Eric Peters: "One Day Your Investment Style Will Blow Up: Will You Fold Or Double Down?"

Sunday morning brings us the traditional Weekend Notes from One River CIO, Eric Peters, whose panoply of topics under discussion today include systematic investing, economic forecasts, Fed reaction functions, Twitter algorithms, bond yields for the new abnormal, fear and greed, and of course "Rocket Man."

Below are several excerpts from his latest weekly note:

Anecdote

“Whatever investment style you adopt will blow up someday,” said the CIO. “When that day comes, will you fold or double down?” he continued.

We were discussing systematic investing. I see its future dominance and am building my firm accordingly.

“If you’ve surrendered control to a machine, how will you make that decision?” he asked. Before I could answer, he supplied his own. “I’d rather practice making decisions along the way so that I’ll either avoid the blow up or at least understand my strategy in the crisis.”

That’s a credible position to take on the matter; for years I took it myself. But time changes most things, ourselves in particular. Day by day, month by month, we’re different people. Humble, hubristic, stubborn, objective, greedy, fearful, certain, confused, euphoric, depressed, and every imaginable combination thereof.

The two greatest advantages of developing decision-making algorithms are that they allow us to consistently be our finest selves, and they can apply our process across more markets than a single human ever could. But the difficulty of distilling profound complexity into a set of robust rules leads many practitioners to cut corners - which takes the form of choosing rules that worked in the recent past for seemingly arbitrary reasons, and building algorithms without sensible risk-mitigation to avoid its corresponding costs.

Such strategies put their investors at risk of catastrophic loss in exchange for a pile of pennies, and/or tend to make money in every time period except for the future.

But such pitfalls are not machine error, they reflect human weakness, and are thus common to both poorly designed discretionary and systematic strategies.

Because ultimately, every conceivable form of successful money management requires the experience to identify rules that tend to make money over time, and the introspection necessary to come to know our finest selves.

Bonus #1: Peters on bond issuance in the "illiquidstan" market:

Tajikistan issued 10yr bonds this month. Less than 1bp of mankind can locate Tajikistan on a map. Nearly all are Tajiks.

But the bonds paid 7.125% which is roughly what pensions need to prevent insolvency. Bahrain issued $3bln of 12yr paper at 6.75% ($15bln of bids). Iraq issued $1bln at 5yrs at 6.75%. Belarus issued 10yr paper at 7.63%. And Ukraine issued $3bln of 15yrs. $1.6bln rolled existing paper that nearly defaulted 2yrs ago when investors wrote off $3.6bln in debt and delayed payments for 4yrs.

This new issue yielded 7.37%.

Bonus #2: Rocket Man

“Did he really call me Rocket Man?” cried the chubby Korean kid. “Yes he did Rocket Man,” said some nervous sycophant in a cheap suit, saluting his Dear Leader.

“Did he call me a scared, barking dog?” barked earth’s most powerful man, typing a tweet. “Woof!” answered the President’s pack. “He called me a suicidal madman on Twitter!” stammered shorty, combing his black bouffant. “He said he’d tame Trump with fire?” asked The Donald, incredulous, swirling his sweep.

“He tweeted North Korea would be tested like never before!” screeched Kim, pounding the table, knuckles mere dimples, baby fat.

“He said he’ll detonate a hydrogen bomb over the Pacific?” asked our entertainer in chief, excited, knowing a sensational season opener when he sees one.

“Shall I go thermonuclear?” asked the itsy bitsy dictator. And his generals glanced left, right, unsure. “Shall I do it?” he screamed. The garden gnomes stood motionless. “Tell me, shall I mention Trump’s little hands?” asked Kim Jong Un, dead serious. They shook their heads in perfect unison; such a devastating insult would surely end 3.5mm years of human evolution. “Dear Leader, such an insult must be saved, savored,” pleaded his generals. “Very well, I’ll call him a dotard!” cried the child.

“Kim called me a dotard! A dotard! What the hell does that even mean?” whispered the steward of earth’s largest nuclear arsenal. An Ivy League intern explained, “Mr. President, it’s actually pronounced DOE-turd, and it’s a middle English word used by Shakespeare that means an ageing imbecile…” The Donald cut him off, “You’re fired!”

The room fell silent, the enormity of this unexpected crisis sinking in. You see, dotard is the kind of nickname that just might stick.

But at least the risk of nuclear Armageddon had receded. Because of course, it’s simply not possible to end civilization amidst such buffoonery.

America's 'Fake' Stability & Boobs On Credit

Authored by Jim Quinn via The Burning Platform blog,

Do you ever hear something so startlingly mind numbingly ridiculous you realize it must be a sign things have gotten so fucked up something has got to give?

As I was driving to work yesterday morning on the Schuylkill Expressway a commercial comes on the radio from a plastic surgeon advertising for anyone looking for a better set of boobs. I had never heard a plastic surgeon commercial before, so I thought that was unusual. But, that wasn’t the best part. This plastic surgeon was offering no money down 18 month interest free financing on your new boobs.

I wonder if they are moving boobs with subprime debt the same way the auto companies have used subprime debt to move cars. Of course, when a deadbeat defaults on an auto loan the car is easily repossessed. What happens when a bimbo defaults on her boob loan? How narrow minded of me.

What happens when some dude who wants to be a bimbo defaults on his/her loan? I guess it was just a matter of time before breast enhancement met debt enhancement in this warped world of materialism, narcissism, financialization, and delusions.

Now that revolving credit has reached a new all-time high of $1 trillion and total consumer debt outstanding has exceeded it’s 2008 peak at $12.8 trillion, the Fed has completed its job of helping the average American again in-debt themselves up to their eyeballs. This is considered a success story in this twisted, perverted, bizarro world we call America today. The solution to an epic debt induced global financial catastrophe caused by Federal Reserve easy money, Wall Street fraud, and Washington DC corruption has been to increase global debt by 50% since 2007, with virtually all of it created by central bankers and the governments they control.

In what demented Ivy League educated academic mind would piling $68 trillion more debt on the backs of taxpayers as a cure for a disease caused by the initial $149 trillion of debt be considered rational and sustainable? It’s like having pancreatic cancer and trying to cure it with a self inflicted gunshot. And no one seems to care about or even notice the coming reset when this mass debt induced hysteria of delusion turns into the biggest financial collapse in the history of mankind.

This entire ponzi scheme edifice of debt is nothing but a confidence game. When people begin to realize they can’t repay their own debts, start to understand their governments will never honor their debt based promises, and realize central bankers are nothing more than pretend wizards behind a curtain, the confidence will evaporate in an instant and a collapse which will make 2008/2009 look like a walk in the park will ensue. That’s when civil and global war will engulf the world and teach people real lessons about the real world.

The boobs on credit commercial I heard this week is just another example of Wall Street and their Deep State crony co-conspirators completing their scheme to financialize every aspect of our lives and entrap us in chains of debt, beholden to these modern day Wall Street slave owners. When you see the record number of retail bankruptcies and store closings happening when GDP is supposedly rising by 3% and witness with your own two eyes the number of vacant storefronts and restaurants across our great land of materialism, you might wonder why revolving credit card debt is at a new all-time high.

The answer is Wall Street has successfully financialized virtually every aspect of our day to day lives. Consumer and taxpayer transactions which required cash or check ten years ago can now be paid with a credit card. You can pay your IRS bill with a credit card. You can pay your real estate taxes with a credit card. You can pay your utilities with a credit card. You can pay your school tuition with a credit card. You can pay your rent with a credit card. You can “buy” furniture and appliances without paying for seven years. And guess what? That’s what millions of average Americans are doing. In addition, they are driving “rented” $35,000 automobiles on seven year nothing down payment plans.

