Stocks Are In "A Far More Precarious State Than Was Ever Truly Believed Possible"

Submitted by Tyler Durden on 04/19/2016 20:30 -0400
http://www.zerohedge.com/news/2016-04-19/stocks-are-far-more-precarious-state-was-ever-truly-believed-possible
Submitted by Jeffrey Snider via Alhambra Investment Partners,
As the major stock indices overtake or threaten psychological round numbers again (S&P 500 2,100; DJIA 18,000), they have done so with the same problem as occurred in 2015. Stocks have been overvalued for some time in historical comparison especially after QE3 and QE4, but it was supposed to be in anticipation of the full recovery that QE would make. For the longest time, that narrative actually seemed plausible at least in earnings. In June 2014, analysts estimated that total as-reported earnings for the calendar year of 2015 would close out around $144 per share. At an index level of 2,100, it would represent a seemingly low valuation multiple of 14.5 (low because, we were told, low discounting from historically low interest rates, favorable fixed income comparisons, and then high expected growth especially in areas like tech and consumer-related industries).
Analysts’ estimates are always overly optimistic and have the hardened habit of being lowered as each particular quarter draws closer, but what happened with 2015 was something else entirely. Instead of $144 per share, 2015 ttm EPS for the index is going to be about $86.50. Rather than leave stock investors assured in their valuations, it meant the S&P 500 was trading around 24 times actual EPS. Worse, than that, the downdraft in earnings wasn’t apparent to analysts until it actually happened (believing in “transitory” as they did) and companies reported.


As late as March 2015, analysts had been mugged by the events of late 2014 and the first parts of last year but were still predicting that earnings would grow by about 9% for the full year, including a return to “normal” growth by Q4. Even in November 2015, though the downtrend had been established in almost perfect uniformity, analysts were still expecting Q4 and then Q1 2016 to start a very strong turnaround.
From that perspective you can understand why stock investors suddenly became more than a little nervous where only certainty and confidence had existed. On the whole, it was figured that the economy would provide a solid if not historically so valuation floor for stocks that would be pushed up relentlessly by the recovery that economists and the FOMC were describing all the way into the middle of 2015 – only to find by the end of the year that the stock market may have been overvalued by as much as 40% to actual earnings (assuming a multiple of 15 represents “fair value”).
As optimism returns again, all that nasty business and “unexpected” uncertainty is being left behind as nothing more than scholarly conjecture suitable only for historians; 2016 is again on the march, or so it might seem. The surge in stocks during this “dollar” interregnum seems to be (outside of raw momentum and risk chasing) resurrecting the same assumptions as early 2015. “Transitory” has regained form only refashioned from a few months deviation to more than a year – but still to the same effect with only a delay in reaching the long-promised recovery.

Reality still intrudes, however, on two fronts.
Despite analysts’ renewed faith (which sets aside all doubts that should have been their working guesses this whole time) in where earnings will fly in 2016 that still doesn’t recreate the recovery that was once the hardened baseline for projections. The current ttm EPS for 2016 is not even $110 whereas last year was supposed to be $144. It is a huge disappointment even though in relative circumstances $110 is better than $86 – and that is where the focus has returned though it should remain on the recovery’s now nearing permanent disappointment (and thus overvaluation).
The second problem is the familiar downgrade which is already severe, more so than “usual” (though less, so far, than 2015). In other words, $110 may be better than $86 but a year ago it was thought to be $124. The difference in valuation is again quite striking.

A forward PE using March 2015 estimates would have been somewhat expensive at about 17 times earnings but is already now more than 19 even as EPS continues to fall. Over just the last month (March to April), 2016 ttm EPS has dropped by almost $3 which again suggests that when all is completed this year a multiple of 19 will be almost certainly the best and least likely case. That would mean the assumed valuation floor is far lower for a second consecutive year, and we still have no idea just how low it may yet reach.

Where the S&P 500 may have been overvalued by perhaps 40% or more based on actual, as-reported 2015 EPS, the current annual EPS estimates suggest only a return to the 1,600 range not 2,100 or better (for the full year 2016 EPS; current estimates still plug “fair value” as something like 1,330 on the index meaning it will take a surge in earnings growth later this year just to get “fair value” back to 1,600!). As you can plainly observe above, had the 2014 version of recovery worked out the actual trajectory of the index would have been at “fair value” (though in this counterfactual it is very likely that the index and all stocks would have kept going up and up rather than sideways to lower these past nearly two years now) or close to it. Instead, the “transitory” weakness in 2015 has opened a gulf that only entrenches the high degree of overvaluation even under scenarios where 2016 isn’t so bad. That would leave stocks especially vulnerable to any further swings in sentiment as the assumed valuation “floor” quite “unexpectedly” remains quite distant.
While momentum and risk chasing take about pushing the various indices in the near term, longer term (actual) investors will be forced to reckon with this huge disparity – that prices surged after QE4 in anticipation of the recovery happening and justifying what would have been only temporary overvaluation due to the giddiness of actual discounting. The fact that earnings are now nowhere near vindicating those expectations is a fundamentally different proposition altogether, including that QE was itself a lie. I believe it is this incongruence that explains the very curious and conspicuous sideways behavior in stocks as remnants of the old QE-driven hopes remain but are no longer in such unison or enjoy such widespread support.
Doubt is the operative condition now, though especially variable in its short run expressions. It is in shorter supply today but that is no more the case than November 3 when the S&P last closed above 2,100 (just days before more “unexpected” hit) or even August 17 with the S&P 500 at 2,102 and already a week past the great Chinese warning of the intensified “dollar” run and only a week before the mini-crash of August 24 that run fulfilled.

Even if the events of 2015 and early 2016 turn out to be the end of it, it still means that full recovery in earnings and the real economy has been pushed several years farther into the future – a far more precarious state than was believed to ever be truly possible. To figure, then, that there is now much, much more than a trivial chance of still more disruption and contraction does not mix well with such durable overvaluation.

The Age Of Authoritarianism: Government Of The Politicians, By The Military, For The Corporations

Submitted by Tyler Durden on 02/23/2016 
http://www.zerohedge.com/news/2016-02-23/age-authoritarianism-government-politicians-military-corporations 

Submitted by John Whitehead via The Rutherford Institute,

“I was astonished, bewildered. This was America, a country where, whatever its faults, people could speak, write, assemble, demonstrate without fear. It was in the Constitution, the Bill of Rights. We were a democracy... But I knew it wasn't a dream; there was a painful lump on the side of my head... The state and its police were not neutral referees in a society of contending interests. They were on the side of the rich and powerful. Free speech? Try it and the police will be there with their horses, their clubs, their guns, to stop you. From that moment on, I was no longer a liberal, a believer in the self-correcting character of American democracy. I was a radical, believing that something fundamental was wrong in this country—not just the existence of poverty amidst great wealth, not just the horrible treatment of black people, but something rotten at the root. The situation required not just a new president or new laws, but an uprooting of the old order, the introduction of a new kind of society—cooperative, peaceful, egalitarian.” ? Historian Howard Zinn

America is at a crossroads.
History may show that from this point forward, we will have left behind any semblance of constitutional government and entered into a militaristic state where all citizens are suspects and security trumps freedom.
Certainly, this is a time when government officials operate off their own inscrutable, self-serving playbook with little in the way of checks and balances, while American citizens are subjected to all manner of indignities and violations with little hope of defending themselves.
As I make clear in my book Battlefield America: The War on the American People, we have moved beyond the era of representative government and entered a new age—the age of authoritarianism. Even with its constantly shifting terrain, this topsy-turvy travesty of law and government has become America’s new normal.
Don’t believe me?
Let me take you on a brief guided tour, but prepare yourself. The landscape is particularly disheartening to anyone who remembers what America used to be.

