economic threat we face.”

A third participant, Cato Institute scholar Arnold Kling, speculated where these trends, unless changed, might be leading—to a U.S. sovereign debt crisis, in which a stagnant U.S. can’t meet its obligations to bondholders and retirees, and political chaos and repression ensue.

Straight lines can always be extended to oblivion, of course, and it’s the discontinuities that make history. Tea party types talk a good game but many are dependent on an unreformed Social Security and Medicare, and lately some have rallied to Donald Trump, who distracts them by blaming immigrants without actually offering a solution to immigration or consecutive sentences on any policy question. Meanwhile, the Barack Obama-Hillary Clinton Democratic Party offers bigger, more intrusive government as the solution to the problems of traditional minorities, the economically insecure and target blocs like single women or the LGBT community.

A deus ex machina is needed, and happily a precedent exists. Now if American political economists would just get around to explaining the most ignored moment in our history. We’re referring to the unexpected (and undemanded by voters) but remarkably productive deregulation of energy and transportation during the Carter and Reagan years.

Recall that it was ultraliberal Ted Kennedy who led the fight in Congress to decontrol the airlines. It would be good to know how this consensual revolution came about. (If we had the answer, we’d tell you—but it seems to have begun with policy thinkers who, amazingly, were able to communicate actual ideas to actual politicians.) In any case, without a similar bipartisan recognition that what we’re doing today isn’t working, our future is a grim one.

Credit Spreads: Ominous!

By: Bob Hoye

Fri, Jul 31, 2015

The following is part of Pivotal Events that was published for our subscribers July 23, 2015.

Credit Markets

We have been plotting the path of US corporate credit spreads against the pattern that set up the dislocations in 1998 (LTCM), 2007 (Bear Stearns) and in 2008 (the crash).

A breakout to extended widening was accomplished earlier in the month. This was on track and within the same time in the three previous examples. Early July.

The next and more threatening breakout is scheduled for late in July.

We doubt that the Fed has this as number one on their list of bad things to prevent. Meanwhile, the FMOC has be going on--and on--about raising the administered rate, which has been a dangerous distraction. Hadn't thought much about this. Perhaps it's been considered as a symbol of the advent of central bank prudence, but market forces have not allowed them to increase the rate.

Previous Pivots included the charts for 1998 and 2007. Now it is time to include charts for 2008 and 2015, which follow.

The main issue is that credit spreads remain in the path to serious dislocation as exampled in 2008, 2007 and 1998. The killer reversal in spreads in 2000 was only one month from warning to the stock market peak.

We remain positive on the long bond. The initial target on the TLT has been 120. This week it has moved above the 50-Day ma at 118.22 and is at 119.45.

After the disaster ended in December, JNK enjoyed a vigorous rally from 36 to 39 in May. The latter part of the rally was seasonal and then it has accomplished the seasonal reversal.

Junk action is not good. The last rally to 38.38 failed at the 200-Day. At 37.74 today, it has taken out the March setback. Taking out the panic low of 36 would, well, be a panic. Spreads, as plotted by JNK/TLT, are threatening to slip below the 200-Day ma.

Today's action in credit markets is increasing the warning on the inevitable collapse of speculation.

Precious Metals

At major tops in this sector, we use momentum on the silver/gold ratio. The RSI on the ratio soared to 92 in 2011. The only other time it had been there was at the fateful peak in 1980.

The last "sell" from this indicator was a weak one in May of this year. In our November study, Caveat Venditor, we noted what was needed to determine an important bottom. This would be gold stocks beginning to outperform the bullion price and silver beginning to outperform gold. GDX outperforming the S&P would also be constructive.

These had their last up in May.

Still patiently holding large numbers of junior golds, this page would welcome a cyclical bottom and eventual recovery in the sector.

However, we have to play the hand we are dealt and it is comforting to know that within the next phase of the post-bubble contraction there will be times when the sector does very well.

After August, stock markets could suffer a concerning loss of liquidity, which may further depress precious metal stocks. However in magnificently grasping at straws, banks stocks sold off hard as the Tech-Bubble soared to the moon. Golds are being hit hard now.

What works for gold and gold stocks at severe lows is our Downside Capitulation model. This is registering Daily signals now and a Weekly signal would be associated with a cyclical bottom.

"As the touchstone tryeth gold, so gold tryeth men."

US Credit Spreads: 2008 Crash

US Credit Spreads: 2008 Crash
  • The initial breakout was accomplished at 300 bps on June 27.
  • The critical breakout was achieved at 335 bps on August 7.


  • The initial breakout was achieved at 124 bps on June 25.
  • The critical breakout occurred at 135 bps on July 20.



US Credit Spreads: 2015
  • The initial breakout occurred at 192 bps on June 29.
  • At 199 bps now it extends the trend.
  • Rising through 210 bps will be critical.
  • As with previous examples, it would begin the transfer of power from central bankers to margin clerks.
Yield Curve and Bank Stocks

Yield Curve and Bank Stocks
  • Note the reversal in the curve at close to general stock market peaks in 2007 and in 2000.
  • Banks sold off during the Tech mania and then became the "go to" item.
  • In 2007, banks peaked and reversed with the change in the curve.
  • The curve is not good in determining important bottoms.

