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Asymmetry in the market deals with probabilities and expectations. Probability is nothing more than a math calculation that tries to deal with uncertainty or the unknown, which is of course the future.

Volatility is low. Lower than it has been for, well almost forever. Articles are being written on how low volatility is, what it means, is this a new paradigm, etc.

Obviously this is a time to buy volatility, that should it return, could provide that asymmetrical outcome sought. My favourite target in these circumstances are yield hogs. These chaps buy high yield, mostly junk, for the returns as against say treasuries.

With volatility so cheap…you can buy volatility a long way into the future, to allow time to work in your favour, for pennies. That will be my trade on Monday when the markets re-open. My candidate is prepared.

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Ask anyone who’s heard of Dan White — and there are fewer and fewer people who have — how it was that the clean-cut, conservative San Francisco supervisor received such a light sentence in the shooting deaths of progressive San Francisco Mayor George Moscone and gay Supervisor Harvey Milk 25 years ago, and it brings an automatic response: the “Twinkie defense.” The impressionable jury, they’ll say, swallowed the defense contention that Dan White gobbled Twinkies, which blasted sugar through his arteries and drove him into a murderous frenzy. About as simple as: “Eat a Twinkie, commit a murder.”

As Thursday’s 25th anniversary of the killings approaches, what survives is a shared understanding of the gross miscarriage of justice: that an angry young man many thought should have received the death penalty instead was convicted of voluntary manslaughter and got a meager sentenceof less than eight years (with time off for good behavior, he would end up serving only five years, one month and nine days).

The “Twinkie defense” is so ingrained in our culture that it appears in law dictionaries, in sociology textbooks, in college exams and in more than 2, 800 references on Google. Only a few of them call it what it is: a myth.

“I don’t think Twinkies were ever mentioned in testimony,” said chief defense attorney Douglas Schmidt, who recalls “HoHos and Ding Dongs,” but no Twinkies. In fact, the cream-filled confections were mentioned, but only in passing. Junk food was an insignificant part of the defense. The matter was raised briefly in testimony by Marin psychiatrist Martin Blinder, one of five defense therapists. Today, the entire episode is characterized by Schmidt as “a throwaway witness . . . with a throwaway line.”

The main focus of the defense’s case in May 1979 was diminished capacity — that White had suffered from periodic bouts of depression, amounting to “a major mental illness.” That, along with “the machinations of dirty politics at City Hall,” White’s co-counsel Stephen Scherr said in a recent interview, “drove him ’round the bend.”

During his day on the stand, Blinder, a former mayor of San Anselmo and a onetime teacher at UCSF’s medical school and at Hastings College of the Law, characterized White as his family’s black sheep, a man with rigid values and locked-up emotions. In a recent interview, Blinder said his intent was to explore, “What is it that makes a good man kill?”

In his daylong accounting of how White’s life “unraveled,” one small aspect of something Blinder said — “two minutes of a greater part of the day on the stand” — was later turned into the irrational explanation for everything that came after. “Studies show,” he said recently, “that if you have a general predisposition to bipolar mood swings, things you ingest can play a part.” In the days leading up to the killings, the psychiatrist told the jury, White cast aside his normal habits and grew slovenly, quit working, shunned his wife, grew a stubble beard and rather than eat his healthful diet, indulged in Twinkies and Coke — all symptoms, Blinder testified, of depression. The junk food, he said, only made White more depressed, which caused him to binge even more.

Today, a still-angry Blinder says, “It’s preposterous to think that 12 middle class homeowner jurors would give a killer even a partial pass on the basis of what he ate the night before.” He blames the press for perpetuating the myth. “If I found a cure for cancer,” he said, “they’d still say I was the guy who invented ‘The Twinkie defense.’ ”

“It drives me crazy,” said co-counsel Scherr, who suspects the simplistic explanation provides cover for those who want to minimize and trivialize what happened. If he ever strangles one of the people who says “Twinkie Defense” to him, Scherr said, it won’t be because he’s just eaten a Twinkie.

A 1979 San Francisco Examiner story on the anatomy of the White defense, written by Jim Wood, my late husband, cited the makeup of the conservative, mostly female jury, many with children the age of defendant (there were no gays and no African Americans). Wood pointed out that the defense had not challenged the facts, but had put on a psychiatric defense for the former cop and firefighter. White, the defense claimed, had acted in the heat of passion, not out of malice. In his depressive state, he had “snapped.” Not once in the lengthy piece did Wood say anything about a sugar rush, and Wood, who went on to become the wine and food editor of the Examiner, cared about food.

In his 24-page closing argument, defense attorney Schmidt acknowledged that White was “guilty.”

“The only issue,” he told jurors “is the degree of responsibility.” His client “was a good man, a man with a fine background,” Schmidt declared, but “there was something wrong with that man.” Schmidt said psychiatrists had found that White was incapable of “deliberation” — one of the requirements for a first degree murder conviction. He claimed that White had suffered from “diminished capacity” and in that state had acted in “the heat of passion . . .

which fogs judgment.”

In two lukewarm paragraphs, Schmidt let the jury nibble on the snack food explanation: “Whether or not ingestion of food stuffs with preservatives and sugar in high content causes you to alter your personality somehow, or causes you to act in an aggressive manner, I don’t know. I’m not going to suggest to you for a minute that that occurs. But there is a minority opinion in psychiatric fields that there is some connection . . .”