The Executive Branch: Whether it’s the Obama administration’s war on whistleblowers, the systematic surveillance of journalists and regular citizens, the continued operation of Guantanamo Bay, or the occupation of Afghanistan, Barack Obama has surpassed his predecessors in terms of his abuse of the Constitution and the rule of law. President Obama, like many of his predecessors, has routinely disregarded the Constitution when it has suited his purposes, operating largely above the law and behind a veil of secrecy, executive orders and specious legal justifications. Rest assured that no matter who wins this next presidential election, very little will change. The policies of the American police state will continue.

The Legislative Branch:  It is not overstating matters to say that Congress may well be the most self-serving, semi-corrupt institution in America. Abuses of office run the gamut from elected representatives neglecting their constituencies to engaging in self-serving practices, including the misuse of eminent domain, earmarking hundreds of millions of dollars in federal contracting in return for personal gain and campaign contributions, having inappropriate ties to lobbyist groups and incorrectly or incompletely disclosing financial information. Pork barrel spending, hastily passed legislation, partisan bickering, a skewed work ethic, graft and moral turpitude have all contributed to the public’s increasing dissatisfaction with congressional leadership. No wonder 86 percent of Americans disapprove of the job Congress is doing.

The Judicial Branch: The Supreme Court was intended to be an institution established to intervene and protect the people against the government and its agents when they overstep their bounds. Yet through their deference to police power, preference for security over freedom, and evisceration of our most basic rights for the sake of order and expediency, the justices of the United States Supreme Court have become the guardians of the American police state in which we now live. As a result, sound judgment and justice have largely taken a back seat to legalism, statism and elitism, while preserving the rights of the people has been deprioritized and made to play second fiddle to both governmental and corporate interests.

Shadow Government: America’s next president will inherit more than a bitterly divided nation teetering on the brink of financial catastrophe when he or she assumes office. He or she will also inherit a shadow government, one that is fully operational and staffed by unelected officials who are, in essence, running the country. Referred to as the Deep State, this shadow government is comprised of unelected government bureaucrats, corporations, contractors, paper-pushers, and button-pushers who are actually calling the shots behind the scenes right now.

Law Enforcement: By and large the term “law enforcement” encompasses all agents within a militarized police state, including the military, local police, and the various agencies such as the Secret Service, FBI, CIA, NSA, etc. Having been given the green light to probe, poke, pinch, taser, search, seize, strip and generally manhandle anyone they see fit in almost any circumstance, all with the general blessing of the courts, America’s law enforcement officials, no longer mere servants of the people entrusted with keeping the peace but now extensions of the military, are part of an elite ruling class dependent on keeping the masses corralled, under control, and treated like suspects and enemies rather than citizens. In the latest move to insulate police from charges of misconduct, Virginia lawmakers are considering legislation to keep police officers’ names secret, ostensibly creating secret police forces.

A Suspect Surveillance Society: Every dystopian sci-fi film we’ve ever seen is suddenly converging into this present moment in a dangerous trifecta between science, technology and a government that wants to be all-seeing, all-knowing and all-powerful. By tapping into your phone lines and cell phone communications, the government knows what you say. By uploading all of your emails, opening your mail, and reading your Facebook posts and text messages, the government knows what you write. By monitoring your movements with the use of license plate readers, surveillance cameras and other tracking devices, the government knows where you go. By churning through all of the detritus of your life—what you read, where you go, what you say—the government can predict what you will do. By mapping the synapses in your brain, scientists—and in turn, the government—will soon know what you remember. And by accessing your DNA, the government will soon know everything else about you that they don’t already know: your family chart, your ancestry, what you look like, your health history, your inclination to follow orders or chart your own course, etc. Consequently, in the face of DNA evidence that places us at the scene of a crime, behavior sensing technology that interprets our body temperature and facial tics as suspicious, and government surveillance devices that cross-check our biometrics, license plates and DNA against a growing database of unsolved crimes and potential criminals, we are no longer “innocent until proven guilty.”

Military Empire: America’s endless global wars and burgeoning military empire—funded by taxpayer dollars—have depleted our resources, over-extended our military and increased our similarities to the Roman Empire and its eventual demise. The U.S. now operates approximately 800 military bases in foreign countries around the globe at an annual cost of at least $156 billion. The consequences of financing a global military presence are dire. In fact, David Walker, former comptroller general of the U.S., believes there are “striking similarities” between America’s current situation and the factors that contributed to the fall of Rome, including “declining moral values and political civility at home, an over-confident and over-extended military in foreign lands and fiscal irresponsibility by the central government.”

I haven’t even touched on the corporate state, the military industrial complex, SWAT team raids, invasive surveillance technology, zero tolerance policies in the schools, overcriminalization, or privatized prisons, to name just a few, but what I have touched on should be enough to show that the landscape of our freedoms has already changed dramatically from what it once was and will no doubt continue to deteriorate unless Americans can find a way to wrest back control of their government and reclaim their freedoms.
That brings me to the final and most important factor in bringing about America’s shift into authoritarianism: “we the people.” We are the government. Thus, if the government has become a tyrannical agency, it is because we have allowed it to happen, either through our inaction or our blind trust.
Essentially, there are four camps of thought among the citizenry when it comes to holding the government accountable. Which camp you fall into says a lot about your view of government—or, at least, your view of whichever administration happens to be in power at the time.

In the first camp are those who trust the government to do the right thing, despite the government’s repeated failures in this department.

In the second camp are those who not only don’t trust the government but think the government is out to get them.

In the third camp are those who see government neither as an angel nor a devil, but merely as an entity that needs to be controlled, or as Thomas Jefferson phrased it, bound “down from mischief with the chains of the Constitution.”

Then there’s the fourth camp, comprised of individuals who pay little to no attention to the workings of government, so much so that they barely vote, let alone know who’s in office. Easily entertained, easily distracted, easily led, these are the ones who make the government’s job far easier than it should be.

It is easy to be diverted, distracted and amused by the antics of the presidential candidates, the pomp and circumstance of awards shows, athletic events, and entertainment news, and the feel-good evangelism that passes for religion today. What is far more difficult to face up to is the reality of life in America, where unemployment, poverty, inequality, injustice and violence by government agents are increasingly norms.
The powers-that-be want us to remain divided, alienated from each other based on our politics, our bank accounts, our religion, our race and our value systems. Yet as George Orwell observed, “The real division is not between conservatives and revolutionaries but between authoritarians and libertarians.”
The only distinction that matters anymore is where you stand in the American police state. In other words, you’re either part of the problem or part of the solution.

