Emergency Plan: Starting Monday, Continuing Forever

February 27, 2014

  • A perpetual “emergency plan”: Mother of all financial bubbles hits home again
  • The problem with traders who anticipate a “black swan” any day now
  • Eat the rich: IMF’s plans for your wealth
  • How the 3-D-printed gun is just like a blog
  • Keeping tabs on China’s gold… why the hate against Arthur Chu?… second thoughts on cyberwar… and more!

  Starting next Monday, police in Las Vegas won’t respond to a car crash unless someone’s hurt.

“Every week,” CNN explains, “police in Sin City estimate they spend 250 hours on this kind of work. Time they’d rather spend tackling bigger cases.”

So it’s like a perpetual “emergency plan” of the sort Northerners are accustomed to during snowstorms: Exchange your insurance info with the other guy and move on.

Hmmm… The Case-Shiller housing numbers out this week show housing prices up 25.5% last year in Vegas — the best performer among 20 metro areas the index tracks.

So property tax revenue is up from the housing crash years and the department is still strapped?

“This may simply be the way of the future,” The Car Connection suggests. “Las Vegas isn’t the only city with such a policy: Los Angeles, San Diego and San Francisco do, too. Faced with budget cuts and recruitment lags, many departments feel that their officers’ time is being frittered away on minor incidents like these instead of serious crimes.”

For nearly three years, we’ve said you’ll feel the “mother of all financial bubbles” on the local level first. For dramatic effect, we’ve cited dead-broke cities like Camden, N.J., letting go half its police force… and Oakland, Calif., no longer responding to a couple dozen categories of crime.

But the story’s looking much the same even if you’re in an island of relative “prosperity”…

  Another day of sideways churn on Wall Street. The S&P 500 is up fractionally and within a few points of its all-time high at 1,850. No, we didn’t resend yesterday’s 5 by mistake.

Not much excitement to report: Fed chief Janet Yellen is telling the Senate she doesn’t know the extent to which bad weather accounts for weak economic numbers of late. (Humility from a central banker — whoda thunk it?) And those numbers are weak again this morning. First-time unemployment claims rang in more than expected; durable goods orders slipped during January.

 “The bears are getting very antsy again,” says Jonas Elmerraji of our trading desk.

Among the trading set on Twitter, he’s encountering more and more chatter about a looming correction. Or crash. “I’m seeing lots of comments suggesting now’s the time the black swans come out — when these big unexpected price crashes are likely to happen.”

Hilarious. “Black swans are by definition unpredictable,” Jonas reminds us. “But that glut of bear sentiment isn’t necessarily a bad thing. It speaks more to indecision and confusion in the markets.”

Looking at the charts, Jonas figures that indecision will take another couple weeks to sort out. He’s sticking to his call of new all-time highs next month.

We daresay you pooh-pooh that call at your own risk: Jonas spotted the S&P’s reversal three weeks ago today. Since then, the index is up 4%… and his most elite readers are up 76%.

If you were with us yesterday, you know where we’re going with this: If you want to be on board with Jonas’ next great trades, time’s a-wastin’. His current presentation — yeah, the goofy one in which he’s sorta silhouetted but not really — is going offline tonight at midnight.

Click here for access to Jonas’ “hacked” trading tools…

  And now the latest installment on our “Eat the Rich” watch: A research paper from the International Monetary Fund claims that taxing the wealthy does not harm economic growth, and might even help.

“We find,” says the paper, “that higher inequality seems to lower growth. Redistribution, in contrast, has a tiny and statistically insignificant (slightly negative) effect.”

The paper comes on the heels of an IMF publication last fall that claimed a one-time “wealth levy” of 10% would fix the precarious fiscal balance in many European countries.

Among the people cheering the report is the international development group Oxfam: “In the bad old days,” says Oxfam’s Nicolas Mombrial, “the IMF asked governments to cut public spending and taxes. We hope this research and [IMF chief] Christine Lagarde’s recent statements are a sign that they are changing their tune.”

No, it’s not time to clean out your bank account and IRA… but clearly, there’s some intellectual groundwork being laid here. Stay tuned…

  Gold is clawing and scratching its way back from yesterday’s losses. At last check, it’s up nearly $10 from this time 24 hours earlier, at $1,334.

  The boo-birds are out in force again reacting to China’s latest gold import figures.

Last month, China imported 102.6 metric tons via Hong Kong. (The Chinese government keeps import figures via Shanghai hush-hush.)

“China’s Gold Shipments From Hong Kong Decline as Demand Weakens,” shrieks Bloomberg.

Well, yes, the month-over-month figure was down a bit. But as we’ve long said, it’s the year-over year figure that counts… and it’s almost double. The steady accumulation trend in place the last three years continues…

All that gold should come in mighty handy during the “financial collapse of unprecedented magnitude” foreseen by Currency Wars author Jim Rickards.

  The 3-D-printed gun is no different from the blog, says the creator of the former. Or at least it springs from the same creative impulse.

“If 3-D printing means anything,” Cody Wilson tells We Are Change, “if the digital revolution and 3-D printing revolution have any interesting terminus, it’s because we will all have access to greater means of production. Just like these cameras and computers that we have enable us to become cultural producers outside of the monopoly schemes of the legacy players, so too with material things, and that must, of course, include guns.”

Hard to believe it’s been nearly a year since Wilson came on the scene with his 3-D-printed weapon, the “Liberator.” He says attempts to ban his creation — in Philadelphia and elsewhere — are doomed to failure. “These are just kind of advance ways of, like, you know, magical thinking, dealing with the threat in the dark and acting like we have some sense of control over the future.”

Sounds as if Mr. Wilson is well aware of all the implications of what he’s done. So is our Ray Blanco — who’s thought through the implications for your portfolio. Check out Ray’s liberating message right here.

