Thanks to NIRP and ZIRP; Many Japanese Turn to Crime In Order to Live Off From Prison Welfare

The following serves as wonderful example of how government interventions fundamentally mangle society’s ethical fabric.

Through ZIRP and NIRP or the invisible redistribution/transfers via monetary channels, or the Japanese government’s thrust to inflate her debt away has only led to the crucifixion of Japanese savers.

Destruction of the yen has only shrunk the purchasing power or reduced real income of Japan’s dramatically aging society (yes Japan has a declining to population).

So the expanding paucity of income, such has now spurred many of the elderly to commit crime with the intent to get fed or live by Japan’s prison welfare state.

From CNBC.com (bold added)

Japan's prison system is being driven to budgetary crisis by demographics, a welfare shortfall and a new, pernicious breed of villain: the recidivist retiree. And the silver-haired crooks, say academics, are desperate to be behind bars.

Crime figures show that about 35 per cent of shoplifting offences are committed by people over 60. Within that age bracket, 40 per cent of repeat offenders have committed the same crime more than six times.

There is good reason, concludes a report, to suspect that the shoplifting crime wave in particular represents an attempt by those convicted to end up in prison — an institution that offers free food, accommodation and healthcare.

The mathematics of recidivism are gloomily compelling for the would-be convict. Even with a frugal diet and dirt-cheap accommodation, a single Japanese retiree with minimal savings has living costs more than 25 per cent higher than the meagre basic state pension of Y780,000 ($6,900) a year, according to a study on the economics of elderly crime by Michael Newman of Tokyo-based research house Custom Products Research.

Even the theft of a Y200 sandwich can earn a two-year prison sentence, say academics, at an Y8.4m cost to the state.

The geriatric crime wave is accelerating, and analysts note that the Japanese prison system — newly expanded and at about 70 per cent occupancy — is being prepared for decades of increases. Between 1991 and 2013, the latest year for which the Ministry of Justice publishes figures, the number of elderly inmates in jail for repeating the same offence six times has climbed 460 per cent.

The surging rates of crime among the elderly disguise a darker trend than mere contempt for the law, say economists and criminologists. Retiree crime is rising more quickly than the general demographic ascent into old age that will put 40 per cent of the Japanese population over 65 by the year 2060.

So as the prison system absorbs more people, the government’s budget will have to increase to accommodate this, thus furthering the vicious cycle of bigger debts and the destruction of the yen.

And more affirmation of how inflationism will lead to the destruction of society, from JMKeynes

Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose. 

Updated to add: Sorry for the small font.

Phisix 7,350: Team Viagra March 28 Edition

Only in the Philippines!

Through rampant use of "Marking the Close", Team Viagra chopped today's headline index losses by half!

The headline index seen from different platforms

The sectors which participated or benefited from the last minute pump

The issues which benefited from the closing session pump.

To repeat, these postings are intended to document on the brazen irregularities at the PSE, with the aim to demonstrate that "There is no such thing as a free lunch; perversion of the marketplace will eventually incite a blowback or will backfire."

Note: figures/images from colfinancial.com, Bloomberg, PSE and technistock.net.

Happy Easter!

Tweet of the Day: China's Strong Man Rule: 16 Media People Missing After News Site Asked for the Resignation of the President

Tweet of the day comes from journalist George Chen

This reminds of the Philippine strong man rule bubble, or the above represents a roadmap of what strong man regimes are about: repression via violence

Updated to add

For email subscribers, only 3 blog posts are delivered to your mail box, so I included the links of two other early posts here.

See US Politics: Reason Why the Fed Didn't Raise Rates? Donald Trump

See Infographics: Domo Arigato, Mr. Roboto: The Booming Robot Industry

Bloomberg Warns: Japan's Bond Market Is Close to Breaking Point

It's a curiosity to see some of mainstream media, whom were once cheerleaders for Abenomics, panic over growing dislocations at the JGB market.

