Study: Global Warming Skeptics MORE LIKELY To Be Eco-Friendly Than Climate Change Alarmists

Skeptics of the junk science that has become climate change are more likely than their global warming alarmist counterparts to be “eco-friendly.” Those who are skeptical of the often manipulated data are more likely to recycle and conserve fossil fuels than those who buy into the climate change religion.

Al Gore has been accused of hypocrisy for talking the talk on climate change despite burning through fossil fuels at a rapid clip, but it turns out he’s not alone.  His lemmings don’t exactly “walk the walk” either.

Published in the April edition of the Journal of Environmental Psychology, the one-year study broke 600 participants into three groups based on their level of concern about climate change: “highly concerned,” “cautiously worried,” and “skeptical.” The study by Cornell and the University of Michigan researchers found that those “highly concerned” about climate change were less likely to engage in recycling and other eco-friendly behaviors than global-warming skeptics, according to The Washington Times.

Those “highly concerned” about climate change were the most supportive of government climate policies (meaning they want others stolen from and forced at gunpoint to pay for their beliefs) but were the least likely to report their own individual-level actions.  Whereas those who were “skeptical” of the manipulated data surrounding the climate change “science” opposed government policy solutions but were most likely to report engaging in individual-level pro-environmental behaviors, such as recycling and saving fossil fuels.

It’s highly possible that skeptics may place more emphasis on personal responsibility than government action.  As Pacific Standard’s Tom Jacobs put it, “remember that conservatism prizes individual action over collective efforts. So while they may assert disbelief in order to stave off coercive actions by the government, many could take pride in doing what they can do on a personal basis,” he said in a Friday post.

Facebook Really Is Bad For You, Researchers Say

Apparently, Chamath Palihapitiya was on to something when he revealed earlier this week that he felt “tremendous guilt” for the role that he played in Facebook’s success as a social-media company.

To wit, Facebook"s director of research David Ginsberg and research scientist Moira Burke published a blog post this week explaining that, in some instances, the social network can have a deleterious impact on an individual’s overall mood and health.

"University of Michigan students randomly assigned to read Facebook for 10 minutes were in a worse mood at the end of the day than students assigned to post or talk to friends on Facebook," the blog post said. "A study from UC San Diego and Yale found that people who clicked on about four times as many links as the average person, or who liked twice as many posts, reported worse mental health than average in a survey."

In other words, using Facebook to mindlessly browse through your feed or click posts can leave you in a foul mood after.

However, the research wasn’t exclusively negative. Facebook also worked with Carnegie Mellon University and found that "people who sent or received more messages, comments and timeline posts reported improvements in social support, depression and loneliness." Likewise, Facebook said students at Cornell who used Facebook for 5 minutes while viewing their own profiles saw "boosts in self-affirmation," while folks who looked at other profiles did not.

Chamath Palihapitiya

In other words, using Facebook to interact with people - as opposed to just "browsing" as the University of Michigan study analyzed - seemed to have a positive effect on people

Facebook says it"s going to take this data and work to encourage more social interaction among users  to try and cut down on those who spend it to waste time and, ultimately, feel worse after.

Meanwhile, Facebook’s research showed that social support can help prevent suicide.

Facebook is in a unique position to connect people in distress with resources that can help. We work with people and organizations around the world to develop support options for people posting about suicide on Facebook, including reaching out to a friend, contacting help lines and reading tips about things they can do in that moment.

Toward the end of its post, Facebook acknowledged that it hadn’t yet had time to discover “all the answers” – though the company recently pledged $1 million toward research to better understand the relationship between media technologies, youth development and well-being to determine how Facebook has affected the attention spans of its users.

While Palihapitiya later walked back his assertion that Facebook is “ripping apart the fabric of how society works” after being brutally flamed on Twitter for his purported hypocrisy, the notion that Facebook is making its users sick and miserable is certainly nothing new.

As we pointed out in August, even though post-Millennials are safer, physically, than adolescents have ever been. Social media has pushed them to the brink of a mental health crisis.

Another One Of The World"s Largest ICOs Is Collapsing

Last month, we reported that the world’s largest ICO was imploding after just three months as its developers admitted they wouldn’t be able to deliver the tokens purchased during a $230 million July “presale” by the end of the year, as they had promised, causing an understandable furor among its investors.

