Buy The Dip, An American Tradition Since 1987

Buy the dip has been an American tradition since 1987. The first truly modern global financial crisis unfolded in the autumn of  that year. October 19, 1987, has become the day known infamously as “Black Monday. It set forth a chain reaction of market distress that sent global stock exchanges plummeting in a matter of hours. In the United States, the Dow Jones Industrial Average (DJIA) dropped 22.6 percent in a single trading session. This loss remains the largest one-day stock market decline in history and marks the sharpest market downturn in the United States since the Great Depression.

Note Where "Buy The Dip" Started (click to enlarge)

The important significance of this event lies in the fact Black Monday underscored the concept of “globalization,” which was still quite new at the time. The event demonstrated the extent to which financial markets worldwide had become intertwined and technologically interconnected. This led to several noteworthy reforms, including exchanges developing provisions to pause trading temporarily in the event of rapid market sell-offs. More importantly, it forever altered the Federal Reserve’s response on how to use “liquidity” as a tool to stem financial crises.

Leading up to this event the stock markets raced upward during the first half of 1987 gaining a whopping 44 percent in just seven months. This, of course, created concerns of an asset bubble, however, few market traders expected the market could unravel so viciously. Prior to US markets opening for trading on Monday morning, stock markets in and around Asia began plunging. In response investors rapidly began to liquidate positions, and the number of sell orders vastly outnumbered willing buyers near previous prices, creating a cascade in stock markets.

          Thomas Thrall, a senior professional at the Federal Reserve Bank of 
          Chicago, who was then a trader at the Chicago Mercantile Exchange 
          later said, “It felt really scary, people started to understand the 
                     interconnectedness of markets around the globe.” 

Without a doubt, several new developments in the market enlarged and exacerbated the losses on Black Monday. Things like international investors becoming more active in US markets and new products from US investment firms, known as “portfolio insurance” had become very popular. These included the use of options and derivatives. A number of structural flaws also fueled the losses. At the time of the crisis, stock, options, and futures markets used different timelines for the clearing and settlements of trades, creating the potential for negative trading account balances and forced liquidations.

That is when, Alan Greenspan, then Federal Reserve chairman, came forward on October 20, 1987, with a statement that would shape traders' actions for decades. Fed Chairman Alan Greenspan said, “The Federal Reserve, consistent with its responsibilities as the Nation's central bank, affirmed today its readiness to serve as a source of liquidity to support the economic and financial system” Prior to this markets were seen as a much riskier venture. The great legacy from the events taking place in 1987 is rooted in the actions and swift response of the Fed, that the central bank would backstop markets. This premise has grown over time.

After Black Monday, regulators overhauled trade-clearing protocols and developed new rules. One of the most important is known as circuit breakers which allow exchanges to halt trading temporarily in instances of exceptionally large price declines.  Under these rules, the New York Stock Exchange will temporarily halt trading when the S&P 500 stock index declines 7 percent, 13 percent, and 20 percent. This is done in order to provide investors time to make better informed decisions during periods of high market volatility and reduce the chance of panic. Risk managers also re-calibrated the way they valued options.

Unlike previous financial crises, the Black Monday decline was not associated with a deposit run or any other problem in the banking sector. Still, it was very important because the Fed’s response set a precedent that has over time when coupled with other events massively increased the moral hazard associated with intervention in free markets. Following the rout stock markets quickly recovered a majority of their Black Monday losses. In just two trading sessions, the DJIA gained back 57 percent, of the Black Monday downturn. Because of the Fed action in less than two years, the US stock markets surpassed their pre-crash highs and was not followed by an economic recession.

And now for the grand point of this post, we should not underestimate how the Fed’s response to Black Monday ushered in a new era of investor confidence in the central bank’s ability to control market downturns. The actions by Fed Chairman Greenspan galvanized the mantras "buy the dip" and "don't fight the Fed" and powered them to the top of trading lexicons. It has also been a key factor in allowing the stock market to morph into a much larger symbol of the economy than it merits. This is reflected in how over the decades growth in the financial sector has soared dwarfing that in the real economy.

Decades Of Nikkei Action (click to enlarge)

To all those market aficionados that forget markets can fall and for decades fail to regain their luster I point to the Japanese markets and their fierce meltdown in 1990. The chart to the right would look far more depressing had the market trends over the last decade coupled with buying from the central Bank Of Japan not bolstered its performance. We should also remember many market high-flyers simply vanish into a deep hole and that during the 1930s the Fed was unable to bring the economy out of its funk,

Another often overlooked issue is how changes in tax laws over the years have moved more wealth into stocks. These include the often forgotten and seldom mentioned changes many made by the Bush administration following the dotcom bust and 9-11. These factors and money constantly funneled into markets by pension funds and such coupled with soaring central bank liquidity has levitated markets to record high, after record high, despite stagnant fundamentals. It seems the "fear of missing out" and exuberance has caused many investors to become blind to the idea that years of profits can vanish in a blink of the eye.