“It wasn’t a big deal, not in the overall context of depression,” recalled former Chronicle reporter Duffy Jennings, who covered the trial for this newspaper.

But over time, the media found it convenient to adopt a snappy nickname. “It’s not as sexy to call it a depression case,” Jennings said.

During the trial, no one but well-known satirist Paul Krassner — who may have coined the phrase “Twinkie defense” — played up that angle. His trial stories appeared in the San Francisco Bay Guardian. Since then, Krassner went on to publish another piece in The Nation and more recently to write a book, “Sex, Drugs & The Twinkie Murders.”

In a thoughtful essay about San Francisco’s “wild, manic depressive swings,” and “its not very well-hidden undercurrents,” the day after the verdict, Chronicle columnist Herb Caen remarked about the police support for Dan White and their “dislike (understatement) of homosexuals.” In an offhand remark, he added that one attorney was calling it “the Twinkie insanity defense.”

Several weeks later, Newsweek spread the term. And by September, barely four months later, outrage had spilled over into the Legislature. There, politicians debated the diminished-capacity defense, eventually abolishing it, in large part because of the White trial. In the course of the debate, conservative Democrat Alister McAlister, anxious to make his point, waved a Twinkie in the air. Within two years, the phrase had slipped into popular lingo. Newspapers across the country, including The Chronicle, were tossing around the “Twinkie defense” as if it were synonymous with diminished capacity.

The true story was far more disturbing.

Back in those tumultuous days, when politics was almost a pugilistic sport, the progressive and puckish Harvey Milk became the first openly gay San Francisco supervisor (and possibly the first openly gay elected official in the nation). Extreme right-wingers felt Milk and other gays threatened their American way of life. Milk told me, as he no doubt told other reporters, he had received so many death threats that he expected to be assassinated. But surely, he didn’t expect the bullet to come from a colleague.

To Milk’s far right on the board stood a crisp all-American-boy, Supervisor Dan White, whose conservative views reflected his Excelsior neighborhood. About a year after his election to the board, the 32-year-old White suddenly resigned. With a pregnant wife, he no longer could afford to earn only $9,600 annually.

Moscone publicly stated that if White changed his mind, he could have his job back. Five days later, after appeals from firefighters, police and neighborhood residents, White did want it back. But by then, liberal supervisors, led by Milk, had persuaded the mayor to appoint a liberal to the open seat. Believing he had been betrayed, White loaded his .38 revolver on the morning of Nov. 27, 1978, stuffed his pockets with bullets and headed for City Hall. To avoid the metal detectors, he climbed in through a basement window and scurried to the mayor’s office. Moscone was shot in the chest and head at close range. White reloaded his gun then fled into the supervisors’ chambers, where he killed Milk.

The debate still rages over how White could have been found guilty of only two counts of voluntary manslaughter when it seemed clear he had committed premeditated murder. He’d shown up at City Hall with a loaded revolver determined to meet with the mayor and, after killing him, reloaded before going to kill Milk. As former newspaperman Jennings said, “It seemed like a slam dunk.”

But faced with a death penalty case, prospective jurors were asked if they supported capital punishment, a requirement that former DA Joseph Freitas,

Jr., says made them more conservative than the natural pool of San Francisco jurors. That, he said, was the first step toward a “miscarriage of justice” in the case.

These “everyday working people,” Jennings said, “didn’t care much for liberal politicians.” When the jury listened to Dan White’s confession, some of them wept.

“A lot of people share this view that the trial was lost in the jury selection,” said Moscone’s former press secretary and family friend, Corey Busch. But Busch argues there was more to it than that. He’s still angered by what he calls the defense’s “very cynical approach.” Although he was not in the courtroom, Busch contends the defense portrayed White as a victim of the city’s cultural and political change. The diminished capacity argument, he believes, was no more than “a hook the jury was able to hang its hat on.”

“If White had just murdered the mayor, I think the outcome of the trial would have been very different,” he said. But with a conservative jury, which Busch considered homophobic, jurors felt more comfortable finding White guilty of a lesser crime.

Darlene Benton, who was on that jury, takes umbrage at that. “People think it was about Twinkies and gays,” she said. “It wasn’t. I was born and raised in San Francisco. I’ve never been against gay people. There may have been a couple of jurors who were,” she said, “but they never told us they felt that way.”

“There was no question that Dan White was guilty,” the now-57-year-old insurance agent said, but “the prosecution thought it was such a clear-cut case they didn’t do their job.” Yes, she said, White carried a gun into City Hall, but then witnesses testified so did then-Mayor Dianne Feinstein. Sure, White climbed through a window, rather than submit to the metal detectors, but,

Benton said, others climbed through that window as well. White reloaded his gun after shooting the mayor to death, but that, she said, is something police officers and former cops do automatically. And Twinkies, she said, played no part.

For days, jurors examined the evidence and the defense’s contention that White suffered from diminished capacity and depression. On a blackboard, they scribbled pros and cons of premeditation. The discussion grew so heated, and the yelling so loud, that at one point, they were escorted to the roof of the Hall of Justice to cool off. The jury was especially hung up over the killing of Milk because White had reloaded his revolver just beforehand. It was not until the final day of deliberation that jurors, mindful that they had to take into account “reasonable doubt,” agreed to the lesser charge.