This massive debt induced fraud of a recovery gives the appearance of normalcy and stability. The stock market is at all-time highs is used as the narrative of central banker success. We’ve experienced extremely low volatility as the central bankers around the world have coordinated their money printing/debt creating schemes to purposely elevate financial markets to give the masses confidence that all is well. Anyone with critical thinking skills knows all is not well. The longer this fake stability is maintained the greater the collapse. Success breeds disregard for the possibility of catastrophe.

So you can call me the boy who cried wolf, but our Minsky Moment is approaching.

Sometimes they do ring a bell at the top.

In this case they are shaking fake boobs at the top.

“Stability leads to instability. The more stable things become and the longer things are stable, the more unstable they will be when the crisis hits.” – Hyman Minsky

"Lies, Lies, & OMFG More Lies!"

Authored by Jim Quinn via The Burning Platform blog,

“There are three types of lies — lies, damn lies, and statistics.” – Benjamin Disraeli

Every month the government apparatchiks at the Bureau of Lies and Scams (BLS) dutifully announces inflation is still running below 2%. Janet Yellen then gives a speech where she notes her concern inflation is too low and she needs to keep interest rates near zero to save humanity from the scourge of too low inflation. I don’t know how I could survive without 2% inflation reducing my purchasing power.

This week they reported year over year inflation of 1.9%. Just right to keep Janet from raising rates and keeping the stock market on track for new record highs. According to our beloved bureaucrats, after they have sliced, diced, massaged and manipulated the data, you’ve experienced annual inflation of 2.1% since 2000. If you believe that, I’ve got a great real estate deal for you in North Korea on the border with South Korea.

“Lies sound like facts to those who’ve been conditioned to mis-recognize the truth.” ? DaShanne Stokes

Ignore that silly Shiller PE ratio far surpassing 1929 and 2007 levels. Ignore every historically accurate valuation method showing the stock market 70% to 129% overvalued. Wall Street shysters like Jamie Dimon, faux financial analysts, corporate media talking heads and even Donald Trump tell you this time is different. Tax cuts, amnesty for illegals, more wars, and eliminating the debt ceiling will surely spur massive economic growth. Trillion dollar deficits are always bullish. Making America Great with More Debt should drive the stock market to 30,000 in no time.

All is well. Real median household income just surpassed the level achieved in 1999. Think about that for a second. It took seventeen years for the average American family to get back to a household income of $59,000. The $59,000 of household income in 2017 doesn’t quite go as far as it did in 1999, with even BLS manipulated inflation showing an 87% increase in medical costs, 80% increase in energy costs, 51% increase in food costs, 53% increase in housing costs, and a 115% increase in college education. And of course the BLS changed their methodology, boosting household income by $1,700 in 2013. So, in reality it is still below 1999 levels.

When you consider 50% of all households make less than $59,000, have not benefited one iota from the Fed/Wall Street debt engineered stock bull market, have less than $1,000 in savings, and less than $50,000 of retirement savings, you realize your Deep State masters must propagandize economic data and manipulate inflation and unemployment figures to keep the masses confused, deluded, and misinformed. The Big Lie is their strategy of choice.

The lies built into the politically motivated CPI figure are designed to screw senior citizens, bond investors, and average hard working Americans who depend upon annual salary increases to keep their heads above water. Corporations are able to point to the low levels of CPI as the reason they don’t need to provide higher salary increases. The government can get away with providing little or no Social Security increases to senior citizens by purposely under-reporting inflation based upon academic theories put forth by captured Ivy League pinheads paid off by the Deep State.

The chart below provides the government reported cumulative increases in key categories since 2000. Not only does the government purposely under-report the increases in these costs, they also purposely under-weight the significance of particular categories in order to reduce the reported level of inflation. Some of these categories show significant increases, but they are far lower than what average Americans are actually experiencing in the real world.

One of the outrageous examples of how the government uses academic gibberish about product improvements to drastically under-report CPI is how they report new vehicle inflation. The average price of a new car in 2000 was $22,000. Today, the average price is $34,500. That’s a 57% increase. The BLS bullshit artists have the gall to report new vehicle inflation of a whopping 2% since 2000.

They have “adjusted” away 55% of the actual increase by saying airbags and other unnecessary technological baubles improved automobiles to such an extent, prices didn’t really go up. What a fucking joke. Having your ass warmed with the push of a button didn’t put the extra $12,500 in your bank account to pay for that car. And new vehicles account for 3.6% of the CPI calculation, while health insurance accounts for 1% of the weighting. Yeah, that reflects reality.

Another outrageous example of under-reporting inflation is in the highest weighted category of housing. It is supposed to reflect the cost of rent and home ownership. The owners equivalent rent calculation is purposely opaque in order to suppress the true cost increase. Median home prices were $165,000 in 2000 and are currently $317,000, a 92% increase. The average rent of $475 in 2000 has risen to $910 today, also a 92% increase. So it makes total sense for the BLS drones to report a 53% increase in housing since 2000. I’m sure their academic model adjusted the true increase downward by 39% due to some obscure algorithm created by a Princeton economics professor.

Medical care advancing by 87% since 2000 sounds substantial, but that only equates to annual inflation of 3.5%. I’d love to find anyone in this country who has only seen their medical costs rise by 3.5% per year. The blatantly shameful falsification of medical inflation is evident to anyone living through the current Obamacare nightmare. According to these BLS prevaricators, health insurance has only risen by 21% since the passage of the Obamacare abortion bill. That lie is beyond comprehension as anyone living in the real world has likely experienced insurance premium increases exceeding 100% since 2009.

I work for the largest employer in Philadelphia, with the most leverage in negotiating insurance premiums with the health insurance complex. I also have tracked my expenditures by category since the 1990’s with Quicken. I know exactly what my medical costs and health insurance costs were in 2009 and what they are today. Let’s do a reality check on the BLS inflation figures of 26% for medical services and 21% for health insurance premiums.

Back in 2009 we had no individual or family deductibles, no co-pays for lab work, and low co-pays for doctor visits. Today, with $1,500 individual deductibles and co-pays 70% higher, our annual medical expenses are 140% higher than they were in 2009, with one less person in the house. That’s slightly more than the BLS fraudulent figure of 26%. Our annual health insurance premiums aren’t 21% higher than 2009. They are 90% higher. And I work for an employer that has negotiating leverage. Many Americans are experiencing 200% to 400% increases. This is the real world, not some excel spreadsheet model world created by academics, politicians and bureaucrats.

Could the BLS be as incompetent in capturing medical inflation as they appear or are they massively under-reporting the true inflation and the weighting for the average American family on purpose? I would contend it is purposeful and directed by those in power as a last ditch effort to keep the masses from revolting and hanging them from the nearest lamppost. The Federal Reserve and their Deep State co-conspirators must massively understate true inflation because reporting the truth would require interest rates to be raised, Social Security payments to be increased, and wages to be elevated – blowing a gaping hole in the federal budget and initiating a stock, bond and housing market collapse.

Those in power know their decades of propaganda and social engineering in public schools have dumbed down the masses to such an extent not one in ten could even tell you what CPI stands for, let alone how it is measured. Any critical thinking intelligent person aware of their daily costs knows their true annual inflation rate isn’t 1.9%. It exceeds 5% and has exceeded 5% since 2000.