While stocks have been surging, the Bloomberg recently warned on growing signs of instability in Japan's government debt (JGB) bubble: (bold mine)

Signs of stress are multiplying in Japan’s government bond market, which is crumbling under pressure from the central bank’s unprecedented asset-purchase program and negative interest rates.

Bank of Japan Governor Haruhiko Kuroda has repeatedly said his policies are having the desired effect on markets, including suppressing JGB yields. His success is driving frenzied demand for longer-dated notes as investors avoid the negative yields offered on maturities up to 10 years. And as buyers hang on to debt offering interest returns, the BOJ is finding it harder to press on with bond purchases of as much as 12 trillion yen ($106 billion) a month, sparking sudden price swings leading to yield curve inversions that have nothing to do with economic fundamentals.

“We hold a lot, and we’re not selling,” said Yoshiyuki Suzuki, the head of fixed income in Tokyo at Fukoku Mutual Life Insurance, which has $59 billion in assets. “We can get interest income. If we sell, there are no good alternatives.” The following charts show signs of stress in the market:

Yields on 40-year JGBs dipped below those on 30-year securities Tuesday, and a BOJ operation to buy long-term notes last week met the lowest investor participation on record. Bond market functionality has deteriorated, with 41 percent of respondents last month rating it as “low,” the highest proportion since the BOJ began the quarterly survey more than a year ago.

“It wouldn’t be surprising to see some BOJ operations fail,” said Yusuke Ikawa, a salesperson at UBS Group AG’s Knowledge Network in Tokyo. “The biggest risk of that is in superlong bonds.”

A dearth of liquidity has driven a measure of bond-market fluctuations to levels unseen since 1999.

“The market has gone from having extremely high liquidity previously, to the point where trading by investors can easily show up as volatility in yields,” said Tatsuya Higuchi, chief fund manager in the fixed income investment division at Mitsubishi UFJ Kokusai Asset Management Co. “There is a negative side to the BOJ’s bond buying.”

Demand for JGBs has increased so much since the start of negative-rate policy that it’s flipped the market for repurchase agreements on its head: Dealers who in normal circumstances would pay to borrow overnight cash in the repo market -- offering debt as surety of repayment -- are instead willing to pay to get access to the collateral.

Distortions in the market are poised to become even more pronounced, with almost 90 percent of analysts in Bloomberg’s most-recent survey predicting additional stimulus by the end of July.

The BOJ has already cornered close to a third of the JGB market, more than any other class of investor. That proportion will grow as asset purchases continue -- even without an expansion of easing.

The central bank is also buying negative-yielding bonds in the market, which has an overwhelming majority of the world’s sub-zero debt. The benchmark 10-year JGB yielded minus 0.09 percent on Thursday, after plunging to a record low of minus 0.135 percent on March 18. Positive yields on 40- and 30-year debt jumped about 10 basis points after the BOJ reduced the size of an operation to buy long-term bonds.

The market disruptions raise concerns that the BOJ is nearing the limits of its stimulus, even as Kuroda has said the central bank can do more. There are also questions over whether, if the central bank is forced to exit prematurely, the market can withstand the potential shock.

“How can the BOJ head for the exit?” Dan Fuss, vice chairman of Loomis Sayles & Co., said at an event in Tokyo last week. “If they open the exit door, there’s a fire on the other side.”

Truly awesome developments!!!

 

Typical political actions have been designed to address short term issues while disregarding long term consequences, so the mainstream only discovers now that "there is a negative side to the BoJ's buying". Duh!

It's just like the stampede by the average citizens to own home safety boxes and signs of increased demand for higher yen notes in response to negative interest rates. 

The mainstream is surprised to see people's different or opposite reactions from desperate government policies.

Of course, there is practically no limit to the BoJ's or any central bankers to employ 'stimulus'. If JGBs run out, then the BoJ's buying can spread to directly own equities (rather than just ETFs), corporate bonds, properties (home commercial) or even Ketchup (discussed here)! 

The BoJ can embrace Wall Street Journal's recommendation to "buy oil"! 