This should force us to question the utter madness displayed in the widening disconnect between current valuations and underlying fundamentals. It could be argued that because of these actions QE has amplified speculation as investors seeking yield now feel almost invulnerable to future losses. We can cast away all the terms and warnings about "moral hazards" and "slippery slopes," however that does not guarantee they will not return to haunt us. Historically our hubris and arrogance has shined  as a beacon illuminating the fact that every time those in high finance declare it is different this time they have been proven wrong.     

Apple And Amazon Both Exceed In Exploiting America

Two of America's largest companies, Apple and Amazon share an ugly truth. It is rooted in exploitation and how they excel in exploiting America. Due to their strong ties to America's government, both these companies have been allowed to create a persona or facade that far outshines reality. Not only do they exploit workers but each in its own way, mask the huge amount of income they pluck from our government on all levels while avoiding paying taxes. The situation has become so obvious to many people that while moderating the Golden Globes awards, comedian Ricky Gervais in a joking manner slammed actors for calling themselves “woke” while taking money from Apple, Amazon, and Disney, who use slave labor.

While I concede both these companies have many admirers it is important to look from where much of their success flows. Years ago I penned an article titled, "The Poison Apple" where I questioned how Apple remains the darling of so many Americans while stories continue to surface on how it abuses its workers? This coupled with the widespread criticism of its environmental practices and tax avoidance schemes would have caused major damage to the corporate image of most companies. It might even result in large protests outside their offices and massive boycotts of their products. Yet, Apple is a company that Fortune magazine has called the most admired company in the United States and in the world. This is a company that the Economist called a "phenomena" and questioned if "it was a bubble" years before its stock price soared.

A More Truthful Logo

Some time ago the Paradise Papers highlighted the murky dealings by Apple that allowed it to pay a mere 3.7% in corporate taxes in 2017. This is a fraction of the worldwide average and well below what most people would imagine It detailed how Apple's tax-avoidance strategies, which are infamous, allowed it to find different avenues at securing its worldwide profits, which accounted for roughly 55% of its total income in 2017. In August of 2016, Apple was ordered by the European Commission to pay €13 billion in taxes, which Tim Cook called 'total political crap' at the time. None of this has altered how Apple has moved forward.  

It is as if people are totally blind to the less tasty side of Apple that appeared in a 2006 report focusing on the deplorable working conditions at factories in China where the contract manufacturers Foxconn and Inventec produced the iPod. The article stated that one complex of factories that assembles the iPod and other items had over 200,000 workers, that lived and worked in the factory. Employees regularly worked more than 60 hours per week making around $100 per month and were required to pay for rent and food from the company.  This generally amounted to a little over half of the workers' earnings. While things may have improved a bit over the years it is difficult to think the lives of these workers has become anything to brag about. 

Four months ago China Labor Watch issued a lengthy report accusing Apple and its manufacturing partner Foxconn Technology Co Ltd of breaching numerous Chinese labor laws. Yet, as big an issue as the history of worker exploitation of workers in China is the fact that since Apple manufactures in China it creates few jobs in American. Is the typical Apple user so self-centered that they just don't care, or do they lust for the product so much that they bury and ignore their social conscience?  These consumers are even willing to pay higher prices to lock themselves into a closed system tightly controlled by Apple.

Bezos Quietly Shapes Public Opinion

For a moment let us put aside Apple and explore some of Amazon's corporate tactics as well as some of the recent stories and the ever-growing political power of the very influential Washington Post which is owned by Amazon's CEO Jeff Bezos, which at times has claimed the title of the worlds richest man. Among the goals of this online retail mogul is replacing workers with robots which his company will both build and market.

 Bezos is also the head of Blue Origin, a company with big plans to pioneer the frontier of space. Last but far from least as Amazon's CEO Bezos ties this all together with Amazon Web Service or AWS. This is a cloud service that also collects data and has strong ties to the government. This means they know when you are sleeping, they know when you're awake, they know when you are bad or good. This all constitutes a great deal of power in the hands of one man.

Because of Amazon's strong ties with the government and what is often referred to as the "deep state," we should be concerned about whether The Washington Post is making a concerted effort to shape public opinion in a way that is at odds with our current President. Lurking in the back of my mind is that it was the Washington Post and not a newspaper located in Alabama that broke the Roy Moore story which has turned many women against the Republican party. This brings up the question of just how much the Roy Moore story also has fed into the "me too" movement that had huge ramifications across society. Are stories like this a coincidence or is a strong hidden agenda at play?

All this could be one of the reasons President Trump has voiced concern about Amazon as a force in America.

Donald J. Trump ✔ @realDonaldTrump

I have stated my concerns with Amazon long before the Election. Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!

117K

6:57 AM - Mar 29, 2018

Twitter Ads info and privacy

The bottom-line is that Apple and Amazon, both receive and feed at the teat of our government and receive a lot of American tax dollars. We should never forget that in America the government and schools use taxpayer money to buy countless numbers of Apple products produced in China adding to Apple's credibility and helping to carry tax-evading Apple to the next level. While this is happening the money-losing United States Postal Service bends over backward to deliver Amazon products while the American government pays out billions to AWS for its services in collecting and storing data on American citizens.