Anyone reading and understanding this article is a dangerous man to the government. We know they are dishonest, insane and intolerable. Our job is to spread discontent until a tipping point is reached. I don’t think we are too far away.

“The most dangerous man to any government is the man who is able to think things out for himself, without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane and intolerable, and so, if he is romantic, he tries to change it. And even if he is not romantic personally he is very apt to spread discontent among those who are.” ? H.L. Mencken

Exposing The Student Servitude Scam

Authored by Gordon Long via MATASII.com,

Many today strongly believe it is morally wrong to indenture students to the degree of liabilities presently required to achieve the education required to become a productive contributor within our modern society.

The question we need to demand answers to is why has college costs for students exploded upward, while salaries and job positions for graduates has not?  What is driving the relentless and inexplicable surge in the debt burden for students and their parents?

The well researched "Ivy League Inc" by my friends at OpenTheBooks only begins to scratch the surface of what is minimally a sham and may be better described as an orchestrated banking scam, not to dissimilar in design to the last financing bubble (i.e. the Residential Real Estate bubble in the last decade).  Let me take the discussion in a critical direction which they politically may have felt it to be too sensitive to broach?

TWO BASIC NOTIONS OF UNDERSTANDING

First, to quickly grasp the underpinnings of how this sham has been symphonized it would help to frame our thinking around what might appear as two unrelated notions of how the capitalist system works (or more appropriately in the case of growing student debt - doesn"t work!).

INFLATION - Money Supply and Coconuts

If three hungry people were stranded on an island, each having two damp dollar bills and one having the only coconut which he/she found - what is the price of that coconut?

This of course assumes the finder of the coconut is a former Wall Street banker. The likelihood is that the maximum price that can be extracted for that coconut (no doubt partially eaten by our banker) is $4.

If a government plane then suddenly appears and drops much needed assistance in the form of $5 of financial aid for each inhabitant (which they distribute equally) - How much is the coconut now likely to be worth?

I suspect the banker would extract closer to $14.

As Nobel Economist Milton Freedman postulated " Inflation is always and everywhere a monetary phenomenon".   Credit or Money supply as this scenario illustrates, significantly determines price.

CORPORATE PRICING - "Pricing-to-Market"

When a corporation has a product it prices that product based on the market.

In the first instance, if there are many competitors then the product must be priced relative to competitive pricing.

In the second instance, if there are relatively few well know competitors and the product is not yet well accepted in the market it usually will be priced against how much money it will save or how much it will increases revenues by. The corporation then prices their product against what the customer might be willing to surrender via their expected profit increases to secure the product.

Finally, when a corporation has no competition, a monopoly exists or "unwitting" demand exists,  then the corporation will "Price-to-Market".  That is to say it will charge whatever the market is willing to pay, can afford or can secure financing for.

As in a gold rush, miners in the field paid anything for the picks and shovels they needed to strike a claim. Similarly, today parents and students will pay anything for the "degree" they need to get "a leg up" towards needed employment.

IVY LEAGUE ENDOWMENTS

Let"s start by considering the requirement by colleges for increased tuition levels. Do they actually need significantly more money? Where is the money going?

We decided to start by examining the Endowments of US Ivy League colleges and not surprisingly found that endowments are now measured in the billions of dollars. So why are college costs for Ivy League now being raised to $63,ooo/year? Why do these financially well positioned colleges need $63,000 per year from students?

If we use an average of $2M/student from the above table as endowment levels per student from Tier One colleges, we can quickly calculate that a minimal 5% annual return on endowment money would fund full scholarships for every Ivy League student and still leave $37K/year left over for operating costs, grow the existing endowment and fund new capital expenditures. However, that is not what is happening simply because there is no incentive for this to occur. There is just too much financial aid available

Colleges such as Harvard are incredibly doing much, much, better than our 5% illustration above and frankly better than most professional investors can understand to be possible in a QE/ZIRP environment!

Who is Getting An Overall 15% Yields in an Era of QE/ZIRP?

Consider the most recent Financial Statement of Harvard University (not to pick on Harvard as all the elite colleges reflect similar financial approaches). We see that the revenues from Federal Government sponsorship aid is equivalent to 60% of the revenue received from student income (remembering that in turn student debt is sponsored by government aid funding).

As we see below, Operating Revenue is dominated by Government funding, despite Harvard sitting on an endowment approaching net asset value of ~$40 BILLION dollars (and rapidly expanding). This asset base is bigger than most major banks in America.

Similar to our three deserted island inhabitants, when the government inserts more money or credit financing aid the price of the "coconut" or "student tuition" goes up!

The simple truth is that Ivy League schools have become non taxable, not-for-profit investment banks funding expenses through outrageous government guarantees in the form of student aid loans.

The "Ivy League Inc"   report summarized their investigations as follows:

1. Ivy League payments and entitlements cost taxpayers $41.59 billion over a six-year period (FY2010-FY2015). This is equivalent to $120,000 in government monies, subsidies, & special tax treatment per undergraduate student, or $6.93 billion per year.

2. The Ivy League was the recipient of $25.73 billion worth of federal payments during this period: contracts ($1.37 billion), grants ($23.9 billion) and direct payments - student assistance ($460 million).

3. In monetary terms, the "government contracting" business of the Ivy League ($25.27 billion - federal contracts and grants) exceeded their educational mission ($22 billion in student tuition) FY2010-FY2015.

4. The eight colleges of the Ivy League received more money ($4.31 billion) - on average - annually from the federal government than sixteen states: see report.

5. The Ivy League endowment funds (2015) exceeded $119 billion, which is equivalent to nearly $2 million per undergraduate student.

6. As a non-profit, educational institution, the Ivy League pays no tax on investment gains. Between FY2011-FY2015, the Ivy League schools received a $9.6 billion tax break on the $27.3 billion growth of their endowment funds. In FY2014, the tax-free subsidy on endowment gains amounted to $3.4 billion, or nearly $60,000 per student.

7. With continued gifts at present rates, the $119 billion endowment fund provides free tuition to the entire student body in perpetuity. Without new gifts, the endowment is equivalent to a full-ride scholarship for all Ivy League undergraduate students for 51-years, or until 2068.

8. In FY2014, the balance sheet for all Ivy League colleges showed $194,332,115,120 in accumulated gross assets. This is equivalent to $3.35 million per undergraduate student.

9. The Ivy League employs 47 administrators who each earn more than $1 million per year. Two executives each earned $20 million between 2010-2014. Ivy League employees earned $62 billion in compensation.

10. In a five-year period (2010-2014) the Ivy League spent $17.8 million on lobbying, which included issues mostly related to their endowment, federal contracting, immigration and student aid.

What we found particularly amusing  is that Harvard"s endowment had cashflow in 2016 of over $5.5B in trading changes in government repos and reverse repos.  Go figure how this is good for parents and their indebted children? What appears good for Harvard and the Government isn"t necessarily good for students and parents.

We would truly like to see where all this endowment money is being invested, but of course like the teamster"s union pension which under Jimmy Hoffa was invested by the "mob" into funding Las Vegas, we will never know!  I am not for a moment suggesting anything nefarious is going on here but rather that angry and debt burdened parents have a right to know why tuition is going up despite the size of the endowments - if only for their own piece of mind.

You are probably thinking, well this may all be true for the elitist schools but my kids are going to colleges for normal kids, well down the the status ladder. They are  just trying to get a shot at a job.