Advisor Profiles

A Top Advisor’s Case for Bonds

Randy Garcia, Barron’s No. 1 advisor in Nevada for the past two years, recommends a hefty fixed-income allocation. Here’s why.

By Michael Vallo           

Aug. 1, 2015 1:47 a.m. ET

At a time when many investment pros are skittish about bonds, Randy Garcia stands out. The Las Vegas–based financial advisor is allocating nearly half of his average client’s portfolio to bonds and other fixed-income investments. This isn’t some high-rolling wager. To the contrary, Garcia thinks well-chosen bonds remain one of the most sensible ways to fund a retirement—the goal of most of his clients.

Many advisors, concerned by low yields and the risk that rising rates will hurt bonds’ value, have been moving clients into “alternative investments,” such as hedge funds and private equity. Top wealth managers have scaled back bond allocations to less than 30% of portfolios, while boosting alternatives to nearly 20%, a Barron’s study found.
BAD ALTERNATIVE Hedge funds are “a far better deal” for managers than for investors, Garcia says. Photo: Jacob Kepler for Barron's
But to Garcia, alternatives are no alternative at all. Most fail to meet his basic requirements for investments: no leverage, high transparency, and clarity on downside risk. He’s particularly wary of hedge funds. “It’s a far better deal for the hedge fund manager, who’s charging a 2% flat fee, plus a 20% performance fee, than for the client,” he says. “It leaves too little profit potential for the investor.”

THE DESIRE TO MAKE CLIENT NEEDS his first priority is at the heart of the Las Vegas native’s firm, the Investment Counsel. While he never planned to start his own business, he found that it was the easiest way to align clients’ interests with his own at a time—unlike today—when even top brokers operated on a commission structure.

Earlier, Garcia spent 10 years at Paine Webber, where he built the largest affluent-client book in Nevada. When he launched his own shop, in 1987, he persuaded all but two clients to move with him. Since then, his client base has grown tenfold, to 225 families. Garcia has been No. 1 in Nevada in Barron’s Top 1,200 Financial Advisors ranking for the past two years.

His bond-heavy strategy is a reflection of his client base, which has changed dramatically over his 37-year career. At one point, businesses, particularly those in the construction industry, made up a large portion of his book. Today, many of their owners have cashed out and retired, meaning most of his clients now are affluent families. For many of them, avoiding risk is paramount.
Despite being well above average, Garcia’s fixed-income allocation is actually smaller than he usually recommends. With the persistent uncertainty over interest rates, he has pared the bond portion to 50% from 60%.

He likes the JPMorgan Core Bond Select fund (ticker: WOBDX) because it tilts toward the most liquid federal-government and mortgage-backed securities. Garcia says that mortgage securities offer flexibility in a rising-rate environment because they make regular payments of principal, as well as interest, and those funds can be reinvested at higher rates.

“If interest rates go, up, I have cash available because of the principal payback to reinvest,” he adds. “But if interest rates go down as a result of the world getting uglier, I’m holding Treasuries and Treasury-like securities that are likely to rally the most.” In total, higher-quality mortgages constitute about half of his fixed-income holdings, while Treasuries make up 12%.

Garcia recently added a 7% allocation to bank-loan funds, which have adjustable rates that will climb if market rates do. Bank loans are below investment-grade, but Garcia buys only those rated BB- and B-, the highest quality available.

ON THE EQUITY SIDE, he greatly favors domestic stocks, allocating less than a tenth of the portfolio to foreign shares. He has very little emerging-market exposure. “The risk and the uncertainty is too high with respect to China, and China is such a large piece or portion of the emerging-market index,” he observes. For international exposure, he likes the Lazard International Strategic Equity fund (LISIX).

In the U.S. market, he prefers growth to value, particularly large-cap stocks. “Small-growth and mid-growth valuations are trading at far higher levels—extreme levels actually,” he says.
In general, he prefers best-ideas funds, typically smaller portfolios of managers’ favorite stocks.
Specifically, he likes the Sequoia (SEQUX) and Vulcan Value Partners funds (VVPLX).

Garcia’s modernistic office sports a conference table based on the wing of a 1930s biplane, and offers a view of the periphery of Red Rock Canyon. Near his desk sits an antique slot machine disguised as a pinball game. With a Wall Street theme, it’s the only nod to chance in one of the few corners of Sin City devoted to avoiding risk. 

What You’ve Heard About Gold and Interest Rates is Dead Wrong

US stocks have done something they hadn’t done in 111 years.

After rallying 26% in 2013 and 12% in 2014, the S&P 500 has gone nowhere this year. It gained just 0.6% in the first two quarters of 2015.

Thomas Lee, the Head of Research at Fundstrat Global Advisors, found that this is extremely rare.

Lee found that the US stock market almost never “goes nowhere” two quarters in a row. The last time it happened was in 1904.

Following those two “go nowhere” quarters in 1904, the Dow Jones Industrial Average (an index of 30 large US stocks) had a huge rally. It gained 43% in the next six months.

Big moves, up or down, can often happen after a market goes nowhere for a long time. It’s why a famous trading quote says, “Never short a boring market.”

We don’t expect a huge 1904-like rally anytime soon. But a sizable move, up or down, wouldn’t surprise us after the stock market breaks out of its current trading range.