Busch was at the home of the slain mayor when the verdict came in. “I don’t know how to describe the feeling of such a lack of justice,” he said. “The family accepted it for what it was. But there was a lot of pain.”

The gay community’s agony spewed out onto the streets of San Francisco. During what came to be called the White Night riot, protestors set fire to police cars and stormed City Hall. The violence was in marked contrast to the day Moscone and Milk died. Then, a candlelight march flowed quietly and peacefully from the Castro district to City Hall.

Yet, all that many people remember about the case that still engenders such anger and passion is that jurors succumbed to the defense claim that a politician ate Twinkies and then executed the mayor and a fellow supervisor.

“America loves labels,” said Dr. Alan Dundes, UC Berkeley professor of anthropology and folklore. He compares our belief in the “Twinkie defense” to the conviction that George Washington cut down the cherry tree. He didn’t. Folklore trumps history.

“I don’t care if the ‘Twinkie defense’ has any validity or not,” he said. “People think it was a factor. And thinking makes it so.”

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It is ironic in a way that the Federal Reserve and its “rate hikes” have played a crucial role in setting back “reflation.”  There was some renewed hope up until that last FOMC vote in mid-March.  But since then, contrary to how markets “should” approach a higher federal funds band, bonds and funding have moved opposite. Swap spreads that for the first two and a half months of this year were decompressing, suggesting an easing in “dollar” pressure, began to compress (meaning for the 10s and 30s more negative) all over again after March 15.

It’s not difficult to assess why that was the case, where eurodollar futures, for example, could rise in price and therefore signal a (much) lower interest rate paradigm in the not-too-distant future despite the outwardly “hawkish” policy stance.  I wrote earlier this week:

“The markets ‘wanted’ the Fed exit to be the one that was described three years earlier, where ‘overheating’ was a more common term slipped consciously into policymaker speeches and media presentations. But the Fed only disappointed, with Janet Yellen at her press conference forced by less fawning questioning to admit, complete with the deer-in-headlights stare only she can give, that none of the models foresaw any uptick in growth whatsoever. Worse, the FOMC statement confirmed that though the CPI was nearly 3% at that moment, it was indeed going to be just a temporary artifact of oil price base effects, and that officially inflation was not expected to return to ‘normal’ until after 2019. Major, major buzzkill.”

In other words, as we have been saying all along, the Fed is exiting not because recovery is coming but because it never will.  There is, in their official judgment, nothing left for monetary policy to accomplish.  This pathetic economic condition, which they describe in their own way, through calculations like low or possibly negative R*, is now our baseline. What was unthinkable just three years ago (in the mainstream) is reality; ten years ago, it was plain impossible.

In January 2009, I wrote, “The economy is not likely to repeat the Japanese scenario.”  Unlike Japan, I reasoned, the American economy was far more dynamic and flexible, qualities that counterintuitively were on display at that very moment.  US businesses were laying off millions of workers every month, a horrible result for them but systemically what was necessary to restore profitability and cash flow.  Japan’s economy in the 1980’s and 1990’s was a contradiction of rigidity and a tangle of sclerosis, I thought, therefore its undoing and where the US would defeat the comparison.

Now so many years later, here the whole world sits in exactly the Japanese scenario.  Boy, was I wrong thinking that the Fed’s inability to affect the monetary system would be so easily set aside; or, if not so easily than overcome after enough time through good ol’ Americana.  I quite reasonably if naively assumed that faced with such incompetence on the policy level the far more dynamic American economy (which it was) would find its way out of that mess through other means. I had failed to appreciate the scale of the disaster on a longer timescale, how the eurodollar system had over the decades before entangled itself in everything here and everywhere else; and what that truly meant.

The most unambiguous and convincing evidence is how interest rates are low and have only remained that way no matter what, echoing what Milton Friedman wrote in 1963 about the 1930’s.  The issue cannot be business but money.

“The Federal Reserve repeatedly referred to its policy as one of ‘monetary ease’ and was inclined to take credit – and, even more, was given it – for the concurrent decline in interest rates, both long and short.”

He wrote again in the 1990’s warning the Japanese of the same condition, calling it the “interest rate fallacy” because though it is a clear sign of monetary tightness it is made unclear by economists who never seem able to understand money.  It’s a weird result for any central bank to be staffed with people who, at the top at least, can’t comprehend the nature of their own primary task.  It is far more so when it is a major central bank in a premier economy facing an historic liquidity situation.

It is downright criminal given the economic consequences of it, first Japan now the world.  The repeated situation strains all credibility, for the Japanese case was up to 2007 one of the most studied in all history.  How in the world could US (and European) officials end up making all the very same mistakes?

For one, US policymakers believed, in a way as I did, that they were superior to their Japanese counterparts.  In June 2003, the FOMC discussed these very scenarios and how the Bank of Japan was already at a place they increasingly believed they might have to follow.  QE had begun in March 2001 on that side of the Pacific, and was expanded after only a few months. In the US, the Federal Reserve had lowered the federal funds rate, what they believed was “stimulus”, even well more than a year after the official end of the dot-com recession.