Now, in the latest sign that the $3 billion ICO market is imploding, Bloomberg report’s that the value of formerly high flying Bancor, the world’s fifth-largest ICO by funds raised, has plunged by more than 50% since the company’s June ICO as investors have become disillusioned with its obscure product.

Bancor attracted big name venture capitalists like Tim Draper this year when it published a white paper proposing to create a kind of decentralized digital currency exchange that would allow holders of the Bancor tokens to exchange them for other digital currencies listed on their market-making platform - a functionality, its creators insisted, that would one day render digital currency exchanges obsolete.

But while it’s founders delivered a compelling pitch, beneath the surface was a product that was, at best, needless complex, and at worst, downright nonsensical.

Of course, the obliqueness of Bancor"s plan showcases a common trope in the ICO market whereby companies say they’re “improving” on the “user experience” of a product that most users are already satisfied with - except instead of creating a more streamlined solution, they propose to make it needlessly more complex by involving “decentralized” systems and monetizable tokens.

The result is a soup of hypertechnical gibberish, and a use-case that, tellingly, only the people building the product seem to understand. For many investors, that should trigger nightmarish flashbacks to synthetic CDOs (which are themselves experiencing something of a renaissance led by Citigroup) and other arcane credit derivatives that helped crash the economy and market in 2008.

Cornell professor Emin Gun Sirer, in a takedown of Bancor published shortly after the ICO, validated this view, arguing that Bancor’s formula is less efficient than simply making the market manually, Sirer says. And they say the technology could also be vulnerable to front running, where people make money off of the visibility of others’ transactions.

Here’s Bancor’s explanation of its functionality from its white paper:

Abstract: The Bancor Protocol enables the creation of networks of smart contract-based “Smart Token.” Smart Token hold balances of one or more other tokens--“Connectors”--and have a builtin autonomous conversion mechanism that allows any party to instantly purchase or sell the Smart Toke for one of its Connectors, directly through the Smart Toke contract, at a price calculated by a formula which balances buy and sell volumes.

 

Bancor believes that Smart Token can address the challenge of liquidity  faced by conventional tokens, cryptocurrencies, and community currencies on three levels. First, and most fundamentally, by being autonomously convertible for their Connectors, and with an unconstrained supply that grows in response to purchases, each individual Smart Token has built-in liquidity that does not depend on counterparties or exchanges. Second, Bancor has developed specialized Smart Token that enable inter-convertibility between any two other Smart Token or, with an added step, between any Smart Token and any conventional Ethereum network token. Third, Bancor’s ultimate vision is that users will create their own tokens and community currencies in the form of Smart Tokens™ that hold a common Connector, enabling any Smart Token™ in the network to be converted into any other. Bancor’s own Smart Token, BNT, is the common Connector in the first such network, which we call the Bancor Network.

And here"s Bloomberg"s translation.

Bancor protocol enables anyone to create a new type of digital coin called a Smart Token, which can hold and trade other tokens. This allows the Smart Token contract to serve as its own market maker, automatically providing so-called price discovery, and liquidity to other coins. So effectively, Bancor has created an exchange that will automatically price and trade any cryptocurrency that wants to list with it, as well as a token. The company says it will always have enough liquidity to make the market because the currencies have to build a reserve in Bancor tokens.

Initially, the notion that Bancor - which is named after the universal curency proposed by John Maynard Keynes - can “guarantee liquidity” for ICO tokens that have been shunned by major digital currency exchanges sounds like a vaguely useful market nich. And one could argue that there might be a niche. Today, the FT reported that GDAX, one of the largest cryptocurrency exchanges, said it wouldn’t list most ICOs because of doubts about their viability. But as one trader explains, when exchanges refuse to list a token, there"s generally a good reason.

Kyle Samani, managing partner at Austin, Texas-based hedge fund Multicoin Capital, said the functionality Bancor provides isn’t needed. Tokens that can’t list on exchanges may simply not be good enough, he said.

"For assets that actually have value, there will be a market," Samani said. "For assets that people don’t want to buy... why should there be some pity-based programmatic market maker to provide liquidity? My inner capitalist is just dumbfounded by the concept of Bancor."

Even the venture capitalists don’t get it.