This chart shows how the S&P 500’s 87% rally since October 2011 is stalled for now:

• While the S&P 500 is flat this year, the Nasdaq is up 10.3%...

But there are signs that the Nasdaq’s rally isn’t as strong as it looks.

The Nasdaq is an index heavy on tech stocks. Last week, The Wall Street Journal wrote about the “lack of participation” in the Nasdaq’s rally:

More than half of the index’s gain this year is due to three stocks that also happen to be among the largest by market capitalization: Apple Inc., Google Inc. and Amazon Inc., according to Mike O’Rourke, chief market strategist at JonesTrading.

Throw in biotechnology company Gilead Sciences Inc., Facebook Inc. and Netflix Inc., and the figure rises to 80%.

Six large stocks account for 80% of the Nasdaq’s gains this year. Generally, it’s not ideal for a few big stocks to drag an index higher. It’s healthier when a lot of stocks contribute to a rally.

• This is part of the stock market’s “bad breadth” problem…

Market “breadth” refers to the number of stocks participating in a bull or bear market.

Professional investors use it to measure a market’s health.

On Tuesday, 27 stocks on the New York Stock Exchange (NYSE) hit one-year highs. But 164 stocks hit one-year lows. In a healthy market, more stocks set new highs than new lows.

This isn’t good news… but it doesn’t mean you should panic and sell all your stocks. The market has had “bad breadth” several times in the last few years, but it was a false alarm every time. After all, we’re still in a bull market. As we mentioned, the S&P 500 has now gained 87% since October 2011.

And it hasn’t “corrected” by 10% or more in 46 months.

Our friends at Daily Wealth Trader explained yesterday that “bad breadth is reason for caution... but not a ‘sell everything’ panic. The big picture in stocks is still up.”

• This afternoon, the Federal Reserve announced that it won't raise interest rates yet...

This was expected. Bloomberg reports:

While economists in a Bloomberg survey saw virtually no chance of an interest-rate rise this week, investors will scrutinize the statement for any hint that policy makers are inclined to move in September. The odds of an increase at that meeting were put at 50 percent, according to the survey.

If the Fed does raise rates in September, it will be for the first time since 2006.

Conventional wisdom says that rising rates are bad for gold. The argument goes that gold doesn’t generate income. So when interest rates rise, people prefer to own bonds and dividend-paying stocks instead of gold.

But it turns out that’s dead wrong. The price of gold actually goes up when the Fed raises rates.

HSBC’s Global Research team found that the price of gold has actually risen the last four times rate hikes began. A recent article by The Reformed Broker explained…

History shows that gold prices also fall leading into a rate hike and generally rise, though sometimes with a lag, after the first rate hike… Investors are apt to unload gold in anticipation of tightening monetary policies. This negative pressure is sustained until the Fed announces a rate hike, which then eases the negative sentiment towards the yellow-metal. This explains the subsequent rallies in gold that occurred shortly after the Fed announced the first rate hike in the last four tightening cycles.

This is an important finding. Most investors assume that higher rates will hurt gold. But the data shows that rate hikes have actually been good for gold in the recent past.

We borrowed this chart from HSBC to show what happened the last time the Fed began a rate hike cycle in 2004. As the Fed raised rates (represented by the red line), the gold price went up (black line):

Chart of the Day

Last week we told you about the bloodbath in commodities like oil, lumber, and coffee. As a group, commodities are at their lowest level since 2002. They’re even cheaper than they were during the financial crisis.

The chart below shows a simple ratio between the Bloomberg Commodity Index and the S&P 500. The Bloomberg Commodity Index tracks 22 different commodities.

The higher the ratio, the cheaper commodities are compared to stocks. And as you can see, the commodity/stock ratio is at an all-time high right now.

This shows that commodities are the cheapest they’ve ever been compared to US stocks.

Doug Casey on the Real FIFA Scandal

by Doug Casey

July 31, 2015

Recently, high-ranking officials at FIFA, the world’s governing soccer (aka “football”) body, were charged with corruption and fraud. The US’s Federal Bureau of Investigation (FBI) is deeply involved in the case. Doug Casey weighs in on the real scandal… the one you’re not reading in mass media.

The truth be known, I really don’t give a damn about soccer. Nor do most Americans.

Indeed, until recently, all that most Americans knew about “football” was that Brandi Chastain ripped off her jersey, to display a great physique, after she scored the winning goal for the US in the 1999 FIFA Women’s World Cup playoff against China.

However, “football”, as it’s known to the 6.7 billion non-Americans on the planet, is revered by the rest of the world as a secular religion.

But now football, and FIFA, the sport’s governing body, is in the news because of an alleged corruption scandal. Let’s not discuss the details of who was bribing whom, and where all the money went, for two reasons.

First, that’s all over the Internet, and you don’t need me to repeat it here.

Second, and much more important, it’s really none of our business. Despite the fact that the FBI has taken it upon itself to prosecute at least 14 FIFA officials for corruption.

Why is it none of our business? Because FIFA is a Swiss association that’s been around over 100 years. All of its officers and directors are non-US persons. And about 99% of its players, officials, and spectators are non-American.

But that doesn’t matter. The FBI has decided to prosecute FIFA’s officials for corruption, and is successfully moving to have them all extradited to the US for trial.