By the start of summer in 2003, the short-term money rate was down to 1%, a level only a few years before that was thought beyond the pale of good monetary stewardship; so much so, that the gathered committee members at that meeting waxed philosophically about what they were doing, and even as Alan Greenspan contemplated what they really could do. The tone of that part of the discussion, centered on Japan and its experience at the zero lower bound that for the Fed had suddenly come into view, was “what if it’s us?”

“MR. KOHN.  Another problem in Japan was that the authorities were overly optimistic about the economy. They kept saying things were getting better, but they didn’t. To me that underlines the importance of our public discussion of where we think the economy is going and what our policy intentions are.”

That’s only true if you can be honest about it.  Japanese policy was only ever the same as American policy in that respect, for in all cases central banks believe they hold enormous power that given the will to use can only result in the preferred outcome.  Stimulus of the monetary type has been reduced to a tautology, or at best unchallenged circular logic; it works because it works. Or, as Ben Bernanke stated in his infamous “deflation” speech of November 2002:

“But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”

He made that statement which was received without controversy as a technical matter; philosophically, he was criticized in the Weimar Germany kind of way without thinking it all the way through. A year before, the Federal Reserve, as well as the Bank of Japan I have to assume, had already found startling contrary evidence, at least as far as quantitative easing was concerned.  QE as an operative scheme is simple and straightforward; purchase assets from private banks so as to increase the level of bank reserves, therefore satisfying Milton Friedman’s supply critique. That was the same argument that Bernanke was echoing in 2002, to raise the money supply through whatever means so as to achieve what he claimed and therefore expected.

Mark Spiegel, an economist at the Federal Reserve Bank of San Francisco, had published in November 2001 an account of some already serious deficiencies observed in the effects of QE then ongoing in Japan.  As everyone expected as a matter of basic central bank math, Japan’s M1 that had sharply decelerated in its growth rate reversed course with the introduction of BoJ’s bond buying scheme expanding so-called base money.  But, as Spiegel detected, in the real world it wasn’t so simple and easy:

“While M1 has indeed enjoyed robust positive growth since the inception of the quantitative easing strategy, there has been a matching decline in the aggregate known as ‘quasi-money,’ which includes time deposits and a number of other less liquid assets. While the central bank can increase the stock of narrow money in the economy, the banks appear to be treating the exercise much like a swap of near-zero and zero interest rate assets, and they are responding with little change in their lending activities.”

The US and global banking system after 2007 has acted in the same way, as both Japanese banks in 2001 (and after) as well as American and European banks post-crisis did more than just what Spiegel had described. This liquidity “swap” was indeed far-reaching, eventually over time eroding balance sheet factors in any number of ways.  I have tracked gross notional derivative books as a proxy for this very behavior, which suggests that in truth the conditions of bank balance sheets and therefore money in Japan as everywhere else is worse than even Spiegel spelled out fifteen and a half years ago.

We are left with one, and only one, conclusion; Ben Bernanke was right that the Federal Reserve as the duly appointed US government agency is in possession of the printing press.  However, quantitative easing no matter how much academic gloss it is given is not it. Actual monetary conditions are determined by a myriad of other outside factors (relating exclusively to bank balance sheets) that appear impervious to QE-type strategies, a verdict rendered by sixteen years of experience in Japan and another eight in the US and elsewhere.

You could have made a quantitative case against QE in the Japanese or the first American instances, where the “Q” part was simply too small.  In the last five years in particular that factor has, too, been empirically eliminated, most especially by the Bank of Japan’s QQE reaching now half a quadrillion in yen reserves with the same results (none positive).

Why the Federal Reserve merely followed in BoJ’s footsteps for all these years is almost inexplicable; almost.  Again, going back to that meeting in June 2003, policymakers here knew it wasn’t working and Alan Greenspan began to wonder about his own capabilities.

“CHAIRMAN GREENSPAN.  What is useful, as has been discussed, is to build up our general knowledge so that when we are confronted with the need to respond with a twenty-minute lead time—which may be all the time we will have—we have enough background understanding to enable us to make informed decisions. We need to know how the system tends to work to be able to make the necessary judgments without asking one of our skilled technical practitioners to go off and run three correlations between X, Y, and Z. So I think the notion of building up our knowledge generally as a basis for functioning effectively is exceptionally important.”

Or, as I put it a year ago, make sure you can actually do what you say you can do before you have to do it.  The emphasis was in 2003 clearly on the “before you have to do it part” and largely because of how the Bank of Japan was executing a theoretically sound strategy that wasn’t producing the desired or expected results. But they never did that. The FOMC as well as most of the academic literature instead focused on BoJ’s execution of QE rather than the technical factors that were clearly suggesting (really proving) from the very beginning at the very least far more complexity in money than was assumed.

And so it brings the world back to repeating the Japanese mistakes, as Governor Kohn described them so many years ago, “They kept saying things were getting better, but they didn’t.”  The Fed was never honest in its assessment of what it really could do so that by the time D-day arrived for them they were arrogantly dismissive even of direct market contradictions (especially eurodollar futures that were in early 2007 correct and have remained so despite all the QE’s).  It wouldn’t have mattered if the FOMC had their skilled practitioners run off and do X, Y, and Z correlations, because X, Y, and Z were all based on the same mistaken premises, those of Ben Bernanke’s 2002 speech. Throughout the crisis period officials kept claiming “things were getting better” (subprime is contained) only to see the whole thing nearly collapse.  Afterward it was always the same, “things were getting better” (green shoots) even though QE1 was followed by a QE2, another global liquidity crisis, a QE3, a QE4, and then another global liquidity crisis.

