Are Governments Running Out Of Candy?

Authored by Jeff Thomas via InternationalMan.com,

By now, many readers will have seen the popular American YouTube video by Mark Dice in which he stands on a city sidewalk and offers passers-by a free gift. They may choose between a 10-ounce silver bar or a large Hershey’s candy bar.

Each taker chooses the candy - most of them with no deliberation. The only taker who seems to hesitate at all soon decides on the candy, as “I don’t have any way to do anything with the silver.” (Behind them is a coin shop. Mister Dice offers to take the silver bar inside if she wishes, but she’s uninterested and takes the candy.)

A 10-ounce silver bar is presently valued at about $140, the Hershey’s bar at about $2.

(Editor’s Note: If you have not seen the video, please see below.)

Mister Dice doesn’t comment in the video as to what lesson might be learned from this, but an obvious one would be that Americans (or at least those who reside in his home town of San Diego, California) are prone to prefer instant gratification over something of substantially greater, but delayed value.

If this is his intent, he’s succeeded well in his light-hearted, but instructive video.

Since the 1950’s, much of the world has perceived Americans as being on “Easy Street,” and in recent decades, the U.S. government has fuelled American complacency through a consciousness of easy money and entitlement.

And so, Americans are often perceived by those outside the U.S. as being somewhat insulated, spoiled, naïve, and short-sighted. But, if this is true, Americans certainly aren’t alone. Much the same exists in Europe, Canada, and quite a few other countries that have, over recent decades, followed the American socio-economic model.

Trouble is, all that easy money and entitlement exists only as long as a source for the “freebies” exists. Unfortunately, the idea that freebies are free is inaccurate. Freebies of any description must be paid for by someone.

In business, freebies are sometimes provided as “loss-leaders” to attract more business. They therefore become a line item on the monthly balance sheet, a cost-of-doing-business expense. The business hopes to make the loss back through sales generated by the loss-leader.

But, when governments hand out freebies, no sales will be generated, so the loss will not be recovered. When governments hand out freebies, the cost is paid with tax revenues. And when taxes have been raised to the point that further increases would be difficult without inciting rebellion, governments generally rely on borrowing.

But, of course, borrowing, too, eventually reaches the point that it has become so great that it cannot be repaid. What then?

Invariably, economic collapse is the outcome. But, why should this be so? Well, when the tipping point is reached (as in jurisdictions like the EU and U.S., where more than 50% of the public are net recipients and the other 50% must pay for both themselves and the other 50%), there’s no turning back. Those who have been receiving the candy have been told that they’re entitled to it and now they believe it. They will not tolerate the suggestion that the freebies must end, even though no further tax can be reasonably levied; no further funds can be borrowed. Therefore, in every case, the result is systemic collapse, not a gradual tapering off.

For thousands of years, governments have sought to appease people with freebies. In ancient Rome, a dole of grain and free entertainment (bread and circuses) helped to usher in the decline of the empire. Like all great empires, it collapsed under a weight of debt and mismanagement.

Much of the world is presently at this tipping point. Governments continue to promise benefits that they know will soon come to an end. If history repeats, they will continue repeating this promise right up until the day when the candy stops being dished out.

They will then say that no one could have seen this coming.

Amongst the public who will be the victims, there will be three general groups. First will be the Takers, those who have been the recipients who depended upon the freebies the most. They will be the hardest hit, as not only will they lose the freebies, they will have neither the skills nor the imagination to become self-reliant overnight.

The second group will be the Payers, those whose tax dollars paid for the freebies. They will be hard hit, as the system in which they live and operate has broken down, although they will fare better than the Takers. They will have the skills and imagination to rebuild their lives (having previously been productive enough to pay for themselves and others.)

Third will be the Preparers, those who envisioned the inevitability of the collapse of the system. They most certainly will have the skills and imagination to rebuild their lives, but, additionally, they’ll have the means with which to rebuild quickly. They will be the very few who chose the silver bar over the candy and had the wisdom to store the silver in a jurisdiction where it was not likely to be appropriated by a dying empire.

Much of the world is now running out of candy. The latest version of Bread and Circuses is reaching its inevitable end.

Replaying the video, we observe Mister Dice offering chocolate or silver. Each Taker looks at him incredulously, then makes the obvious choice, the candy. Each of them gives him a smile. Each is pleased to walk away with the chocolate, but, likely as not, each will have consumed the bar before the day is out and the benefit of the freebie will be short-lived.

