Expect a Continuation of the Risk ON-Risk OFF Environment

Today’s controversial split decision loss by World champion and Filipino boxing legend Manny Pacquiao serves as a vivid example of the self-imposed limits of nature on people.

As I pointed out on my blog[1], about 2 hours prior to the Pacquiao-Bradley match, Pacquiao has almost reached the natural speed limits of boxers, where the law of diminishing returns from ageing will turn the tide against him. Pacquiao’s contemporaries, the greatest boxers of the pasts, essentially sought retirement by mid-30s. Mr. Pacquiao is 33 and turns 34 this December.

And contrary to popular expectations, today’s match reveals that the venerable (in sports, not in politics) Filipino champion Manny Pacquiao is just like everyone else, a mortal. A victory from a rematch will not take away the laws of nature. The Pacquiao-Bradley fight heralds the twilight of the Pacquiao boxing era.

Pacquiao’s experience applies to the markets, the inflationism is a policy that will not and cannot last.

For the past few weeks, I have been emphasizing on this[2].

Like it or not, UNLESS there will be monumental moves from central bankers of major economies in the coming days, the global financial markets including the local Phisix will LIKELY endure more period of intense volatility on both directions but with a downside bias.

I am NOT saying that we are on an inflection phase in transit towards a bear market. Evidences have yet to establish such conditions, although I am NOT DISCOUNTING such eventuality given the current flow of developments.

What I am simply saying is that for as long as UNCERTAINTIES OVER MONETARY POLICIES AND POLITICAL ENVIRONMENTS PREVAIL, global equity markets will be sensitive to dramatic volatilities from an increasingly short term “RISK ON-RISK OFF” environment.

And where the RISK ON environment has been structurally reliant on central banking STEROIDS, ambiguities in political and monetary policy directions tilts the balance towards a RISK OFF environment.

Proven True: Sharp Volatility on Both Directions With A Downside Bias

This week, local markets confirmed my assessments.

Today’s dramatic volatilities have been representative of the gross distortion of the financial markets from sustained interventionism in various forms.

Unlike Pacquiao’s predicament, while it may be so that peak inflationism has yet to be reached, I believe that we are nearly there. All it would probably take is a global recession which will likely be met by the fully loaded firepower of central bankers.

Because the Phisix missed the selloff during the previous week as global markets got clobbered which I suspect has been due to some interventions by non-market forces, Monday’s 3.4% quasi-crash seems like a belated ventilation of the downside volatility that I have been concerned with.

Yet bulls remain in the hopeful that stock markets will continue to climb, I am not sure. Again, evidences don’t seem to confirm this and that the conditions I have stated above has yet to be met.

Also the current actions in the Phisix serve as a wonderful example of the tradeoffs between magnitude and frequency, where the frequency of accrued small gains can easily be wiped out by rare short bout/s of huge moves.

One of my favorite radical thinkers Nassim Nicolas Taleb called this the Turkey problem.

I explained in February of 2011[3]

The Turkey is fed from day 1 and so forth, and as a consequence gains weight through the feeding process.

From the Turkey’s point of view such largesse will persist.

However, to the surprise of the Turkey on the 1,001th day or during Thanksgiving Day, the days of glory end: the Turkey ends up on the dinner table. The turkey met the black swan.

The turkey problem is a construct of the folly of reading past performance into the future, and likewise the problem of frequency versus the magnitude, both of which serves as the cornerstone for Black Swan events.

In short, to avoid being the turkey means to understand the risk conditions that could lead to a cataclysmic black swan event (low probability, high impact event).

And this is why it has been IMPERATIVE to establish the underlying risk conditions affecting the marketplace rather than simply guessing on where short term fluctuations are headed for.

Given the current conditions, I wouldn’t want to be the turkey that ends up on the dinner table.

I would rather identify a trend that can provide me the opportunities for measured price moves in the face of established risk conditions given a time window to work on. Luck, to paraphrase the distinguished French chemist and microbiologist Louis Pasteur[4], favors the prepared.

In other words, determining the whereabouts of the stages of the boom bust cycle should be more of the priority than just the price levels.

Volatility has been ubiquitous and not limited to the Phisix. The US S&P 500 has been experiencing the same degree of turbulence.

Under current environment it would be very risky to interpret sporadic moves as sustainable trends.

Even gold has not been spared from drastic pendulum swings.

While I am still exceedingly bullish gold over the long run, I think there will equally be strong vacillations on both directions. Perhaps gold will undergo a consolidation phase first. But a severe downside move cannot be discounted.

Yet going back to the Phisix, the major Philippine bellwether was down only by 1.35% over the week which means 60% of Monday’s losses had been recovered.

At the world markets, this week’s performance has been in sharp contrast with that of the previous.

Monday’s quasi-crash by the Phisix has partially been offset by intra-week succession of gains whose rebound comes in the light of a global rally founded on multiple reports of rescues.

The markets cheered when ECB’s president Mario Draghi declared that “We monitor all developments closely and we stand ready to act”[5]. Also proposals for a grand rescue mechanism via a regional banking union had been floated[6] to the delight of steroid addicted markets.

Meanwhile, the US Federal Reserve chair Ben Bernanke employed the same I will backup the markets spiel with “As always, the Federal Reserve remains prepared to take action as needed to protect the US financial system and economy in the event that financial stresses escalate”[7] US markets soared.

India’s Prime Minister also chimed in to promise more engagement of fiscal spending on infrastructure projects[8].

Notice that outside Russia’s equity markets, the best gainers had been stock markets which made promises of rescues, particularly the India, US, Germany and France.

Ironically, the reaction has been different for those who actualized easing policies.

Australia pursued policy easing by chopping policy interest rates by 25 basis points for mortgages and business loans[9]. However, Australia’s stock market seems to have ignored the monetary stimulus by closing almost unchanged for this week.

More dramatically, China also did respond by cutting of interest rates for the first time since 2008, coupled with the further loosening of controls over lending and deposit rates[10]. Yet instead of recovering, China’s major equity bellwether, the Shanghai index slumped by 3.88% this week.

Again the Shanghai index also manifested the same volatility symptoms as with the rest. The difference is that the downside of China’s equity markets has been more elaborate and possibly signifies the admission of the severity or depth of China’s economic junctures and possibly too of the manifestations (or say protests) of the inadequacy of policy responses.