Were FIFA officials treating themselves to huge salaries and expense accounts, and paying and receiving millions to decide where the World Cup should be played? Of course. Is that corrupt? We have to first define “corruption.” I devote a lot of thought to the subject here, and suspect you’ll find it of interest. But, essentially, corruption is about a betrayal of a fiduciary trust. In simple terms, it’s sticking your hand in a till that you’re supposed to guard for the interest of someone else.

Based on that, are FIFA officials corrupt? Their behavior is certainly unsavory and unseemly.

Nobody likes people who take advantage of their positions to line their pockets. But they are actually less morally culpable than the directors and officers of many US public corporations who pay themselves scores of millions of shareholder dollars, often while running the companies into the ground.

And less morally culpable than politicians who dispense favors and contracts with public funds. Corporate directors and politicians have fiduciary responsibilities. FIFA, however, doesn’t have shareholders. FIFA is really only responsible to the 200-something countries that vote to elect its officials; it’s essentially a political body.

Its “stakeholders” (a morally loaded and highly problematical term that’s gained currency in recent years) are the fans who watch football. They’re happy as long as someone, anyone really, makes sure the games are played.

In other words, FIFA and the people who run it are at liberty to do as they wish with funds and favors. It may seem sleazy, that they allocate venues for the World Cup according to who pays the most (even under the table). But since the association doesn’t have a fiduciary responsibility, it’s not corrupt.

If corruption charges are warranted, it’s against the presidents of the countries that are members of FIFA. Any self-respecting president today leaves office as at least a billionaire. If anything, FIFA is a more of a co-conspirator, or even a victim, rather than a perpetrator. If even Mother Teresa was in charge of FIFA, I would expect her to do the same as the indicted officials, actually. She’d just spend the proceeds on bandages instead of parties.

The real problem is that the whole system is politicized, much like the Olympic Games. FIFA, and the Olympic Committee too, have turned sports into showcases for nationalism. Corruption is a necessary and inseparable part of politics.

The solution to the problem is to start a new sanctioning group, organized with new teams, players, and officials. Let them organize their own World Cup games wherever they wish, on whatever terms they wish. The fans can support whomever. It’s actually a non-problem. Maybe the new organization will change the rules so that they more closely resemble those of Rollerball. Maybe they’ll cultivate attendance by semi-pro football hooligans among the fan base. Who cares?

But wait. That’s where the US government, the world’s arbiter of morality, comes in.

What’s really scandalous about the FIFA affair isn’t the alleged corruption, but the US government’s reaction to it. Nobody, anywhere, seems to be asking how the US can not only unilaterally bring charges, but then extradite foreign citizens to stand trial in the US. And for things that aren’t even real crimes. Without a peep from anyone.

It’s part of an accelerating pattern that Pastor Martin Niemöller might have recognized in a different context. You’re likely familiar with his poem about the passive reaction to the Nazis and their aggressions:

First they came for the socialists, and I did not speak out --
because I was not a socialist. Then, they came for the trade unionists, and I did not speak out -- because I was not a trade unionist. Then, they came for the Jews, and I did not speak out -- because I was not a Jew. Then, they came for me -- and there was no one left to speak for me.

How might that poem read today?

First they sent a SWAT team to New Zealand to capture Kim Dotcom, a German national, for something that’s legal in both New Zealand and Germany, and I did not speak out -- because I was not in the computer business. Then, they conducted drone strikes and assassinations and renditions around the world, and I did not speak out -- because I was not a swarthy foreigner. Then, they invaded countries, from Granada and Panama, to Afghanistan and Iraq, and I did not speak out -- because I believed we were always on the side of truth and justice. Then, they prosecuted the FIFA guys, and I did not speak out -- because I couldn’t care less about rich guys making money from soccer. Etc. Etc.

Specific charges (brought under the RICO Act, an abusive monstrosity) are wire fraud, racketeering, and money laundering. Passive and thoughtless Americans accept these charges as if they were part of the cosmic landscape. But none of them are common law crimes.

“Wire fraud” is simply the use of electronic media to assist in the commission of an alleged crime. But why does that constitute an extra crime?

“Racketeering” is generally just a pattern of extortion. But you can’t have extortion without a threat of violence. How was FIFA threatening violence?

“Money laundering” is a very recently manufactured crime, generally the disguising of the source of funds. Why is that even a crime?

All of these charges exist only to make the prosecutor’s life easier. The fact that these things are being alleged is the real crime.

You might ask why is the US government involved at all in international soccer. FBI Director James Comey gave an Orwellian answer shortly after the indictments. Get a load of this:

If you touch our shores with your corrupt enterprise, whether that is through meetings or through using our world-class financial system, you will be held accountable for that corruption.

In other words, the Department of Justice’s indictment alleges that since a part of the alleged corruption may have been planned in the US -- even if it was then carried out elsewhere -- they are in charge. And the use of US banks to transfer US dollars gives them additional jurisdiction.

It’s a sign of how degraded the world’s moral climate has become that nobody even comments on the absurdity of all this, much less is outraged.

That the US government can get away with all this is analogous to the Haitian government arresting an American baseball player for violating one of their laws because the game is played with balls manufactured in Haiti. It’s likely the charges were brought because Russia was awarded the venue for 2018, and Washington wants to punish its designated enemy.