What we need to fully appreciate is that the above directly affects everyone trapped in the American post secondary educational scam.

EVERYONE IS BENCHMARK PRICING

As many parents have learned, when the "Harvard"s" raise their annual cost to $63K  every college then adjusts their price to close the available revenue gap in about a New York minute! As salaries rise at Ivy League schools, every college feels forced to raise salaries to attract Professors. Colleges feel competitively trapped and have little choice but to follow.

Of course all of this is nothing more than college"s version of the corporate game of how to "Price-to-Market" which we discussed above as our second notion of understanding.

Whether competitive pricing or price-to-market the colleges know they have an insatiable demand for their product and can price accordingly. Its how the capitalist system works. It continues until demand falls off  because pricing becomes un-affordable. This cycle will not stop until the an affordability level is reached and the cost no longer merits the debt level. With shrinking availability of quality, well paying jobs in America, the perceived "value level" is becoming even higher.

GAMING GOVERNMENT GRANTS & "FUNNY MONEY"

Just so you don"t think the villains here are solely the Ivy League schools, lets consider a personal example I encountered.

My neighbor"s son was a terrible student and his father often forlornly related the fact that unless his under achieving son received  a full basketball scholarship (which was the only thing he had a talent for), college was probably out. The concern wasn"t just his son"s poor academic achievements, but also the overall financial cost burden to the family with other more academically inclined children.

However, when he graduated high school his father suddenly appeared over my fence to tell me the great news. His son had graduated and had been accepted into college.  As I was digesting the surprise and was about to ask where he had received the basketball scholarship from, his father proceeded to unload the big news.

Though his son had not been awarded a basketball scholarship he had been awarded a $15,000/year academic scholarship.

"From where?" I blurted out uncontrollably.

His father sheepishly named a college I had never heard of and told me the annual tuition was going to be $45,000 but his son"s annual funding would now only be $30K after taking off the $15K scholarship.  I knew at the time that $30K was about what a state college would cost. I therefore asked where the money was coming from to pay for the scholarship as the college he named didn"t appear to have that sort of financial capabilities to reach down to his son"s GPA level?

It turned out after some further investigation that it was partly some government funding to the college for the program his son was enrolling in.  The more seats they filled the greater the money flowed.

However, it was much more insidiously as I curiously investigated the situation further. It turns out it was nothing more than the college elevating their stated college tuition by $15K and then "giving it way as a scholarship". Effectively creating "funny money". It was an illusion.  It was nothing more than a marketing sham. However, it worked in filling student seats, even if some of these students simply weren"t meant for college!

My neighbor was so proud of his son being awarded a scholarship that despite distance and other obstacles his son attended that college. Of course it didn"t go unnoticed by other colleges that tuition was now $45K at a college not "nearly as good as theirs"  Academic communities are notoriously very competitive and highly status conscious.  They obviously reacted in a New York minute!

This young man will possibly graduate? He and his family will likely have $120,000 in debt.

The questions to be answered is; Will he be employable?  Get a job?  Will he and his parents ever pay off the $120,000 of debt?

GAME ON

Once the game above has begun, it quickly takes on a life of its own. Everyone immediately justifies why more "whatever" is needed and tuitions shoot up. Salaries rise. Benefits rise. New buildings spring up. Labs become more  opulent. Administration becomes larger. Today the games is being further enhanced with additional fees (fees for student activities, fees for athletics, fees for building maintenance, fees for libraries—even fees for graduation, the bills for which often arrive just as students and their families thought they were finally done paying for their higher education).

This chart which Charles Hugh Smith and myself circulated a number of years ago shows, by 2010 we felt it was out of control.  Little then stood in the way of college costs being pushed to student loans and government grants guaranteed by the Department of Education and then serviced by private unscrupulous service providers (some of which are only now being brought to court).

The real questions today is whether the education is any better and whether jobs are available for these now heavily indentured debt slaves!

If the answer is no, then the only winners have been those receiving all the endowment investments, college spending or higher government income taxes being paid.

With student debt now approaching $1.3T and over $600M now in "forebearance", there is little doubt who the losers of this sham are: students, parents and every US taxpayer.

It maybe that Tax Payers just don"t know it yet!

What Nassim Taleb Can Teach Us

Authored by Jeff Deist via The Mises Institute,

Nassim Nicholas Taleb does not suffer fools gladly. Author of several books including The Black Swan and Antifragile, Taleb is known for his incendiary personality almost as much as his brilliant work in probability theory. Readers of his very active Medium page will experience a formidable mind with no patience for trendy groupthink, a mind that takes special pleasure in lambasting elites with no “skin in the game.”

“Skin in the game” is a central (and welcome) tenet of Taleb’s worldview: that we are increasingly ruled by an intellectual, political, economic, and cultural elite that does not bear the consequences of the decisions it makes on our (unwitting) behalf. In this sense Taleb is thoroughly populist, and in fact he correctly identified trends behind the Crash of ’08, Brexit, and Trump’s election. He understands that globalism is not liberalism, that identity and culture matter, and most of all that elites don’t understand how randomness and uncertainty threaten the inevitability of a global order. 

Thus Taleb argues the intelligentsia are not only haughty when they plan our future, they are also clueless: fragility abounds, and threatens to crash the Party of Davos. Hubris results from unearned wealth and prominence, coupled with a blindness to the Black Swans lying in wait.   

Born in Lebanon to a prominent family, educated at the University of Paris and Wharton, Taleb was poised to become part of the cognitive aristocracy he mocks. But he was never one of them. His hard-nosed persona, enhanced by a dedication to rigorous deadlift workouts, is quickly evident in his notorious interviews and very public Twitter brawls. His willingness to delve into history and and religion sets him apart from the neoliberals who hope to wish them both away. Taleb writes for the intelligent everyman, and this blue-collar approach also extends to his description of himself as a “private intellectual, not a public one.”

Austro-libertarians will find much to admire in his brilliant takedowns of the “pseudo-experts” he identifies in academia, journalism, politics, and science. But Taleb is no Austrian. While he holds a decidedly jaundiced view of most economists—calling for the Nobel in economics to be cancelled— he does not denounce economics as a field of study per se. Nor does he claim heterodox or reactionary inclinations:

“I am as orthodox neoclassical economist as they make them, not a fringe heterodox or something. I just do not like unreliable models that use some math like regression and miss a layer of stochasticity, and get wrong results, and I hate sloppy mechanistic reliance on bad statistical methods. I do not like models that fragilize. I do not like models that work on someone"s computer but not in reality. This is standard economics.”

While he is not averse to using mathematics and statistics in economics, Austrians share his perspective that both are tools for economists. Statistical models are mostly bunk that provide no value to economic forecasters or investors, despite the highly paid Ivy League quants who produce them. In fact, models often have harmful effect of creating a false sense of relative certainty where none exists. It"s refreshing to see Taleb make this claim so effectively from outside the Austrian paradigm of praxeology. But if his view of economics is mainline, his tone is Rothbard meets Hayek:

I"m in favour of religion as a tamer of arrogance. For a Greek Orthodox, the idea of God as creator outside the human is not God in God"s terms. My God isn"t the God of George Bush.

We know from chaos theory that even if you had a perfect model of the world, you"d need infinite precision in order to predict future events. With sociopolitical or economic phenomena, we don"t have anything like that.