"I’m a big fan of what they’re building and think they are the most qualified team around to do it," Brock Pierce, co-founder of Blockchain Capital, an investor in Bancor’s tokens, said in an email. "Not everyone understands it."

In defending Bancor, one adviser had the temerity to argue that consumers don’t understand how exchanges work, and that Bancor’s concept is somehow more straightforward, which is an obviously absurd thing to say.

But even if Bancor tokens did have a clearly defined use-case, it wouldn’t make a difference if the company couldn’t implement it, or if nobody used their product ( the network effect is obviously crucial for these tokens to thrive). Right now, Bancor tokens are - to borrow a conspicuously apt analogy from Cornell Professor Gun Sirer - “like a child’s swimming pool placed in an ocean.” Essentially a less liquid, more volatile version of Ether. Bancor was built on top of the Ethereum protocol, and Gun Sirer said buyers needed ethereum to purchase Bancor during the crowdsale - a claim Bancor disputed.

However, while Gun Sirer’s criticisms appear thoughtful, his perspective is automatically rendered suspect by the fact that he’s an adviser to Tezos, an ICO that raised more than $230 - the largest haul so far - but has been plagued by missed deadlines and internal strife, as we noted above.

Bancor, which penned a thorough - but glib - rebuttal to Gun Sirer’s comments, claims its product is already in demand. To wit, thirty tokens are already using, or planning to use, its platform, it says. But given the performance of the tokens, vanishingly few people are trading on it.

Still, Draper, the project"s most visible backer says it’s only a matter of time before the tech blossoms and the value of Bancor tokens soars.

Backed by billionaire venture capitalist Tim Draper, Bancor is the fifth-largest ICO by amount raised by startups, which totals more than $3 billion this year. "All of these projects are in development," Draper said in an email. "Wait two years, and I believe we will all be blown away by what these people can do for the world.”

But let us stop you right there.

As many of our long-time readers are probably aware, venture capitalists and entrepreneurs talking about how their (in this case, nonexistent) tech will ‘change the world’ is a red flag that a given venture might be headed for the rocks.

And most crucially, large digital-currency traders agree that the functionality isn’t needed. At best, Bancor is what some in the digital currency and blockchain communities would call “a solution in search of a problem.”

* * *

When Bancor raised an astonishing $153 million during its coin offering in June, it instantly transformed its creators into millionaires.

And after a brief but tantalizing run of gains, it appears Bancor’s investors will now be left holding the bag. The only question now, it seems, is how long before it goes to zero.
 

"This Only Ends When The Bond Market Pukes"

Authored by Kevin Muir via The Macro Tourist blog,

We all get it wrong, including Bass, Yusko, Icahn, Dalio, and [insert whatever guru you want in here].

So when you take solace in the fact the stock market is running higher without you, I would be weary of consoling yourself that you are in smart company.

Now please don’t mistake my unwillingness to join the chorus of those warning about the dangers ahead as my belief that everything is rosy. I understand the arguments about the huge imbalances in the financial system. I don’t need a lecture about the unsustainability of the current environment. I get it, we are screwed. We have made too many promises, have not saved enough and have created a can’t win financial situation.

Yet why is everyone so sure it will end in a deflationary bust? I hear all these gurus talking about the optionality of cash. Yeah, I understand. If you hold cash when prices collapse, you are able to buy when everyone else is selling. You listen to these hedge fund managers tell the story, and it sounds so compelling. It makes you want to sell everything, sit back and wait for the inevitable collapse.

But here’s another way of looking at cash. A dollar from 1913 is now worth less than a nickel.

And that’s using the government’s official CPI data! Imagine if you used the correct level of inflation…

So I ask you, with Central Bankers determined to create inflation, why on earth would you want to hold cash? For this trade to work, you have to assume Central Bankers will suddenly change their tune and be willing to preserve the purchasing power of money.

I don’t see any signs of Central Banks becoming more responsible. In fact, the math makes it virtually impossible for them to ever normalize rates. Do you know the economic slowdown that would happen with proper interest rates? It would be devastating. It would make the 1929 depression look like a walk in the park.