Time and time again it has been pointed out that Amazon is one of the world’s most valuable companies, valued at nearly $800 billion. Even after the e-commerce giant pulled in $232.9 billion in global revenue in 2018, it paid $0 in federal taxes. In fact, Amazon was said to be getting a federal tax refund of $129 million this year, this is in spite of Amazon nearly doubling its taxable income in 2018 to $11.2 billion, from $5.6 billion a year earlier. The matter of Amazon's check to the IRS reading exactly $0.00 was also confirmed in a report published by Fortune which stated, the e-tail/retail/tech/entertainment/everything giant would not be paying a cent in federal taxes for the second year in a row.

It should be noted that President Trump is not the only politician that has taken aim at Amazon. current Presidential candidate, Sen. Bernie Sanders, I-Vt., has also criticized Amazon for not paying higher federal taxes and is not a fan of the company. Particularly troubling is money from our government flowing into Amazon adds to its war chest and feeds its ability to continue exploiting the brick and mortar stores that line the streets of our communities. These are the real businesses that provide jobs to millions of Americans. All in all, it is a bit ironic that so many people are infatuated with these two companies that seem hell-bent on taking far more from us than they are willing to return. To us not so enamored with these two companies the fact is, we just don't get it.

China Is Not Waiting For The Trade Issue To Be Resolved

China Hellbent On Becoming Leading Power!

China is not merely waiting for the trade issue with America to be resolved. China has a plan and is busy cutting a path forward with far more focus than is being displayed by America. Despite economic problems popping up in countries across the world, China is hellbent on pursuing its goal of galvanizing itself as the leading global power. The Chinese are actively pursuing a scheme to expand President Xi Jinping's continent-spanning One Belt One Road into new areas by promising loans and investments to countries across the world that are struggling economically. 

China has also been moving strongly into other areas of investment. For example, the Nikkei Asian Review recently reported that China is nearing completion of its new global positioning system (GPS) network. This is a sign of China's desire to dominate the world's next generation of telecommunications services and further decouple from the US' GPS network. China's Beidou network of satellites is expected to be completed in a few months when the last two of 35-satellites will be launched. Over 70% of Chinese smartphones are ready to tap into Beidou's positioning services. The system also plays a role in fifth-generation wireless communications, this is an area where China's Huawei Technologies is said to be leading in technological development.

The Beidou network of satellites is supposed to create a number of global services that benefit ASEAN, South Asia, Eastern Europe, West Asia, and Africa in precision farming, digital construction, and smart port application. By the end of next year, positioning accuracy is expected to improve from within 5 meters to within centimeters. This accuracy is crucial for self-driving vehicle development and seen as an advancement that will aid in search-and-rescue missions. Moving farther up the food chain is a core part of Beijing's "Made in China 2025" plan for boosting self-reliance in vital technologies. This is also apparent in an article I penned about the C-919. Their new Chinese airplane is intended to compete directly against Boeing and Airbus.

This does not mean China has left its problems behind. It is important to remember that politicians, even those in China, tend to go to extreme efforts to avoid taking responsibility for the problems they create. History shows that one way a country can kick their gross domestic product higher is to build a false economy based on infrastructure or war. One of the best examples of building an economy on a foundation of military might or a massive move to militarization was demonstrated by how Germany was turned into a war machine during the 1930s. China's version of this has been apparent over the years in its bizarre housing market and "ghost cities" where 75% of its peoples' wealth is stored. The OBOR initiative and China's growing space program may be an extension of this idea.

One of the biggest challenges china has going forward is that, in some ways, the Chinese residential real estate market could be called the most overvalued asset class in the world. An article written in late 2018 details how much of China's so-called wealth is tied up in poorly constructed overpriced homes. The fact these have only gone up in value has created a Ponzi scheme of massive proportions. The excesses in China's real estate market have not yet been resolved and when they are it is very likely the process will be deflationary. The resolution of bad debts reduces the money supply and tends to put downward pressure on prices until the excess supply gets worked off. With estimates that as much as 75% of Chinese net worth is tied up in this market the contagion resulting from dropping prices will undoubtedly spill into other markets.

Debt Has Exploded In China (click to enlarge)

The point of this article is to focus on two things, where China wants to go and how it got to where it is. This includes the matter of its addition and dependence on new credit creation to drive its economy. Prior to 2008 money flowed into China as companies invested there but since then the inflow slowed to a trickle then reversed. Since then new credit and surging debt have become the new driver of growth. When a country gorges at the trough of deficit spending that generates a big temporary boost in its GDP it also quickly creates a wall of debt and this has been China's fate.

Despite Beijing's efforts to decouple from America and its progressive agenda, China's economy continues to slow. This has forced the Peoples Bank of China to undertake several major liquidity injections. Each time the PBOC does this global markets have moved higher because the money seeps out across China's border. Simply put, China's currency is much weaker than many people think when they point to China's large holdings of U.S. Treasuries as proof of its solvency. The fact is even though China owns these U.S. Treasuries, China is running a massive U.S. dollar shortage both on a corporate and a national level. A great deal of debt has grown within the Chinese system. Chinese companies owe roughly $2 trillion U.S. dollar-denominated debt owed to international investors.