After giving out eight bars, Mister Dice is all out of chocolate and he presumably goes home. He has no candy, but he does have 10 ounces of silver. Perhaps he owns other silver bars as well, stored in a safer jurisdiction.

Each of us has the opportunity to make a choice as to whether we wish to be Takers, Payers, or Preparers. The choice we make may define our future.

*  *  *

The U.S. government’s bad financial decisions and massive debt levels will cause another financial crisis sooner rather than later.

Like most governments that get into financial trouble, we think American politicians will keep choosing the easy option…money printing on a massive scale.

This has tremendous implications for your financial security. These politicians are playing with fire and inviting a currency catastrophe.

This is a big reason why we think everyone should own some physical gold and silver. Precious metals are the ultimate form of wealth insurance. They have preserved wealth through every kind of crisis imaginable. They will preserve wealth during the next crisis, too.

But, if you want to be truly “crisis-proof”, there is more to do...

Most people have no idea what really happens when a currency collapses, let alone how to prepare…

How will you protect your savings in the event of a currency crisis? This just-released video will show you exactly how. Click here to watch it now.

Stanford Says Soaring Public Pension Costs Devastating Budgets For Education And Social Services

A new study from Joe Nation of Stanford"s Institute for Economic Policy Research entitled "Pension Math: Public Pension Spending and Service Crowd Out in California, 2003-2030," says that the devastating consequences of the ill-advised, Cadillac pensions doled out to America"s public employees over the past several decades are only getting started. 

Looking back at taxpayer contributions to public pensions in California, Nation found that they"ve increased by 5 times since 2002-2003 and are very likely to double again by 2029-2030.  Not surprisingly, that kind of hyper-inflationary growth has massively outstripped increases in tax revenue, even in the great progressive state of California (shocking, we know), meaning that pension contributions now account for 11.4% of California"s operating budget, up 3x from the 3.9% it consumed in 2002-2003.

For more than a decade, public pension costs have been rising sharply in California. There is contentious debate about what is driving these cost increases—significant retroactive benefit increases, unrealistic assumptions about investment earnings, operational practices that mask or delay recognition of true system costs, poor governance, 1 to name the most commonly cited. But there is agreement on one fact: public pension costs are making it harder to provide services that have traditionally been considered part of government’s core mission.

• Employer pension contributions (i.e., pension contributions plus debt service on any Pension Obligation Bonds) from 2002-03 to 2017-18 expanded on average 400%, i.e., contributions in nominal dollars are now five times greater.


• Employer contributions are projected to rise an additional 76% on average from 2017-18 to 2029-30 in the baseline projection and 117%, i.e., more than double, in the alternative projection.


• Employer pension contributions from 2002-03 to 2017-18 have increased at a much faster rate than operating expenditures. As noted, pension contributions increased an average of 400%; operating expenditures grew 46%. As a result, pension contributions now consume on average 11.4% of all operating expenditures, more than three times their 3.9% share in 2002-03.


• The pension share of operating expenditures is projected to increase further by 2029-30: to 14.0% under the baseline projection—that is, even if all system assumptions, including assumed investment rates of return, are met—or to 17.5% under the alternative projection.


• The average employer funding amount expressed as a percent of active member payroll, i.e., the employer contribution rate,5 has increased from 17.7% in 2008-09 to 30.8% in 2017-18. By 2029-30, it reaches 35.2% under the baseline projection and 44.2% under the alternative projection.


• On a market basis, the average funded ratio fell from 58.5% in 2008 to 43.0% in 2015. By 2029 it improves to 48.2% in the baseline projection, but falls to 39.0% in the alternative projection. The unfunded liability per jurisdiction household on an actuarial basis also rose from an average $1,682 in 2008 to $5,071 in 2015; the unfunded liability per household on a market basis is $21,491, up from $9,127 in 2008.

Here"s a graphical depiction of California taxpayers getting steamrolled...

...or as a percent of total operating expenditure, if you prefer...

What"s getting cut from California"s budget to make room for these exorbitant pension payouts?  Well, basically everything else...

As discussed above, the pension expenditure share of the state’s operating budget increased from 2.1% in 2002-03 to 4.9% in 2008-09; it is estimated at 7.1% in 2017-18. This increasing share, despite an expanding budget, has shifted $6.0 billion in 2017-18 from other state expenditures to pensions.

Changes in state expenditures by agency and department suggest that this reduction has come primarily from social services and higher education. For example, the expenditure share for the Department of Social Services (DSS) fell from 10.7% in 2002-03 to 6.0% in 2014-15 before climbing to 7.0% in 2017-18. The higher education share of operating expenditures fell from 11.3% in 2002-03 to 9.8% in 2014-15, although it increased to 10.5% in 2017-18.