They can even use the nuclear option, instead of helicopter money, they can borrow US B-52s bombers to drop yen from the sky! But since cash will be disallowed, then the BoJ can send yen via postal mail (if no bank accounts) or credit every individual's bank accounts. In essence, the BoJ can create the yen at will!

It is not what the BoJ can do, but the effects of their actions that truly matters. 

In the economic spectrum, despite the deepening use of magic from monetarism, Japan has had FIVE recessions in the last SEVEN years. 

But for Japan's politicians, the real economy seems not the real concern. The BoJ appears to prioritize the financial markets, specifically, the JGB market and the stock market. And that's because they realize that once the 'animal spirits' dissipate, the government's access to credit will become hard to come by. 

And to consider Japan's debt position (as per 2016 budget) where about 25% of total budget is allocated for debt service and that debt service accounts for 41% of tax revenues--the loss of animal spirits will most likely translate to a debt-currency crisis!

So the BoJ wants to own most of the JGBs to prevent any volatility from overindebtedness. But in doing so, their actions have incited the current upsurge in volatility.

In the political spectrum, the BoJ's increasing ownership of the factors of production simply means nationalization of assets or increased embrace of or the slippery slope to socialism.

In the financial markets, the ongoing dislocations at the JGBs have spilled over to corporate bonds where default risks premiums have been surging as previously discussed here. 

The untoward effects from interventions only begets more interventions that leads to more unintended and increasingly more complicated consequences. And the mainstream gets surprised for unexpected outcomes.

Understand that these are not just technical issues, rather these are technical dynamics in reaction to the political response on Japan's structural political-economic problems. 

And rising stocks won't be able to conceal what has been going on (or the erosion of economic-financial foundations) for long. 

And if Japan's fixed income market unravels, global financial markets will suffer from a contagion.

 

Quote of the Day: Europe is Drowning Under the Cost of Welfare Bills

A debt crisis in Europe seems inevitable. Reason? Exploding costs of welfare politics.

Telegraph's Matthew Lynn explains:

Europe’s welfare spending is out of control, and is on a scale that is both lavish and unaffordable compared with the rest of the world. There is a problem, however. Neither she, nor any other political leader in Europe, has the will to do anything about it.

Eurostat, the statistical agency of the European Union, has this week published updated figures on the total welfare bill across Europe. It is rising, and in some countries is getting up to a quarter of national output. Meanwhile, the percentage of spending on stuff like infrastructure or education, which increase an economy’s potential output, is falling.

So long as that is true, it is very hard to see anything other than a bleak future for any of Europe’s economies.

If you dip into the blogs, there is a mildly entertaining debate about whether Merkel’s often-quoted figures are correct. On close inspection, it turns out that nations that make up the EU currently account for 7.2pc of the world’s population and a shade over a quarter of total output. When the World Bank crunched the numbers on social spending, however, it found that in fact Europe accounts for a massive 58pc of global welfare spending.

What is certainly true is that Europe’s welfare budget has turned into a juggernaut that is careering out of control. On the World Bank data, the United States accounts for 18.8pc of global welfare spending, as you might expect from the world’s biggest economy. But Germany, around a third of its size, currently spends 12.5pc of the global total. France, a smaller country still, accounts for 9.9pc. The UK racks up close on 7pc. Contrast that with some far bigger, and faster- growing, countries. China, with 20 times our population, accounts for 2.4pc of the total. Russia accounts for 2pc and India just 0.6pc.

According to Eurostat, the total cost of welfare across the EU now amounts to 19.5pc of total GDP, compared with 17.5pc as recently as 2006. If you restrict that to the eurozone countries, the total rises to 20.5pc. In Denmark and France it is now close on 25pc.

For all that the Left complains about austerity in this country, our total spending on social protection is only slightly below the European average at 16.5pc of GDP. In controversial areas such as disability benefits, where the Government has now abandoned some modest cuts, we are in line with the EU average, spending 2.8pc of GDP. (Our welfare bill is only less than average because a fantastic performance on job creation means we spend just 0.2pc of GDP on unemployment, compared with a eurozone average of 1.8pc, and 2pc in a country such as France).