Ironically, the Fed has become the great enabler in this game of allowing China's currency to hold together. China's rapid expansion of debt and credit during the last decade could not have occurred without the Fed being complicit. It has been the Fed that decided to allow the dollar to be used as a global prop. A key role of a reserve currency is to force other currencies to toe the line or pay a stiff price. Ignoring this economic reality translates into pain for those holding the currency of any country that abuses this economic law. The rubber will meet the road as more countries that export to China question the value of the Chinese currency and demand payment in dollars and refuse the yuan.

The power of fresh credit as a tool to propel growth forward in China has collapsed. Over the years each new wave of money has begun to lose its impact as the efficiency of stimulus waned and more and more of the credit was absorbed in supporting existing debt. The fact is few good investment opportunities currently exist in China which has caused more and more money to leak across the border inflating asset bubbles in other countries. In other words, injecting more credit into the economy is not the miracle solution it used to be. China needs a much larger expansion of credit than 10 years ago to have the exact same amount of GDP. This has caused an article in the  Global Times to speculate China is contemplating moving interest rates to zero in a desperate move to stimulate its economy. 

China's debt has become the biggest wildcard for the stability of the global financial system. Continuing along this "one-way path," in January, Beijing injected a staggering $685 billion in new credit into its financial system, greater than the GDP of the 21st largest country, Taiwan. China watchers, economists, and investors have been forming battle-lines for years as they debate the true strength and sustainability of China's economy and its role as a global player. Those of us that paint a picture of China's future collapse are often accused of spreading "doom-porn" when we claim the Chinese have masked over their dire situation by continually expanding credit. Those of us in this camp see China as continuing to prop up the unpropable, and yes, while no such word exists, when it comes to China's economy it should, for "unpropable" describes the financial collapse that can only be postponed but not stopped.

The "China discussion" is comprised of many threads. These range from concern over what is seen as its goal of world dominance to huge questions over China's true strength. Some people even think, we should or can simply "take them out." In a world jaded by propaganda and fake news, it is difficult to get your head around what is real. I stand with those that see China has little intention of altering its course. This means China will continue to concede little as trade talks drag on and their goal is to "wear-down the impatient Americans." Beijing and Washington have agreed to a tariff cease-fire as part of a "phase one" trade deal. Yesterday Bloomberg reported the U.S. would lift China's "currency manipulator" tag hours ahead of the Phase One trade deal signing. This coupled with talk the second part of this deal may not be implemented until 2025 shows America has no stomach for playing hardball. Expect more conflict ahead.

Inflation Surge Will Be Driven By Fees, Tolls, And Taxes

When we look at where inflation has occurred during the last decade or so we find it centered in areas where the government has expanded its influence. This is why it is not always prevalent in manufactured consumer goods. Two that rapidly come to mind are in the area of healthcare and education. The skyrocketing cost of even basic health tests and medicine, as well as tuition at universities, screams inflation. Other sectors where the government is moving prices higher is in utility bills, new construction, and the cost of providing local services such as police and fire protection. A less often noticed area that carries massive implications over time is the broken legal system but that is its own story.

The next surge in inflation or higher cost to consumers regardless of the pace of economic growth might well come from huge increases in fees and taxes. People tend to forget just how much of government spending is done on the local and state level where simply printing more money is not an option for eliminating revenue shortfalls. The difference between stagflation and inflation is marked by the rate of economic growth. In this case, I'm talking about real growth and not the Gross Domestic Product numbers or GDP which many people view as a yardstick of growth. The GDP numbers are heavily skewed by numbers more associated with money churning rather than quality sustainable growth that positively benefits society.

State And Local Governments Need Revenue

This theory of where much inflation will be based is tied to governments' need for revenue. Local and state governments have hidden and masked the size of its growth and financial promises from the public. Since state and local governments lack the federal government's ability to print money and buy back its own debt they must pay higher interest based on their credit rating. As a state or local government's debt rises so does the amount of interest they must offer to sell their bonds. The damage this can cause is becoming evident in Illinois which is the poster child for dysfunctional state and local governance.

The combination of high debt and taxes has caused both businesses and people to flee Illinois. It was recently reported by Wirepoints that Illinois has lost more population than any other state in the country and is one of just four states to shrink since 2010. The population of 93 of the state’s 103 counties has shrunk since 2010. Only New York lost more people than Illinois in 2019. The population loss across so many counties is a reflection of the state’s outlier status on many of the nation’s economic, demographic and financial metrics. Illinois has the nation’s most costly pension crisis, one of the highest tax burdens. This coupled with corruption, falling home prices and a general lack of economic opportunity is contributing to the exodus.

A factor many people fail to grasp is just how much government has expanded over the years. Much of this is because we have masked its growth by "outsourcing" a great deal of the work its workers had been doing. Another place this sneaks under the radar is in the huge growth of "quasi-government " entities such as airport authorities and downtown improvement districts which are able to levy special taxes. An example can be seen in how today many of the services and maintenance that had been performed in the past by local street departments are now bid out to private companies. Utility companies also can fall into this category in that they are often monopolies carrying out government mandates under government supervision. 