 Back to eating the rich: Is envy of the wealthy the reason so many people are hating on Arthur Chu?

Your editor was unaware of the Chu phenomenon until our fearless leader and 5 founder Addison Wiggin brought it up yesterday. Chu is an insurance compliance analyst from Cleveland. He’s won on Jeopardy! seven straight days, racking up total winnings of $180,000. Many of the show’s fans have taken to the Interwebz calling him “smug” and “evil” because he… well, we’re not sure.

From The Guardian: “Rather than follow each category top to bottom, as some contestants might naturally play, Chu jumps around the board, hunting Daily Doubles — clues that let players wager any amount. Chu has a couple things in mind with this: Daily Doubles are opportunities to make big gains and ‘control the flow of the game’; he keeps these chances out of opponents’ hands; and he keeps competitors off balance by switching categories.”

Arthur Chu, evil genius?

“The haters online are right to an extent,” Chu concedes, also at The Guardian. “I’m just up there being a machine, playing the game. Mowing through the questions mechanically with this detached mien like a crazy person. That is not the most likable side of me on TV; that’s the side of me I had to let out in order to win. (I’m sure that’s a theme in the movie Gladiator too, it’s been a long time since I’ve actually seen it.)”

So maybe it’s not a wealth thing after all? Ken Jennings, the guy who won $3,172,700 winning, among other things, 74 straight games in 2004, never was the target of such vitriol. But people still had jobs and incomes back then, sort of…

[Totally quirky aside: Your editor was present for the first — and perhaps only — game of “House Jeopardy!” emceed by the late Art Fleming, Jeopardy!’s original host in the ’60s and ’70s.

It was 1987. Four of my colleagues at a TV station in Terre Haute, Ind., had rented a house together and decided to host a Jeopardy!-themed housewarming party. As the concept grew ever more elaborate, someone got the idea to reach out to Fleming, who was in semiretirement on the radio at KMOX in St. Louis. He’d done Jeopardy! events for trade shows and such, but never a private party. Maybe 40 or 50 of us chipped in for his appearance fee, and he made the short drive up I-70 one Saturday to join us.

He was charming and brilliant, and he adapted his old-school style perfectly for a gathering where libations flowed freely. When one of the contestants made an especially conservative Daily Double wager, Fleming exclaimed, “$200!? What a piker!”]

  “While ‘there’s a sense in Russia that the Soviet era bonded Russia and Ukraine together into a social-cultural union,’ this is not the case with ethnic Ukrainians,” a reader writes after Byron King’s musings Tuesday over the dicey situation there.

“In the 1930s, Stalin collectivized the farms of Ukraine at the point of a bayonet. Farmers killed off their livestock and hid their food rather than hand it over to the communists.

“The Russians killed about 100,000 of them off the bat and shipped millions more to Kazakhstan and Siberia, and the resulting famine claimed another 10 million lives before it was all done. To add insult to injury, due to the many Russians migrating into the Ukraine, the ethnic Russians have enough political clout to control the government of a Ukraine supposedly free of Moscow.

“I work with a Ukrainian, and he is still pissed at the Russians for what they did to his grandfather. No, the Ukrainians do not like the Russians. In fact, many of them probably still hate them, and that is what this conflict is all about. They’re choosing freedom over heat.”

The 5: Understood. So riddle us this: Why are the post-coup leaders so adamant that “separatism” is evil? Why won’t they let the ethnic Russians in the east of the country go their own way?

Probably because most of Ukraine’s economic output comes from the east, and without it, the place would be an even worse basket case than it is already.

  “China’s deluding itself if they think they will have a ‘short, sharp war’ with Japan,” writes a reader with a follow-up from Friday.

“Just like the First Battle of Bull Run was supposed to be a weekend party in Manassas in 1861, ah, things went a little sour. Heavy fighting swept away any notion of a ‘quick war.’

“China is playing with fire if they stir up the Japanese. They pushed the Greatest Generation to the limit for a while.”

  “Regardless of how high-tech things get,” a reader writes of cyberwar, “it will still take grunts to dig the bad guys out of the ground. This sounds like what the Air Force said after WWII. We don’t need ground forces, we can bomb them into submission. How did that turn out?”

The 5: For sure. As it turns out, there’s less than meets the eye with some of the “draconian cuts” the Pentagon floated on Monday. Uncle Sam will still have 11 aircraft carriers, and the troubled F-35 fighter jet is still in the works.

Point is, even the “big iron” traditional defense projects have an underpinning of whiz-bang technology now. That’s one reason we launched a high-end newsletter whose only mission is to seek out the best plays in the military-tech sector.

  “Correct me if I’m wrong,” a reader carries on the cyber discussion, “but wasn’t Stuxnet actually the start of Web War I?

“You know, if you think about it, isn’t Web war the new Cold War of this generation, just not as destructive as a nuke? If a Web war were launched at us and, say, just knocked out a few systems, say water, sewer and electrical, think about the widespread panic this would cause in any good-sized city. As the people rioted and just plain went nuts, the reaction would be as destructive as a nuke.

“Takes me back to a great movie that, in jest, made fun of the Cold War back in the ’60s, Dr. Strangelove. I quote Brig. Gen. Jack Ripper, as played by Sterling Hayden: ‘Today, war is too important to be left to politicians. They have neither the time, the training nor the inclination for strategic thought.’

“Generals and politicians, NSA and Homeland Security, heaven help us all! Just lightening the mood!”

The 5: Gee, thanks.

Best regards,
Dave Gonigam

The 5 Min. Forecast

P.S. Who says the NSA doesn’t do any good? Apply some of its “predictive analysis” techniques to the stock market and you end up with winning plays 86% of the time. Check out the details while you can: This presentation will go offline tonight at midnight.

rspertzel

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