In addition, expenditure shares fell in several smaller departments from 2002-03 through 2014-15: the Department of Justice (0.4% to 0.2%), Department of Parks and Recreation (0.2% to 0.1%), and Department of Water Resources (0.2% to 0.1%).

So good luck with that whole education thing kiddos because you"re grandparents are about to crush your future.

Here is the full study:

Which College Offers The "Best Bang" For Your Tuition Buck?

Is making the investment in a college education still worth it? How much debt can you expect to have after you graduate, and how much money will you make in your career?

As HowMuch.net details, Nitrocollege.com crunched the numbers from the top twenty public and top twenty private schools in the country and created a visualization to find out. The data was extracted from the U.S. Department of Education and U.S. News & World Report. 

We ranked each school according to the median salary someone can expect to earn ten years after enrolling. We then looked at the median student debt graduates typically carry. Focusing on median debt and median earnings makes a lot of sense - half of all students fall above these numbers, and half fall below. We then color-coded each school in a floating bar chart, making the private schools blue and the public schools yellow.

Several things immediately jump out of this visualization.

First off, private schools dominate the top half of the list while public schools by and large fall to the bottom. Graduates from private universities simply earn more money, which suggests that attending a private school pays off in the long run.

Source: HowMuch.net

Top Five Universities by Median Salary 10 Years after Enrollment

• Harvard - $95,500


• MIT - $89,200


• Stanford - $86,000


• University of Pennsylvania - $$79,700


• Princeton - $77,900

Something else stands out about our visualization: Harvard students take on significantly less debt compared to their peers from Ohio State. Nobody thinks Harvard is cheaper than Ohio State, right? More to the point, Harvard grads make more than twice as much money. From a financial perspective, it is by far and away the best school. In fact, the 11 universities with the lowest debt loads are all private. This suggests that many students come from wealthy families who can afford to pay the tuition without taking out loans. Perhaps this also affects their career outcomes.

Consider another way to look at the data. Suppose you want to find the best bang for your buck - you want the highest earning potential with the lowest possible debt, but you also want to avoid paying private school tuition. Where should you go?

The University of California, Berkeley offers the best opportunity. Graduates have the highest earning potential of all public schools at $60,800 with the lowest debt burden of $14,200.

There’s a lot that goes into picking the right school. You have to decide how much debt you are comfortable carrying, and ask yourself if the future earning potential is worth it. The most important factor you should consider, however, is how much you are willing to pay for the life-defining experiences that come with a college degree.

Americans Are Rapidly Descending Into Madness

Authored by Mike Krieger via Liberty Blitzkrieg blog,

I don’t live in an echo chamber, partly because there aren’t enough people out there who think like me, but also because I constantly and intentionally attempt to challenge my worldview by reading stuff from all over the political map. I ingest as much as I can from a wide variety of intelligent sources, picking and choosing what makes sense to me, and then synthesizing it the best I can.

Though I’m certainly grounded in certain key principles, my perspective on specific issues remains malleable as I take in additional information and perspectives. I try to accept and acknowledge my own ignorance and view life as a journey of constant mental, emotionally and spiritual growth. If I’m not growing my capacity in all of those realms until the day I die, I’m doing it wrong. Life should be seen as a battle against one’s own ignorance, as opposed to an obsession with the ignorance of others. You can’t legislate morality, nor can you legislate wisdom. The only way the world will improve on a long-term sustainable basis is if more of us get wise. That’s a personal journey and it’s our individual duty to accept it.

While I’m only in control of my own behavior, this doesn’t mean that the behavior of others is irrelevant to my life. Unfortunately, what I see happening to the population of America right now seems very troublesome and foreboding. What I’m witnessing across the board is hordes of people increasingly separating themselves into weird, unthinking cults. Something appears to have snapped in our collective consciousness, and many individuals I used to respect (on both sides of the political spectrum) are becoming disturbingly polarized and hysterical. People are rapidly morphing into radicalized mental patients.

What’s worse, this environment is providing a backdrop for the most destructive people of my lifetime - neoconservatives and neo liberals - to preen around on corporate media as “the voices of reason.” This is one of the most perverse and dangerous side-effects of the current political climate. As I noted earlier today on Twitter:

What the entrenched political class is doing now, is exactly what the Fed did after the crisis. Posing as saviors to a disaster they created

— Michael Krieger (@LibertyBlitz) August 16, 2017

This is how humans who are dangerous failures stay in power. They claim they"ll help handle a problem of their own doing.