"Who Do They Think They Are?" - Donald Trump Slams Apple Decision To Refuse Hacking Of iPhone

Submitted by Tyler Durden on 02/17/2016 10:13 -0500
http://www.zerohedge.com/news/2016-02-17/who-do-they-think-they-are-donald-trump-slams-apple-decision-refuse-hacking-iphone
Earlier we reported that in a sign of "defiance", Tim Cook said he would oppose the "chilling" government demand to help the FBI hack its own phones, and that it vehemently opposes the government's intention to implement a back door in iPhones. Just hours later Donald Trump has decided to join the fray in the biggest topic of the day, by insisting that Apple should unlock the iPhone of one of the San Bernardino shooters.
"To think that Apple won't allow us to get into her cell phone," Trump said on Fox and Friends Wednesday morning. “Who do they think they are? No, we have to open it up."
As the Hill reports, Trump argued vehemently that Apple should help investigators crack the phone’s encryption system.
"Apple, this is one case, this is a case that certainly we should be able to get into the phone," he said. "And we should find out what happened, why it happened, and maybe there's other people involved and we have to do that."
To be sure, this is not Apple's first time standing up for encryption and personal security: Cook has repeatedly argued that building any guaranteed access for law enforcement into devices — what has been short-handed as a “back door” — would undermine the overall security of the device.
“There have been people that suggest that we should have a backdoor. But the reality is if you put a backdoor in, that backdoor's for everybody, for good guys and bad guys,” Cook said in a December interview with “60 Minutes.”
Trump disagreed stridently on Wednesday, calling it a matter of “common sense.”
"I agree 100% with the courts," the business mogul said. "In that case, we should open it up. I think security over all — we have to open it up, and we have to use our heads. We have to use common sense."
However, as we further showed earlier, it would appear that both sides of the argument are merely padding on theatrics to an issue that has long ago been resolved in favor of the government. Once again, this is what we reported back in September 2013 in, when the revelations from Edward Snowden's whistleblowing campaign emerged:
NSA Mocks Apple's "Zombie" Customers; Asks "Your Target Is Using A BlackBerry? Now What?"

The following slide comes from a secret presentation called "Your target isusing a BlackBerry? Now what?" It shows an email from a Mexican government agency which was sent using BlackBerry encryption technology -- and intercepted by the NSA nonetheless.




But the kicker is when, in another secret presentation, the NSA itself mocks Orwell, using a reference from the iconic Apple "1984" advertisement...


... As it says the man who has become "Big Brother" is none other than AAPL's deceased visionary leader Steve Jobs...


... And is so very grateful for Apple's paying client "Zombies" who make its job so much easier

In other words, not only does the government already have easy access to any iPhone it seeks to "enter", but today's dramatic and vocal defense by Cook, and the likewise just as dramatic theatrics by Donald Trump are just that.

The Uncomfortable Truth About The Great Boom And This "Recovery"

Submitted by Tyler Durden on 12/31/2015 08:53 -0500
http://www.zerohedge.com/news/2015-12-31/uncomfortable-truth-about-great-boom-and-recovery
Submitted by Harry Debt via EconomyAndMarkets.com,
A Yahoo Finance headline this morning reads: “Unhappy New Year: The U.S. Economy Is Stalling Out.”
We recently learned that existing home sales in November crashed 10.5% from the month before.
Guess when the last time was when we saw these levels? The housing crisis of the mid- to late-2000s!
I also recently shared a chart showing a cataclysmic 82% drop in the ratio of new home sales to the U.S. population. To put it simply, we won’t need more real estate for decades to come, with baby boomers increasingly dying to offset rising millennial home purchases.
I and a few other experts like David Stockman have continued to argue that this re-bound since 2009 has been all smoke and mirrors – artificial stimulus that has only created greater bubbles in financial assets like stocks, and financial engineering to create rising corporate profits. None of it goes toward real expansion for future jobs, productivity and growth… things like new office space and industrial capacity.
Wall Street analysts and corporate CEOs can argue against this with their “this is not a bubble” logic, but this chart tells the real story.
Below is a chart that shows the office space per worker in square feet. It shows a rise into the height of the financial crisis, after which it’s fallen like a rock!
At first this could seem counterintuitive. Why did the square footage per worker go up into the worst of the recession into mid- to late-2009? That’s because companies were laying off workers going into that recession, meaning there were more workers per square feet.
But the real story comes in the recovery from late 2009 forward.

Square footage per worker has declined very sharply from 371 square feet to 270, down a whopping one-third in just over six years as businesses have rehired a large portion of the laid-off workers – which means largely NOT creating new jobs.
You should not look at this chart and assume that because less square footage per worker means more workers than in the past that everything is hunky dory.
What’s more important is that the sharp decrease in square footage implies a lack of demand in commercial real estate. And that’s because commercial real estate is already way over-expanded! We overbuilt it in the great boom of 1983 to 2007, so even these hires have not filled up the available space. Which means businesses aren’t expanding their office or industrial space!
So while hiring more workers sounds fine out of context… it’s masking much more severe, deeper-set issues in our capacity to build for the future.
This is the hard truth that no one is looking at: businesses are merely re-employing their past capacity, and not creating new plants and offices for future employment. All the 200,000-plus jobs numbers per month, if they are even fully real, are just catching up with the past. And we shouldn’t be investing in such new work space as we already have all we need for decades ahead.
This is the reality of demographics that clueless economists just don’t get.
Meanwhile, more and more people drop out of the workforce either from giving up on finding a job, or retiring earlier once their kids have left the nest.
And more jobs are part-time or in the low-end service sector – like bartenders and waiters, not the higher-paid manufacturing and professional jobs of the past.
To top it off, fewer and fewer people are entering or staying in the workforce. Hence, the workforce participation rates continue to edge down – after falling sharply for years.
And all of that means… we’re not even at capacity for all this overbuilt real estate.
Folks, this “recovery” isn’t working! And no one has expected it to given the over-expansion in the greatest debt bubble in U.S. history from 1983 to 2008.
Inflation hasn’t risen due to excess capacity here and around the world, especially China…
Money velocity continues to drop without lending and productive investment to expand it…
Businesses are struggling with stagnant earnings because we already hit the peak of debt capacity and demographic spending growth in the great boom that finally peaked in late 2007, as I forecast two decades before.

Debt was running at 2.54 times GDP for 26 years. It doesn’t take a rocket scientist or nuclear physicist to tell you that pretty much guarantees a massive period of deleveraging and depression – not continued expansion.
So since growth is all but impossible, corporations have resorted to financial engineering to keep the wagon rolling – all courtesy of the Fed, with near-zero short- and long-term interest rates.
They’ve had two options: either increase stock buybacks to leverage their stagnant earnings with rising earnings-per-share on fewer shares, or increase dividends to compete with lower and lower yielding bonds (also courtesy of the Fed). And they’ve been milking both options for all they’re worth!
But financial engineering does not result in real growth.
And speculation does not expand the money supply.
It is only a sign of decreasing money velocity, and a bubble that will only burst – like in 1929, 2000, and now again!
It’s a mirage.
It isn’t real.
And it isn’t sustainable.
Despite such endless financial engineering, sales for the S&P 500 have been declining for the last three quarters. And profits have declined for the first time since the 2009 expansion.
I’d be surprised if both didn’t continue down in the 4th quarter.
This will end badly… which is the only way bubbles end.
My forecast today: the stock market will start to crash by early February, if not sooner, when it gets this clear realization.