The point to emphasize is that financial markets has been vastly distorted and importantly, have been held hostage by politics.

As the illustrious Ayn Rand rightly explained[11],

When you see that trading is done, not by consent, but by compulsion - when you see that in order to produce, you need to obtain permission from men who produce nothing – when you see money flowing to those who deal, not in goods, but in favors – when you see that men get richer by graft and pull than by work, and your laws don't protect you against them, but protect them against you – when you see corruption being rewarded and honesty becoming a self-sacrifice – you may know that your society is doomed.

Risk ON-Risk OFF: Capital Flight, Bursting Bubbles and Political Gridlock

If the solution to the current crisis is about having more “stimulus”, then it would be ironic to have seen trillions upon trillions of dollars of “stimulus” thrown into the system, since 2008, and yet see the crisis linger, if not intensify.

Mainstream thinkers have been utterly lost or confused with the current situation for the simple reason that the commonsensical approach of keeping one’s house in order has been eschewed and substituted for the philosopher’s stone of bailouts and money printing. In a world based on aggregates, commonsense is a scarcity while fantasies are in abundance.

Where the problem has been about the lack of competitiveness and economic opportunities from too much regulation, bureaucracy and welfare spending, the propounded solution has been to “tax”, “spend”, “inflate”, “regulate” or “centralize” as if government can increase productivity by edict or by throwing money from helicopters.

Common sense also tells us that if these things worked we don’t need to work at all.

Yet when the law of diminishing returns for these interventionist measures becomes apparent, they ask for more of the same set of actions. The problem of debt requires to be solved by more debt (see above [12]). It’s like if your problem has been about alcohol then you should take more alcohol!

For the mainstream, money is wealth. Print money and everything gets solved. These have been the same prescription that has been complicating today’s crisis scenario with “exit” and “drachmaisation” therapy.

Yet instead of people willing to accept sacrifices for the “common good” as so expected by omniscient mainstream experts, reality reveals the opposite, people run and hide for cover.

There has been accelerating exodus of foreign money from Spain’s banking and financial system as shown above.

Dr Ed Yardeni notes[13],

According to data compiled by Spain’s central bank, foreigners reduced their deposits at Spanish credit institutions by 102.3 billion euros from a record high of 547.1 billion euros during June 2011 to 444.7 billion euros during March. In March alone, the outflow was 30.9 billion euros, and it probably accelerated during April and May…

The TARGET2 balances are more or less consistent with the trends in M2 money supply measures over the past year showing that they are falling in Spain and Greece while rising in Germany. On balance, M2 in the euro zone was up 2.8% y/y during April. This suggests that while the area's depositors are moving their funds from the periphery to the core countries, they aren’t fleeing the euro. However, the recent plunge in the euro suggests that they may be starting to shift funds into the US dollar.

Such exodus or capital flight out of the crisis affected EU nations has been destabilizing money supply conditions around the world.

Residents of these economies obviously don’t like to get robbed of their savings through the loss of purchasing power or through policies of devaluation. Devaluation theory is getting hit right smack on the faces of statist experts.

I pointed out last week that Swiss bonds have turned negative.

The same with Denmark’s 2 year bonds[14] as resident and foreign money flees Greece, Italy, Portugal or Spain. People from these nations would rather pay Swiss and Denmark’s central banks for safekeeping of their money than risk real losses from devaluation and the real risk of a collapse of the banking system.

The US Federal Reserve has partly countered the surges of capital flows by contracting their balance sheet.

This is perhaps comes along with the culmination of Operation Twist[15]—or the selling bonds with maturities of 3 years and below, which should lead to a decline of money supply and which eventually implies of negative effects on the markets. I would suspect that the gold markets have been sensing this thus the current volatility

Of course, once the episode of today’s capital flight from the Eurozone diminishes (which should amplify the money contraction), the FED will likely try to neutralize this by replacing or buy back of the assets which they earlier sold. Unfortunately the FED does not know beforehand when this will be happening, thus will only resort to reactive measures.

The uncertainty in the monetary actions should lead to heightened volatility that would be transmitted into the markets.

Hence, we should EXPECT very volatile markets ahead.

There could be another problem for further monetization of debts. Even if central bankers decide to print more money as another temporary patch to the current turmoil, the availability of their preferred asset[16], government bonds, has accounted for a steep decline. This implies that any future central bank purchases will likely be centered on mortgages and or privately issued securities (equities?).

The bottom line is that the combined effects of interventionism through price controls and bailouts which had prevented markets from clearing malinvestments or misallocated overpriced resources ALONG WITH sharp vacillations of capital flows as consequence of capital flight AND indecisive central bankers in the face of steroid dependent markets have been prompting for the recent market stresses.

This hasn’t been about imaginary ‘liquidity traps’ but of people’s subjective responses to perceived to political risks and policy uncertainties.

Yet as of this writing Spain has asked for $125 billion of rescue fund[17] as firewall from a potential fallout from the elections in Greece.

Does this imply a smooth sailing for the markets? We will see.

And as ramifications to the current dislocations in the monetary sphere out of policy indecisions and of political standoffs, it’s really hard to be unrealistically sanguine when forward indicators of factory activities have shown a synchronized decline[18]. The UK and Eurozone are in a recessionary mode, China is on the borderline while the US seems to be rolling over.

One offsetting factor has been today’s reported surge in China’s external trade[19]. Again this should be monitored rather than taken at face value given all of the above.

Yet we should ask; what if today’s (Pavlovian) stimulus conditioned markets become blasé to further promises from policy procrastination? How would the markets respond?

Again we need to seek clarity in all these than just recklessly plunging into markets centered on the belief that rescues would inherently come along and ride like a white knight to save the proverbial damsel in distress. The reality is that money does not grow on trees.

Thus we should expect the continuation of the Risk ON Risk OFF environment until concrete actions would have been taken.

It is only from here where we can have a sense of direction. And where we can assess and decide as to what position to take.

It is unfortunate that Pacquiao had to lose, but reality has long been staring at him which he denied, and may continue to deny. Many thought he was impervious and invincible too. They were all wrong.

The same with popular expectations for sustained bailouts, reality stares at our faces which we continue to deny. Yet the mounting intensity of crisis upon crisis has been admonishing us of the increasingly tenuous system. Public opinion will be proven wrong too.