— Michael Krieger (@LibertyBlitz) August 16, 2017

 If in your disgust with Trump, you’re willing to run into the cold embrace of these destroyers of the middle class and the Middle East, you’ll get what you deserve . In contrast, if we really want to deal with our very real and very systemic problems, the last thing we need is a population-level mental breakdown that leads to a longing for the criminally destructive political status quo, yet that’s exactly what seems to be happening.

Ok fine, so everything seems to be rapidly collapsing, but what are we supposed to do? First of all, don’t lose your minds.

As I suggested in February’s post, Why Increased Consciousness is the Only Path Forward:

As noted earlier, Wilber thinks 10% is a key tipping point. In other words, if we can get 10% of the population to center around a yellow second-tier level of thought, which consists of a momentous leap in consciousness, the entire world will change for the better. I agree. I’m not here trying to sell you a seminar on how to expand your consciousness; rather, I think these article can help spark some sort of revelation in the minds of many of you who are already at yellow, or at least at the cusp of such a transformation. Since consciousness can and does regress under conditions of stress and fear, it’s extremely important to be conscious of your consciousness so that you don’t fall back into lower states.

Unfortunately, I see many people regressing at the moment, and I see the media as an intentional force in trying to get people to lower their consciousness. A perfect way to tell if someone is operating at a low level of consciousness is if they’re constantly placing tens of millions of their fellow citizens into an outside group they subsequently demonize. It’s perfectly fine and healthy to harshly criticize the system itself and the many powerful individuals doing awful things within it, but once you start dehumanizing large swaths of the population as a matter of your worldview, you are most certainly on a very counterproductive path that will lead to merely a blackhole of nothingness for society.

Beyond maintaining one’s sanity, it’s imperative that conscious humans create systems and communities that have as little connection as possible to the existing and rapidly disintegrating paradigm. This will create “anti-fragile” units of strength within the collapsing Potemkin village socio-economic structure that dominates our culture right now. Some of these projects need to be local, while others can be global. Community farming/food production is a great example of a local initiative, while Bitcoin (and cryptocurrencies in general), represent global initiatives to replace the hopelessly corrupt and archaic entrenched financial system. While crazy, power-obsessed tribes focus on taking over the hopelessly corrupt centralized government in Washington D.C., we need to continue to build separate, decentralized paradigms — and there isn’t much time to waste.

Fortunately, there are plenty of very decent, very conscious people out there. I want this piece to provide encouragement to those of you already engaged in this invaluable work, as well as inspiration for those of you looking for an outlet for your creative and intellectual energies. It’s never been more important to keep our heads steady and not permit ourselves to be sucked into the mental sickness infecting so many of our fellow humans. It’s imperative that we vigilantly guard our wisdom and consciousness, because the best solutions will only come from a place of spiritual and mental health. If you descend into the gutter with everyone else, your output will also end up looking like trash. That’s the last thing we need.

Stay strong and stay conscious.

Why Illinois Is In Trouble - 63,000 Public Employees With $100,000+ Salaries Cost Taxpayers $10 Billion

Authored by Adam Andrzejewski via Forbes.com,

The "Big Dogs" of local government in Illinois.

Illinois is broke and continues to flirt with junk bond status. But the state’s financial woes aren’t stopping 63,000 government employees from bringing home six-figure salaries and higher.

Whenever we open the books, Illinois is consistently one of the worst offenders. Recently, we found auto pound supervisors in Chicago making $144,453; nurses at state corrections earning up to $254,781; junior college presidents making $465,420; university doctors earning $1.6 million; and 84 small-town “managers” out-earning every U.S. governor.

Using our interactive mapping tool, quickly review (by ZIP code) the 63,000 Illinois public employees who earn more than $100,000 and cost taxpayers $10 billion. Just click a pin and scroll down to see the results rendered in the chart beneath the map.

Here are a few examples of what you’ll uncover:

• 
  

  20,295 teachers and school administrators – including superintendents Joyce Carmine ($398,229) at Park Forest School District 63, Troy Paraday ($384,138) at Calumet City School District 155, and Jon Nebor ($377,409) at Indian Springs School District 109. Four of the top five salaries are in the south suburbs – not the affluent north shore.

  
  


• 
  

  10,676 rank-and-file workers and managers in Chicago – including $216,200 for embattled Mayor Rahm Emanuel (D) and $400,000 for Ginger Evans, Commissioner of Aviation – including a $100,000 bonus. Timothy Walter, a deputy police chief, made $240,917 – that’s $146,860 in overtime on top of his $94,056 base salary. Ramona Perkins, a police communications operator, pulled down $121,318 in overtime while making $196,726!