Taleb does see a role for government, and supports consumer protection laws against predatory lending as one example. But he also purportedly supported Ron Paul in the 2012 presidential election, and has indeed mentioned Hayek as an influence regarding the dispersal of knowledge in society. He’s also applied special venom to several worthy targets in professional economics, including Paul Krugman, Joseph Stiglitz, and Paul Samuelson. Taleb labels as “Stiglitz Syndrome” the process whereby public intellectuals suffer no financial or career consequences for being spectacularly wrong in their predictions.

This is especially galling to a man who correctly called (and in fact became wealthy as a result of) economic crises in 1987 and 2008. In both instances, Taleb had “skin in the game” as a market trader. His own money and reputation were on the line, unlike the court economists in the New York Times.

For an excellent (albeit indirect) analysis of how Austrians and libertarians can advance their cause from a minority position, Taleb’s recent article The Most Intolerant Wins: The Dictatorship of the Small Minority is a must-read. He reminds us that a small minority with courage—the most important form of skin in the game— can prevail over the slumbering masses. And he also reminds us that courageous individual actors, not 51% mass movements, drive real changes in every society:

The entire growth of society, whether economic or moral, comes from a small number of people. So we close this chapter with a remark about the role of skin in the game in the condition of society. Society doesn’t evolve by consensus, voting, majority, committees, verbose meeting, academic conferences, and polling; only a few people suffice to disproportionately move the needle. All one needs is an asymmetric rule somewhere. And asymmetry is present in about everything.

Economics is lost, mired in a quicksand of predictive models that fail to predict and macro-analysis that fails to analyze.

Democratic politics is lost, ruined by bad actors with perverse incentives to burn capital rather than accumulate it.

And academia is lost, still stuck in a centuries-old model run by hopelessly sheltered PhDs.

Taleb gets all of this, and does an admirable job of explaining it. Austro-libertarians would be wise to see him as a valuable ally and voice in the ongoing fight against states, central banks, and planners of all stripes.

Here Are The States With The Highest Property Taxes

ATTOM Data Solutions has scoured county-level property tax records from across the country to figure out exactly who is getting punished the most on their real estate taxes.  To our complete "shock", the resulting map looks eerily similar to the 2016 presidential electoral college map with the liberal bastions of the Northeast and Midwest suffering the highest property tax burdens.  Per RealtyTrac:

Average Annual Property Tax was $3,296, an Effective Tax Rate of 1.15 Percent; Highest Effective Tax Rates in New Jersey, Illinois, Texas, New Hampshire, Vermont; Owner-Occupied Properties Register Higher Effective Tax Rates Than Investment Properties

ATTOM Data Solutions, curator of the nation’s largest fused property database, today released a 2016 property tax analysis for more than 84 million U.S. single family homes, which shows that property taxes levied on single family homes in 2016 totaled $277.7 billion, an average of $3,296 per home and an effective tax rate of 1.15 percent.

The report analyzed property tax data collected from county tax assessor offices nationwide at the state, metro and county level along with estimated market values of single family homes calculated using an automated valuation model (AVM). The effective tax rate was the average annual property tax expressed as a percentage of the average estimated market value of homes in each geographic area.

Not surprisingly, residents of New Jersey won the award for highest property taxes of any overall state in the union while Westerchester County, the posh suburb of New York City, won for most expensive local municipality with taxes averaging over $16,000.

Per the chart below, states with the highest effective property tax rates were New Jersey (2.31 percent), Illinois (2.13 percent); Texas (2.06 percent); New Hampshire (2.03 percent); and Vermont (2.02 percent).  Other states in the top 10 for highest effective property tax rates were Connecticut (2.00 percent), Pennsylvania (1.89 percent), New York (1.88 percent), Ohio (1.68 percent), and Rhode Island (1.64 percent).

Meanwhile, among the 586 counties with a population of at least 100,000 and at least 10,000 single family homes, nine posted average annual property taxes of more than $10,000...and again, to our complete shock, each one of them is in a deep-blue state: Westchester, Rockland, and Nassau counties in New York; Essex, Bergen, Union and Morris counties in New Jersey; Marin County, California; and Fairfield County, Connecticut.

Perhaps this is why our young snowflakes don"t own homes anymore...their desires to put their Ivy League anthropology degrees to good use in New York City don"t mesh well with the financial realities of implementing their socialist utopias.

NYC Rents Need To Fall Up To 15% Says Billionaire Real Estate Investor

Billionaire real estate investor Richard LeFrak sat down with Bloomberg this morning and unloaded some rather disappointing predictions for New York real estate owners, namely that they should expect 10-15% rent reductions over the coming months/years.  As we have several times as well, LeFrak said the pricing weakness will come courtesy of a massive oversupply of new apartment capacity which was built in anticipation of "incomes that don"t exist in the market now."

"Rents are going to come down, I would say, 10-15%.  They started to already.

Part of that is because we built a lot of new product at the high end...anticipating incomes that don"t exist in the market now.

You can have a job in a hotel or the hospitality business and you can have a job in the financial services business.  Those two jobs don"t pay the same but they both count as a job.

So we need more affordable product in the market.  There"s huge demand in that price point.

But what we built, whether it"s in New York or San Francisco, or some of the other over-served markets, will get absorbed because in the end, it"s jobs."

* * *

Of course, as we noted just a few days ago, rents in NYC have already started their descent with median prices down 1.7% in February.

After years of gouging the precious, Ivy League snowflakes that flood Manhattan every summer with nothing but their $10 million inheritance checks, a dream and the Faconnable shirts on their back, New York City landlords, courtesy of the flood of new apartment supply coming online, are being forced to offer record-high rent concessions to attract tenants.

Per the latest February 2017 rental report from Douglas Elliman, the number of new leases signed on Manhattan apartments crashed 27.9% YoY as listing inventory surged 11.7% and median rental prices dropped 1.7%.  Meanwhile, even a massive increase in the share of apartments carrying rent concessions, which averaged 1.2 months of free rent, wasn"t enough to spark demand.

As Bloomberg notes, even the once defensive studio segment, which caters to all those people who will happily live in a shoe box just to have a Manhattan zip code, is showing signs of weakness.

“There’s so much inventory, and that influx is hitting across all price points, even the studios,” Hal Gavzie, executive director of leasing for Douglas Elliman, said in an interview. “There were a lot of studios that hit the market and have been sitting there. They had to reduce prices.”

Until now, studios -- smaller, cheaper and in demand among young job-seekers in Manhattan -- had better withstood the pressures from the wave of apartment construction that’s kept a lid on prices across the market. Now, even those units are getting reductions as landlords fret about rising vacancies and renters at all price levels sense they have the leverage to demand a better deal.

“In the months of January and February, we had customers requesting three to four months free, which is pretty unheard of,” said Melinda Sicari, a broker with Douglas Elliman.

Meanwhile, East Side and West Side prices were hit the hardest as Manhattan"s hipsters continue to abandon SoHo for the cheaper "Uptown" (a.k.a. "Harlem") market.

But this is surely just another weather-related catastrophe...we"re certain March will be much better.

New York City Rents Crash Again In February Under Weight Of "So Much Inventory"

After years of gouging the precious, Ivy League snowflakes that flood Manhattan every summer with nothing but their $10 million inheritance checks, a dream and the Faconnable shirts on their back, New York City landlords, courtesy of the flood of new apartment supply coming online, are being forced to offer record-high rent concessions to attract tenants.