Yet I am not saying that we should all be 100% cash. I am saying is that we should get less exposed to equities and overweight cash until conditions change. If the ECB and the FED collaborate on a maximum overdrive to stuff their balance sheets in exchange for green pieces of papers marked by Benjamin Franklins to the public, then we should make a swift move back into commodity based insurance positions. I suspect that come the next phase of interventions, it won’t be a risk ON risk OFF landscape but possibly one of STAGFLATION.

In the meantime be very careful out there.

---

[1] See On Manny Pacquiao’s Boxing Career, June 10, 2012

[2] See The RISK OFF Environment Has NOT Abated, May 27, 2012

[3] See Dealing With Financial Market Information February 27, 2012

[4] Wikipedia.org Louis Pasteur

[5] Bloomberg.com Draghi Says ECB Is Ready To Act As Growth Outlook Worsens, June 6, 2012

[6] See Eurozone’s Proposes Grand Bailout: Regional Banking Union, June 7, 2012

[7] Telegraph.co.uk Ben Bernanke says Fed ready to act if crisis intensifies, June 7, 2012

[8] See HOT: India Joins Pledge for Stimulus June 7, 2012

[9] Reuters.com ANZ cuts variable mortgage rates by 25 basis points June 8, 2012

[10] See HOT: China Cuts Lending Rates and Deposit Rates, June 7, 2012

[11] Rand, Ayn Atlas Shrugged Money padworny.com p. 387

[12] Price Tim Fixed Cobden Center March 12, 2012

[13] Yardeni, Ed Europe June 4, 2012 yardeni.com

[14] Bloomberg.com Denmark Government Bonds 2 Year Note Generic Bid Yield

[15] Wikipedia.org History of Federal Open Market Committee actions

[16] Zero Hedge, Presenting Dave Rosenberg's Complete Chartporn June 1, 2012

[17] Bloomberg.com Spain Seeks $125 Billion Bailout As Bank Crisis Worsens, June 10, 2012

[18] Yardeni Ed, Global Manufacturing June 5, 2012 yardeni.com

[19] Bloomberg.com China May Export Growth Tops Estimates As U.S. Demand Rises, June 10, 2012

Argentina’s Snowballing Capital Flight

This should be another slap on the face for inflationistas or people who myopically advocate inflation as economic elixir.

From Reuters,

Argentine banks have seen a third of their U.S. dollar deposits withdrawn since November as savers chase greenbacks in response to stiffening foreign exchange restrictions, local banking sources said on Friday.

Depositors withdrew a total of about $100 million per day over the last month in a safe-haven bid fueled by uncertainty over policies that might be adopted as pressure grows to keep U.S. currency in the country.

The chase for dollars is motivated by fear that the government may further toughen its clamp down on access to the U.S. currency as high inflation and lack of faith in government policy erode the local peso.

"Deposits keep going down," said one foreign exchange broker who asked not to be named. "There is a disparity among banks, but in total it's about $80 million to $120 million per day."

U.S. dollar deposits of Argentine banks fell 11.2 percent in the preceding three weeks to $11.5 billion, according to central bank data released on Friday. The run on the greenback has waxed and waned since November, after President Cristina Fernandez won a second term on promises of deepening the state's role in the economy.

From May 11 until Friday, data compiled by Reuters from private banks showed $1.9 billion in U.S. currency had been withdrawn, or about 15 percent of all greenbacks deposited in the country.

Feisty populist leader Fernandez was re-elected in October vowing to "deepen the model" of the interventionist policies associated with her predecessor, Nestor Kirchner, who is also her late husband.

Since then she has limited imports, imposed capital controls and seized a majority stake in top energy company YPF.

Earlier, Argentina’s central bank President Mercedes Marcó del Pont even mocked at the laws of economics and haughtily declared that printing money does NOT lead to inflation.

Like in the Eurozone, what governments and their minions say and what people do always clash: The prospects of intensifying devaluation worsened by concerns over capital controls and other forms interventionism have been prompting people to turn to black markets, take refuge on foreign currencies and flee the Argentine banking system altogether

Joel Bowman at the Daily Reckoning has a nice take on this…

The Argentinean government’s policy of theft via inflation has created a demand for the relative safety of US dollars. Obviously, a massive flight from pesos would create considerable headaches for the Argentine State and its efforts to control “its” people…and their taxable income. And so, even though there is no official rule preventing the purchase of US dollars (or any other foreign currency), Argentina’s equivalent to the IRS, AFIP, has made it virtually impossible to do so through regulated channels (i.e., banks).

Therefore, the informal exchange houses do a roaring trade responding to a very real and honest demand for US dollars. And there’s still enough business left over to maintain a vibrant market for the “green rate.” This exchange rate is even less official than the unofficial “blue rate.”

The “green rate” is offered by los arbolitos — i.e. “little trees” — who stand along Florida Street waving their arms (like little trees) and offering their exchange services. That rate, currently at 6.20 pesos to the dollar, is quite literally the “street price” for dollars.

The nearby chart shows the wide — and rapidly widening — gap between the official exchange rate and the blue rate, the most often quoted parallel dollar rate.

Exactly as you would expect, the more money the government prints, and the tighter the capital controls they impose, the greater the urgency to swap pesos into dollars…and the higher the unofficial exchange rates soar.

Clearly, this is a trend that cannot continue indefinitely.

The Argentine State is scrambling to outlaw the consequences of its own recklessness. For years now, Argentina’s Central Bank (BCRA) has brought forth freshly inked fiat notes by the billions to pay for unaffordable election promises. Our North American readers will recognize this crafty monetary prestidigitation as “money printing.”

The practice is nothing new, of course — neither here nor in any country where the tyranny of the mobjority — democracy — enjoys the power to decide the cost to be levied on the minority.

What seems peculiar about Argentina’s case is the government’s Herculean effort to ignore the immutable laws of economics in their pursuit of grand larceny. The country has seen five currencies in just the past century, averaging a collapse every twenty years or so. In 1970, the peso ley replaced the peso moneda nacional at a rate of 100 to 1. The peso ley was in turn replaced by the peso Argentino in 1983 at a rate of 10,000 to 1. That lasted a couple of years, and was then replaced by the Austral, again at a rate of 1,000 to 1. To nobody’s surprise, the Austral was itself replaced by the peso convertible at a rate of 10,000 to 1 in 1992. During the past four decades, when all was said and done, after the various changes of currency and slicing of zeroes, one peso convertible was equivalent to 10,000,000,000,000 (10¹³) pesos moneda nacional.