4 Warnings And Why You Should Pay Attention

Submitted by Tyler Durden on 10/13/2015 10:54 -0400
http://www.zerohedge.com/news/2015-10-13/4-warnings-and-why-you-should-pay-attention
Submitted by Lance Roberts via STA Wealth Management,

When I was growing up my father, probably much like yours, had pearls of wisdom that he would drop along the way. It wasn't until much later in life that I learned that such knowledge did not come from books, but through experience. One of my favorite pieces of "wisdom" was:

"Exactly how many warnings do need before you figure out that something bad is about to happen?"

Of course, back then, he was mostly referring to warnings he issued to me "not" to do something I was determined to do such as jumping off the roof with a bedsheet convinced it was a parachute. After I had broken my wrist, I understood what he meant.
Over the weekend, those warnings came to mind as the recent bounce in the financial markets once again has individuals scrambling to grab "bedsheets" to jump off the roof once again. Of course, much of their behavior is driven by mainstream commentary suggesting that the recent market rout is over.
However, there are currently plenty of warning signs that suggest that individuals might want to reconsider the risks before taking that leap. Here are four warnings to consider.

Warning 1: Profit Margins

Edward Harrison at Credit Writedowns picked up on the issue of declining profit margins that I addressed last week. 

"While I am not talking about recession yet, I do think we are seeing economic weakness toward the end of the business cycle. And while that doesn't mean recession in the near-term, it could do in the medium-term.

We know from history that the dates when profits rolled over coincide very much with the slide into recession. My interpretation of these data is exactly as Barclays says, that you get enough of a slide in profits and it generally leads to recession. That is because the profits recession comes as a result of a weakening economy that has weakened so much that companies are no longer able to cut costs, buy back shares or massage accounting enough to keep profits rising.

We are now in the seventh year of a cyclical recovery and bull market. Shares have tripled in that time frame. I would say this means we are much closer to the end of the business cycle than the beginning. Moreover, as Jeremy Grantham is quoted in the Business Insider piece, profits are mean-reverting and right now they are reverting from a phase that is "wildly optimistic" according to Warren Buffett. All of this is taking place against the backdrop of an economy in which wage growth is weak, household debt is still relatively high on a historic basis as a percentage of income and we have no policy room on the monetary side, with limited political appetite for policy on the fiscal side.

To me, the pre-conditions for this profits recession speak to downside risk, both for risk assets and for the real economy. None of the data speaks to recession in the real economy right now. We are seeing a slowing of job growth and likely of trend economic growth as well. But with a profits recession hitting, the potential for further downside is high."

Warning 2 - Margin Debt

Recently, Doug Ramsey, Chief Investment Officer for Leuthold Weeden Capital Management, concurred with that view stating:

"Margin debt contracting is a sign of loss of investor confidence and it's confirmation of a lot of other evidence we have that we've entered a cyclical bear market. We got a lot of traditional warning signs leading up to the high in terms of market action, and deteriorating breadth and margin debt is important to the supply-demand analysis."

As I have discussed previously, the importance of margin debt as it relates to the market should not be dismissed. To wit:

 "While 'this time could certainly be different,' the reality is that leverage of this magnitude is 'gasoline waiting on a match.' When an event eventually occurs, that creates a rush to sell in the markets, the decline in prices will reach a point that triggers an initial round of margin calls.

Since margin debt is a function of the value of the underlying "collateral," the forced sale of assets will reduce the value of the collateral further triggering further margin calls. Those margin calls will trigger more selling forcing more margin calls, so forth and so on.
 Notice in the chart that margin debt reductions begins innocently enough before accelerating sharply to the downside."

No one knows for sure where how far the market needs to fall before "margin calls" are triggered. However, if that point is eventually reached, there will be very little investors can do to shield themselves from the decline.

Warning 3 - Valuations

Valuations are a very poor market timing device for short-term investors. However, from a long-term investment perspective, valuations mean a great deal as it relates to expected returns. Chris Brightman at Research Affiliates recently noted this exact point.

"As a long-term investor, we experience short-term price volatility as opportunity, and high prices as risk."

With earnings growth deteriorating, and valuation expansion having ceased, the risk of high-prices has risen sharply. As I addressed in "Shiller's CAPE - Is There A Better Measure:"

"The need to smooth earnings volatility is necessary to get a better understanding of what the underlying trend of valuations actually is. For investor's periods of 'valuation expansion' are where the bulk of the gains in the financial markets have been made over the last 114 years. History shows, that during periods of 'valuation compression' returns are much more muted and volatile.

Therefore, in order to compensate for the potential 'duration mismatch' of a faster moving market environment, I recalculated the CAPE ratio using a 5-year average as shown in the chart below."

 "There is a high correlation between the movements of the CAPE-5 and the S&P 500 index. However, you will notice that prior to 1950 the movements of valuations were more coincident with the overall index as price movement was a primary driver of the valuation metric. As earnings growth began to advance much more quickly post-1950, price movement became less of a dominating factor. Therefore, you can see that the CAPE-5 ratio began to lead overall price changes.

As I stated in yesterday's missive, a key 'warning' for investors, since 1950, has been a decline in the CAPE-5 ratio which has tended to lead price declines in the overall market."

Warning 4 - Economics

Ultimately, asset prices are a reflection of the underlying economic growth and, as Edward Harrison noted above, we are very long in the current economic cycle.
I regularly publish the Economic Output Composite Index which is comprised of the Chicago Fed National Activity Index (a broad measure of 85-subcomponents), the Fed regional manufacturing surveys, the NFIB survey, LEI index, and the Chicago PMI. The correlation between this index and the real economic activity is very high.

Notice that the EOCI index has now fallen to levels where the Federal Reserve has previously "loosened" monetary policy by adding accommodative measures such as "Quantitative Easing." Importantly, despite the Fed's assurances, the economy is clearly not strong enough to withstand a "tightening" of monetary policy by increasing interest rates.
As you will also notice, not only have sharp drops in the EOCI index been coincident with far weaker economic activity, but also declines in asset prices as well.

If They Don't "Buy & Hold" - Why Should You?

Of course, these are just "warning signs." None them suggest that the markets, or the economy, are immediately plunging into the next recession-driven market reversion.
But they are warning signs nonetheless. Past experience suggests that future returns are likely to be far less than historical averages suggest. Furthermore, there is a dramatic difference between investing for 30 years and whatever time you have left before you need your retirement funds intact.
While much of the mainstream media suggests that you "invest for the long-term" and "buy and hold" regardless of what the market brings, that is not what professional investors are doing. As addressed recently by UBS:

"Nothing is good in general. We are in an environment where nothing is good.

At some point, it will disconnect, and it disconnects very aggressively. And the repercussions are very significant. It's very difficult to hedge or prepare for that. We can't take anything for granted.

We challenge through black-swan scenarios every month, every week, every day. We try to understand what in our scenarios is a given, and what happens when it's not a given when it could cause very significant losses for the investment bank.

Rate hikes, big volatility swings, are things we try to anticipate, and we do that all the time. We try to compensate for lack of experience through a lot of thinking."