Well, fear not. This is all just, in relative terms, a tempest in a toilet bowl. Much more serious things are brewing. Not just ISIS in what used to be Iraq and Syria. Or China in the Spratly Islands. Or the separatist provinces in the eastern Ukraine.

International Business

Bailout Money Goes to Greece, Only to Flow Out Again


JULY 30, 2015


A Greek flag floating in the sea at the Kalamitsa beach on Skyros island. Credit Louisa Gouliamaki/Agence France-Presse — Getty Images                    

A few hours later the man touched down in Frankfurt, where he quickly deposited the money in a German bank.
The stash was part of 40 billion euros, or about $44 billion, that businesses and individuals have withdrawn from Greek banks since December, exacerbating the country’s financial woes.
The cash exodus is a small piece of a bigger puzzle over why — despite two major international bailouts — the Greek economy is in worse shape and more deeply in debt. It is a politically charged issue that will color the negotiations on a new financial assistance package worth €86 billion, about $95 billion. 

Much of the previous bailout funds have gone to pay off Greek bonds held by private investors and other eurozone governments, rather than stoke growth. Within Greece, the money was supposed to help replenish banks’ capital, to get them lending to revive the moribund economy.

Instead, it sat in banks’ coffers as bad debts piled up, and it bought time for Greeks and foreign investors to get their money out.
“I know it’s not patriotic,” said the cash-toting Greek businessman, who spoke on the condition of anonymity to protect his reputation. But the money, about €14,000, represented the life savings of his retired parents, he said, and it was no longer safe in the local bank.
Since 2010 other eurozone countries and the International Monetary Fund have given Greece about €230 billion in bailout funds. In addition, the European Central Bank has lent about €130 billion to Greek Banks.
The latest financial aid package is following a similar pattern to the previous ones. Only a fraction of the money, should Greece get it, will go toward healing the economy. Nearly 90 percent would go toward debts, interest and supporting Greece’s ailing banks.
The European Commission has offered to set aside an additional €35 billion development aid package to jump-start the economy. But the funds are difficult to obtain and will become available only in small trickles later in the year.
“The bailout is mostly going to banks and our creditors,” said Nikos Kalaboyias, 54, a grocery store owner in central Athens who said his clients had stopped shopping for all but the most basic goods, putting the business he has run for more than a decade in jeopardy.
“I hope it will help, but the banks are not lending, and I see no sign that any money is going to help this economy,” he said.
In Germany and other northern European countries, the opposite sentiment prevails. The wealthier countries lent huge sums to Greece, the thinking goes, and the Greeks wasted it.
“The country’s economy is destroyed,” Wolfgang Schäuble, the German finance minister, said in an interview published last week in the German magazine Der Spiegel. “The Greek government has to answer for that.”      

In the talks between Greece and its creditors, there is a growing recognition that Greece’s debt burden must be eased. On Thursday, a senior official at the International Monetary Fund said that European countries needed to come up with a concrete plan for easing Greece’s debt before the fund would participate in any new bailout.
But leaders elsewhere in Europe believe that Greek leaders have not done enough to reduce debt and achieve better growth, by selling state assets, cracking down on tax evasion or reducing red tape.
“Some debt relief will be needed,” said a senior official at the European Central Bank who spoke on condition of anonymity. “But it’s important that it be linked to reforms which ensure that Greece can grow again.”
Growth was never the primary consideration when Greece first started receiving bailouts.
Back in 2010, political leaders in the eurozone as well as top officials of the International Monetary Fund were terrified that Greece would default on its debts, imposing huge losses on banks and other investors and threatening a renewed financial crisis. The debt was largely held by Greek and international banks. And Greece, officials feared, could be another Lehman Brothers, the investment bank that collapsed in 2008, setting off a global panic.
Forcing banks to take losses on Greek debt “would have had immediate and devastating implications for the Greek banking system, not to mention the broader spillover effects,” said John Lipsky, first deputy managing director of the I.M.F. at the time, during a contentious meeting of the organization’s executive board in May 2010, according to recently disclosed minutes.
To prevent Greece from defaulting on debts, creditors granted Athens a €110 billion bailout in May 2010. But that did not calm fears that other heavily indebted countries might also default. The Greek lifeline was soon followed by bailouts for Ireland and Portugal.
When Greece again veered toward a default in summer of 2011, it got a second bailout worth €130 billion, not all of which has been disbursed.     
Instead of writing off those countries’ debts — standard practice when a country borrows more than it can pay — other eurozone countries and the I.M.F. effectively lent them more money. One of the main goals was to protect European banks that had bought Greek, Irish and Portuguese bonds in hopes of making a tidy profit.
The banks and investors did not escape the pain. In 2012, when Greece was again at risk of default, investors accepted a deal that paid them only about half the face value of their holdings.
Much of the aid dispensed to Greece has revolved around banks. Since 2010, Greece has received €227 billion from other eurozone countries and the I.M.F. Of that, €48.2 billion went to replenish the capital of Greek banks, according to MacroPolis, an analytics firm based in Athens. More than €120 billion went to pay debt and interest, and around €35 billion went to commercial banks that had taken losses on Greek debt.
In addition, the European Central Bank has provided more than €130 billion in loans to Greek banks, including about €90 billion in the form of short-term emergency cash. The banks are closely intertwined with the government, which owns majority stakes in three of the four largest Greek lenders.
There is a logic to saving the Greek banks. Their collapse would have terrible consequences for the already moribund Greek economy.
“Whenever something happens with the banks, the whole economy stops,” said Nikos Vettas, the director general of IOBE, a prominent economic research organization based in Athens. “So money was given to the banks and the idea was that once they were stabilized, the economy would start running again. At least, that was the plan.”
But the banks never healed enough to start lending more into the economy, and foreign investment barely trickled in. Worse, the money provided to bail out Greek banks was not a gift. It was a loan. So the sums added to Greece’s already huge debt.
In a few years, according to I.M.F. projections, Greece’s debt will be equal to about twice the country’s annual economic output.
Economists say the new bailout package will hardly make things better.
About €25 billion of the latest bailout would finance yet another rescue of Greek banks. They now need even more money to make up for billions of euros in deposits withdrawn by Greeks fearful of political turmoil and restrictions on money transfers. The capital controls now in place are further squeezing business.
The rest of the €86 billion will be used to make debt and interest payments to creditors, particularly the E.C.B. and the I.M.F., according to Oxford Economics, a British analytical firm.
“They are borrowing new money to pay old money. That’s the trap they’re in,” said Ashoka Mody, a former I.M.F. economist who now teaches at Princeton. “The Greek tragedy is that there are no winners.”