Obviously Argentinians haven’t learned, yet they are adversely responding to such policies via capital flight. Nevertheless sustained capital flight should help starve the beast.

While stock markets have functioned as to flight to safety against governments going into a maximum inflation overdrive, apparently Argentina’s worsening capital controls has been sending their benchmark index the Merval into a steady downhill as Argentinians seem fearful that their savings could be seized anew like in 2001.

Inflationism constitutes part of, or a mixture of the many other repressive measures from an increasingly despotic government such as higher taxes, price controls, capital controls, nationalization, protectionism and other forms of anti-market interventions. So whatever interim gains will be offset by lower real economic growth.

Argentina seems likely headed for for another sordid chapter of hyperinflation.

The other hyperinflation candidates are neighboring Venezuela, communist North Korea or any European crisis affected nations who will severe ties with the EU.

On Manny Pacquiao’s Boxing Career

This morning, much of the Philippines will be in a standstill as World Boxing champion local idol Manny Pacquiao goes back into the ring.

As a former boxing enthusiast (during my teenage days), I’d say that Manny Pacquiao is past his prime and will likely succumb to a younger player than he is, perhaps as days go by.

I’m not predicting that he will lose this or today’s match. But I am saying that the chances of continued victories will likely diminish if he persists to fight. This will be pronounced especially when he gets to fight younger boxers. It’s simply called the law of diminishing returns brought about by ageing.(unless technology comes to Mr. Pacquiao's rescue)

As a physical contact sport, age and mental condition are what fundamentally matters. Others like physical conditioning, ring technique and tactics are subordinate to this.

Unknown to many, most of Manny Pacquiao’s great victories came against pugilists older than he is (Marco Antonio Barrera, Juan Manuel Marquez, Oscar de La Hoya, Joshua Clottey, Shane Mosley) or at his age level (Ricky Hatton and Antonio Margarito). Only Miguel Cotto has proven to be the younger player whom Pacquiao recently beat.

In addition, the typical retirement age of many boxing legends is at the mid-30s.

The unbeaten Rocky Marciano made a comeback and retired by age 36. The great Muhammad Ali, my favorite hang up his gloves by age 39, but this came amidst back-to-back losses and the emergence of his Parkinson’s disease.

In short, based on the track record of great boxing legends, Pacquiao’s window of boxing greatness has been narrowing.

And there is always the psychological factor. Mike Tyson has been a great of example of a champion consumed by psychology particularly of hubris.

Mr. Pacquiao’s record as politician has not been smooth either. Corruption has been attributed to him, a recent dispute with the local tax agency the BIR shows that he is not an ally of the incumbent administration, and lastly, “God told me to retire”, for me, is a sign of admission of the actual state of his physical condition and of mental stress, where religion becomes his escape mechanism, or as means to endear himself with voters.

In reality, contrary to the popular opinion, it would not be Floyd Mayweather Jr., who will likely beat him, who again is older than Pacquiao and who is more mentality stressed than he is and will likely lose to Pacquiao, but some younger foe.

Of course reality bites, Mr. Pacquiao’s fame, fortune and political career have all been tied up with his boxing career. Once Mr. Pacquiao retires this privilege will erode overtime, as with all of the local celebrity sporting forebears.

So he may push his boxing career to the limits or take unnecessary risks in order to struggle to preserve this privilege.

[UPDATED to ADD: 28 years old Tim Bradley split decisions 33 years old Manny Pacquiao]

10 Signs of a Sociopath; The Worst Get on Top

The recent unfortunate slapping incident during a TV debate by a Greek politician looks like signs of a sociopath.

Naturalnews.com talks about the risks of associating with people with sociopath traits.(bold original)

Sociopaths are masters at influence and deception. Very little of what they say actually checks out in terms of facts or reality, but they're extremely skillful at making the things they say sound believable, even if they're just making them up out of thin air. Here, I'm going to present quotes and videos of some legendary sociopaths who convinced everyday people to participate in mass suicides. And then I'm going to demonstrate how and why similar sociopaths are operating right now... today.

Why cover this subject? I've seen a lot of people get hoodwinked, scammed or even harmed by sociopaths, and it bewilders me that people are so easily sucked into their destructive influence. I want to share with NaturalNews readers the warning signs of sociopaths so that you can spot them, avoid them, and save yourself the trouble of being unduly influenced by them.

Much of this information is derived from the fascinating book,The Sociopath Next Door(http://www.amazon.com/Sociopath-Next-Door-Martha-Stout/dp/0767915828), which says that 4% of the population are sociopaths. The book is a fascinating read.

Aside from being hoodwinked from their glib persuasions, sociopaths or psychopaths don’t take the responsibility for their actions, and thus, resort to blaming others for their mistakes, as explained by author Michael Cross (video on this link, thanks to an anonymous commenter)

Yet here are the ten signs to look for, again from Naturalnews.com

10 Signs for Spotting a Sociopath

#1) Sociopaths are charming.Sociopaths have high charisma and tend to attract a following just because people want to be around them. They have a "glow" about them that attracts people who typically seek guidance or direction. They often appear to be sexy or have a strong sexual attraction. Not all sexy people are sociopaths, obviously, but watch out for over-the-top sexual appetites and weird fetishes.

#2) Sociopaths are more spontaneous and intense than other people. They tend to do bizarre, sometimes erratic things that most regular people wouldn't do. They are unbound by normal social contracts. Their behavior often seems irrational or extremely risky.

#3) Sociopaths are incapable of feeling shame, guilt or remorse.Their brains simply lack the circuitry to process such emotions. This allows them to betray people, threaten people or harm people without giving it a second thought. They pursue any action that serves their own self interest even if it seriously harms others.

#4) Sociopaths invent outrageous lies about their experiences.They wildly exaggerate things to the point of absurdity, but when they describe it to you in a storytelling format, for some reason it sounds believable at the time.

#5) Sociopaths seek to dominate others and "win" at all costs.They hate to lose any argument or fight and will viciously defend their web of lies, even to the point of logical absurdity.