The point here is simple. No professional or successful investor every bought and held for the long-term without regard, or respect, for the risks that are undertaken. If the professionals are looking at "risk" and planning on how to protect their capital from losses when things go wrong - then why aren't you?
Exactly how many warnings do you need?

The Deep State: Source Of All Negativity

Submitted by Tyler Durden on 10/09/2015 22:25 -0400

http://www.zerohedge.com/news/2015-10-09/deep-state-source-all-negativity

Submitted by Doug Casey via InternationalMan.com,

I’d like to address some aspects of the Greater Depression in this essay.

I’m here to tell you that the inevitable became reality in 2008. We’ve had an interlude over the last few years financed by trillions of new currency units.

However, the economic clock on the wall is reading the same time as it was in 2007, and the Black Horsemen of your worst financial nightmares are about to again crash through the doors and end the party. And this time, they won’t be riding children’s ponies, but armored Percherons.

To refresh your memory, let me recount what a depression is.

The best general definition is: A period of time when most people’s standard of living drops significantly. By that definition, the Greater Depression started in 2008, although historians may someday say it began in 1971, when real wages started falling.

It’s also a period of time when distortions and misallocations of capital are liquidated, and when the business cycle, which is caused exclusively by currency debasement, also known as inflation, climaxes. That results in high unemployment, business failures, uncompleted construction, bond defaults, stock market crashes, and the like.

Fortunately, for those who benefit from the status quo, and members of something called the Deep State, the trillions of new currency units delayed the liquidation. But they also ensured it will now happen on a much grander scale.

The Deep State is an extremely powerful network that controls nearly everything around you.You won’t read about it in the news because it controls the news. Politicians won’t talk about it publicly. That would be like a mobster discussing murder and robbery on the 6 o’clock news. You could say the Deep State is hidden, but it’s only hidden in plain sight.

The Deep State is the source of every negative thing that’s happening right now. To survive the coming rough times, it’s essential for you to know what it’s all about.

The State

Now, what causes economic problems? With the exception of natural events like fires, floods, and earthquakes, they’re all caused directly and indirectly by the State, through its wars, taxes, regulations, and inflation.

Yes, yes, I know this is an oversimplification, that human nature is really at fault, and the institution of the State is only a mass dramatization of the psychological aberrations and demons that lie within us all. But we don’t have time to go all the way down the rabbit hole, so let’s just talk about the proximate rather than the ultimate causes of the Greater Depression. And here, I want to talk about the nature of the State, in general, and then something called the Deep State, in particular.

A key takeaway, and I emphasize that because I expect it to otherwise bounce off the programmed psyches of most people, is that the very idea of the State itself is poisonous, evil, and intrinsically destructive. But, like so many bad ideas, people have come to assume it’s part of the cosmic firmament, when it’s really just a monstrous scam. It’s a fraud, like your belief that you have a right to free speech because of the First Amendment, or a right to be armed because of the Second Amendment. No, you don’t. The U.S. Constitution is just an arbitrary piece of paper...entirely apart from the fact the whole thing is now just a dead letter. You have a right to free speech and to be armed because they’re necessary parts of being a free person, not because of what a political document says.

Even though the essence of the State is coercion, people have been taught to love and respect it. Most people think of the State in the quaint light of a grade school civics book. They think it has something to do with “We the People” electing a Jimmy Stewart character to represent them. That ideal has always been a pernicious fiction, because it idealizes, sanitizes, and legitimizes an intrinsically evil and destructive institution, which is based on force. As Mao once said, political power comes out of the barrel of a gun. But things have gone far beyond that. We’re now in the Deep State.

The Deep State

The concept of the Deep State originated in Turkey, which is appropriate, since it’s the heir to the totally corrupt Byzantine and Ottoman empires. And in the best Byzantine manner, the Deep State has insinuated itself throughout the fabric of what once was America. Its tendrils reach from Washington down to every part of civil society. Like a metastasized cancer, it can no longer be easily eradicated.

I used to joke that there was nothing wrong with Washington that 10 megatons on the capital couldn’t cure. But I don’t say that anymore. Partially because it’s too dangerous, but mainly because it’s now untrue. What’s now needed is 10 megatons on the capital, and four more bursts in a quadrant 10 miles out.

In many ways, Washington models itself after another city with a Deep State, ancient Rome. Here’s how a Victorian freethinker, Winwood Reade, accurately described it:

Rome lived upon its principal till ruin stared it in the face. Industry is the only true source of wealth, and there was no industry in Rome. By day the Ostia road was crowded with carts and muleteers, carrying to the great city the silks and spices of the East, the marble of Asia Minor, the timber of the Atlas, the grain of Africa and Egypt; and the carts brought out nothing but loads of dung. That was their return cargo.

The Deep State controls the political and economic essence of the U.S. This is much more than observing that there’s no real difference between the left and right wings of the Demopublican Party. It’s well known by anyone with any sense (that is, by everybody except the average voter) that although the Republicans say they believe in economic freedom (but don’t), they definitely don’t believe in social freedom. And the Democrats say they believe in social freedom (but don’t), but they definitely don’t believe in economic freedom.

Who Is Part of the Deep State?

The American Deep State is a real, but informal, structure that has arisen to not just profit from, but control, the State.

The Deep State has a life of its own, like the government itself. It’s composed of top-echelon employees of a dozen Praetorian agencies, like the FBI, CIA, and NSA...top generals, admirals, and other military operatives...long-term congressmen and senators...and directors of important regulatory agencies.

But Deep State is much broader than just the government. It includes the heads of major corporations, all of whom are heavily involved in selling to the State and enabling it. That absolutely includes Silicon Valley, although those guys at least have a sense of humor, evidenced by their “Don’t Be Evil” motto. It also includes all the top people in the Fed, and the heads of all the major banks, brokers, and insurers. Add the presidents and many professors at top universities, which act as Deep State recruiting centers...all the top media figures, of course...and many regulars at things like Bohemian Grove and the Council on Foreign Relations. They epitomize the status quo, held together by power, money, and propaganda.

Altogether, I’ll guess these people number a thousand or so. You might analogize the structure of the Deep State with a huge pack of dogs. The people I’ve just described are the top dogs.

But there are hundreds of thousands more who aren’t at the nexus, but who directly depend on them, have considerable clout, and support the Deep State because it supports them. This includes many of the wealthy, especially those who got that way thanks to their State connections...the 1.5 million people who have top secret clearances (that’s a shocking, but accurate, number)... plus top players in organized crime, especially the illegal drug business, little of which would exist without the State. Plus mid-level types in the police and military, corporations, and non-governmental organizations.

These are what you might call the running dogs.

Beyond that are the scores and scores of millions who depend on things remaining the way they are. Like the 50%-plus of Americans who are net recipients of benefits from the State...the 60 million on Social Security...the 66 million on Medicaid...the 50 million on food stamps...the many millions on hundreds of other programs... the 23 million government employees and most of their families. In fact, let’s include the many millions of average Joes and Janes who are just getting by.

You might call this level of people, the vast majority of the population, whipped dogs. They both love and fear their master, they’ll do as they’re told, and they’ll roll over on their backs and wet themselves if confronted by a top dog or running dog who feels they’re out of line. These three types of dogs make up the vast majority of the U.S. population. I trust you aren’t among them. I consider myself a Lone Wolf in this context and hope you are, too. Unfortunately, however, dogs are enemies of wolves, and tend to hunt them down.