Per the latest February 2017 rental report from Douglas Elliman, the number of new leases signed on Manhattan apartments crashed 27.9% YoY as listing inventory surged 11.7% and median rental prices dropped 1.7%.  Meanwhile, even a massive increase in the share of apartments carrying rent concessions, which averaged 1.2 months of free rent, wasn"t enough to spark demand.

As Bloomberg notes, even the once defensive studio segment, which caters to all those people who will happily live in a shoe box just to have a Manhattan zip code, is showing signs of weakness.

“There’s so much inventory, and that influx is hitting across all price points, even the studios,” Hal Gavzie, executive director of leasing for Douglas Elliman, said in an interview. “There were a lot of studios that hit the market and have been sitting there. They had to reduce prices.”

Until now, studios -- smaller, cheaper and in demand among young job-seekers in Manhattan -- had better withstood the pressures from the wave of apartment construction that’s kept a lid on prices across the market. Now, even those units are getting reductions as landlords fret about rising vacancies and renters at all price levels sense they have the leverage to demand a better deal.

“In the months of January and February, we had customers requesting three to four months free, which is pretty unheard of,” said Melinda Sicari, a broker with Douglas Elliman.

Meanwhile, East Side and West Side prices were hit the hardest as Manhattan"s hipsters continue to abandon SoHo for the cheaper "Uptown" (a.k.a. "Harlem") market.

But this is surely just another weather-related catastrophe...we"re certain March will be much better.

Rahm Emanuel Tells Democrats To Stop Crying, Bend Over For "Long Haul" - Then Offers Subversive Advice On Dirty Politics

Apparently Stanford University is putting on a week of elite liberal inspirationalists to help the tender psyches of turtleneck wearing "compliant and unawares" recover from the depths of despair. I imagine that miserable couple on the plane to Portland were in attendance - both wearing jeans and faux-buckle loafers with no socks. In a sermon to the fractured cult of Jobs on Monday, Justice Ginsburg put down her antique ivory ear-trumpet to let the world know she wants to eradicate the electoral college, and people need to be more charitable. Credible sources within earshot say many tears of inspiration were shed.

In stark contrast to Ginsburg"s feel-good appearance, Chicago Mayor Rahm Emanuel took a big check to show up on the Palo Alto campus - where he effectively called tantruming democrats whiny children, telling them to put on their big boy/girl/it pants and move on.

Our party likes to be right, even if we lose. If you win, you then have the power to go do what you need to get done. If you lose, you can write a book about what happened. Great. That"s really exciting [Sarcastic Rahm eye roll].

He then went all Harkonen apprentice, talking about plans within plans and biding time:

You also gotta know, you can"t beat something with nothin" - that was Bill Clinton"s always lesson. You have to have an alternative. You have to give people your vision. And I would also be honest, it took us a long time to get this low - it ain"t gonna happen in 2018. Take a chill pill, man. You gotta be in this for the long haul. If you think it"s gonna be a quick turnaround, like that - it"s not.

Of course while waiting to regain power, the most effective thing congressional Democrats can do for the country is stop infighting - and then divide, divide, divide! Here"s Rahm"s advice:

• "Democrats don"t have the power to swing at everything, so we have to pick what is essential."

 

•  B - Wedge: "wherever there is a disagreement among Republicans, I"m for one of those disagreements. President wants Russia, I"m for John McCain and Lindsey Graham, I"m for NATO. Why? Wedge. Schisms have to be wedges, wedges have to be divides."

 

• Third: "We gotta lower the President, why? Because they are strong enough to get him in [against?] us. We"re not strong enough."

How about "don"t cheat during the primaries with a candidate whose fake charity took tens of Millions of dollars from our enemies?"

Video here:

"Traders Got It Wrong Before The Election, And Continue To Get It Wrong Today"

In light of the only thing that matters for markets (that would be Donald Trump for those who have slept through the past three months), here are some salient thoughts from the latest weekend notes by One River Asset Management"s Eric Peters, whose uncanny ability to put a unique spin on events in third person continues to impress.

Beep Beep: “The world got caught in its own trap,” said Roadrunner, the market’s biggest equity volatility trader. “Traders got it wrong before the election, and continue to get it wrong today.” The VIX touched 10.50. “You see the tweets, the media battle, illegal voters, conspiracy theories, Mexican feuds, European taunts, border walls, fake news, and lies,” said Roadrunner, looking left, right, up. “But be careful what you watch. There is only one thing that doesn’t lie, and that’s the price,” he said. “Look where the price is, what it’s telling us.” 

“VIX tells you that there’s someone in charge who’s not a madman,” continued Roadrunner. “He speaks and acts like he’s crazy, but the market is wiser than all of us, it’s smarter than everyone combined.” He paused, contemplating our new surroundings. “Barnum and Bailey closed just ahead of the inauguration. How could they compete with this circus?” The wall is a show. Our world is now theatre. We’re all extras. “Of course at some point vol will explode, but for the moment the market is saying maybe America First will work.”

“Dollar rally doesn’t seem close to done,” said Roadrunner. “As rates head higher, they’ll hurt equities.” It won’t be Goldilocks forever. “When vols fall to these levels it’s because people got too long and slowly get squeezed out.” We’ve begun to see the first signs of animal spirits returning, but not of the intensity to signal a bull market high. Volatility is cheap, pretty much everywhere, though of course it can always go lower, for a time.

“What I’d like to see is a scramble for S&P calls before I get really bearish,” said Roadrunner, and darted off.

Next follows an interlude on human hypocricy:

“My wife screamed today, hysterical,” he said. “Said she’s giving a ton of money to Greenpeace. So I asked why? Said she’s going to help anyone that opposes this man. I almost asked how that’ll help, but knew better than to argue. I left for work, then a biz dinner. Told the story, and turns out I’m not alone. Everyone’s wives are wearing pink hats. They took buses to the DC March. They’re excited, angry, outraged. And I dare not tell her that no matter how much she gives to Greenpeace, we’re richer, because this man made us a fortune on our bank stocks.”

Finally, some observations on why this time may be different:

“Complete garbage,” cried the professor from Edinburgh University. “I’m appalled by what’s being published in Science,” he continued. You see, some Ivy League nerd claims to have created a miraculous super-conducting material. “It’s the first time solid metallic hydrogen has existed on Earth,” boasted the pioneering Harvard scientist. He’d inserted hydrogen atoms into a synthetic diamond anvil at a pressure of 495 gigapascals; which any moron knows is equivalent to bench-pressing 5mm earth atmospheres. Do that at -270 Celsius and magical things happen – Presto! - hydrogen atoms share electrons, creating a crystal lattice, just like a metal. But the Edinburgh propeller-heads are skeptical. They demand more proof. Rightly so. These kinds of breakthroughs are rare, they transform the economy, society. And they’re happening more often now than ever before.

You connect 7.48bln hungry humans, stand them atop the shoulders of giants, compress them into a shrinking planet, warm things up a few degrees, and magic happens. ISIS happens too. All sorts of unexpected things happen. Like quantum computing, the rise of robots, green energy, declining birth rates, shrinking labor forces, growing inequality, secular stagnation, rising nationalism, anti-globalism - a return to policies made famous in the 1930s, with utterly disastrous consequences. But these things we already know. Yet global equity markets continue to rise. Despite chants of America First, emerging market equities are inexplicably outperforming on the way up. The VIX index grinds to levels seen only during periods of supreme calm. Perhaps something else is happening here. Something less pernicious. Positive. It’s vital to keep an open mind. After all, it may be the first time solid metallic hydrogen has ever existed on Earth; and our countless other innovations, accelerating inexorably. “Complete garbage,” cry the economists, political scientists, appalled, with history firmly on their side.