#6) Sociopaths tend to be highly intelligent, but they use their brainpower to deceive others rather than empower them. Their high IQs often makes them dangerous. This is why many of the best-known serial killers who successfully evaded law enforcement were sociopaths.

#7) Sociopaths are incapable of love and are entirely self-serving. They may feign love or compassion in order to get what they want, but they don't actually FEEL love in the way that you or I do.

#8) Sociopaths speak poetically. They are master wordsmiths, able to deliver a running "stream of consciousness" monologue that is both intriguing and hypnotic. They are expert storytellers and even poets. As a great example of this in action, watch this interview of Charles Manson:
http://www.youtube.com/watch?v=aIfGj_55FHI

#9) Sociopaths never apologize.They are never wrong. They never feel guilt. They can never apologize. Even if shown proof that they were wrong, they will refuse to apologize and instead go on the attack.

#10) Sociopaths are delusional and literally believe that what they say becomes truth merely because they say it!Charles Manson, the sociopathic murderer, is famous for saying, "I've never killed anyone! I don't need to kill anyone! I THINK it! I have it HERE! (Pointing to his temple.) I don't need to live in this physical realm..."
Watch Charles Manson saying this at the 3:05 mark of this video:
http://www.youtube.com/watch?v=aIfGj_55FHI

Read the explanations of the above qualities here.

Well, as previously pointed out, there are parallel traits between politicians and psycho-sociopaths.

[UPDATED to ADD: As an aside, although sociopaths may rise in the corporate world, their actions are limited by profits and losses. This is unlike politics, where mistakes would, ironically, have politicians call for more of the same set of actions which brought them to such conditions. Besides, since government is a mandated monopoly, there are no market prices for their activities, example police are paid for in salaries but we cannot establish the real worth of their services, hence there is no way to make politicians or the bureaucracy accountable in the same way as the markets operate. Thus politicians usually come away clean from their blemishes.]

That’s because the nature of politics seamlessly fits into the adaption of these qualities such that people with these characteristics tend to rise to the occasion to assume the role of leadership.

The great Friedrich von Hayek said that in politics, the only worst people get on the top.

Explains Mises Institute’s Doug French, (bold emphasis mine)

F.A. Hayek famously argued in The Road to Serfdom, that in politics, the worst get on top, and outlined three reasons this is so. First, Hayek makes the point that people of higher intelligence have different tastes and views. So, as Hayek writes, “we have to descend to the regions of lower moral and intellectual standards where the more primitive instincts prevail,” to have uniformity of opinion.

Second, those on top must “gain the support of the docile and gullible,” who are ready to accept whatever values and ideology is drummed into them. Totalitarians depend upon those who are guided by their passions and emotions rather than by critical thinking.

Finally, leaders don’t promote a positive agenda, but a negative one of hating an enemy and envy of the wealthy. To appeal to the masses, leaders preach an “us” against “them” program.

Quote of the Day: Distinguishing the Environmentalist from the Conservationist

An "environmentalist" is a totalitarian socialist whose real objective is to revive socialism and economic central planning under the subterfuge of "saving the planet" from capitalism. He is "green" on the outside, but red on the inside, and is hence appropriately labeled a "watermelon."

A conservationist, by contrast, is someone who is actually interested in solving environmental and ecological problems and protecting wildlife and its habitat. He does not propose having government force a separation of man and nature by nationalizing land and other resources, confiscating private property, prohibiting the raising of certain types of animals, regulating human food intake, etc. He is not a socialist ideologue who is hell bent on destroying capitalism. He does not publicly wish that a "new virus" will come along and kill millions, as the founder of "Earth First" once did. More often than not, he seeks ways to use the institutions of capitalism to solve environmental problems. There is even a new name for such a person: enviropreneur. Or he may call himself a "free-market environmentalist" who understands how property rights, common law, and markets can solve many environmental problems, as indeed they have.

That’s from Professor Thomas DiLorenzo on the coming Earth Summit

Shale Revolution Fuels Agricultural Boom in Parts of India

One of the multiplier effects of the ongoing Shale gas boom has been to promote a special agricultural product, a bean grown in India, required for horizontal fracking.

From the Wall Street Journal (hat tip Professor Mark Perry)

From its place on humble Indian tables, a little-known Indian bean called “guar” is making the fortunes of poor farmers.

The demand for guar has soared since gum made from guar seeds started being used to extract shale gas late last year.

Mostly grown in the heart of India’s desert lands, the price of the vegetable has jumped from about 40 rupees ($0.7) a kilogram at the time of the September-October harvest to around 300 rupees ($5.4) per kilogram today.

As a result, barefoot farmers who until recently struggled to make a living are now riding cars and motorbikes and carefully locking the seeds away, according to B.D Aggarwal, managing director of Vikas WSP, an exporter of guar gum.

“There was very strong demand from the overseas oil industry because of a new technology – that is horizontal fracking – for shale gas extraction. There is no alternate to guar for this technology,” said Mr. Aggarwal.

Shale gas, natural gas trapped within shale formations, has become an increasingly important source of natural gas in the United Stated over the past decade, with some analysts expecting its supply to surge to around half of the natural gas production there by 2020.

Horizontal fracking, which requires the use of guar gum as a gelling agent, is considered safer for the environment than the other alternative – a technology known as “hydraulic fracking.”

Guar gum has other uses as well, including for oil drilling and in the textile and paper industries.

Mr. Aggarwal estimates that around 80% of the 1.2 million tons of guar that were harvested last season were snapped up for oil and gas drilling.

For investors such opportunity is what one would call a "pick and shovel play" (Investopedia.com) or a strategy where investments are made in companies that are providers of necessary equipment for an industry, rather than in the industry's end product.

America’s Asia Military Strategy: Encirclement via Air Power

Naval presence, according to historian Eric Margolis, has not been the real issue of US military expansion in Asia, which has been aimed at a supposed encirclement strategy of China, as already half of US warships, aircraft, and logistics vessels have already been deployed in the region.

The real goal is to expand air power.

Writes Eric Margolis,

However, naval forces are no longer the primary expression of America’s power. The US Air Force has dominated much of the non-communist globe since the 1950’s and serves America’s strategic interests in the same way the Royal Navy imposed the British Empire’s military and commercial power. Air power has played the decisive role in all of America’s military victories since World War I.