viernes, agosto 07, 2015



Stranger in a Strange Land

By: The Burning Platform
Saturday, August 1, 2015

"Thinking doesn´t pay. Just makes you discontented with what you see around you."

  ~ Robert A. Heinlein, Stranger in a Strange Land

I wish I didn´t think when I travel to NYC. It only makes me discontented. My last article about New York City -- Uneasy in NYC -- produced a lot of commentary pro and con about New York. That two day trip last October was more eventful as we met world renowned financial mind David Stockman. When my son got notice he had to leave for Penn State this weekend to start his job as an RA (saving his old man $6,800 in rent), we decided to do something fun before he left. The choice was a one day sightseeing excursion to the Big Apple.

My wife plotted out the day and the boys and I just went along for the ride. The plan was to drive to the Hamilton Station and catch a NJ Transit train to Penn Station. We got up early and were on the road by 8:10. We should have been able to easily make the 9:22 express.

Everything was going smoothly until we were ten miles from the station on Route 1. First there was an accident, then one car overheated in the left lane, then another car overheated in the left lane. We picked a day with a heat index of 100 degrees to go to New York.

We didn´t make the 9:22 express. We got the last spot in the parking lot about a quarter mile from the station. We made the 10:00 local. I expected a 50 year old piece of crap train with standing room only to pull into the station, but to my pleasant surprise a brand new double decker train with dozens of open seats pulled in. Life was good again. We got a four seat combo and settled in for our 1 hour and 15 minute trek to Penn Station. The family were pecking away on their iGadget phones while I started reading my tattered copy of Running Man, bought at the used book store -- Hooked on Books -- in Wildwood a few weeks ago.

It looked good for a 11:15 arrival until the engineer came over the loud speaker (which sounded like the teacher from Charlie Brown) and announced that a train had stalled in the tunnel and we´d be delayed for 30 minutes. The concept of on-time is meaningless in our paradise of crumbling infrastructure. As you get closer to New York, the decay comes into clear view.

Dilapidated vacant factories covered in graffiti dot the landscape along the tracks. The disappearance of our manufacturing base is clearly evident. Instead of producing capital goods we produce financial derivatives, debt and despair. As you approach the tunnel into New York you see the Empire State building and off in the distance the new Liberty Tower, where you once saw the Twin Towers.

We eventually made it to Penn Station at about 11:40 and began our day of being tourists in a strange land. Penn Station was bustling with activity. New Yorkers, foreigners, and out of towners mixed in a whirl, as they rushed to and from trains or hustled to their high rise office jobs. Our day was semi-plotted out in a way to try and keep our two teenagers entertained.

First lunch on a ferry cruising on the Hudson, then the top of Rockefeller Center, maybe some shopping (not my choice), then Central Park (my choice), then dinner, and the train back to my land of PA. And as luck would have it, walking 5 to 10 miles on one of the hottest days of the summer.

As strangers in a strange land we had to get our bearings once we exited Penn Station. We were at 34th Street and 8th Ave and had to walk to 41st on the Hudson. The kids got to experience the beauty of NYC almost immediately. Two cars attempted to aggressively pass each other at the same time resulting in a side view mirror flying 20 feet through the air into the middle of the intersection. I chuckled.

My wife had found a cruise boat called the North River Lobster Company where there was no charge to get on board. It was essentially a floating restaurant/bar that cruised on the Hudson for 45 minutes while you ate, drank and enjoyed the scenery. By the time we reached the boat, we were sweating, hungry and thirsty. We settled down at a table in the air conditioned interior and wolfed down some lunch. A cup of sangria took the edge off.

The next stop on our journey was Rockefeller Center at 49th Street between 5th Ave. and 6th Ave. It was 25 years ago when the Japanese bought Rockefeller Center for $2 billion, marking the top in their stock and real estate markets. The Chinese bought the Waldorf Astoria for $1.95 billion last Fall, likely signaling another top. History may not repeat exactly, but it does tend to rhyme.