Central Bankers are becoming less responsible, not the other way round. I started following this interesting organic chemistry professor from Cornell that is a self professed Libertarian, and admits to being a fan of ZeroHedge (not something you see in most professors these days). Dave Collum had this terrific tweet that summed up the current situation perfectly:

Dave is correct that the free market wants deflation. There is too much debt in the system, and the market is trying to reset through a credit destruction event. The 2008 great financial crisis was the result of the private sector trying to pay down credit. It was stopped when governments and Central Banks stepped in to replace the private sector, but it was a difficult, scary process. Officials underestimated how much credit expansion was needed, so the bounce ended up being choppy and prone to stops and starts.

But as Central Bankers have become more comfortable with balance sheet expansion, they have increased the rate of increase. Have a look at the chart above. The rate of expansion has been increasing, not the other way round.

Does this look like the chart where Central Bankers are about to reverse the constant inflating?

Central Bankers, through their actions of financial repression, have told you that they don’t respect the value of your savings. Why on earth would you want to hold the asset they have constantly debased?

I don’t think stocks, real estate or any other financial asset offers value at these lofty prices. Yet I believe the asset in which all these other securities are priced in, is an even worse investment.

Which brings me back to today’s stock market. On Friday, the Non-Farm Payrolls missed. The US macro data has disappointed versus expectations for the past couple of months, and this has finally bled into the employment number.

Although Central Bankers are inflating, they are not doing it uniformly. In the period after the 2008 credit crisis, the Federal Reserve was the most aggressive Central Bank out there, causing many distortions in the financial markets. The ECB was reluctant to join the party, and their stinginess resulted in their own 2011 European crisis. Eventually, Draghi & Co. had to turn on the liquidity taps. The Bank of Japan is on their own timeline, kicked off with the Fukushima nuclear disaster. It’s not as simple as saying all Central Bankers are printing without abandon. They have taken turns, sometimes one country doing more, while the others sit it out.

And right now, the Federal Reserve is the one on the sideline. In fact, the Fed is trying to normalize interest rates, and even more boldly, setting up plans to shrink their balance sheet.

I think it was Jim Bianco who said there has never been a modern day Central Bank that has successfully shrunk their balance sheet, so the Fed’s ambitious plans should prove interesting.

If you believe the Fed will stay the course with higher rates and a lower balance sheet in the face of economic weakness, then, by all means, short U.S. equities. If you think the last century of dollar debasement will reverse and the Federal Reserve will become a saver’s friend instead of their enemy, then stock up on a big slug of cash.

I don’t believe for a second the Federal Reserve will stick to their plan to normalize the balance sheet and raise rates when the economy slows down. In fact, I think markets will be shocked at how quickly the Fed changes their tune. They don’t really have a choice, the massive debts need to be serviced, and force feeding the economy cheap credit is the only way to keep the economy moving forward.

This vicious cycle of a slow down being met with ever easier Central Bank policies will only be stopped when we enter into an inflationary bust. It’s only when the bond market does what Bill Fleckenstein has warned about, and finally takes away the keys, will governments be forced to deal with the massive imbalances in the financial system.

So when Friday’s employment number disappointed, it was met with all sorts of glee from the stock market bears. I don’t view it the same way. Of course, a slowing economy will often be met with equity selling and bond buying, but this isn’t a regular market.

What is the biggest risk to financial markets? Contrary to popular opinion, it’s not a slowing economy. No, it’s the withdrawal of Central Bank stimulus. Right now the Fed is tightening, probably a little too quickly given the huge amount of debt. A slowing economy will change the pace of this tightening, and eventually even cause easing. Therefore, ironically, an economic slowdown is stock market bullish.

I am not scared of a slowing economy because I know Central Bankers will be there with a big fistful of blue tickets. I am scared of inflation finally spurting up and having the Central Bankers withdraw liquidity too quickly.

It seems crazy to rely on these Central Bank knobs as a backstop as you buy assets. But that’s the problem. It is irresponsible to be invested at these levels based on a Central Bank put. And that’s why everyone is under-invested. Could you really go in front a pension board and suggest an overweighting in equities because Central Bankers have your back? Not a chance. Or if you are a retail investor, with nightmares of the 2008 crisis still swirling through your mind, do you really want to expose yourself to that sort of drawdown? When you combine those worries with the fact that you haven’t saved enough, add in the fact you are probably going to live longer than any other generation, you simply don’t want to lose it again. It’s no wonder less US adults are invested in the stock market than any period in the past twenty years.