The Pentagon plans to strengthen its Pacific air power. This likely includes re-establishing US air bases in the Philippines and Australia, and expanding air bases in Guam, Okinawa, and South Korea.

America has been at war for decades. Its aircraft and warships are aging rapidly. Equally threatening, Congress may force deep military spending cuts as deficits worsen – at a time when the US military is being ordered to keep China bottled up on the Asian mainland.

China need only build its military power close to home. The United States must project and maintain its naval and air power 10,000 km across the Pacific Ocean, a hugely expensive, complex undertaking that gives cash-rich China an important, even decisive advantage.

The recent report of a Drone strike against supposed terrorists in Mindanao coupled by a free hand use of Subic and Clark facilities seems to validate this theory as well as partly my theory of the stealth resurrection of US bases here.

Material Bank Note Order: Writing on the Wall for the EU?

A company which produces bank notes recently had a press release which noted of a “material bank note order”.

From Digital Journal (hat tip Zero Hedge) [bold emphasis added]

Fortress Paper Ltd. ("Fortress Paper" or the "Corporation") (TSX:FTP), announces that its wholly-owned subsidiary, Landqart AG, a leading manufacturer of banknote and security papers, has had a material banknote order reinstated. This order was unexpectedly suspended in the fourth quarter of 2011 which negatively impacted the financial results of Landqart's operations in the first half of 2012.

Chadwick Wasilenkoff, Chairman, Chief Executive Officer and President of Fortress Paper, commented, "The recommencement of this previously delayed order will provide Landqart with momentum to realize additional orders and maximize operating efficiencies. This important order allows Landqart to better optimize the overall mill and should provide a meaningful contribution to its margins compared to recent quarters."

About Fortress Paper

Fortress Paper operates internationally in three distinct business segments: dissolving pulp, specialty papers and security paper products. The Company operates its dissolving pulp business at the Fortress Specialty Cellulose Mill located in Canada which is also in the process of expanding into the renewable energy generation sector with the construction of a cogeneration facility. The Company operates its specialty papers business at the Dresden Mill located in Germany, where it is a leading international producer of specialty non-woven wallpaper base products. The Company operates its security paper products business at the Landqart Mill located in Switzerland, where it produces banknote, passport, visa and other brand protection and security papers, and at its Fortress Optical Facility located in Canada, where it manufacturers optically variable thin film material.

This could herald a major policy move, such as a Greece or German (or other crisis affected EU states) exit from the EU or Bernanke’s helicopter drop, the ECB edition.

Interesting times.

Big Brother now a Reality in the US

The Philippines has a popular reality TV program, called the Pinoy Big Brother (PBB) which is a local version of a foreign reality show.

The basic concept of which is that a select number of participants, who are called “housemates”, live in a camera ubiquitous house and strictly according to the "entertaining" rules of ‘Big Brother’. These housemates competes to survive through elimination rounds, as nominated by Big Brother, where audiences determine the victor, who receives material prizes. Of course, the other implied goal for these participants is to be "discovered" as celebrities.

PBB, according to Wikipedia.org, follows the same premise as its many foreign counterparts around the world: twelve Philippine residents are forced to live with each other inside a house for about 3 months or at least 100 days. (italics mine)

So the sublime message of these shows has been one of generating social acceptability for people to forcibly live under the dictates of a “big brother”, a.k.a despot or a tyrant.

Once people are seduced to the idea of condescension and submission, then the implementation of social policies under a 'compassionate' “big brother” regime becomes easier.

In the US, the city of San Francisco has reportedly started using cameras to supposedly prevent crimes

From the New American,

The United States continues its slow morphing into Big Brotherdom, this time through the use of cameras that predict crimes before they take place based on “suspicious” behavior. The cameras will then summon law enforcement to help pre-empt the crime from taking place.

The Daily Mail (Britain) reports, “Using a range of in-built parameters of what is ‘normal’ the cameras then send a text message to a human guard to issue an alert-or call them.” They can track up to 150 people at a time and will build up a “memory” of suspicious behavior to begin determining what is inappropriate.

BRS Labs, the company behind the camera, indicates that the cameras “have the capability to learn from what they observe.”

BRS Labs President John Frazzini said that the technology involves 11 patents that deal with the camera’s ability to learn.

They are also equipped with the technology to adjust for poor light or shaky imagery, and have a series of “trip wires” that become activated and then alert a human supervisor. The footage is then sent over the Internet to employees with a text message summarizing the details.

“The video surveillance technology we have invented is distinctly and materially different from the simple recognition capabilities found in video analytics solutions currently available from a number of vendors in the physical security market,” Frazzini said in astatement. “Generally speaking, video analytics software receives video data from cameras, and issues alerts based on very specific and narrowly defined human programmed rules that have failed to provide operational value in the video surveillance market. In strong contrast to those limited and deteriorating solutions, the patented technology of BRS Labs does not require any human pre-programmed rules, thereby providing an inherently scalable enterprise class software platform to the video surveillance market.”

The cameras have already been installed in prime tourist attractions, government buildings and military bases, and are now being prepared to be installed throughout the transportation system in San Francisco, including buses, trams, and subways.

According to the company, the cameras will eventually be placed in 12 San Francisco stations, 22 cameras per station, totaling nearly 300 cameras in all.

The San Francisco cameras include a special feature that turns the footage into code before they are analyzed.

The reality is that such measures are designed not really to prevent crimes or terrorism, where policies have always been marketed under the cover of some pretentious public good, but about the slippery slope towards the establishment Big government, if not totalitarianism, for the benefit of the political class and their cronies. Shades of George Orwell's dystopian society of 1984.

Hilarious Spoof Hitler Videos

Hitler Long the US Dollar (hat tip Charleston Voice)

Hitler on Scott Walker's victory at the Wisconsin Recall election (thanks to Dan Mitchell)

Estonian President Slams Paul Krugman

When apologists for the state don’t have developments going their way, they intuitively employ verbal sleight of hand as defense mechanism.

Given that Estonia has recently been recognized as the pro-austerity model of success, which I recently posted here, Keynesian high priest Paul Krugman quickly wrote to downplay on such progress. Mr. Krugman's comments drew a vitriolic rebuke from the Estonian president.