Airline Fees (click to enlarge)

The average Joe or Jo may not see many of these increases in fees and taxes aimed at increasing revenue  because they are not assessed against them personally. Still, they do directly affect businesses and landlords which are forced to eventually pass on the added cost to consumers. Often this is through higher prices. Another way to do this is by transferring responsibilities, limiting warranties, or reducing goods and services that had been previously provided. A city forced to cut costs or increase revenues often choose to plow snow only when three or more inches fall, reduce the number of times it picks up leaves, or increase fines for such things as parking violations. Some areas have even gone to ticketing drivers for violations caught on camera.

An example of drastically surging tolls was highlighted in a recent op-ed in The Philadelphia Inquirer. The Pennsylvania Turnpike Commission has again raised tolls to use the turnpike. In 2008, it cost just $15.25 to travel across the state from New Jersey to Ohio, over the years this has jumped to $61.20. This is being attributed to a 2007 law that helped turn the turnpike system into a piggy bank that allowed legislators to avoid raising taxes for state roads and mass transit. The Pennsylvania Turnpike Commission, currently $11.8 billion in debt, is required by law to send hundreds of millions of dollars each year to PennDOT to help fund public transportation projects in Pennsylvania cities.

The irony of this is that in 2007 it was in the black, with more assets than liabilities on its books so Democratic Gov. Ed Rendell and the legislature enacted a law mandating payments from the commission to help pay for transportation projects.

All these fees, tolls, taxes, increased cost for permits, and fines flow back into society and our economy in a complex way with intricate ramifications to America's ability to compete going forward. Inefficient and wasteful government does have a cost and it must be paid. It will as I have outlined above come in many forms. Do not be surprised if 2020 is the year when these extra costs really begin to hammer brick and mortar retailers as well as commercial real estate across America. In the end, we will all be forced to pay the price of this "cost-shifting" by suffering a lower standard of living.


Footnote; Something is very wrong when we create expensive transportation systems that carry few riders. Local public bus systems often brag and carry on about how local dollars are leveraged to match federal and state resources and are a win for their residents the picture painted by the numbers in their annual reports are often not pretty or impressive. The following article highlights how such quasi-government entities need little accountability to be accepted into a community as a positive force.

https://Public Transportation-My City's Empty Bus Boondoggle.html

Believing In Illusions - Our Five Favorite Financial Myths

The Reality Of "Facts" Blows Myths Apart!

It is far easier to believe the five favorite financial myths of our time when you are rolling in dough and flush with cash. Due to a slug of freshly printed liquidity being pumped into the global financial system stock markets are making new highs and asset bubbles continue to expand. An increase in liquidity results in people feeling comfortable to take on more risk and this tends to swell leverage. During such a time true price discovery has a way of being diminished.

Whether it is a question of people generally just being too lazy to question what they see or lacking the imagination to pull back the curtain to reveal the truth they often choose to accept what is presented to them as reality rather than go to the effort to seek the truth. A myth is often defined as any invented story, idea, or concept, an imaginary or fictitious thing, or an unproved or false collective belief that is used to justify a social institution. The entertainment industry has flourished as society seeks any diversion to pull our attention away from the sharp edges of reality and into the soft comfort of escape. This may be the result of past experiences where we have learned reality can be hard to face and we can't handle the truth! In some ways, it could be said that our culture has become obsessed with avoiding what is real.  

Central Banks Failed To Stop (click to enlarge)

To say the system has been stoked by the actions of central banks is an understatement. In just the last few months nearly a trillion dollars of new stimulus has been poured into the markets. It comes in the form of  repo injections, new infrastructure programs, and things like slashing bank reserve requirements. A desperate attempt by central banks to keep the wheels from coming off the bus has been interpreted by many as confirmation the current trend of never-ending growth will continue. Rather than considering it is time for a reality check it is both easier and more comforting to adopt an "all is well" attitude and ignore the signs of danger lurking around the corner. 

The crux of this article is about some of our society's favorite myths that feed directly into the economy and how we feel about our financial security. While it could be argued the myths below have more to do with how we feel about life than about money, it cannot be denied that most people make many of their financial decisions based on the assumption the below statements are true. As a society, we rapidly choose to embrace and often choose not to question them because of the discomfort it would undoubtedly create. Sure many other myths exist or you can slice and dice them in other ways but the five below are very common and should be enough to remind you and even shed a bit of light upon the fact we are vulnerable at any time to having reality raise its' ugly head.

Believing Myths Is A Head In Sand Approach

Government is for the people and by the people - Seriously? After the last few years and dog and pony show, we experienced during the last presidential primary all illusions of that should have been erased. After often being forced to choose between the least of two evils it is difficult to praise our political system. After all the talk about "we the people" the fact is the average "person" is far removed from the power to decide important issues.