Overall, in almost every country, it is going up. With ageing populations, that is hardly likely to decrease – poverty-stricken Greece is now spending 15pc of GDP on pensions, and Italy 14pc. Europe is literally drowning under the cost of its welfare bills.

US Politics: Reason Why the Fed Didn't Raise Rates? Donald Trump

One recognizes that the political season is heating up with comments like this. From New York Posts' John Crudele 

The upcoming election and, especially, the surprising strength of Donald Trump also make it almost impossible for the Fed to boost rates. If Trump gets elected, the Fed will almost immediately be hit by audits that will reveal lots of secret, sinister things. 

So Fed Chair Janet Yellen and her fellow central bankers can’t do anything — like raise the cost of money — that might slow the economy down and give Trump a better shot at winning the presidency.

Presidential aspirant Donald Trump seeks to have the FED audited. And this is probably why a FED official has recently been under fire for donating to rival Hillary Clinton. Fed employees have placed big bets on Democrats while campaign donation to the Trump: ZERO!

Infographics: Domo Arigato, Mr. Roboto: The Booming Robot Industry

One of the sunshine industries of the information/digital/third wave age would be robotics. The Visual Capitalist has an effusive overview of the industry:

Domo Arigato, Mr. Roboto

ROBOT MARKET GROWING AT 15%, WITH 1.3 MILLION NEW INDUSTRIAL ROBOT INSTALLATIONS BY 2018

The market for industrial robot installations has been on a skyward trend since 2009, and it is not expected to slow down any time soon. According to the World Robotics 2015 report, the market for industrial robots was approximated at $32 billion in 2014, and in the coming years it is expected to continue to grow at a compound annual growth rate (CAGR) of at least 15%.

That means between 2015 and 2018, it’s anticipated that 1.3 million industrial robots will be installed worldwide. This will bring the stock of operational robots up to just over 2.3 million, mostly working in the automotive and electronics sectors.

For how long can the global robot population continue to grow?

ROBOT DENSITY

Perhaps the most interesting way to peek into the future of industrial robot installations is to look at potential sales in China.

Currently, the world’s most populous nation has a density of robots that is about half of the world average, equal to just 36 robots for every 10,000 manufacturing workers in China.

However, this is changing fast. It’s been the largest market for robots since 2013, and in 2014 the country bought 57,100 robots – the highest quantity ever recorded in a year. By 2018, one in every three robots in operation around the world will be in China.

What will happen if China’s density approaches that of other robot industrial centers?

Highly automated countries such as Germany, Japan, and South Korea all have robot densities that are multiples higher. South Korea, for example, has 478 industrial robots for every 10,000 workers – a ratio that is 13x higher than China’s.

With this kind of potential for growth, it’s clear that this is only the start of the robot story.

The spread of robots would entail not only of investments aspects but of political-economic ones as well. For instance expect the rise of neo-Luddism.

Courtesy of: Visual Capitalist

Cartoon of the Day: Why Economists are No Longer Welcome in Hell

From SMBC-comics (hat tip Tim Taylor)

Charts: Has the Hiatus of US Dollar Ended? Return of Risk OFF?

The February-March Risk ON landscape has partly been a function of oversold conditions from the January 2016 meltdown. However, the fall of the US dollar has signified as the primary driver for 'fast and furious' rebound (helped by the global central banks' recent Shanghai Accord).

Yet has the US dollar's hiatus (via short covering) ended?

The Bloomberg USD (BDXY) index

The original USD (DXY) Index

The Asian dollar (JP Morgan Bloomberg ADXY) Index

The rise in the USD translates to lower commodities in particular oil. 

US WTIC

Europe's Brent

And higher US dollar will mean lower the overall commodity prices: the topping of the S&P GSCI commodity index?

And the correlation of oil with risk assets have only tightened which means if the correlations hold then lower oil equal lower stocks.

 

Moreover, since the rise of the USD implies tightening of systemic liquidity then it should also mean lower prices for risk assets

The FTSE World

The MSCI ACWI World iShares

And finally the PSEi's twin, Brazil's Bovespa

Has Risk OFF arrived?