  
  


• 
  

  9,567 college and university employees – including the southern Illinois junior college power couple Dale Chapman ($465,420) and Linda Terrill Chapman ($217,290). The pair combined for a $682,000 income at Lewis and Clark Community College. Fady Toufic Charbel ($1.58 million) and Konstantin Slavin ($1.04 million) are million-dollar doctors at the University of Illinois at Chicago.

  
  


• 
  

  8,640 State of Illinois employees – including $258,070 for Marian Frances Cook, a “contractual worker” at the newly created Dept. of Innovation and Technology. Further, there are the “barber” and “teacher of barbering” positions in the state prisons making $100,000+. Loreatha Coleman made $254,781 as a nurse at the Dept. of Corrections.

  
  


• 
  

  8,817 small town city and village employees – including 84 municipal managers out-earning every U.S. governor at $180,000. These managers include Lawrence Hileman (Glenview – $297,988); Michael Ellis (Grayslake – $264,486); Robert Kiely (Lake Forest – $255,247); Kevin Bowens (Libertyville – $254,428); and Richard Nahrstadt (Northbrook – $250,248).

  
  

In total, there is roughly $12 billion in cash compensation flowing to six-figure government workers when counting the 9,031 federal employees based in Illinois.

So, who are the biggest culprits in conferring six-figure salaries? We ranked the top 15 largest public pay and pension systems in Illinois:

Illinois’ largest pay and pension systems conferring $100,000+ cash compensation

Corruption in Chicago

Rahm Emanuel’s Chicago now pays out more six-figure incomes than the state government. We found city truck drivers, tree trimmers, and street light repair workers earned six-figures. But, really, the problem is the overtime. Last year, the city paid out $283 million in overtime to 1,000 employees who pocketed more than $40,000 apiece.

Chicago paid out $283 million in overtime (2016) - here are the top 10 city departments.

Taxpayer-Expensive Educators

Some of Illinois’ K-12 schools are spiking salaries and padding pensions. Data reveals nearly 30,000 teachers and administrators earned $100,000+ incomes. However, just 20,295 of those educators are currently employed; the other 9,305 are retired, resting on six-figure pensions.

Here’s how it breaks down in two of 900 school districts. Just 1,236 of the 2,147 educators with $100,000+ incomes are currently working.

• 
  

  In Township High School District 214, there were 500 retirees receiving six-figure annual pensions in addition to 640 working educators.

  
  


• 
  

  In Palatine Township High School 211, while 596 educators earned a six-figure salary, 491 retirees received six-figure lifetime pensions.

  
  

Private associations, nonprofits, and retired lawmakers

All kinds of entities are jumping on the gravy train. Private associations, nonprofit organizations and former lawmakers have gamed the system for personal gain. All of this is legal, although it shouldn’t be:

• 
  

  Former state representative Roger Eddy (R) currently makes $334,433 – that’s $303,953 as Executive Director of Illinois Association of School Boards (IASB) and $30,500 from his lawmaker’s pension. Eddy is double dipping for a second government pension, and his employer (IASB) – a private nonprofit – is further burdening an underfunded Teacher’s Retirement System.

  
  


• 
  

  Two of the highest earners within the municipal pension system work for private associations – not government. Brett Davis, Executive Director of Park District Risk Management Agency, makes $319,404, while Peter Murphy, Executive Director of Illinois Park District Association, brings in $309,972. These private nonprofits muscled their way into the government system and their huge salaries will mean lavish taxpayer-guaranteed pensions.

  
  


• 
  

  Former Gov. Jim Edgar (R) took $2.38 million in compensation from the University of Illinois (2000-2013) and has received at least $2 million in pension payments earned from his 20-year career as legislator, secretary of state and governor. Today, Edgar receives $241,272 ($20,106 per month) per year from two pension systems: the General Assembly Retirement System ($161,016) and the State University Retirement System ($80,256).

  
  

Highly Compensated Locals

County bosses are getting in on the action. In three of the 102 counties – DuPage (201), Lake (237) and Will (190) – 628 employees earned $100,000+. Lake won top honors with 237 six-figure employees. In DuPage, Tom Cuculich, the “Chief of Staff” to DuPage Board Chair Dan Cronin (R), made $201,750.

Even “water district” employees are tapping into the taxpayer largess with 1,432 employees making $100,000+. Across Illinois, 348 highly compensated “park district” employees make over $100,000.