Financial planning means you only have to start saving a little money each year to guarantee an easy retirement.  - The fact is life is a casino where our future is tenuous at best. Much of our circumstances and lives revolve around money and the number of options it gives us when we possess it. I intentionally used the term "casino" to conjure up the image of financial fortune. Which you can lose in a blink of an eye if things go against you. This myth includes things such as the promises made by the government and others such as pension plans and financial institutions will indeed be honored.

You have rights and that we are not slaves - I defer to a few lines from a blog by Gerry Spence who has spent his lifetime representing and protecting victims of the legal system from what he calls The New Slave Master: big corporations and big government. In his blog, Spence wrote; The Moneyed Master has closed its doors against the people and sits on its money like an old hen on rotten eggs. The people will not prevail. With its endless propaganda the Moneyed Master has caused its slaves to believe they are free.

Your life will progress and move along pretty much as you have planned - When you think back over the years of your life if you are like most people things have not unfolded as you had planned. You may not be in the occupation you trained for or with your true love. Throughout our life watershed events occur that we have little control over, this holds true when it comes to your finances as well. Things such as having an investment or pension plan go south can be very unsettling. The thought that things could be worse does not mean they will become so, this is a reason to count your blessings. 

Those in charge or above you care about you and will protect you -  Well of this we can hope but more than one person has been sliced and diced by the people he or she trusted most. History shows when push comes to shove it is not uncommon for a person to look out for the person they treasure the most and that is often him or her self. Politicians and those in power tend to throw people under the bus rather than rise up and take responsibility for the problems they create.

My apologies if this post has been a downer or seems overly negative, however, it is what it is and it was written for a reason. Best stated by a comment I read on another site, these myths add up to where "This is not a can of worms but a warehouse stacked with pallets of cans of worms."  Because of how believing the above myths can impact our lives it is important we recognize their existence. This is not to say that we cannot by making good and reasonable choices eliminate much of the risk we encounter when we get out of bed each morning. Developing the habit of pressing on and forward to complete solid and reasonable goals is the best medicine to combat a deck that is often stacked against us. Be careful out there!

Iran's Deep Distrust Of America Is Rooted In History

Our agreement with Iran reached under the Obama administration and canceled by President Trump was viewed, by many, as an alternative to the unsavory option of taking military action to halt Iran from developing a nuclear bomb. John Kerry crafting the agreement with Iran always stressed that if Iran fails to meet the requirements of the current deal, all options remain on the table. With this in mind, we should not give the Obama administration too much credit for bringing us a great or even good agreement. 

Remember that during the Obama years many people considered Middle-east policy a mess as he flip-flopped ignoring the red lines he boldly drew in the sand. At the time, Iran held more cards than we were told because ISIS was a growing threat. In many ways, Iran held the fate of Baghdad in their hands. If the Shia militias from Iran that were defending Baghdad wavered both the Iraqi capital and the American Green Zone could have come under fire from ISIS, this would have been very embarrassing for Obama and our government. When Kerry talked about offsetting the one hundred and fifty billion dollars Iran was to receive when the sanctions were lifted by "upping our game in the area" questions arise as to the cost and how Washington intended to pay for this gambit. 

Iran Has Little Reason To Trust America

While officials claimed the agreement would halt much of Iran’s nuclear program and ratchet back other elements, several U.S. senators, both Democrat and Republican, voiced displeasure with the agreement. They argued that the U.S. and its partners offered too much for something short of a full freeze on uranium enrichment. Also, if part of the boatload of money released at the signing of the agreement was used to fund Iran's many proxy wars it would create chaos. If  Iran does not halt and reverse its course it can always ramp up its plans to develop a nuclear bomb at off-site locations. 

Much of the problem America has with Iran stems from the perception that we have created over the years by portraying Iran as a larger than life boogeyman that threatens our very way of life and existence. Iran was elevated to this level when President George W. Bush included Iran as a member of the "Axis Of Evil" in his State of the Union Address in 2002. Unfortunately, Washington and the politicians who reside there often mislead us as they allow agendas of special interest to influence policy. When it comes to Iran's official stance towards America anyone saying that Iran has good reason not to trust the American government is making an understatement. America through its foreign policy has wreaked havoc upon many countries few have been affected or suffered from our meddling as much as Iran.

A somewhat neutral source for information on the history of Iran post-World War II is Wikipedia. It shows America has constantly interfered in their internal politics. In 1953 the British M16 and the American CIA organized a military coup d'etat to oust the nationalist and democratically elected Prime Minister and put in power Mohammad-Reza Shah Pahlavi, the man we all know as the Shah of Iran, in Persian Shah means king. It is only fair to call attention to some very damning declassified documents released recently, the approximately 1,000 pages of documents, shed light on the Central Intelligence Agency’s central role in the 1953 coup that brought down Iranian Prime Minister Muhammad Mossadegh.

The documents conflict with the U.S government's long denied involvement in the coup. The State Department first released coup-related documents in 1989 but edited out any reference to CIA involvement. Public outrage coaxed a government promise to release a more complete edition, and some material came out in 2013. Two years later, the full installment of declassified material was scheduled but the release was delayed fearing it might interfere with the Iran nuclear talks that were taking place. Now they have finally been released, it should be noted they are not complete because numerous original CIA telegrams from that period are known to have disappeared or were destroyed long ago.