By the time we reached Rockefeller Center we were drenched in sweat again. We needed some overpriced Ben & Jerry´s ice cream to sustain us. Then it was time to make our way to the Top of the Rock for the low low price of $30 per person. We took the elevator to the 67th floor and disembarked with the other suckers. The views are spectacular. Until some schmuck gets in the way of your picture.

As usual, I couldn´t just enjoy the scenery. I had to think about what I saw, resulting in discontent. When you first look out over the vast expanse of concrete jungle, the oasis of green known as Central Park seems completely out of place. Without this sanctuary within the millions of square feet of concrete office towers, retail, restaurants, and luxury penthouses, New Yorkers would go crazy in this madhouse of financial shenanigans.

The city moves at a breakneck pace. Cars, trucks, bikes, and people, rushing like mad in a swirl of activity amounting to nothing. New York City produces nothing. It trucks in baubles and designer clothing from China and sells them at outrageous prices to lemmings with credit cards. It trucks in all the food for its five star restaurants catering to the glitterati, its Hell´s Kitchen pubs, and its famous delis. The only thing New York City produces is arrogant Wall Street assholes and financial derivatives of mass destruction -- designed to impoverish the masses. It also produces egotistical control freak politicians who enforce surveillance state measures on its population in the name of safety and security.

The second thing I pondered was the engineering marvel that New York City truly is. It´s a testament to brilliant engineers and architects, and mostly to the construction workers who risked life and limb to build the hundreds of 50 story skyscrapers. They harnessed all of the ingenuity, mathematical excellence, and technological advancements of our society to create a wondrous spectacle.It´s a wonder of the world.

Just the thought of keeping these buildings heated, cooled and supplied with water boggles the mind. But it also reveals the fragility of the entire paradigm. The modern day New York City has been built upon a foundation of cheap plentiful oil, Wall Street profits and taxes, an exponential increase in consumer, corporate and government debt, and endless propaganda creating a delusional population of narcissistic mindless consumers.

These technological marvels would become concrete and glass tombs within a week if the power grid ceased functioning. We´ve already seen the helplessness of the population when tragedy suddenly strikes in the case of 9/11 and Hurricane Sandy. There are only a couple bridges and tunnels in and out of NYC. The city is in a normal state of gridlock on an average day. During a crisis the gridlock will lead to the deaths of thousands. If the water supply was disrupted, panic would ensue.

There are 1.6 million people living on the 23 square miles that encompass Manhattan Island, with another 2.3 million workers, tourists, and students piling in on an average day. The entire edifice of debt financed infrastructure is dependent upon the high finance Lords of the Manor on Wall Street generating hundreds of billions in ill-gotten profits by rigging financial markets and luring domestic and foreign serfs into spending money they don´t have on shit they don´t need.

And so far its still working. The city is bustling. The stores are crowded. The restaurants are overflowing. It´s hard to even get a cab. There are very few Store For Lease signs in NYC, as opposed to entire strip malls lying vacant in middle America. NYC is still an oasis of wealth in a nation of squalor. The city does lend itself to Medieval comparisons as the obscenely wealthy tyrants occupy penthouse suites in guarded buildings, while millions of peasants commute onto the island from the boroughs and do the menial labor necessary to keep the wheels turning.

The peasants don´t work in the fields. They are the waiters, waitresses, bartenders, cooks, diswashers, window washers, parking attendants, cashiers, doormen, and taxi drivers, catering to the tourists and the financial industry aristocracy. The .1% rule over the 99.9% through the use of debt enslavement and NYC is the crown jewel of our bifurcated have and have not nation.

Of course, to me it all has the smell of impending doom, or was that just the smell of rotting garbage in 95 degree temperatures wafting from back alley dumpsters? I believe NYC is living on borrowed time and borrowed money. The unemployment rate in NYC soared from 4.7% to 10% in 18 months during the 2008/2009 financial crash. It now sits at 6.1%. With a global recession in progress, Chinese stocks crashing, and simultaneous bubbles in stocks, bonds and real estate getting ready to pop in the U.S., NYC will resemble the land of the living dead in the not too distant future.

As Wall Street banks again hemorrhage from self inflicted wounds, laying off thousands, the middle class workers will be screwed again. The small businesses will be forced to close their doors as business dries up. The high end stores on 5th Avenue will contract as the wealth of their clientele is cut in half and the previously rich foreigners can´t afford shopping trips to the U.S. anymore. The Potemkin Village on the Hudson will be revealed as a faux wealth fantasy land.

But enough doom, back to my day as a tourist. My wife and her best friend have visited NYC far more frequently than myself. They have found numerous off the beaten path joints to get relatively cheap food and drinks. We departed Rockefeller Center and headed to Mother Burger for a snack and, according to my lovely wife, the tastiest Margarita in the city. She was probably right, but it was pushing 4:00 and the heat was really taking a toll on me. I drank four glasses of ice water and couldn´t finish my Margarita.

I really didn´t want to get up from our shaded outside spot, but the troops were off to do some shopping and I lagged behind on the ten block trek to the trendy Uniqlo store on 5th Avenue. As we got closer and closer to 5th Avenue the people on the streets appeared wealthier and wealthier, with shopping bags filled with stuff they absolutely did not need. But wants trump needs these days.