How can even the most robust and dynamic economy move even slightly forward under those conditions?  That is another result we have over the last ten years fully tested and established; it can’t. Whatever the unobserved direct effects of monetary tightness, such outward and visible instability is another depressive factor all its own, and a very important one.

Because of one simple variable we have followed a path that a decade ago was believed literally impossible. Indeed, everything that has happened this last period had it been described to someone in 2005 would have sounded totally insane.  And there is only one factor capable of creating that situation, the one, tragically, most experts were the least concerned about. Life does have a habit of unfolding in that way, where the one thing you don’t expect is what kills you in the end. Call it the maestro’s curse, no conundrum required.

We aren’t yet dead, though we are now living in John Maynard Keynes’ long run.  Apologies to Dr. Keynes, it does matter, quite a bit actually.  Chaos, whether social or political, is the inevitable product of extended economic dysfunction.  People will put up with a lot, a large recession and even a sluggish recovery, but no people (the Japanese have committed to demographic suicide) will be able to withstand the social consequences of unceasing bleakness and no legitimate answers for it.  Such a condition offends all modern sense of human progress.

It is a testament to how far down we have gone, that in 2017 pleading with the Fed to just say it one more time, “things are getting better”, because that is all that is left standing between the comforting fiction and the cold reality of Japanification.  It could only have been a bitter blow, for the Fed in truth was up until now good for only that one thing, meaning optimism; carefully worded, of course, but in the end constant positivity about recovery even if always off just over the horizon. For many, that fiction was more meaningful than being led unwilling to the truth about a world without growth.

Thus, all hope is not extinguished, merely transposed to right where it belonged all this time.  Central bankers have said “listen to us because that is the only way for recovery”; only now to say instead, “listen to us because there is no recovery” as if nobody is allowed to notice the change.  We need only stop listening to economists altogether because they were wrong then and utterly so now.  The problem isn’t economics but economists, the former having been removed from the latter generations ago.

That is the great unappreciated truth about Japanification. It was never about zombie banks and asset bubbles, at least so far as separate issues from economists who know nothing, prove they know nothing, and then refuse to learn when all results show it. Nobody ever bothers to challenge a central banker about money because who would ever do such a thing?  It is such a thin façade, though, as once you move past it to do so is incredibly easy.  One need read only a single FOMC transcript from 2008 (and now 2011) to establish this.

As “reflation” hopes fade just as they did three years ago, how the world proceeds is a choice.  It is a collective one, but one that must be made nonetheless. We can allow nothing to ever change as the Japanese have.  The political situation in Japan has been upended several times over the past quarter-century, but what is the one thing that has remained constant no matter which side sits in power?  The Bank of Japan.  Republican or Democrat, what is the one thing that hasn’t changed in America?  Monetary policy that was and remains strangely devoid of any money.

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So in 2010 I undertook an analysis of BHP [here is the link to the original] reproduced below:

BHP is my proxy stock for getting short China, due to their supplying the basic resources to China that is fueling their infrastructure build-out with inflationary Yuan.

The capitalization ratios are good, no real problems here, the problems all occur elsewhere. The elsewhere is in the profitability.

%Profit margin……..5yrs Av………Current…..36%…….24%
%Earned on Capitalization………….4.6%…………………2.2%

Deteriorating. China, Germany, Japan are the big manufacturing bases. China is probably the only one that has continued to order vast amounts of resources, everywhere else is quiet. If China is a bubble, which I maintain that it is, then the popping of the China bubble will collapse BHP’s earnings.

The profit margins are not only contracting, they are also being manipulated. The COG has lagged Revenues very badly, this is always a very bad sign, and tends to suggest that Inventories are being held back from costing. When we look at inventory figures, they are growing faster than sales, they are jumping alarmingly, suggesting fudged figures.

Combine the rising Inventory picture with the slowing Receivables picture and you have further confirmation that something dodgy is taking place. Again rising Revenues, with falling Receivables, something is just not right.

In contrast to this poor picture, Cash from Ops/Operating Income ratio’s have improved. Cash from Finance is less, which is good. How then are they improving in this area? Again most likely from improper accounting of Inventories.

Management in the meantime have increased in a surreptious manner their compensation. SG&A has $2,231,000 that is purely discretionary in nature – where’s it gone? Hmmmm. Also a further $1,727,000 from CapEx, again, where’s it gone? Discretionary funds are accounted for under their line entries, but contradict cross-checks against other line entries leaving a trail.

One valuation method:
[i] Total Return Value = [earnings growth + yield] / P/E
[i] Total Return Value = [(-1.8%) + 2.1%]/94 = 0.00

Intrinsic Value = $27.63
Current Share Price = $79.00
Overvalued by some 65%

 And the current chart:
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Deputy Attorney General Rod Rosenstein appointed a special counsel on Wednesday to oversee the FBI’s investigation into Russia’s election interference and whether there was any collusion between the Trump campaign and the Kremlin.