But humanity has never experienced a time quite like our present.

And with that, here"s looking forward to tomorrow"s new all time highs in the S&P 500.

Against The Tyranny Of The So-Called Experts

Submitted by Kurt Schlichter via Townhall.com,

America’s elite – that collection of puffed up mediocrities who until recently held the undisputed command of the heights of our politics and culture – is in crisis. Its unbroken track record of failure has finally stirred the rest of America from its coma. The normals are now hella woke, and the elitists are being hella rejected. Unused to accountability, the elite is in a tizzy over the way people are not only blaming it for its myriad failures but are taking concrete steps to restrict its power. It’s not just electing Donald Trump. It’s ignoring the media, ignoring Hollywood stars, and ignoring the cabal of “experts” who presume to tell us how to live.

And it’s about time.

The best thing about being a member of the elite is that you really don’t have to do anything to become one. You can be born one – no matter how dumb or drug-addled you are, if you’re a Kennedy you’re elite regardless of how many times you blow the bar exam. Or you can become one by getting into the right school – remember, a Harvard degree does not mean you did well at Harvard. Everyone at Harvard does well – an “A” is a participation trophy. It’s getting in that matters, and getting in depends, in significant part, on who you are. Elite mom and dad, welcome to the Ivy League.

The elites, having been called out for their failure, are now trying to rebrand themselves as “experts.” It’s important to distinguish “elites” from “experts.” Elites want to be seen as experts because an expert is assumed to actually know something and to have some sort of technical skill. To be elite, you just have to be accepted as elite. That’s why elitists fudge the terms; they want the credibility of being experts without actually having to do what a real expert does.

Take, for example, the notorious New Yorker cartoon of the passenger on the plane electing himself pilot. The point, which the elitists think is brilliant, is that the running of government should be left to the experts without the participation of you people. Of course, pilots are trained in detailed technical skills and, critically, are accountable for their performance. If they fail, they get fired – or worse. [Insert Kennedy pilot joke here] If an elitist fails at an important job, she gets nominated for president. See the difference?

The point they want to make is that we should submit to their “expert” (really, elite) guidance, since we are unfit to determine our own destiny. Yet, when piloting this country over the last couple decades, these elites have flown the plane straight into the ground. Real experts are held accountable, but elites never are. Their landing is always soft – it’s never the elites who suffer while the normal prosper, only the other way around. The elitists always win – that’s why they are called “elite.”

Remember, whenever anyone tells you to blindly give up your input and rely on an “expert,” you stand a good chance of being scammed. Take a doctor. Doctors have a hard skill. They go through a lot of training. And medical malpractice kills about 98,000 people per year. Doctors are experts, but they are not perfect. No expert is. Nor are they perfectly disinterested technicians. A lot of doctors are terrible people – the worst divorces lawyers deal with are doctor divorces. Don’t confuse expertise with morality.

Like all humans, experts are self-interested. That’s why some doctors complain when their patients read up on their symptoms in Google. “Gosh, these peons are presuming to gain access to my secret knowledge – how dare they!” Yes – thanks to technology, much of what doctors do (which is maintain and use knowledge – many never touch a scalpel) can be done by normals on line. You have a symptom and you go to Web MD and often it answers your question – “Eww, that weird lump is a sebaceous cyst, not melanoma.”

The same with lawyers – go to LegalZoom to create your routine limited liability company and you’ll do it for a third of the price of the lawyer who merely changes the names on the last routine limited liability company formation documents he prepared. Trying a case is different – you probably want a technical expert who has done it before. But a lot of legal knowledge is not only accessible but employable by regular citizens; the laws restricting the practice of law to those with a license may protect some people from harm, but it also ensures we lawyers can restrict supply and thus justify our outrageous fees. Remember, a lot of “expertise” is not skill derived from experience but merely access to information. And when everyone has that access, well, the guilds get really protective of their turf.

The expert technocracy model of governance also depends on the underlying assumption of a disinterested, objective technician class that will protect others’ interests before its own. But the notion that a particular expert is disinterested and somehow only concerned with objective facts is simply silly. As a trial lawyer, I absolutely know the other side is always going to hire some “expert” to say exactly what needs to be said to help its case. We litigators regularly refer to experts as “whores” – it’s just assumed. Now, smart lawyers try to get honest experts – I’d much prefer to hear early that my client’s case has problems. But there are surprisingly few smart lawyers – again, simply because you are in an expert caste does not mean you are not a half-wit.

The simple fact is that when people push for government by expert, the experts they want running things will always – every single time – happen to have exactly the same policy preferences as the people pushing them. “Leave climate science to the experts!” Yeah, and in a shocking turn of events, the experts we are supposed to defer to feel the solution to climate change is to give more money and power to the people demanding “Leave climate science to the experts!”

And then there’s the problem of incompetent experts. This is especially true in the media, where the internet has made the journalistic gatekeeper model obsolete. These hacks are panicking, and trying to claw back their authority by labeling dissent “fake news” – that is, when they aren’t themselves publishing outright lies and propaganda they imagine we’ll buy into. Talk about, as Peggy Noonan aptly put it, being patronized by our inferiors.

You would think that if you presumed to tell the rest of us what to think that you might first ensure that you actually know stuff. But then, being elite means never having to actually accomplish anything, like knowing stuff. For example, Judd Legum, a senior apparatchik at ThinkProgress.org – the popular leftist political site best known for stuffing two questionable assertions into one web address – went on with Hugh Hewitt, who asked him a series of pretty basic questions about government and foreign policy. Well, it was pretty ugly. What he didn’t know was … extensive. I’d liken the segment to the Bataan Death March but Judd would probably not get the reference. He’ll have to check Wikipedia, just like everyone else. But then, if everyone else can do what Judd does, why do we need him and his ilk?

Experts aren’t what they used to be – that is, experts. “Experts” tell us that by an act of sheer desire, Dave can transform into Diane. That’s crazy. We try to outsource our moral judgment to “ethics experts” and end up with nutballs telling us infanticide is cool. The experts told us how there was an ice age coming. Then acid rain. Then ozone depletion. Then global warming. Then, when it didn’t actually get warmer, global climate change. Yet, somehow we are expected not to notice this litany of wrong and to just submit to the guidance of people who are literally never right.

Sure, if I had a brain tumor, I’d want a skilled neurosurgeon to take it out – though note how Dr. Ben Carson’s demonstrated track record of competence at that hard skill has earned him zero respect from the left, demonstrating that their alleged regard for expertise is simply another scam. But while I would rely on my doc for the technical work of cutting and slicing, his expertise does not apply to the other key issues involved – like whether I want to accept the consequences of the surgery on my quality of life. Questions that relate to our preferences and morals are not the province of experts. Nor should decisions regarding the principles and policies of our government be delegated to the technical experts charged with carrying them out.

We are American citizens. We can decide for ourselves what kind of nation we want to live in. That’s our decision. Experts? Well, you can provide advice, and then you can carry out our instructions. But don’t presume to do any more than that. You work for us, not vice versa.