The Deep State is destructive, but it’s great for the people in it. And, like any living organism, its prime directive is: Survive! It survives by indoctrinating the fiction that it’s both good and necessary. However, it’s a parasite that promotes the ridiculous notion that everyone can live at the expense of society.

Is it a conspiracy, headed by a man stroking a white cat? I think not. I find it’s hard enough to get a bunch of friends to agree on what movie to see, much less a bunch of power-hungry miscreants bent on running everyone’s lives. But, on the other hand, the top dogs all know each other, went to the same schools, belong to the same clubs, socialize, and, most important, have common interests, values, and philosophies.

The American Deep State rotates around the Washington Beltway. It imports America’s wealth as tax revenue. A lot of that wealth is consumed there by useless mouths. And then, it exports things that reinforce the Deep State, including wars, fiat currency, and destructive policies. This is unsustainable simply because nothing of value comes out of the city.

Something Is Very Wrong In Saudi Arabia...

Submitted by Tyler Durden on 08/24/2015 11:30 -0400
http://www.zerohedge.com/news/2015-08-24/something-very-wrong-saudi-arabia
Ever since Kazakhstan stormed onto the radar of market participants who, prior to last week, didn’t know the country existed, the world has awoken to the fact that a sharp and persistent decline in oil, that most financialized of commodities, comes with very real and far-reaching consequences.
For producers, crude’s slide strains budgets and pressures FX reserves and as we documented at length on Sunday in "Saudi Arabia Faces Another 'Very Scary Moment' As Economy, FX Regime Face Crude Reality," nowhere is this more apparent than in Saudi Arabia where the country faces a fiscal deficit on the order of 20% and the first current account deficit in a decade.
The situation has some betting that Saudi Arabia will not be willing (or able) to retain the riyal’s peg to the dollar and as you can see from the 12-month forwards, it might be time for sellside FX strategists to reconsider their position that the currency regime isn’t likely to change anytime soon.

One of These Things Is Not Like The Other

Submitted by Tyler Durden on 08/24/2015 09:57 -0400
http://www.zerohedge.com/news/2015-08-24/one-these-things-not-other
The Fed-inspired "wedge" between stock market perception and 'reality' had never been wider before last week...



Charts: Bloomberg

Our Government, Destroyer Of Jobs

Submitted by Tyler Durden on 08/12/2015 14:20 -0400
http://www.zerohedge.com/news/2015-08-12/our-government-destroyer-jobs
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
If our government can't destroy all the private-sector jobs directly, it will do so indirectly by borrowing so much money the system collapses.
Conventional economists and pundits are puzzled why jobs growth has been so anemic in this "recovery." Here's one factor they overlook: our government. In theory, our government is supposed to encourage private sector job growth. In reality, all the hundreds of pages of regulations are killing job growth, one small business and one job at a time.
Correspondent/entrepreneur Ray Z. was kind enough to share his experience of trying to open a bagel shop and create six jobs:

"For many years, many of my friends and family who have come to my home and experienced my cooking, have told me that I should "open a restaurant". Of course, I took this with a grain of salt, :0 since many people say this exact phrase, to many other people. There are a lot of people who are able to create very delicious meals.

About five years ago, there was a restaurant for sale, not too far from my home and business. I thought about buying the restaurant, but at that time, the economy was not doing well and I wanted to take a wait and see attitude before I committed to anything. Eventually, the restaurant closed down and a different type of business opened up in the space that had been a restaurant. That business went under in the middle of 2014 and I decided it might be time to open a retail food establishment in the space that used to be a restaurant. How hard could it be?

I signed a lease with the property owner for his 1000 square foot space. I contracted with a general contractor and designed the restaurant floor space on a CAD program I have on my office machine.

Having boot-strapped two seven figure companies from the ground up over the past 25 years, I knew all of the permits needed in order to open a regular business. First, I had to have my attorney file for incorporation in my state. Then, I secured my FEIN (Federal Employer Identification Number) from the IRS, opened a bank account, got my sales and use tax permit (to collect sales taxes) from the State and contacted the person at the state level who is responsible for food establishments at the state level. The department that handles such things is the Nevada Health Department.

The inspector who is responsible for my geographic area (since I live in a sparsely populated county, we don't have a county health department) at the state level told me that since the space had not been a restaurant for a few years, I would need to pay additional fees the first year and my endeavor would be treated as a "new" retail food establishment. The cost was an additional $500, but that's just the way it is. The property already had a grease interceptor (1500 gallons), floor drains, a mop sink, air exchanger on the roof and was mostly plumbed. I'll get back to this later.

I submitted plans to the state contact person and was told that my symbology was not standard for the plumbing and electrical. The suggestion was made that I seek the services of an architect. Very well. I did. I found an architect who has done some restaurants in the area and we got to work. I submitted my floor plan to him, which he said was very detailed and seemed to use the space to its maximum potential. However, he did mention that if I were going to serve one single person as a dine-in customer, I would have to have at least one ADA compliant bathroom. The space had two existing bathrooms that were ADA, but not the latest version. So, those would have to be upgraded. Next, he told me that if I served, in-house, I would need to provide two ADA compliant bathrooms. I was going to remove one of the ADA bathrooms, so I could have more seating, but if I had more seating, I would need two bathrooms. Catch-22.

My architect submitted to the state for review and was told that I would need to expand the hallway. That means that the current hallway walls would need to be completely gutted, with plumbing removed and drains moved.

I guess it really did not matter though, since according to the State of Nevada, I was required to have EIGHT (8) sinks in my 1,000 square foot space. I needed two bathroom sinks (which I had), one dirty sink with three wells, clearly labeled "wash, rinse, sanitize"; this sink needed to have two side-boards of not less than 18 inches etc. I also had to have one prep sink, with a wand facet, one dedicated mop sink, two hand wash stations (that could not be near any other sinks) and a bar sink for smoothies. This meant I had to have an extra floor drain put in, while the others needed to be moved. Great. 8 sinks. Cost to bring the plumbing to code and provide engineered drawings and system? $20-25 thousand.

After six revisions to the plans (to make the state happy), I finally gave the plans to a general contractor. He sent it to his electrical and plumbing sub-contractors. They informed the general that due to code issues, they would have to quote an engineered HVAC system that provided balanced air for the replacement needed by the hood exhaust. The hood exhaust would need to be tied into the HVAC, so that my customers would be in an environment that met the state standards for air quality. OK. The plumber also said that I needed a brand new, engineered waste pipe system, one that could only be installed by jack hammering the entire plumbing system, since the state was requiring a detailed drawing of the pipes in the floor, and since it was put in before they had these requirements, they would want it all dug up and put into a plan. Great. Engineered HVAC cost? $40,000 (even though the place seemed to work fine for 25 years with an evaporative cooler and a gas heater).

Next, I was told that since I would need a 200 amp electrical service panel (which I knew), the power company would have to replace the transformer on the pole outside, since new construction (the buildings are 30 years old, but hey, it's a restaurant) requires new EPA compliant transformers. The power company fee alone would be 12-15 thousand dollars. Cost to upgrade electrical to code? $20,000, including power company costs to install EPA approved transformer.