And if you manage a hedge fund, you remember the fortunes made during the pricking of the last bubble. Hedge fund managers who were previously nobodies, became household names. Everyone wants to replicate that success. Everywhere you look there are managers with calls about the next “big short.”

On Wall Street everyone hedges for the last crisis. I don’t know much, but I do know that the next crisis will look nothing like the previous one.

Owning the asset Central Bankers seem most intent on debasing is perverse logic. If you really think government and Central Bankers are out of control, shouldn’t you be shorting them? And how do you do that? Well, I would argue shorting bonds is a much better trade than betting against stocks. After all, that’s where the real bubble is.

This has turned into a long diatribe, but my main point is that I am not surprised that stocks went higher Friday in the face of bad economic news. A slowing economy will not end this period of overvaluation. It will only end when the bond market finally pukes. Until then, the Central Bank bubble will just continue to get more and more expensive.

Most market participants believe it will end in a deflationary bust, and therefore hiding in long dated risk free fixed income is the best bet. Well, at the risk of being on the other side of the trade of most “smarter” hedge fund managers, I say, sold to them. There will be rallies in bonds that you can trade, but over the long run, I have complete faith that governments and Central Banks will do what they do best - inflate away your hard earned money. Betting against them is betting against history…

Fidelity Is Mining Bitcoin, CEO Abigail Johnson Admits

In what bitcoin geeks undoubtedly interpreted as a sign of bitcoin’s renewed relevance now that its price is at all-time highs, Fidelity CEO Abigail Johnson told CoinDesk’s Consensus conference that her company is now in the business of mining bitcoin.

Per the FT:

“Ms Johnson noted that Fidelity has also set up a bank of computers built by 21 Inc that can crunch complex algorithms to be rewarded with bitcoin.

“My…computer has mined over 200,000 satoshis,” she said, using the name for the smallest unit of bitcoin.

Her remarks coincide with an astounding rally in virtual currencies like bitcoin. As DoubleLine’s Jeffrey Gundlach noted on Tuesday, bitcoin is up 100% in under two months, implying that the turmoil in Chinese markets was driving more locals into bitcoin.

One coin was trading at $2,275 Tuesday according to Coinbase, the latest in a series of all-time highs as global uncertainty rises...

Johnson also added that Fidelity now allows employee to pay for lunch with bitcoin at the cafeteria in its Boston headquarters. She noted that fewer than 100 employees have paid with bitcoin, demonstrating an unnatural-sounding mastery of industry slang.

“I guess we have a lot of hodlers,” she said, using the slang for bitcoin users who avoid selling the currency when it jumps in value.

And Fidelity"s CEO also revealed information about her company"s partners on its journey, naming blockchain startup Axoni, investment firm Boost VC and university initiatives based out of MIT, University College London and Cornell. To date, Johnson explained that Fidelity Labs, its internal R&D division has also set up experiments for bitcoin micropayments and even run bitcoin and ethereum mining operations in the spirit of learning more about the technology. Further, she revealed that Fidelity will be taking some conservative steps to expose Fidelity"s customers more to the industry, announcing that customers will soon be able to see Coinbase holdings on Fidelity.com. Already, she said, this feature is available to employees who own digital currencies available through the startup"s services.

"The Retail Bubble Has Burst" - Summarizing The Dark 4Q Earnings Commentary Of Retail CEOs

Amazon"s willingness to sell almost any product imaginable at a loss, combined with a massive bubble in retail real estate square footage courtesy of decades of low interest rates seems to finally be catching up with the traditional bricks-and-mortar retailers of America. 