Illinois, like many states, is in serious trouble. Policymakers are exploring desperate measures. Two weeks ago, ten Republicans voted with Democrats to override Governor Bruce Rauner’s veto of a permanent 32-percent income tax hike. Without reforms the tax hike will only feed a culture of waste and abuse.

Rauner was right to veto the income tax hike but he hasn’t shown serious resolve to curtail spending. In fact, he created a personal assistant position for his wife – who has no official state duties – for $100,000 a year at taxpayer expense.

But, hey folks, it’s Illinois!

When Do We Know These Are Delusional Markets

In his latest investment outlook, Fasanara Capital"s Franceso Filia, who two months ago explained in one chart how the "fake market" operates...

... discuss what happens when a "Twin Bubble meets quantitative tightening" and answers why record-low volatility breeds market fragility and precedes system instability. We"ll have more to share on that shortly, but for now, here is Filia with his take on "when do we know these are delusional markets":

Signs of complacency and disconnect from fundamentals abound. So to sanity check, it may still be helpful to periodically remind ourselves of a few recent ones. In no particular order:

• Argentina uses defaults as a recurrent macro-prudential policy, to tackle debt overloads from time to time. Most recently in 2014, 2001, 1989. Yet, this year, the country issued a 100-year bond for 7.9% yield. Red-hot demand. It was oversubscribed 3.5x.


• The Bank of Japan now owns almost 75% of the entire Japanese ETF equity market. As a result, the BoJ will likely be the major shareholder in 55 companies by the end of 2017 (read). To entrench firm buy-the-dip reflex in the investment community (and their algos), “the BOJ’s ETF purchases help provide resistance to selling pressure against Japanese stocks,” says Rieko Otsuka of the Mizuho Research Institute (read).


• The Swiss National Bank bought $ 100bn between US and European stocks. It now owns 26 million Microsoft shares (read).


• Easyjet is a great company. Still, 1% yield for 7 years is a stretch. Clearly, ECB programs are behind it. However, but, still, come on... The recognition that EasyJet’s bonds owe their valuation entirely to the Central Bank is widespread. Yet, when it comes to equity markets, such recognition is missing, and claims of bubble valuations are easily dismissed.


• US equity at 30X P/E CAPE, despite political/economic policy uncertainty, and 5yr German Bunds sub-zero despite 1.6% inflation and 2.8% PPI, have every right to belong to this list.


• Leverage to buy stocks at the NYSE (margin debt) hit an all-time record of $549bn this year (read), and went up in lockstep with the S&P as both doubled up since 2009.


• Is it 2007 all over again in CLOs? No, way better than that. Covenant-lite loans are over double what they used to be in 2007 (read, read, read). Assuming 2007 was a credit bubble and covenant-lite was one of the thermometers taking temperature, this is twice a bubble, and the thermometers burned.

Cov-Lite Loans In Both EU And The US Reached A Staggering 70% Of All Loan Supply In 2017.
Before the credit bubble burst in 2007, it was 30%.

Purchases Of US Real Estate By Foreigners Hit All-Time High In 2016

In a testament to Chinese oligarchs, criminals, money launderers and pretty much anyone who is desperate to park their cash as far away from the mainland as possible, purchases of US real estate by foreign buyers surged to an all-time high in 2016, according to data from the National Association of Realtors via CNBC.

Foreign purchases of US residential real estate surged to the highest level ever in terms of number of homes sold and dollar volume last year, with Chinese buyers leading the pack, followed by buyers from Canada, the United Kingdom, Mexico and India. Meanwhile, Russian buyers made up barely 1 percent of the purchases.

Foreign buyers closed on $153 billion worth of US residential properties between April 2016 and March 2017, a 49 percent jump from the period a year earlier, according to the NAR. That surpasses the previous high, set in 2015. Foreign sales accounted for 10 percent of all existing home sales by dollar volume and 5 percent by number of properties. In total, foreign buyers purchased 284,455 homes, up 32 percent from the previous year.

According to CNBC, the increase in home sales comes as a surprise, given the dollar’s relatively expensive valuation versus both developed and emerging-market currencies. Half of all foreign sales were in just three states: Florida, California and Texas.

Aging Canadians buying property in Florida and other warmer climates were responsible for the largest increase of buying activity from any one country.

“But the biggest overall surge in sales in the last year came from Canadian buyers, who scooped up $19 billion worth of properties, mostly in Florida. They are also spending more, with the average price of a Canadian-bought home nearly doubling to $561,000.