Next, I was told that I would have to have the gas pipe dug up, jack hammered and replaced with a larger diameter gas line. This would be $20,000 or so dollars. The reason is, of course, that the new code requires a minimum pipe diameter for gas; even though I was only going to have one appliance on gas; the range. Everything else is electric.

Keep in mind that all of this was taking time. In point of fact, from the time I signed the lease in late December, until just this past week, I was doing nothing but getting my paperwork ready and trying to comply with government mandates. Essentially, I spent 7 months trying to not only figure out what I needed to do, while I was paying rent and utilities, but I also spent many hours trying to figure out the complexities of what the state required.

For instance: Each food establishment is required to have at least one Food Service Handling Manager. Each person who serves or prepares food has to take a Food Handler Course. The manager course is about 500 dollars, when all is said and done. The food handler course is about half of that. This is an annual fee.

Aside from what I was being required to do for the construction, the state also required the following:

-- A complete list of vendors. Said vendors must be USDA certified wholesale food suppliers. No farmer's markets, supermarket or home grown.
-- A complete menu, listing calories of each ready-made product.
-- A sample of my labels for prepackaged product showing nutritional data, ingredients, warnings about any allergens (peanut etc).
-- My estimate of how many employees I thought I would need (so they can tax me on each employee, annually, something the county does too)
-- Certificates for any employees who would be handling food, including any managers. My Federal EIN and my State tax ID.
-- Complete plans, contractors, amount of estimated business (so they can PRE TAX me on estimated sales taxes)

It just goes on and one. The law in Nevada is called the Nevada Revised Statutes, or NRS. The statutes for retail food are about 500 pages thick. That's just the codes that cover food. This does not cover the building, electrical, plumbing and service codes (such as ADA compliance, handicap parking, etc.)

So, I quit. They beat me.

It always amazes me when politicians use the sound bite of how they will "create jobs". Well, I am an entrepreneur and have created thousands of jobs over the past 25 years. I have also be responsible for over 500 million in savings to my customers over that time period. This means that 500 million dollars of wealth that was saved, could be put into new technologies, new business ventures for into savings.

I am a job creator. But here are at least six jobs that I won't be creating.

Government is not a creator of jobs. It's a destroyer."

Thank you, Ray, for this detailed account of what creating a job entails in the real world. Government economists, think-tank pundits and Big Media talking heads prattle on about creating jobs, but they have zero experience in creating even one job. Were they pushed away from the state-cartel trough, they would be clueless about how to start, fund, and profitably operate an enterprise that created jobs.
Every statute, code and regulation has a justification. I've sat in on meetings of engineers and government officials tasked with dreaming up "improvements" to the building codes. Cost never comes up, and neither does cost/benefit analysis.
Yes, a hallway that's a few inches wider might be beneficial. But what are the odds of someone losing their life because the hallway only meets previous codes?
Yes, a 1-inch gas line might have some small advantage over a 3/4-inch gas line, but is that advantage worth $20,000 to a small business or its customers?
Government regulation is supposed to address life safety and the exploitation of workers and the public. But unbeknownst to the status quo, it's supposed to do so with an eye on cost-benefits and diminishing returns.
Would the bagel shop have been demonstrably less safe if it had four sinks instead of eight sinks? The irony here in over-regulating small business food establishments is the vast majority of the tainted food scandals originate in the factory-meat processing plants of Big Ag.
The government's solution to absurdly high costs of opening a small business is: borrow more money. Never mind that the benefits of blowing $120,000 are so marginal they cannot even be calculated; we make the rules, you follow them, and if you can't afford to follow the rules, then don't open the business.
This is how you get an economy of bureaucrats justifying their existence with 500-page manuals regulating private enterprise and abandoned Main Streets and malls. The government assumes private enterprise will jump through an endless number of hoops to operate a business, and that there is an endless supply of willing entrepreneurs who will volunteer to put themselves at risk of bankruptcy.
Back in reality, there is not an endless supply of people willing to jump through an insane number of hoops and risk their capital and health on starting a risky enterprise. (Memo to state regulators: unlike your job, every enterprise is risky. It's called capitalism. You can look it up.)
When the costs of starting and operating a business soar, the odds of succeeding drop accordingly.
Guess what, our government: you forgot that ultimately you live off the private sector. Yes, let's pile on another 500 pages of regulations--no problem--nothing could be easier for those in secure jobs funded by taxpayers. But if the private-sector jobs go away, who's left to pay for state employees to shuffle thousands of pages of regulations and enforce countless "improvements"?
There are ways to ensure public safety and make it straightforward to start a business and create jobs. A few cities/counties have one-stop systems where those willing to start a business can get all the permits and paperwork at one counter. Officials actually work with the entrepreneur to figure out how to meet codes or pehaps get a variance to skirt regs that offer little benefit but would kill the business.
Many others have phony facsimiles of one-stop counters, fake props set up for PR purposes. The process isn't really simplifed; nobody cares if you succeed or not; the purpose was to make the local government appear as if it cares. It doesn't.
Government has the answer, of course: just borrow more money from our kids and grandkids. If taxes aren't enough, just borrow more money.
If our government can't destroy all the private-sector jobs directly, it will do so indirectly by borrowing so much money the system collapses. Good job, regulators; forget costs and cost-benefit analyses; go ahead and add another 500 pages of regs without any regard for costs or consequences. We'll all end up paying for your blindness and cupidity.

Don't Be Fooled By The Political Game: The Illusion Of Freedom In America

Submitted by Tyler Durden on 08/10/2015 22:25 -0400

inShare12

http://www.zerohedge.com/news/2015-08-10/dont-be-fooled-political-game-illusion-freedom-america 

Submitted by John Whitehead via The Rutherford Institute,

“The shaping of the will of Congress and the choosing of the American president has become a privilege reserved to the country’s equestrian classes, a.k.a. the 20% of the population that holds 93% of the wealth, the happy few who run the corporations and the banks, own and operate the news and entertainment media, compose the laws and govern the universities, control the philanthropic foundations, the policy institutes, the casinos, and the sports arenas.”—Journalist Lewis Lapham