As evidence, Scott Krisiloff of Avondale Asset Management compiled the following sample of relatively downtrodden commentary from America"s largest retail CEOs, all of who seem to be throwing in the towel on hopes of any near term upside for their industry:

Everything is not awesome, in fact, it"s kind of awful

“Our industry is the midst of a seismic shift, and, of course, you read the headlines. In fact, many of you write the reports, we’re operating in an incredibly challenging environment. All across the retail industry, many of our competitors are aggressively rationalizing their assets. They are closing stores, exiting markets. They’re cutting costs just to keep their heads above water. We’ve not seen this number of distressed retailers since 2009 in the Great Recession.”   - Target CEO Brian Cornell

Cheap debt created a massive retail real estate bubble that is now bursting right before our eyes

“Retail square feet per capita in the United States is more than six times that of Europe or Japan. And this doesn’t count digital commerce. Our industry, not unlike the housing industry, saw too much square footage capacity added in the 90’s and early 2000’s. Thousands of new doors opened and rents soared; this created a bubble, and like housing, that bubble has now burst. We are seeing the results; doors shuttering and rents retreating. This trend will continue for the foreseeable future and may even accelerate.” —Urban Outfitters CEO Richard Hayne (Retail)

Profitability "race to the bottom" is on as brick-and-mortar stores make "investments" (a.k.a. "slashes prices") to drive volume

“We certainly view 2017 as a year of investment. In 2018, we’ll continue to transition as these different initiatives begin to mature. As we get into 2019 and beyond, we certainly expect stability and a return to growth…We’ve got to invest to grow. We’ve got to reimagine our stores. ” —Target CEO Brian Cornell (Retail)

“we plan to do what any good portfolio manager would. Invest resources in the most promising opportunities, diversify to lower risk, and increase liquidity…Our highest priority is where we’ve had the most recent success, digital” —Urban Outfitters CEO Richard Hayne (Retail)

Inflation may not be as strong as advertised

“Regarding deflation, overall, primarily in the US, we have seen deflation in the 1%, 1.5% range in February. Departments such as foods, sundries, frozen foods, liquor meat, dairy showed the most deflation on the foods and sundries side. On the non-food side consumer electronics continue to be deflationary, primarily in the TV category…The collective view is inflationary, or less deflationary, for the next few months and maybe a little inflationary, but it’s a crap shoot.” —Costco CFO Richard Galanti (Retail)

“we also have to acknowledge the ongoing challenges facing our industry. Our customers are facing a difficult retail environment due to deflation and increased competition. We view deflation as cyclical, inflation will come back at some point but while it’s here, it’s leading to some very real challenges for us and our retail customers.” —UNFI CEO Steven Spinner (Food Distributor)

Retail real estate glut + Market share loss to online = Disaster for REITs

“This would be fine if the increase in DTC sales were wholly additive, but they’re not. Digital shopping is partially replacing store shopping and thus is negatively impacting store traffic and store generated sales. Flat to negative store ‘comps’ are causing occupancy deleverage and eroding four-wall margins.” —Urban Outfitters CEO Richard Hayne (Retail)

But, chin up because this is all "good news" as retail shares will tank and create opportunities for those on wall street who survive

“these inflection points come around every generation or so. And strong retailers endure, while others, well, they don’t. Pick your era defining change throughout history from downtown department stores to suburban malls, catalogs, e-commerce.” —Target CEO Brian Cornell (Retail)

* * *

Meanwhile, as we pointed out earlier this week, the biggest losers in this retail melt down will inevitably be the investors in America"s massively levered REIT companies. 

In fact, the latest note from one of the world"s most vocal mega-bears, Horseman Capital"s Russell Clark, perfectly summarized the slow-motion train wreck that is currently wreaking havoc on mall REITs in a note titled "Mall Rats":

“Intriguingly we have started to see volumes of real estate transactions for shopping malls fall. This means that the number of transactions to buy or sell properties is beginning to decline. Last time this happened, rents began to fall a year later.

His full note is below:

MALL RATS

Shopping mall REITS have been a fantastic investment over the years. Not only have they provided investors with large capital gains, they have also typically offered above market dividend yields. My interpretation of the REIT model is that the operator collects rents from a diverse number of retailers. This is then passed on to the end investors after costs and financing. The REIT manager reduces risk by diversifying the retailers paying rent, and by also spreading the risk geographically. If the REIT manager can acquire more real estate assets at a yield higher than what it needs to pay out as dividend yield, then the REIT can issue more shares and grow indefinitely. Mall REITs have generally done well, except during the financial crisis.

However, it seems to me that North America could well have too many shopping malls. On a per capita basis, the US has twice the space of Australia and 5 times that in the UK.