The probe is now under the purview of former FBI Director Robert Mueller, who has been praised by his former colleagues, national security experts, and members of Congress on both sides of the aisle.

Trump said in a statement after learning of the appointment that he looked “forward to this matter concluding quickly.”

“As I have stated many times, a thorough investigation will confirm what we already know — there was no collusion between my campaign and any foreign entity,” he said. Many of his advisers framed it as a positive development, since the White House would be able to avoid questions about the probe and refer them to Mueller.

Privately, however, a person in the room with Trump and his aides when they heard of Mueller’s appointment said that “everyone knew this wasn’t good news,” according to Politico.

Foreign policy analyst Max Boot tweeted a similar assessment on Wednesday. He said the White House was “desperately spinning the special counsel as good news, but a retired FBI agent tells me Mueller will ‘crush’ Trump.”

Scott Olson, a former FBI agent who recently retired after three decades at the bureau, told Business Insider on Wednesday that Mueller “is a good choice for this investigation.”

“Not only is he a seasoned prosecutor, he has a good level of experience in national security investigations and issues,” Olson said. “I think we can expect him to focus on developing a solid understanding of the facts — what actually happened — and then follow with a thoughtful recommendation regarding who, if anyone, should be held accountable.”

‘Make no mistake: This is bad news for President Trump’

Trump fired FBI Director James Comey last Tuesday amid the bureau’s investigation into his Russia ties, prompting Democrats and national security experts to call for a special counsel. Those calls subsequently grew louder when The New York Times reported that Trump had asked Comey to drop the bureau’s probe into former national security adviser Michael Flynn.

“People across the political spectrum should be able to breathe a sigh of relief at the appointment of Robert Mueller,” said Andy Wright, a professor of constitutional and criminal law at Savannah Law School.

“He begins this process with the bipartisan gravitas that can reassure to have confidence in the criminal and counterintelligence investigation,” Wright added. “Make no mistake, though: This is bad news for President Trump.”

Robert Deitz, a former top counsel for the NSA and the CIA who worked with Mueller when he headed the FBI, said that he has “enormous respect” for Mueller. He echoed Wright’s assessment, however, that Mueller’s appointment means “the president may have gone from the frying pan into the fire.”

Wright said Mueller, unlike Rosenstein, enjoys political independence, and that Trump would pay a “much higher price” for firing Mueller than he did by firing Comey. Most Republicans openly supported Comey’s dismissal but reacted with alarm when they heard that Trump asked Comey to drop the Flynn probe in February.

“Trump won’t have the ability to influence or impede this investigation without severe consequences,” Wright said. “The special counsel doesn’t have additional power, but he has independence. Unlike Rosenstein, Mueller doesn’t have to run the broader Department of Justice. Therefore, he gets to avoid the awkwardness of investigating, say, Attorney General Jeff Sessions’ conduct while sitting through five other meetings a day with him.”

The FBI is reportedly examining Sessions’ interactions with Russia’s ambassador to the US, Sergey Kislyak, last year — which he failed to disclose during his Senate confirmation hearings — as part of its probe into Russia’s election interference.

“In addition,” Wright said, “Mueller will enjoy a base of support in Congress that will be wary of any efforts to clip his wings.”

Lawyer up?

Trump’s advisers have recommend that he hire a private criminal counsel to deal with the Russia investigations, according to The New York Times. It would not be unprecedented: President Bill Clinton hired a personal counsel, David Kendall, in the early 1990s amid the FBI’s Whitewater probe.

Wright said Trump won’t be able to depend on White House counsel Don McGahn to defend him, because “his use of them in a defence could transform them into instruments of obstruction of justice.”

“He needs to hire private criminal counsel,” Wright said. “White House lawyers represent the Office of the President and not Donald J. Trump.”

In any case, Wright said, McGahn is becoming “a fact witness in his own right” with regard to Trump’s relationship with Flynn.

Former acting Attorney General Sally Yates told a Senate Judiciary subcommittee earlier this month that she warned McGahn about Flynn’s conversations with Russia’s ambassador in January so the Trump administration “could take action” amid concerns Flynn could have been subject to blackmail by the Russians.

Any private counsel Trump hires, moreover, would have their work cut out for them given the president’s penchant for out-of-court comments — like his frequent use of Twitter.

Former Justice Department prosecutor Beth Wilkinson told Reuters that Trump’s comments last year about the judge overseeing his Trump University fraud case — he called the Indiana-born judge a “hater” and noted his Mexican heritage — “shows the difficulty of having a client who won’t listen.”

Indeed, when it comes to examining whether Trump sought to obstruct the FBI’s investigation into Russia’s election interference and whether the Trump campaign played a role, experts say the president’s pattern of behaviour and past statements about the probe will likely come back to haunt him. (Trump’s comments about barring Muslims from the US were similarly considered when federal courts were debating the intent behind his two controversial executive orders on immigration.)

“The president needs a sophisticated lawyer who has dealt with cases at the intersection of criminal law and politics,” a Washington lawyer involved in several White House investigations told Reuters on Wednesday. “He is flunking all the rules of crisis management.”

The White House did not respond to a request for comment.