Speaking of Trump, we passed his glittery gold phallic tower on our way to Central Park. And of course home of the $600 Hillary haircut -- Bergdorf Goodman.

But first I was dragged into a trendy Japanese owned clothing store with literally thousands upon thousands of brightly colored clothes stacked in bins from floor to ceiling. My son wanted some new clothes for college. My other son and myself just wanted to find a bench to sit on. We plopped ourselves down for 30 minutes as my wife and son roamed the vast showroom with the hundreds of foreigners jib jabbering in their native languages. I was again a stranger in a strange land.

Based on my day of observations it appeared that more than half the tourists in the city and shoppers in the stores were foreign. To me this is a reflection of the shift in wealth and economic activity to the developing world as the average American sees their standard of living gradually descending.

Then we were off to Central Park for our final tourist destination of the day. It was the first real place we had visited all day. Real trees, real waterfalls, real grass, real lakes, and real quiet. When you walk the streets of NYC you better be on your toes. It seems like every other person is looking down at their iGadget, sending a text, talking to the office, or reading emails as they blunder down the overcrowded streets.

No one makes eye contact. No one smiles. No one says excuse me. No one says good morning.

Everyone seems consumed by their digital world, as the real world passes them by. I find it kind of sad. Face to face human interaction is slowly being phased out. Even when people are at a restaurant or bar, they can’t put down their electronic tracking devices. They are so self involved, they leave no time to think. I guess that keeps them from becoming discontented with the state of our world. Without an electronic gadget in my hand, I was a stranger in a strange land.

It was pushing 6:00 and the entire family was bushed. We had walked miles in the sweltering heat. We paid a small fortune to a vendor in the park for a few drinks and found a shady bench near where some paunchy middle aged office workers were having a league softball game. New Yorkers were laying on blankets, jogging, riding bikes, pushing strollers, sleeping on benches, and generally enjoying the solitude of a forest nestled within the confines of Skyscraper National Park. It is my favorite place in NYC.

Another positive aspect of NYC is the lack of obesity among its millions of inhabitants. The native New Yorkers are forced to walk because it is prohibitively expensive to drive. The only obese people are tourists from the heartland of America, as the Asians, Europeans, and Latin Americans are also on the thin side. Of course, barely having enough money to feed yourself while living in NYC may also contribute to the lack of obesity among the working class.

Seeing all those in shape people made me hungry. We headed off to another of my wife´s reasonably priced restaurants with good food -- The Brickyard on Ninth Avenue and 52nd Street. I was just happy it was air conditioned and they served water. I was so inspired by the healthy people in Central Park I actually ordered a chicken Caesar salad -- with organic chicken (whatever the hell that means).

The food was good, the service was excellent, and the atmosphere was nice. It was after 7:00 pm and our whirlwind day was just about over.

We were a good twenty blocks from Penn Station, so it was time to take a cab. Luck was going our way as we stepped out of the restaurant and were able to hail a cab in about 20 seconds. The wife and kids piled into the back and I jumped in the front seat. The driver was strictly business. No conversation, just the way I like it. He was an experienced NYC cab driver as he weaved, cut off buses, honked, made left turns from the middle lane, and generally put on the death defying show you expect in a NYC cab ride. I gave him $10 for the $7 fare and he seemed delighted.

We entered Penn Station and followed the signs to NJT, and having more good luck in catching an express train. It was all going perfectly as we departed the tunnel and watched the sun setting over the toxic swamps of New Jersey with the refineries lighting up the sky with gaseous flames and tinting the air with noxious rotten egg smells. And then our luck ran out again. A railroad bridge up ahead was stuck in the open position. Another 20 to 30 minutes delayed. The concept of on-time is still unknown to the transit authorities. We eventually reached Hamilton Station and after another hour drive home our 14 hour adventure to NYC was over.

New York City will always be a strange land to me. It´s landscape has aspects of the opening pages of the book I was reading on the train -- Running Man. The impersonal, distant, angry, myopic attitude of New Yorkers is reflected in the words of Bob Dylan.
"New York was a city where you could be frozen to death in the midst of a busy street and nobody would notice."
The frantic pace of NYC, its attitude of indestructibility, it´s pride as the financial capital of the world, and the arrogance of its immensely wealthy ruling elite, hide the insecurities of New Yorkers knowing their entire universe is built on a crumbling foundation of debt, financial fraud, pliant central bankers, and a willfully ignorant populace who continue to spend money they don´t have. It seems there is an attitude of living for today, for tomorrow we die. The dynamics which drive NYC are unsustainable.

The fragility of NYC grows by the day and their susceptibility to the coming market crash is greater than it was in 2008. The colossal gap between the haves and have nots in NYC has never been greater. The rich and strong will continue to dominate the poor and weak until this strange land experiences a collapse of epic proportions. The assessment of New York City by renowned author of American Tragedy, Theodore Dreiser, prior to the 1929 Stock Market Crash and Great Depression, harkens to the fact that those who forget the past are condemned to relive it.
"The thing that impressed me then as now about New York... was the sharp, and at the same time immense, contrast it showed between the dull and the shrewd, the strong and the weak, the rich and the poor, the wise and the ignorant... the strong, or those who ultimately dominated, were so very strong, and the weak so very, very weak .. and so very, very many."