Being a citizen in the American corporate state is much like playing against a stacked deck: you’re always going to lose.
The game is rigged, and “we the people” keep getting dealt the same losing hand. Even so, most stay in the game, against all odds, trusting that their luck will change.
The problem, of course, is that luck will not save us. As I make clear in my book, Battlefield America: The War on the American People, the people dealing the cards—the politicians, the corporations, the judges, the prosecutors, the police, the bureaucrats, the military, the media, etc.—have only one prevailing concern, and that is to maintain their power and control over the citizenry, while milking us of our money and possessions.
It really doesn’t matter what you call them—Republicans, Democrats, the 1%, the elite, the controllers, the masterminds, the shadow government, the police state, the surveillance state, the military industrial complex—so long as you understand that while they are dealing the cards, the deck will always be stacked in their favor.
Incredibly, no matter how many times we see this played out, Americans continue to naively buy into the idea that politics matter, as if there really were a difference between the Republicans and Democrats (there’s not).
As if Barack Obama proved to be any different from George W. Bush (he has not). As if Hillary Clinton’s values are any different from Donald Trump’s (with both of them, money talks). As if when we elect a president, we’re getting someone who truly represents “we the people” rather than the corporate state (in fact, in the oligarchy that is the American police state, an elite group of wealthy donors is calling the shots).
Politics is a game, a joke, a hustle, a con, a distraction, a spectacle, a sport, and for many devout Americans, a religion.
In other words, it’s a sophisticated ruse aimed at keeping us divided and fighting over two parties whose priorities are exactly the same. It’s no secret that both parties support endless war, engage in out-of-control spending, ignore the citizenry’s basic rights, have no respect for the rule of law, are bought and paid for by Big Business, care most about their own power, and have a long record of expanding government and shrinking liberty.
Most of all, both parties enjoy an intimate, incestuous history with each other and with the moneyed elite that rule this country. Don’t be fooled by the smear campaigns and name-calling. They’re just useful tactics of the psychology of hate that has been proven to engage voters and increase voter turnout while keeping us at each other’s throats.
Despite the jabs the candidates volley at each other for the benefit of the cameras, they’re a relatively chummy bunch away from the spotlight, presenting each other with awards (remember when Jeb Bush presented Hillary Clinton with a Liberty Medal for her service to the country), attending each other’s weddings (Bill and Hillary had front-row seats for Trump’s 2005 wedding), and embracing with genuine affection.
Trump’s various donations to the Clintons (he donated to Hillary’s Senate campaigns, as well as the Clinton Foundation) are not unusual. Remember, FOX News mogul Rupert Murdoch actually hosted a fundraiser for Hillary’s Senate reelection campaign back in 2006 and contributed to her presidential campaign two years later. In fact, FOX News has reportedly been one of Hillary’s biggest donors for the better part of two decades.
Are you starting to get the picture? It doesn’t matter who wins the White House, because they all work for the same boss: Corporate America. In fact, many corporations actually hedge their bets on who will win the White House by splitting their donations between Democratic and Republican candidates.
We’re in trouble, folks, and picking a new president won’t save us.
We are living in a fantasy world carefully crafted to resemble a representative democracy. It used to be that the cogs, wheels and gear shifts in our government machinery worked to keep our republic running smoothly. However, without our fully realizing it, the mechanism has changed. Its purpose is no longer to keep our republic running smoothly. To the contrary, this particular contraption’s purpose is to keep the corporate police state in power. Its various parts are already a corrupt part of the whole.
Just consider how insidious, incestuous and beholden to the corporate elite the various “parts” of the mechanism have become.

Congress. Perhaps the most notorious offenders and most obvious culprits in the creation of the corporate-state, Congress has proven itself to be both inept and avaricious, oblivious champions of an authoritarian system that is systematically dismantling their constituents’ fundamental rights. Long before they’re elected, Congressmen are trained to dance to the tune of their wealthy benefactors, so much so that they spend two-thirds of their time in office raising money. As Reuters reports, “For many lawmakers, the daily routine in Washington involves fundraising as much as legislating. The culture of nonstop political campaigning shapes the rhythms of daily life in Congress, as well as the landscape around the Capitol. It also means that lawmakers often spend more time listening to the concerns of the wealthy than anyone else.”

The President. With the 2016 presidential election shaping up to be the most expensive one in our nation’s history, with estimates as high as $10 billion, “the way is open for an orgy of spending by well-heeled interest groups and super rich individuals on both political sides.” Yet even after the votes have been counted and favors tallied, the work of buying and selling access to the White House is far from over. President Obama spends significant amounts of time hosting and attending fundraisers, having held more than 400 fundraising events over the course of his two terms in office. Such access comes with a steep price tag. It used to be that $100,000 got you an overnight stay at the White House. Now it will cost you $500,000 for four meetings a year with President Obama. Yet as Harvard professor Lawrence Lessig asks, “[H]ow does a man, as a person, run the nation when he’s attending 228 fundraisers? And the answer is not very well. It's pretty terrible for your ability to do your job. It's pretty terrible for your ability to be responsive to the American people, because—let me tell you—the American people are not attending 228 fundraisers. Those people are different.”

The Supreme Court. The U.S. Supreme Court—once the last refuge of justice, the one governmental body really capable of rolling back the slowly emerging tyranny enveloping America—has instead become the champion of the American police state, absolving government and corporate officials of their crimes while relentlessly punishing the average American for exercising his or her rights. Like the rest of the government, the Court has routinely prioritized profit, security, and convenience over the basic rights of the citizenry. Indeed, law professor Erwin Chemerinsky makes a compelling case that the Supreme Court, whose “justices have overwhelmingly come from positions of privilege,” almost unerringly throughout its history, sides with the wealthy, the privileged, and the powerful. For example, contrast the Court’s affirmation of the “free speech” rights of corporations and wealthy donors in McCutcheon v. FEC, which does away with established limits on the number of candidates an entity can support with campaign contributions, and Citizens United v. FEC with its tendency to deny those same rights to average Americans when government interests abound, and you’ll find a noticeable disparity.

The Media. Of course, this triumvirate of total control would be completely ineffective without a propaganda machine provided by the world’s largest corporations. Besides shoving drivel down our throats at every possible moment, the so-called news agencies which are supposed to act as bulwarks against government propaganda have instead become the mouthpieces of the state. The pundits which pollute our airwaves are at best court jesters and at worst propagandists for the false reality created by the American government.

The American People. “We the people” now belong to a permanent underclass in America. It doesn’t matter what you call us—chattel, slaves, worker bees, drones, it’s all the same—what matters is that we are expected to march in lockstep with and submit to the will of the state in all matters, public and private. Through our complicity in matters large and small, we have allowed an out-of-control corporate-state apparatus to take over every element of American society.

Our failure to remain informed about what is taking place in our government, to know and exercise our rights, to vocally protest, to demand accountability on the part of our government representatives, and at a minimum to care about the plight of our fellow Americans has been our downfall.
Now we find ourselves once again caught up in the spectacle of another presidential election, and once again the majority of Americans are acting as if this election will make a difference and bring about change—as if the new boss will be different from the old boss.
When in doubt, just remember what comedian and astute commentator George Carlin had to say about the matter:

The politicians are put there to give you the idea that you have freedom of choice. You don’t. You have no choice. You have owners. They own you. They own everything. They own all the important land. They own and control the corporations. They’ve long since bought and paid for the Senate, the Congress, the state houses, the city halls. They got the judges in their back pockets and they own all the big media companies, so they control just about all of the news and information you get to hear. They got you by the balls. They spend billions of dollars every year lobbying. Lobbying to get what they want. Well, we know what they want. They want more for themselves and less for everybody else, but I’ll tell you what they don’t want. They don’t want a population of citizens capable of critical thinking. They don’t want well-informed, well-educated people capable of critical thinking. They’re not interested in that. That doesn’t help them. That’s against their interests.

They want obedient workers. Obedient workers, people who are just smart enough to run the machines and do the paperwork…. It’s a big club and you ain't in it. You and I are not in the big club. ...The table is tilted, folks. The game is rigged and nobody seems to notice…. Nobody seems to care. That’s what the owners count on…. It’s called the American Dream, 'cause you have to be asleep to believe it.