Interesting

Phisix 7,400: Team Viagra Turns Red Into Green! Parabolic Index to Test May 2013 Record!

I have to give Team Viagra credit.

They have been so admirably well coordinated, and most importantly very persistent and audacious, such that they have desperately been engaged in serial panic buying mode similar to...

a shark feeding frenzy ....(from CNN)

or like...

zombies scaling up the Jerusalem’s Wall at World War Z

Perhaps they believe that the Phisix will hit 10,000 in a few months. 

The video and portrait above ironically I showed in September 2014. Apparently history rhymes

Today’s slight profit taking was entirely reversed at the closing bell or during the market intervention period. The Phisix was pumped by .32% to close the day in green!!!

In short, 100% of today’s gains came from marking the close pump! So this week's .73% gain has mostly been about manipulation

No profit taking is allowed. 

For Team Viagra, the Phisix will GO STRAIGHT UP like a Rocket Blast! And they will do whatever it takes including the sustained defiance of the SEC's mandate.

Except for the mines and the holding sector, last minute pump was seen in four industries: financial, property and commercial industrial

And 5 issues representing these sectors had been used in the seemingly orchestrated pump

It is interesting to observe that this week’s pumping action has shifted from the top 5 biggest to the next largest issues. Based on weekly performance, the leaders have given way to the supporting teammates mostly from the top 12. Last week's best performers can be seen here or in my post here.

In short, Team Viagra appears to have used rotation to pump the index!

Team Viagra seem to believe that the stock market is all about pumping and pushing with fundamentals irrelevant to its significance or to its existence

And similar to the price inflation, the PERs of the PSEi members have vaulted higher from the bidding fear of missing out spree! 

The most popular issues have traded with TTM PERs at a stunning 20+,30+, 40+!

Yet Team Viagra believes that such levels are cheap and that 50s ,60s, 70s or even 100s would really make no difference!

Consider SM. This week SM, the PSEi's biggest market cap, closed unchanged. But the firm's PER surged 3.4% which to my guess reveals of last year’s ZERO growth!

This means none of this has been about G-R-O-W-T-H but rather about multiple expansions or manic speculations! Or put differently, rabid pumping in the hope that some greater fool out there will be takers at 50,60,70+ PERs! (Of course such has more than just been about greater fools but about the politically correct image called G-R-O-W-T-H! And G-R-O-W-T-H means free access to the public's money)

Nonetheless, even when the PSEi has still been off the May 2013 highs and 9.4% away from the April 2015 record, already FOUR issues within the top 12 biggest market cap have now closed at fresh records. The four issues: SM, AEV, GTCAP and JGS. 

This serves as testament to the concentration of buying activities--all designed to buoy the index.

Moreover, given that SM's share price has been static this week, the rotational pump has shifted to subsidiaries SMPH and BDO. So SMPH now drifts at a stone’s throw from a new record while BDO continues to ascend.

And the reason these issues have been at record highs has been about the ferocity of the pump as seen via the vertical launch or World War Z's zombies!

And JGS should be a wonderful embodiment of current events which serves as my chart of the week…

JGS' chart has gone totally vertical! (Remember BW??? If JGS continues with this then it will be like BW)

And never in JGS' history has this ever happened.Not even during the previous breakouts.

So This Time MUST be Different!!!

....

Or not!!!!

Rampant Marking the close Only in the Philippines!

Charts and table from Bloomberg, PSE, technistock and colfinancial.

Quote of the Day: The Person Who is Best Qualified to Govern You is You

From self development and libertarian author Robert Ringer at his website: (italics original)

All this by way of saying that because of the way our political system operates, it makes it a certainty that the scum will always rise to the top. And why not? Getting into politics is the easiest and quickest way known to mankind to become rich and powerful. How can a larcenous person resist such an opportunity?

As early as the mid-nineteenth century, the great individual anarchist Lysander Spooner put it simply when he explained that when someone says that a certain type of government is best, that does not mean it’s a good government. It simply means that it’s the least bad of all other forms of government.