What is clear and finally brought to light is the CIA plot known as Operation Ajax, was about oil. In early 1951, amid great popular acclaim, Mossadegh nationalized Iran’s oil industry. A fuming Great Britain began conspiring with U.S. intelligence services to overthrow Mossadegh and restore the monarchy under the Shah. While some of the U.S. State Department, the newly-released cables attempt to blame the British for the tensions and indicate efforts to work with Mossadegh plans were made for a coup. The coup attempt began on August 15th but was swiftly thwarted. Mossadegh made dozens of arrests. General Fazlollah Zahedi, a top conspirator, went into hiding, and the Shah fled Iran. At that point according to a newly declassified cable sent on August 18, 1953, the CIA under the impression the coup had failed decided to end their role. The message read, “Operations against Mossadegh should be discontinued.”

Washington wanted to make sure nothing "could be traced back to the U.S,” however, this cable was ignored by Kermit Roosevelt, the top CIA officer in Iran. What unfolded next is pivotal, on August 19, 1953, with the aid of “rented” crowds widely believed to have been arranged with CIA assistance, the coup succeeded and Iran’s nationalist hero jailed and the Western-friendly Shah placed in power. The existence and extent of Operation Ajax have long been a major point of contention for many Iranians from which the flames of anti-Western sentiment grew fueling a surge of nationalism. In 1979 this culminated in the U.S. hostage crisis, the Shah being overthrown and the creation of the Islamic Republic. 

During his time in power, the Shah maintained a close relationship with America and shared our views towards the Soviet Union its northern neighbor. Iran was a strong ally in efforts to keep the Russians contained during the cold war. While the Shah westernized and modernized Iran arbitrary arrests and torture by the Shah's secret police were used to crush all forms of political opposition. Ayatollah Ruhollah Khomeini an active critic of the Shah publicly denounced the government and was arrested and imprisoned for 18 months. After his release when Khomeini publicly criticized the United States government he was sent into exile. When oil prices spiked in 1973 due to an oil embargo declared by OPEC and several other countries a flood of foreign currency into Iran caused double-digit inflation;

Social unrest from waste, corruption and a recession resulted in protests and strikes that spread until they reached a point where the Shah fled the country. Ayatollah Khomeini returned in 1979 and formed a new government. Over the next several years uprisings were violently subdued as the new government went about purging itself of the non-Islamist political opposition that had joined with them to overthrow the Shah. Tens of thousands of Iranians were executed by the Islamic regime. A part of history that lingers strongly in the minds of many Americans is that in November 1979, a group of Iranian students seized the U.S. embassy taking  52 U.S. citizens and embassy personnel hostage after the U.S. refused to return the former Shah to Iran to face trial and execution. The hostages were finally set free but many Americans continue to view this as a slap in the face.

America Supported Iraq Which Attacked Iran

A serious point of discord among Iranians is what happened next. On September 22, 1980, the Iraqi army invaded Iranian Khuzestan which signaled the start of the Iran–Iraq War. The United States, alongside regional and international powers, supported Iraq and Saddam Hussein with loans, military equipment, and satellite imagery during Iraqi attacks against Iranian targets. Although Saddam Hussein's forces made several early advances, by mid-1982 the Iranian forces successfully managed to drive the Iraqi army back into Iraq and Iran decided to invade Iraq in a bid to conquer Iraqi territory. The war continued until 1988 when the Iraqi army defeated the Iranian forces inside Iraq and pushed the remaining Iranian troops back across the border.

Subsequently, Khomeini accepted a truce mediated by the UN, but the war cost Iran many lives and huge economic damage. Half a million Iraqi and Iranian soldiers, with an equivalent number of civilians, are believed to have died and many more injured. It must be noted that during the conflict America and the international community remained silent as Iraq used chemical weapons of mass destruction against Iran as well as the Kurds in northern Iraq. Following the war, Iran concentrated on a pragmatic pro-business policy of rebuilding and strengthening the economy without making any dramatic break with the ideology of the revolution.

Tensions with the United States dramatically increased after the 2005 presidential election brought the conservative populist candidate, Mahmoud Ahmadinejad, to power. His over the top rhetoric galvanized the feeling Iran had no intention to take a peaceful place in the world community. In 2009 protests erupted in Iran after he was reported to have won nearly 60 percent of the vote despite voting irregularities. Despite the relatively peaceful nature of the protests, the police and the Basij (a paramilitary group) crushed the people by using batons, pepper spray, sticks and, in some cases, firearms. Images of Neda Agha-Soltan, who was shot and died were uploaded to mass media and broadcast around the world. It was reported that thousands were arrested and tortured in prisons around the country, with former inmates alleging mass rape of men, women, and children by the Iranian Revolutionary Guards. Relatives of those killed are forced to sign documents claiming they had died of heart attack or meningitis.