 

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“This company looks cheap, that company looks cheap, but the overall economy could completely screw it up. The key is to wait. Sometimes the hardest thing to do is to do nothing.” David Tepper

“Most people are too fretful, they worry too much. Success means being very patient, but aggressive when it’s time.” Charlie Munger

“I consider patience to be the most important ingredient for success in the market.” Francois Rochon

“People always want investments to go up like a line.…That’s just not reality. You make 80% of your money in 20% of the time in investing and you have to be patient.” Jeffery Gundlach

“[There] is the need for patience if big profits are to be made from investment.  Put another way, it is often easier to tell what will happen to the price of a stock than how much time will elapse before it happens”  Phil Fisher

“One of the best rules anybody can learn about investing is to do nothing, absolutely nothing, unless there is something to do” James Rogers

Patience, patience and more patience. Ben Graham said it, but it is true of all investment disciplines, not only value investing, although it is indispensable to that” Peter Cundill

“Inaction and patience are almost always the wisest options for investors in the stock market” Guy Spier

“Throughout all my years of investing I’ve found that the big money was never made in the buying or the selling. The big money was made in the waiting” Jessie Livermore

“There aren’t always great things to do, and sometimes we maximize our contribution by being discerning and relatively inactive. Patient opportunism – waiting for bargains – is often your best strategy” Howard Marks

“I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up” James Rogers

“You don’t have to be fully invested all the time. Have patience, keep your standards.” Irving Kahn

“We don’t get paid for activity, just for being right. As to how long we’ll wait, we’ll wait indefinitely” Warren Buffett

“I like to be very patient and then when I see something, go a little bit crazy.”  Stanley Druckenmiller

“In our style of doing things, patience is patience is patience” Peter Cundill

“When there’s nothing particularly clever to do, the potential pitfall lies in insisting on being clever” Howard Marks.

“Happiness ensues when it is not pursued – investing is the same thing. Success occurs when you are willing to wait for opportunities” Mark Kingdon

“Investors need discipline to avoid the many unattractive pitches that are thrown, patience to wait for the right pitch, and judgement to know when it is time to swing” Seth Klarman

“The big money is not in the buying and selling … but in the waiting”   Charlie Munger

“The stock market is like the weather in that if you don’t like the current conditions all you have to do is wait awhile”  Lou Simpson

“The single most important skill for being a good investor is to be very content with not doing anything for extended periods and that’s perfectly fine” Mohnish Pabrai

“Our success rests on having the discipline to wait patiently for opportunities to present themselves and then having the courage to run towards them when everyone else is running away” Steve Leonard

“Some would say that this patience is part of our strategy, but I would say it’s more part of our DNA. I like to say “If there’s nothing to do, do nothing”  Jim Tisch

“We don’t have to swing at everything” Mario Gabelli

“The trick in investing it just to sit there and watch pitch after pitch go by and wait for the one right in your sweet spot. And if people are yelling “swing you bum”, ignore them.  There is a temptation for people to act far to frequently in stocks just because they are liquid”  Warren Buffett

“Be patient. Watched stock never boils” Peter Lynch

“You have to have patience in any business, and I think ours is no different”  Andreas Halvorsen

“Legendary investor Peter Lynch always emphasized the importance of being patient: “Frequently, years of patience are rewarded in a single year” Francois Rochon

“Sitting still is the hardest thing to do. As Pascal wrote ‘The hardest thing for a man to do is sit quietly in a room'” Mark Kingdon

“Money managers running all types of strategies need good action plans for periods when the opportunity set is fallow. They must resist the allure of stretching parameters and rationalizing why merely good positions are okay to establish in the absence of very good or great positions” Paul Singer

“The beauty in this business is that there are just hordes of future opportunities waiting and some of them may be huge if you’re patient.  And I think Ben Franklin summed it up well: “He who has patience can have what he will” Frank Martin

“Have patience.  Stocks don’t go up immediately” Walter Schloss

“This company looks cheap, that company looks cheap, but the overall economy could completely screw it up. The key is to wait. Sometimes the hardest thing to do is to do nothing.” David Tepper

“Most people are too fretful, they worry too much. Success means being very patient, but aggressive when it’s time.” Charlie Munger

“I consider patience to be the most important ingredient for success in the market.” Francois Rochon

“People always want investments to go up like a line.…That’s just not reality. You make 80% of your money in 20% of the time in investing and you have to be patient.” Jeffery Gundlach

“[There] is the need for patience if big profits are to be made from investment.  Put another way, it is often easier to tell what will happen to the price of a stock than how much time will elapse before it happens”  Phil Fisher

“One of the best rules anybody can learn about investing is to do nothing, absolutely nothing, unless there is something to do” James Rogers

Patience, patience and more patience. Ben Graham said it, but it is true of all investment disciplines, not only value investing, although it is indispensable to that” Peter Cundill

“Inaction and patience are almost always the wisest options for investors in the stock market” Guy Spier

“Throughout all my years of investing I’ve found that the big money was never made in the buying or the selling. The big money was made in the waiting” Jessie Livermore

“There aren’t always great things to do, and sometimes we maximize our contribution by being discerning and relatively inactive. Patient opportunism – waiting for bargains – is often your best strategy” Howard Marks

“I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up” James Rogers

“You don’t have to be fully invested all the time. Have patience, keep your standards.” Irving Kahn

“We don’t get paid for activity, just for being right. As to how long we’ll wait, we’ll wait indefinitely” Warren Buffett

“I like to be very patient and then when I see something, go a little bit crazy.”  Stanley Druckenmiller

“In our style of doing things, patience is patience is patience” Peter Cundill

“When there’s nothing particularly clever to do, the potential pitfall lies in insisting on being clever” Howard Marks.