The challenge, then, is to find a way to educate the public so it understands that government, by its very nature, is inherently evil. Generations from now, if the United States starts to rise from the ashes of its criminally controlled bread-and-circus existence, perhaps some social genius who is a firm believer in liberty can come up with a much better system of government than a “republic” or democracy.

Whenever some slick-tongued politician says something “patriotic” like, “Ask not what your country can do for you, ask what you can do for your country,” it takes an enlightened mind to understand the truth in Samuel Johnson’s observation, “Patriotism is the last refuge of the scoundrel.” Which means that virtually all presidential candidates, this year or any other, are scoundrels.

No system will ever be perfect (even the Founding Fathers failed at that), but the only hope for a morally based society is one that is rooted in Thomas Jefferson’s words that “That government is best which governs least.”

If ever a majority of citizens come to believe this, we may finally find a way to invent a government that governs so little that it becomes almost invisible. The fact is that criminal politicians have no qualifications to govern you. As you labor through the next seven-plus months of political theater, always keep that in mind and remember that the person who is best qualified to govern you is you.

Phisix 7,350: Team Viagra Saves the Day!

In order to prevent the domestic stock market from presenting itself as a blowoff top phase, chart formations would have to be managed.

Also, since the stock market has been presented as the politically correct way to interpret the “economy”, the stock market has to go up. And so it is being made to go up--through anomalous means.

So Team Viagra frequently goes to work in order to fulfill such mission.

For today’s action, the Phisix was down by about 80.74 points or by 1.09%, when a last minute pump virtually erased a stunning 56.9% of the day’s losses!

The Viagra effect as seen from different platforms

With the exception of mines, all mainstream sectors participated in the "marking the close" pump.

And the sectoral representation had been led by their respective heavyweights as shown above. Except for SMPH, which was unchanged at the pre-market close period to suddenly skyrocket 1.81%, the three indicated issues had their respective losses significantly pared.

Nevertheless, I will keep emphasizing that one of the principal reasons why crashes occur has been due to such manipulations. Manipulations distort or destroy the fundamental function of prices to efficiently coordinate the economic/market process.

And as stated before, my purpose for such postings has been to document irregularities for posterity. Such that this may serve as lesson to future generation practitioners: There is no such thing as a free lunch; perversion of the marketplace will have incite a blowback or will backfire.

Yes, the session end Viagra syndrome can be seen "ONLY in the Philippines"! And yet that seems to be the secret formula on how the Best Stock Exchange in ASEAN has been achieved.

Similarly this is why with Team Viagra, “it's definitely more fun in the Philippines!”

Note: figures/images from colfinancial.com, Bloomberg, PSE and technistock.net.

Quote of the Day: Why the Worst 'Politicians' Get on Top: The Comparative Advantage

Austrian economist and Senior fellow at The Independent Institute Robert Higgs discuss the modern day application of the great FA Hayek's “Why the Worst Get on Top” from his classic the Road to Serfdom.

The rise of reprehensible individuals to the top of the political heap is precisely what anyone with a realistic view of history and a bit of education in public choice theory would expect.

Consider first that politics is a competitive endeavor. In this realm, office seekers and program promoters strive to gain their objectives, each at the expense of others similarly striving to promote themselves, their programs, and their other governmental aims. What sort of person is most likely to succeed in this competition?

When prize fighters compete, they first learn how to avoid, ward off, or soften the opponent’s blows while landing the most and the strongest punches themselves. This form of competition is not for the weak or the timid. Besides having a natural fearlessness and training for personal combat in the ring, the prize fighter must possess a capacity for aggressive assault and battery on another human being. Beating a man senseless is all in a successful day’s work. Those incapable of or averse to such conduct cannot succeed in this line of work.