Princeton Cancels Men's Swim Season After "Vulgar, Offensive, Misogynistic And Racist" Emails Discovered

Princeton University has officially become the 3rd Ivy League School, joining Harvard and Columbia, to cancel a team"s sports season after the discovery of what university officials called "vulgar, offensive, misogynistic and racist” emails on a team listserv.  The Daily Princetonian reported that the men"s swimming and diving team had be suspended for the remainder of the season after the alleged "offensive" messages prompted an official complaint to be filed by an anonymous source. 

Princeton has refused to share the contents of the controversial emails citing "privacy concerns for those involved," but posted a statement saying that certain members of the team had "failed to respect the values of this University and the dignity of other students."

"We make clear to all of our student-athletes that they represent Princeton University at all times, on and off the playing surface and in and out of season, and we expect appropriate, respectful conduct from them at all times," Samaan said. "The behavior that we have learned about is simply unacceptable. It is antithetical to the values of our athletic program and of the University, and will not be tolerated.

"After reviewing the situation with Coach Orr, we have decided to suspend the season, and all associated team activities, effective immediately," Samaan added. "In the coming days we will make a determination about the status of the team’s remaining schedule and we also will work collaboratively to determine additional actions aimed at education and positive culture building for the team."

“The athletics department and the University are committed to providing an inclusive environment free from harassment and intimidation and characterized by mutual respect and concern for the well-being of others,” Samaan said. “In recent years we have worked closely with Princeton’s SHARE office (Sexual Harassment/Assault Advising Resources and Education) to provide educational and training programs for our students and our staff.

Of course, Princeton isn"t the first Ivy to cancel sports seasons this year.  Columbia University recently suspended its wrestling team"s season after the discovery of "racist, misogynistic and homophobic" text messages sent by team members.

Apparently this Columbia wrestler longed for the better supply/demand characteristics of "hot girls" at "state schools" after visiting Pitt and Duquesne where "damn near every girl [he] saw was an 8."

Meanwhile, this wrestler got busted for posting a "sexist" article that he lifted from the Huffington Post.

And, of course, who can forget the Harvard men"s soccer team "scouting report" that ranked the womens team by looks and assigned each a nickname and preferred sexual position to match their position on the field.  Per the Harvard Crimson:

The author of the “report” often included sexually explicit descriptions of the women. He wrote of one woman that “she looks like the kind of girl who both likes to dominate, and likes to be dominated.”

Each woman was assigned a hypothetical sexual “position” in addition to her position on the soccer field.

“She seems relatively simple and probably inexperienced sexually, so I decided missionary would be her preferred position,” the author wrote about one woman. “Doggy style,” “The Triple Lindy,” and “cowgirl” were listed as possible positions for other women.

The author also assigned each woman a nickname, calling one woman “Gumbi” because “her gum to tooth ratio is about 1 to 1.”

"For that reason I am forced to rate her a 6,” the author added.

“She seems to be very strong, tall and manly so, I gave her a 3 because I felt bad. Not much needs to be said on this one folks,” the author wrote about another woman.

Concluding his assessment of one woman, the author wrote, “Yeah… She wants cock.”

Meanwhile, proving that Ivy Leaguers aren"t the only "vulgar, offensive, misogynistic and racists," the AP is reporting that the men"s soccer team at Washington University in St. Louis has also just been suspended for "sexually explicit comments and other inappropriate behavior toward the women"s soccer team."

At this rate, there should be no college sports team left by 2018 and asking a girl out for coffee will be universally recognized on college campuses as a hate crime.

After Trump Win, Ad Agencies Admit They're Clueless On How To Market To Midwest Consumers

Donald Trump"s election taught politicians several valuable lessons, including, but certainly not limited to, the following:

1. More spending doesn"t necessarily equate to victory


2. You can speak your mind without alienating voters...actually, a lot of voters kind of like/respect it


3. The American electorate is smart enough to see through blatant pandering based on race, gender, etc.


4. Rural populations in "flyover states" are absolutely fed up with the ruling elites of the establishment

But politicians aren"t the only ones learning valuable lessons from Trump"s stunning victory as advertising agencies have also been forced to admit that they have no idea how to market to the Midwest.  As the CEO of McCann Worldgroup pointed out the Wall Street Journal, Trump"s victory highlighted the error of gearing marketing programs exclusively "toward metro elite imagery" saying that future efforts need to incorporate a bit more "Des Moines and Scranton" and a little less NYC and Los Angeles.

In the wake of Donald Trump’s election as U.S. president with a wave of support from middle American voters, advertisers are reflecting on whether they are out of touch with the same people—rural, economically frustrated, elite-distrusting, anti-globalization voters—who propelled the businessman into the White House. Mr. Trump’s rise has them rethinking the way they collect data about consumers, recruit staff and pitch products.

“Every so often you have to reset what is the aspirational goal the public has with regard to the products we sell,” said Harris Diamond, McCann’s CEO. “So many marketing programs are oriented toward metro elite imagery.” Marketing needs to reflect less of New York and Los Angeles culture, he said, and more of “Des Moines and Scranton.”

Like the large hedge funds and investment banks of wall street, most the people employed by the large, successful ad agencies happen to reside in NYC and Los Angeles.  And, while those offices are well staffed to target consumers in the large metropolitan cities of the U.S. , they are uniquely unqualified to speak to the hearts and minds of people living in the "flyover" states that they loathe to visit.  As one advertising CEO points out, a diversity hire “can be a farm girl from Indiana as much as a Cuban immigrant who lives in Pensacola.”

Some marketers, concerned that data isn’t telling them everything they need to know, are considering increasing their use of personal interviews in research. Meanwhile, some ad agencies are looking to hire more people from rural areas as they rethink the popular use of aspirational messaging showcasing a ritzy life on the two metropolitan coasts. One company is also weighing whether to open more local offices around the world, where the people who create ads are closer to the people who see them.

“This election is a seminal moment for marketers to step back and understand what is in people’s heads and what actually drives consumer choice,” said Joe Tripodi, chief marketing officer of the Subway sandwich chain.

Even as many ad agencies try to improve their gender and racial diversity, industry executives say they also need to ensure their U.S. employees come from varied socioeconomic and geographic backgrounds.

A diversity hire “can be a farm girl from Indiana as much as a Cuban immigrant who lives in Pensacola,” said John Boiler, chief executive of the agency 72andSunny, whose clients include General Mills Inc. and Coors Light. The agency plans to expand its university recruitment programs to include rural areas.

Like the pollsters who completely missed Trump"s victory, advertising agencies admit that their customers will likely reduce spending over the next several months as everyone "re-calibrates" their models to reflect the fact that not everyone lives in NYC, San Francisco and Los Angeles.

Advertising executives also said the surprising outcome to the election would likely hamper advertising spending next year, as marketers try to figure out what implications the new administration’s decisions will have on businesses.

WPP’s GroupM, the largest ad buying firm in the world, had been anticipating U.S. ad spending would grow 3% to $183.9 billion next year. Kelly Clark, global CEO of GroupM, now said he anticipates ad spending growth in the U.S. will likely decline a few percentage points over the next six months. “We do believe that investment decisions will be delayed,” said Mr. Clark.

If agencies internalize the societal changes the election reflected, the content or tone of advertising could change, some ad executives predicted.

“The election will have spooked the liberal elite away from high concept, ‘make the world a better place’” advertising to “a more down-to-earth ‘tell me what you will do for me’ approach” said Robert Senior, worldwide chief executive of Saatchi & Saatchi, a creative firm owned by Publicis Groupe.

Isn"t it just glorious to see the Ivy League-educated, coastal elites admit that they know absolutely nothing about roughly 50% of the people residing in their own country?