‘There are more [baby] boomers now than ever before. It"s the demographic,’ said Elli Davis, a real estate agent in Toronto who said she is seeing more older buyers downsize their primary home and purchase a second or third home in Florida. ‘The real estate here is worth so much more money. They all have more money. They"re selling the big city houses that are now $2 million-plus, where they went up so much in the last 10 to 15 years, so they"re cashing in.’”

Mexican buyers nearly doubled their purchases by dollar volume from a year earlier, coming in third behind China and Canada. Though Adam DeSanctis, economic issues media manager at the National Association of Realtors, said "you could easily make the point that perhaps their uptick was wanting to buy now before new immigration policy was in place.”

In general, though, Mexicans have been buying less expensive homes.

“The average purchase price of buyers from Mexico came in at about $327,000, compared with the $782,000 average among Chinese buyers and $522,000 for Indian buyers. Mexicans overwhelmingly favored homes in Texas, while Chinese buyers opted more for California and, increasingly, Texas.

‘The environment is much more Asian-friendly than it used to be with churches, grocery stores and schools that cater to their tastes,’ said Laura Barnett, a Dallas-Fort Worth area Re/Max agent. ‘I have been told they target good schools and newer homes. Yards are not a high priority, but rather community parks.’”

In a sign that home valuations in America’s most populous state might be nearing a peak, some Chinese are being priced out of California, forcing them to buy property in...Texas.

“It"s also possible that Chinese buyers are being priced out of California. The average price of a home purchased by a buyer from China fell from about $937,000 to $782,000, even as the number of properties purchased jumped to nearly 41,000 from 29,000. The drop in purchasing power likely stems from tightened regulations in China with regards to capital outflow.”

As we’ve reported, Chinese authorities trying to stem the capital flooding out of their country adopted new currency controls specifically aimed at stopping Chinese nationals from illegally repurposing money to buy real estate. Those took effect early this year. Because of the new restrictions, CNBC says Chinese demand is beginning to wane – which could be catastrophic for home prices. Luxury markets in cities like New York City are already struggling with high vacancy rates. The recovery in home prices since the crisis has been uneven, but expensive coastal markets like New York and San Francisco experienced massive home-price inflation as younger Americans flocked to urban areas. However, if foreign demand weakens, these markets could be poised for a crash as fewer residents can afford to own their homes.

And of course, there’s the Trump factor…

"Stricter foreign government regulations and the current uncertainty on policy surrounding U.S. immigration and international trade policy could very well lead to a slowdown in foreign investment," said Lawrence Yun, chief economist for the NAR.

But if Chinese oligarchs are now out of the US real-estate game, who’s going to pay $150 million for this 14-acre parcel of beachfront property in the Hamptons?

Did Junk Bonds Just Signal the End to This Credit Cycle?

Stocks are now in very serious trouble.

The S&P 500 has fallen to test its “election rally” trendline. If the market breaks down here, there’s essentially one giant “air pocket” down to 2,200 or so.

The bad news is that high yield credit (HYG), which leads the S&P 500, has already broken its respective trendline. This is a serious “risk off” signal.

Indeed, it gets worse. HYG is in fact breaking out of a massive rising wedge pattern that could very well mark the end for the 9 year bull market in risk.

What would this mean for stocks?

The 3rd and biggest Crisis 20 years.

A CRASH is coming.

And smart investors will use it to make literal fortunes.

We offer a FREE investment report outlining when the market will collapse as well as what investments will pay out massive returns to investors when this happens. It"s called Stock Market Crash Survival Guide.

We made 1,000 copies to the general public.

As I write this, only 35 are left.

To pick up one of the last remaining copies…

CLICK HERE!

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

VIX 'Risk' Hits Record High As Traders Bet On Chaos To Come

While VIX closed at its lowest level since 1993 on Friday, VVIX (which tracks the anticipated volatitilty of VIX) completed a fourth week of gains in five, reaching a record high relative to the measure of equity turbulence.

As Bloomberg notes, with the VIX down more than 30% this year through the end of last week, investors have been using options to bet on volatility.

As the chart above shows, the volume of contracts wagering on a resurgence of market turmoil has reached its highest level since last February relative to those calling for a drop in price movements.

Doug Casey On Why Gold Is Money

Authored by Doug Casey via InternationalMan.com,

It’s an unfortunate historical anomaly that people think about the paper in their wallets as money. The dollar is, technically, a currency. A currency is a government substitute for money. But gold is money.

Now, why do I say that?