One source of REITs revenue growth comes from acquiring more malls. Intriguingly we have started to see volumes of real estate transactions for shopping malls fall. This means that the number of transactions to buy or sell properties is beginning to decline. Last time this happened, rents began to fall a year later. Perhaps it’s a sign that buyers believe rents have some downside risk?

Many people in the market are aware of the problems that the large department stores in the US are currently facing, and their resultant plans to retrench. This affects two of the largest shopping mall REITs that have the department stores as tenants. The reality is that the shopping mall REITs charge extremely low rents to the department stores. The large shopping malls use the department stores to lure traffic, and then make their money from higher rents charged to speciality retailers. Often the per square foot rent of the specialty retailer can be 30 times or higher that paid by the anchor tenant. Looking at the top 2 shopping mall operators, they disclose their top rent payers. Recent share prices performance of 8 shared tenants has been poor, and management commentary has seeming implied that they may also be looking to reduce store count.

It should also be pointed out that many tenants have a clause in their lease to reduce rents should an anchor close a store. Thus, even though the loss of rent due to an anchor closing is minimal, the knock-on effect of reduced rents from the remaining tenants is a serious concern for the REITs.

One of the other problems that shopping mall REITs face is that the size that the large department stores take up is more than 400 million square feet. The largest and most successfully specialty retailer is TJ Maxx which currently has 100 million square feet. It is difficult to see any single retailer quickly being able to fill the space made vacant by department store closures.

Back in the lead up to the financial crisis we found that the share prices of REITs and their tenants were very closely related. Recently we have seen tenants share price weaken again, but REITS remain relatively strong.

Investors are advised to exercise caution with the shopping mall REITs

Dow Hits 20,600 After Trump Hints At "Massive Tax Plan"

Trump did it again: one week after he promised to unveil "phenomenal" tax cuts, moments ago in his meeting with retail CEOs, who are meeting with the president to get him to kill the border adjustment tax idea, he pulled another OPEC, using the precise word the algos were looking for, and this time said that "tax reform is one of the best opportunities to really impact our economy," Trump said. "So we"re doing a massive tax plan that"s coming along really well."

He also said that there will be a “much, much simpler tax code” that will lower rates for everybody in every bracket. He added that “other than H & R Block, people are going to love it.”

Of course, people would love to know when it is coming, to which Trump had no explicit answer, instead saying the "tax plan will be submitted in not so distant future”

Trump then said that “there’s a lot of confidence in our economy right now,” citing both the jobs report and the level of the stock market.

Speaking to the retail CEOs, Trump added the retail industry is important to country in supporting millions of jobs, which however did not explain if the BAT will be cut - if so, then the level of corporate tax cuts would be far less, as there would be no partial revenue offset needed to balance the roughly $2 trillion in revenue losses over the next decade from cutting the tax rate from 35% to 20%.

Retailers are among the biggest opponents of border adjustability, arguing that it would result in higher prices for consumers. A number of Republican senators also have concerns about the proposal, putting its future in jeopardy.

Great listening session with CEO"s of the Retail Industry Leaders Association this morning! pic.twitter.com/sy6xJcWfcF

— Donald J. Trump (@realDonaldTrump) February 15, 2017

The White House has given mixed signals on whether the president supports the border adjustment tax. Trump called it "too complicated" in an interview with The Wall Street Journal, but the White House later said that taxing imports could be one way to pay for a wall on the U.S.-Mexico border. Gary Cohn, head of Trump"s National Economic Council, told CNBC earlier this month that border adjustability is "one of the options that"s on the table."

Trump during Wednesday"s meeting also spoke about his plans to cut regulations. "We"re cutting regulations in just about every industry," he told executives from companies including Target; J.C. Penney; Best Buy; Gap; AutoZone; Walgreen Boots; Tractor Supply; Jo-Ann Fabric and Craft Stores.  The retail executives are slated to meet with House Ways and Means Committee Chairman Kevin Brady (R-Texas) and Senate Finance Committee Chairman Orrin Hatch (R-Utah) later on Wednesday.

As for stocks, one the headline scanning algos saw "massive" tax plan statement and the following headline...

• TRUMP: WE WILL LOWER TAX RATES FOR PERSONAL, BUSINESS

... they quickly pushed stocks to new all time high - breaking above 20,600!!