Many Iranians Want More Freedom

In truth, few Americans know much about Iran or its 78 million inhabitants or have ever visited the country. Many people would have difficulty pinpointing its location on an unmarked map and the chief source of what knowledge they do have is usually from the evening news. The official name of the country is the Islamic Republic of Iran and it is an area that history called Persia with Persian being the official language and the rial is its currency. Iran's unique political system based on its 1979 constitution combines elements of a parliamentary democracy with a theocracy governed by the country's clergy. The country is made up of several ethnic and linguistic groups but most inhabitants are officially Shia.

Travel Documentary Shows Little Malice Towards America

This recall of history is necessary to understand the real nature of the American-Iranian relationship and how we arrived at today. It should be noted that many Iranians have no malice towards America and are far more moderate than the political apparatus with its strong links to the country's clergy. A few years ago Rick Steves produced a documentary that explored Iran in a one-hour, ground-breaking travel special. This is a good place to meet the people of this nation whose government so exasperates our own.

On June 15, 2013, the electoral victory of new Iranian President Hassan Rouhani took place but the moderate has not had as much impact as hoped. The fact is if current trends continue in the future Iran looks to face a defanged and economically weakened America with less power in the region. Regardless the fact remains that one way or the other we must deal with Iran and war is not a great option. Two things are clear. The first is that many Iranians want more freedom. The second is that history shows war to be a poor option to bring about positive change. War brings about change but to what degree and for how long.

Global Financial System Is A Big Rube Goldberg Machine

Much Of Financial System Is Like This Machine

While pondering the current economy that is becoming more of a conundrum every day, I stumbled upon an analogy I would like to share. The global economy is like a giant "Rube Goldberg" machine. It is a ridiculously complicated contraption built to perform what should normally be a simple task. Rube Goldberg machines often mimic the real world in that they are goal-oriented with many parts coming together to complete a task.

In the real world, things are usually not intentionally designed to be complicated but the reality is that they just are. It is an understatement to say the global financial system is not a well-oiled machine. More often than we would like to admit various systems and parts are thrown or "cobbled together" in a haphazard way to get the job done. We tend to try and explain events in terms of cause and effect but in doing so the bigger picture has a way of getting lost. Often hidden away is the nature of the risk that results from complexity and systems becoming codependent upon others. Bestselling author Nassim Taleb who wrote, "The Black Swan" detailed in his book how when something is highly complicated highly improbable and unpredictable events can and do occur.

Some of this is playing out right now and can be seen in the Fed's key reversal in policy. In an effort to avoid a crisis the Fed has been forced to deal with a liquidity issue in repo rates since a sudden and dramatic surge began in September. While it is difficult to see the difference between QE and an injection aimed at maintaining liquidity, in this case, several reasons exist to believe this is not QE but something far more disturbing. While many of us predicted central banks had painted themselves into a corner and would never be able to bring down their balance sheets this could be considered as proof. Still, how this will play out is yet to be seen.  

History shows we often have no idea what is driving events until long after they have transpired and even then the picture is blurred by interpretation. The lens by which we peer at events is firmly controlled by those with an agenda. Even when control occasionally slips from their grasp such as when Donald J. Trump was elected President of America that does not mean the puppet masters have surrendered power it merely represents a temporary lapse in their dominance. An effort to be realistic brings us back to the fact that government, big business, and mainstream media hold the cards and control. With this in mind, it is disturbing to look at the individuals leading these various factions, such a look gives me little reason for faith or calm.

The Direction In Which Things Fall Does Matter

Returning to the analogy of a giant Rube Goldberg machine it should help us realize the problem with getting a good handle on life is complicated by the massive number of variables built into it. If you take the economy, for example, guessing what a central bank might do is one thing, however, how do you make allowances for the money created to stimulate the nation's economy rushing out of the country at the tap of a button or companies using the money to buy back stock or pursuing a leveraged hostile takeover rather than investing in a new plant and equipment.

The argument could be made that central banks can stack the deck but when it gets too high and begins to fall they may not be able to control the direction or who it will crush. While history is important to remember it does not define the future. Just because a market or investors have reacted in a certain way in the past is no guarantee that faced with a similar situation their response will be the same or that once we hit a tipping point a self-feeding loop will not develop and take control. We have become very complacent and accepted the idea those in power will continue being creative enough to keep the economy moving forward and prolong current trends. 

When building a Rube Goldberg machine the designer takes a great deal of effort to complicate the task in an entertaining way by adding far more steps than are necessary. This creates a machine with many moving parts, the failure of just one piece to perform as expected can alter the way events unfold. History is littered with many caution signs as to just how difficult it is to interpret current events and their possible impact on tomorrow. This makes it clear that looking in the rear-view mirror gives us a better image of events than predictions as to what might happen in the future. My point is, don't have a great deal of faith in our economic system because it is severely flawed and does not even meet the criteria of a well designed Rube Goldberg machine.

Footnote; For a grand display of an incredible and impressive Rude Goldberg machine energize the link below, I don't think you will be disappointed. If nothing else it is proof some people have far to much time on their hands.
https://www.youtube.com/watch?v=qybUFnY7Y8w