Historically, many things have been used as money. Cattle have been used as money in many societies, including Roman society. That’s where we get the word “pecuniary” from: the Latin word for a single head of cattle is pecus. Salt has been used as money, also in ancient Rome, and that’s where the word “salary” comes from; the Latin for salt is sal (or salis). The North American Indians used seashells. Cigarettes were used during WWII. So, money is simply a medium of exchange and a store of value.

By that definition, almost anything could be used as money, but obviously, some things work better than others; it’s hard to exchange things people don’t want, and some things don’t store value well. Over thousands of years, the precious metals have emerged as the best form of money. Gold and silver both, though primarily gold.

There’s nothing magical about gold. It’s just uniquely well suited among the 98 naturally occurring elements for use as money…in the same way aluminum is good for airplanes or uranium is good for nuclear power.

There are very good reasons for this, and they are not new reasons. Aristotle defined five reasons why gold is money in the 4th century BCE (which may only have been the first time it was put down on paper). Those five reasons are as valid today as they were then.

When I give a speech, I often offer a prize to the audience member who can tell me the five classical reasons gold is the best money. Quickly now—what are they? Can’t recall them? Read on, and this time, burn them into your memory.

Money

If you can’t define a word precisely, clearly, and quickly, that’s proof you don’t understand what you’re talking about as well as you might. The proper definition of money is as something that functions as a store of value and a medium of exchange.

Government fiat currencies can, and currently do, function as money. But they are far from ideal. What, then, are the characteristics of a good money? Aristotle listed them in the 4th century BCE. A good money must be all of the following:

• 
  

  Durable: A good money shouldn’t fall apart in your pocket nor evaporate when you aren’t looking. It should be indestructible. This is why we don’t use fruit for money. It can rot, be eaten by insects, and so on. It doesn’t last.

  
  


• 
  

  Divisible: A good money needs to be convertible into larger and smaller pieces without losing its value, to fit a transaction of any size. This is why we don’t use things like porcelain for money—half a Ming vase isn’t worth much.

  
  


• 
  

  Consistent: A good money is something that always looks the same, so that it’s easy to recognize, each piece identical to the next. This is why we don’t use things like oil paintings for money; each painting, even by the same artist, of the same size and composed of the same materials is unique. It’s also why we don’t use real estate as money. One piece is always different from another piece.

  
  


• 
  

  Convenient: A good money packs a lot of value into a small package and is highly portable. This is why we don’t use water for money, as essential as it is—just imagine how much you’d have to deliver to pay for a new house, not to mention all the problems you’d have with the escrow. It’s also why we don’t use other metals like lead, or even copper. The coins would have to be too huge to handle easily to be of sufficient value.

  
  


• 
  

  Intrinsically valuable: A good money is something many people want or can use. This is critical to money functioning as a means of exchange; even if I’m not a jeweler, I know that someone, somewhere wants gold and will take it in exchange for something else of value to me. This is why we don’t—or shouldn’t—use things like scraps of paper for money, no matter how impressive the inscriptions upon them might be.

  
  

Actually, there’s a sixth reason Aristotle should have mentioned, but it wasn’t relevant in his age, because nobody would have thought of it…it can’t be created out of thin air.

Not even the kings and emperors who clipped and diluted coins would have dared imagine that they could get away with trying to use something essentially worthless as money.

These are the reasons why gold is the best money. It’s not a gold bug religion, nor a barbaric superstition. It’s simply common sense. Gold is particularly good for use as money, just as aluminum is particularly good for making aircraft, steel is good for the structures of buildings, uranium is good for fueling nuclear power plants, and paper is good for making books. Not money. If you try to make airplanes out of lead, or money out of paper, you’re in for a crash.

That gold is money is simply the result of the market process, seeking optimum means of storing value and making exchanges.

*  *  *

Doug thinks the price of gold could hit $5,000 in the coming years. To help you take advantage of this rare opportunity, he’s sharing the specific method he’s used to make gains as large as 487%, 711%, and even 4,329% in previous gold bull markets. The “Casey Method” is unlike any other investing strategy. If used properly, it could make you HUGE gains over the next few years. Doug explains it all right here. You’ll also learn how to get instant access to a special report that names 9 gold stocks with huge upside. Each of these stocks could rise 100%, 200%, or more in the coming years. Click here to get started.

"You Are Here"

In case you wondered...

You Are Here... Valuation?

And here... Sentiment?

And here... Cognitive Dissonance?

And finally... no it"s not a "new economy" or "different this time"...

So as a reminder, Peak Valuations and Trough Labor Force Participation...

"Probably Nothing"