From the Huffington Post (hat tip Cato’s Dan Mitchell)

The president of Estonia chewed out Paul Krugman on Wednesday, using Twitter to call the Nobel Prize-winning economist "smug, overbearing & patronizing," in response to a short post on Estonia's economic recovery.

Krugman's 67-word entry, entitled "Estonian Rhapsody," questioned the merits of using Estonia as a "poster child for austerity defenders." He included a chart that, in his words, showed "significant but still incomplete recovery" after a deep economic slump.

President Toomas Hendrik Ilves responded to Krugman in a series of outraged tweets, taking offense to Krugman's tone and writing that Krugman didn't know what he was talking about.

"We're just dumb & silly East Europeans. Unenlightened. Someday we too will understand," he tweeted. "Guess a Nobel in trade means you can pontificate on fiscal matters & declare my country a "wasteland". Must be a Princeton vs Columbia thing."

Estonia, which in 2011 became the latest country to join the eurozone, has been heralded by some as an austerity success story. That year, it clocked a faster economic growth pace than any other country in the European Union, at 7.6 percent. Estonia is also the only EU member with a budget surplus, and had the lowest public debt in 2011 -- 6 percent of GDP. Fitch affirmed its A+ credit rating last week.

Politics becomes a religion when people resort to lies and misrepresentation to desperately defend ideas that has been proven to be based on faith and wishful thinking than from reality.

Video: Greek Central Planner Goes Berserk!

Writes Bob Wenzel at the Economic Policy Journal,

Central planning in action.

Greek far-right Golden Dawn Mp slaps another member on LIVE Tv. Golden Dawn spokesman Ilias Kasidiaris was apparently provoked when his alleged involvement in an armed robbery was mentioned. The fun stuff comes in the last 12 seconds of the clip

Politics is religion to many.

For central planners and their followers, who assume that they have far superior knowledge than the rest, any opposition to their views may lead to violent responses as they are hardly tolerant of adverse opinion.

First they resort to fallacies, then ad hominem to score debating points, and eventually such personal attacks incites physical violence.

This essentially exhibits the innate ethical philosophy of statism: the use of force.

Some pseudo experts try to dominate discussions through supposedly a 'gentle' persuasion approach. But whose subtle but incessant (nonsensical) bombardments represent no more than attempts to brainwash, in the guise of 'investment insights' or 'social justice'. They think that discussions should strictly run along their lines (even if they are based on gaping fallacies). You may even consider their spiels, a spam. And if you resist, you are deemed an idiot. They simply cannot respect diversity. For them it is either black or white, with me or against me (false choice).

Nonetheless, fatal conceit in action.

Drone Warfare Hits Philippine Shores

The “War on Terror” theater has expanded to the Philippines. A US drone reportedly targeting local terror groups hit a part of Mindanao scored heavy fatalities.

From Brookings.edu (thanks to the Facebook group Filipinos for Ron Paul 2012)

Early last month, Tausug villagers on the Southern Philippine island of Jolo heard a buzzing sound not heard before. It is a sound familiar to the people of Waziristan who live along Pakistan's border with Afghanistan, where the United States fights the Taliban. It was the dreaded drone, which arrives from distant and unknown destinations to cause death and destruction. Within minutes, 15 people lay dead and a community plunged into despair, fear and mourning.

The U.S. drone strike, targeting accused leaders in the Abu Sayyaf and Jemaah Islamiyah organisations, marked the first time the weapon has been used in Southeast Asia. The drone has so far been used against Muslim groups and the Tausug are the latest on the list.

Just as in Pakistan and other theatres of the "war on terror", the strike has provoked controversy, with a Filipino lawmaker condemning the attack as a violation of national sovereignty. This controversy could increase with the recent American announcement that it plans to boost its drone fleet in the Philippines by 30 per cent. The U.S. already has hundreds of troops stationed on Jolo Island, but until now, the Americans have maintained a non-combat "advisory" role.

The expansion of U.S.' drone war has the potential to further enflame a volatile conflict involving the southern Muslim areas and Manila, which has killed around 120,000 people over the past four decades. To understand what is happening in the Philippines and the U.S.' role in the conflict, we need to look at the Tausug, among the most populous and dominant of the 13 groups of Muslims in the South Philippines known as "Moro", a pejorative name given by Spanish colonisers centuries ago.

While local terrorist groups should be brought to justice for their dastardly acts, the reported incident shows that US has now directly and brazenly intervened in Philippine politics.

This could be part of the protective umbrella deal, which the Philippine government may have secretly struck with the US, owing to the recent territorial disputes. [Again giving weight to my thesis on Scarborough incident as a false flag]

The Philippines rejected the renewal of 1947 Military Bases Agreement in 1991, yet it appears that the treaty has been tacitly revived with clearance and approval of the incumbent local government to use Subic and Clark bases.

This seem to partly validate my thesis

What seems to be the common denominator between now and two decades ago when the Bases Extension Treaty was rejected by the Philippine Senate?

Well both has the Aquino administration (mother and son)taking on the side of—or has fought for an extension of—US foreign policy in the country.

Not that this about the Aquino administration being an American stooge, although they may well be, but about the developing trend in US foreign policy and the possible implications here.

Aside from the free hand to use Philippine facilities to suit US President Obama’s thirst for military expansionism (imperialism) in Asia, drone warfare has substituted for bases to become an intrusive influence to Philippine politics, with the implicit license to kill any US government labeled terrorist (true or not).

Echoing Judge Andrew Napolitano remonstrations

Since 9/11, the United States government has set up national security systems that function not under the Constitution, not under the Geneva Conventions, not under the rule of law, not under the rules of war, not under federal law, but under a new secret system crafted by the Bush administration and personally directed by Obama, the same Obama who condemned these rules as senator and then extended them as president. In the name of fighting demons in pick-up trucks and wars that Congress has never declared, the government shreds our rights, taps our cellphones, reads our emails, kills innocents abroad, strip searches 87-year-old grandmothers in wheelchairs and 3-year-old babies in their mothers' arms, and offers secrecy when the law requires accountability.

Obama has argued that his careful consideration of each person he orders killed and the narrow use of deadly force are an adequate and constitutional substitute for due process. The Constitution provides for no such thing. He has also argued that the use of drones to do his killing is humane since they are "surgical" and only kill their targets. We know that is incorrect. And he has argued that these killings are consistent with our values. What is he talking about? The essence of our values is the rule of law, not the rule of presidents.