Likewise, given the institutional, psychological, ideological, and economic realities of the current electoral system in the United States (and many other countries), no one can succeed if he or she is too fastidious about violating a host of moral and legal strictures. Imagine a presidential aspirant who insisted on always telling the truth, speaking clearly without evasion or distortion of the issues; on proposing only feasible and rational policies to promote the public’s general interest, rather than the self-serving plans of powerful special interests; and on steering clear of unnecessary involvement in the affairs of other countries or engagement in quarrels abroad that do not jeopardize the security of Americans in their own territory. To imagine such a candidate is to imagine practically the exact opposite of the present candidates. These malodorous persons are so far from being morally upright, honest, and forthright—not to mention being simply decent by ordinary standards—that claiming they are basically good people seems only to evince how out of touch with reality one is.

Why is it, then, that the virtues and decencies that we generally expect people to have in their private life are so manifestly absent in the people who succeed best in politics and government? The answer lies in the nature of government itself—at least, government as we currently know it all over the world, a system of imposed, involuntary, monopoly rule whereby the system’s kingpins use military and police power along with ideological enchantment to plunder and bully innocent people—and to get away with doing so year after year. Just as only physically tough, fearless, aggressive persons succeed as prize fighters, so only dishonest, slick, evasive, power-hungry, unscrupulous, and vicious persons have what it takes to succeed in a system whose very foundations—violence, aggression, extortion, and misrepresentation—are completely at odds with private standards of just and virtuous conduct.

If someone like me—elderly, small, weak, timid, and untrained—were put in the ring to fight for the heavyweight boxing championship, you would not expect me to survive more than a few seconds. Likewise, if someone like me—someone who respects other persons’ natural rights to life, liberty, and property and who abhors dishonesty, extortion, aggression, and unnecessary violence—were thrown into the political or governmental arena, I would scarcely last much longer. There’s a reason why today’s leading campaigners are such morally ugly individuals: they have a comparative advantage in taking the kinds of actions one must take in order to reach the pinnacle of government power.

Two Reasons for Mainstream Analysts' "Stubborn Persistence of Optimism": Saving Face and ACCESS!

Incentives drive action. And the key reason why mainstream/establishment analysts have almost always been “bullish” have been due to their personal interests. And such interests usually runs in conflict with, or at the expense of their clients/audiences.

Such is called the principal agent dilemma/agency problem. This Washington Post-Bloomberg article reinforces what I have been saying all along: (bold mine)

What can explain the stubborn persistence of optimism? Two things: saving face and access.

Analysts who’ve told their clients to buy seldom want to reverse themselves, especially when a public downgrade could affect the value of their holdings, said George Serafeim, a Harvard Business School professor.

That’s why price targets remain high even as the seven-year bull market shows signs of fatigue.

Upbeat guidance can mean golf and soirees with company executives, hosting them at investor conferences and being picked first to ask a question on quarterly conference calls.

“To have good relationship with management, the least offensive thing you can say is ‘hold,’ but really ‘hold’ means ‘sell,’” Serafeim said.

Then there’s the flip side. A neutral or negative recommendation can get an angry phone call from the C-suite, said Kennen MacKay, a biotech analyst at Credit Suisse Securities in New York.

“If you have a positive rating and wrong assumption, you might not hear about it from management,” MacKay said. “If you have an underperform, the management will attack every assumption you have....”

More...

Analysts are compromised from both sides, Gheit said. They get too close to company management and also feel pressure from their investment-bank employers who want business with the companies.

“The analysts share the blame with oil companies because they basically have this incestuous relationship,” he said. “Some of the questions on the conference calls from analysts, they are not questions, they are basically to glorify the company because everybody wants the next investment-banking deal.”...

Gearing ratings not for the benefit of investors but to attract investment-banking clients and other business violates securities law.

During the dot-com bubble of the turn of the century, equity researchers such as Merrill Lynch’s Henry Blodget were publishing “buy” calls on companies they were disparaging in private discussions. In 2003, the U.S. Securities and Exchange Commission banned Blodget from the securities industry.

In February, the SEC fined former Deutsche Bank AG analyst Charles Grom $100,000 after the agency said he publicly recommended buying shares in Big Lots Inc. while telling colleagues on the sales team otherwise. Grom neither admitted nor denied wrongdoing.

See why these analysts or "experts" will always remain blind to risks?