“Happiness ensues when it is not pursued – investing is the same thing. Success occurs when you are willing to wait for opportunities” Mark Kingdon

“Investors need discipline to avoid the many unattractive pitches that are thrown, patience to wait for the right pitch, and judgement to know when it is time to swing” Seth Klarman

“The big money is not in the buying and selling … but in the waiting”   Charlie Munger

“The stock market is like the weather in that if you don’t like the current conditions all you have to do is wait awhile”  Lou Simpson

“The single most important skill for being a good investor is to be very content with not doing anything for extended periods and that’s perfectly fine” Mohnish Pabrai

“Our success rests on having the discipline to wait patiently for opportunities to present themselves and then having the courage to run towards them when everyone else is running away” Steve Leonard

“Some would say that this patience is part of our strategy, but I would say it’s more part of our DNA. I like to say “If there’s nothing to do, do nothing”  Jim Tisch

“We don’t have to swing at everything” Mario Gabelli

“The trick in investing it just to sit there and watch pitch after pitch go by and wait for the one right in your sweet spot. And if people are yelling “swing you bum”, ignore them.  There is a temptation for people to act far to frequently in stocks just because they are liquid”  Warren Buffett

“Be patient. Watched stock never boils” Peter Lynch

“You have to have patience in any business, and I think ours is no different”  Andreas Halvorsen

“Legendary investor Peter Lynch always emphasized the importance of being patient: “Frequently, years of patience are rewarded in a single year” Francois Rochon

“Sitting still is the hardest thing to do. As Pascal wrote ‘The hardest thing for a man to do is sit quietly in a room'” Mark Kingdon

“Money managers running all types of strategies need good action plans for periods when the opportunity set is fallow. They must resist the allure of stretching parameters and rationalizing why merely good positions are okay to establish in the absence of very good or great positions” Paul Singer

“The beauty in this business is that there are just hordes of future opportunities waiting and some of them may be huge if you’re patient.  And I think Ben Franklin summed it up well: “He who has patience can have what he will” Frank Martin

“Have patience.  Stocks don’t go up immediately” Walter Schloss

“Traditionally the investor has been the man with patience and the courage of his convictions who would buy when the harried or disheartened speculator was selling”  Benjamin Graham & David Dodd

“Being patient is at the cornerstone of everything we do” John Rogers

“We do a lot of thinking and not a lot of acting.  A lot of investors do a lot of acting, and not a lot of thinking” Lou Simpson

“Investors who aspire to long term success cannot afford the luxury of impatience [though they usually think the opposite is true]” Frank Martin

“Value investing requires deep reservoirs of patience and discipline”  Seth Klarman

“We have a culture of patience. Even though we work hard every day trying to uncover the next great investment, we only deploy our capital when we have real conviction that we have found one. When we don’t find interesting ideas, we do nothing and hold cash. For this reason, I’ve often joked that I’m 97% unproductive. While this means I better be damn productive the other 3% of the time, it also means exercising patience often and waiting for great opportunities.” Brian Spector

“The stock market is designed to transfer money from the active to the patient.”  Warren Buffett

“My mantra has always been like that of Milwaukee Braves pitcher Lew Burdette, who once said “I earn my living from the hungriness of the hitters.”  I earn my living from the hungriness of investors, from their decisiveness, their forcefulness, from their great urge for immediacy” Mark Spitznagel

“Phil Carret is about 96 and has been investing for over 70 years.  He has done very well but he is patient.  I’m not as patient as he is but I’d like to last as long” Walter Schloss

Patience is one of the most important virtues for making any value investment.” Jim Tisch

“If you’ve done the numbers and are satisfied with them and the principle is right, you just have

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Yesterday we got a look under the hood of the portfolios of the biggest money managers in the world, via their 13F filings (required quarterly portfolio disclosures to the SEC). It has been clear that the biggest and best, embrace this big theme, and have been aggressively positioning to take advantage of the very bullish proposed policy tailwinds for stocks, which are: 1) a corporate tax rate cut, which will go right to the bottom line for profitable companies. Not surprisingly, which stocks have been leading the way in the climb in the indicies? The ones that make a lot of money (Apple, Microsoft, Google). 2) a repatriation tax holiday that will bring back trillions of dollars onshore, to be paid back to shareholders and put to work in the economy through investment and projects. 3) a trillion–dollar infrastructure spend that, regardless of how difficult it may be to legislate, should happen in one form or another.

Among the reports on portfolio holdings yesterday, we heard from the Swiss National Bank. As I said above, don’t forget there are still central banks deeply entrenched in QE and, beyond local government bonds, are buying foreign assets (in large amounts). Switzerland’s central bank has more freshly printed money to put to work every quarter, and has been increasing their allocation to equities dramatically–$80 billion of which is now (as of the end of the first quarter) in U.S. stocks! That’s a 29% bigger stake than they had at the end of 2016. The SNB is the world’s eighth biggest public investor.