Obama’s war on terror has made him judge, jury and executioner even in the Philippines.

Quote of the Day: Private Arbitration

Enter 21st century technology: there’s a relatively new service called Judge.Me, an online arbitration service whose decisions are legally binding in 146 countries, from Afghanistan to Zimbabwe… and yes, including the US, Canada, and Western Europe.

At just $299, disputes can be settled in a matter of days, and the firm’s case history shows that 96% of all arbitration awards have been honored.

This is the sort of thing that makes me very excited– the private sector displacing the public sector. And there’s going to be a lot more of it coming.

The more insolvent governments become, the more they’re going to be forced to axe all the things they can’t afford. We’re already starting to see this in places from California to England that can no longer hide from their fiscal reality.

With the government monopoly out of the way, the private sector will mop up every service that it can turn a profit on– trash collection, security, fire, prisons, libraries, etc. This forces competition, higher quality service, and lower prices for everyone.

The people who protest against austerity, or think it’s a tragedy when a courthouse closes down due to budget constraints, are really missing the larger point: the sooner this corrupt house of cards collapses, the better off we’ll all be.

Another gem from the maverick Simon Black at the Sovereign Man.

This serves as another example or evidence of how the information age has been transforming our lives and that will lead to decentralization.

War on Internet: Google will warn Users of State Sponsored Attacks

Hail Google. Google will warn their users of state sponsored privacy intrusions.

From Foreign Policies the Cable

UPDATE: A senior Senate aide confirmed that this evening he received a warning on his Gmail account that Google suspected he had been the target of a state-sponsored cyber attack.

Web giant Google is about to announce a new warning informing Gmail users when a specific type of attacker is trying to hijack their accounts -- governments and their proxies.

Later today, the company will announce a new warning system that will alert Gmail users when Google believes their accounts are being targeted by state-sponsored attacks. The new system isn't a response to a specific event or directed at any one country, but is part and parcel of Google's recent set of policy changes meant to allow users to protect themselves from malicious activity brought on by state actors. It also has the effect of making it more difficult for authoritarian regimes to target political and social activists by hacking their private communications.

"We are constantly on the lookout for malicious activity on our systems, in particular attempts by third parties to log into users' accounts unauthorized. When we have specific intelligence-either directly from users or from our own monitoring efforts-we show clear warning signs and put in place extra roadblocks to thwart these bad actors," reads a note to users by Eric Grosse, Google's vice president for security engineering, to be posted later today on Google's Online Security blog, obtained in advance by The Cable. "Today, we're taking that a step further for a subset of our users, who we believe may be the target of state-sponsored attacks."

When Google's internal systems monitoring suspicious internet activity, such as suspicious log-in attempts, conclude that such activities include the involvement of states or state-backed initiatives, the user will now receive the specialized, more prominent warning pictured above. The warning doesn't necessarily mean that a user's account has been hijacked, but is meant to alert users that Google believes a state sponsored attack has been attempted so they can increase their security vigilance.

Google wants to be clear they are not singling out any one government for criticism and that the effort is about giving users transparency about what is going on with their accounts, not about highlighting the malicious actions of foreign states.

Read the rest here

War on Internet: Anonymous will do a Wikileaks this December

The war on the internet continues.

Despite a string of legal harassment suit waged against activists like Wikileaks, internet activism will persist to haunt governments and their cronies.

Another activist group called the Anonymous announced that they will do a Wiki-leaks expose this December.

From Personal Liberty.com (hat tip Sovereign Man)

The global “hacktivist” syndicate Anonymous wants people all over the world to expose evidence of corruption and injustice by leaking documents to which they have access.

In a recently posted video, the group urges anyone who has access to evidence of corporate or government wrongdoing to purchase a USB drive and document the evidence for publication on the Internet.

“Imagine you purchase a USB drive. Imagine you take it to your work place. Imagine you collect evidence of illegality and corruption. Imagine together we expose all lies. Imagine we leak it all,” scrolls across the screen in a recent video posted by the group.

The initiative, dubbed Project Mayhem 2012, will take place over the 10-day period from Dec. 12 to Dec. 21, during which the video claims “the World will see an unprecedented amount of Corporate, Financial, Military and State leaks that will have been secretly gathered by millions of CONSCIENTIOUS citizens, vigilantes, whistle blowers and insiders worldwide.”

The group claims to be in the process of developing a Wikileaks-style platform called TYLER where the information can be anonymously posted.

Video here.

HOT: India Joins Pledge for Stimulus

Wow. Only hours after China’s announcement, India joins the bandwagon for stimulus.

From Bloomberg,

Indian stocks climbed to the highest level in a month after Prime Minister Manmohan Singh pledged to revive growth in Asia’s third-largest economy.

ICICI Bank Ltd. (ICICIBC), the nation’s second-biggest lender, paced gains among its peers.Reliance Industries Ltd. (RIL), owner of the world’s largest oil-refining complex, rose to a four-week high after Chairman Mukesh Ambani unveiled plans to plans to invest 1 trillion rupees ($18 billion) over five years to double its operating profit. The BSE India Sensitive Index (SENSEX)advanced 1.2 percent to 16,649.05, its highest close since May 7, bound for its best week this year with a 4.3 percent gain.

India’s Singh yesterday outlined port, railways and road projects and a push to add power-generation capacity to bolster the economy. The government’s pledge follows the central bank’s signal to cut borrowing costs to support an economy expanding at the weakest pace in almost a decade as policy gridlock deters investment and Europe’s debt crisis hampers exports.

“From a very low level of confidence there’s now hope that things will happen,” Hitesh Zaveri, head of investments of portfolio management services at Mumbai-based Birla Sun Life Asset Management Co., said in a phone interview. “There’s expectation of a stimulus coming from Europe and of a rate cut locally. That forced short-sellers to cover their bets.”

Stimulus really does nothing but to juice up the markets over the short term at the expense of redistributing wealth from taxpayers to the bankers and cronies, as well as, fueling boom bust cycles which is negative for any economy over the long term.

Again promises are one thing, actions are another.

The US Federal Reserve’s FOMC will meet on June 19-20th, will they be next?