Billionaires Aren’t Quite As Rich as We Think They Are

Source: Mises Institute

“One of the most enduring justifications for State intervention in an economy is the concept of wealth inequality. As the story goes, just 1% of the population owns roughly half of the wealth in the world…However, the problem with this narrative is it fails to address two major questions: 1. What are the components of that wealth? 2. Who are the primary beneficiaries of that wealth?

Wealth, in investment terms, is defined as “the value of all the assets of worth owned by a person, community, company or country.” …each individual will value every good or service on the planet differently based on personal interests…The problem here is that such valuations are subjective…the wealth of the 1% is made up predominantly of business ownership stakes .

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Business ownership is typically represented by stock share in the company…The problem with this definition is how equity is traded. The value of equity you will see on the Dow Jones is not the value of every share in existence. It is, instead, effectively the last marginal transaction for that particular company. The issue here is that maintaining high levels of wealth requires never trading in the goods. The only way the wealthy can remain wealthy is to never convert their equity into usable liquidity.

One can easily counter this to say that those assets still primarily benefit the wealth individual and the rest of us are stuck holding the bag. However, this is also not held up as true. If we use the concept of CEO pay disparity, we can demonstrate who really benefits from that wealth…The wealthy owners of Wal-Mart, the Waltons, only see 0.2% of the economic activity generated by the company…The workers, or the 99%, are overwhelmingly the beneficiaries of all that wealth the Waltons formally own.

Ultimately, these extremely on-paper wealthy individuals have been of an immense value to the rest of us. Without someone taking the risk to form a business, to collect all of our disparate skills that, alone, are worthless and combining them into an organization, we would not be living in a world where poverty and hunger continues to collapse and some countries have gotten so wealthy that people with broadband internet and smartphones are classified as impoverished. This is entirely thanks to all those rich people who are only asking to keep a very small portion of the production their assets produce. Attempting to destroy this with redistribution schemes will ultimately be harmful to the 99%.”

GDP: Fake News

Source: Daily Reckoning

“The first-quarter GDP number was 3.2%, it came in far above estimates. Consensus was about 2.3%. It was also the highest Q1 GDP print since 2015. But there’s probably less here than meets the eye. About half the GDP gain came from a surge in inventories and a sharp reduction in the trade deficit, neither of which is sustainable. They are likely one-time boosts. The economy has been growing since June 2009, making this the second-longest economic expansion on record. However, it has also been the weakest economic expansion on record…I expect lower GDP in the quarters ahead, returning to the same punk levels we’ve seen for nine years. For the year, economists believe GDP will expand 2.4%, down from last year’s 2.9% gain….What about the possibility of recession?….The group that ‘officially’ decides when the U.S. economy is in a recession is called the National Bureau of Economic Research (NBER) based in Cambridge, Massachusetts…the NBER might not identify the start date of a recession until nine months or a year after the recession began. By that method, the U.S. could be in a recession next month and we would not know about it until a year from now when the data were all in….If the economy improves ahead of the election, Trump has an excellent chance. If it falls into recession, the Democratic candidate will probably win, whoever it is. In that case, get ready for class warfare, much higher taxes and even more government spending than today. Got gold?”

The Terrifying Potential of the 5G Network

Source: New Yorker

“Two words explain the difference between our current wireless networks and 5G: speed and latency. 5G – if you believe the hype – is expected to be up to a hundred times faster….One estimate projects that 5G will pump twelve trillion dollars into the global economy by 2035, and add twenty-two million new jobs in the United States alone. This 5G world, we are told, will usher in a fourth industrial revolution. A totally connected world will also be especially susceptible to cyberattacks….Ransomware, malware, crypto-jacking, identity theft, and data breaches have become so common that more Americans are afraid of cybercrime than they are of becoming a victim of violent crime. Adding more devices to the online universe is destined to create more opportunities for disruption. ‘5G is not just for refrigerators,’ according to Robert Spalding, the senior director for strategic planning at the National Security Council. ‘It’s farm implements, it’s airplanes, it’s all kinds of different things that can actually kill people or that allow someone to reach into the network and direct those things to do what they want them to do. It’s a completely different threat that we’ve never experienced before.’….According to James Baker, the former F.B.I. general counsel who runs the national-security program at the R Street Institute, ‘There’s a concern that those devices that are connected to the 5G network are not going to be very secure from a cyber perspective. That presents a huge vulnerability for the system, because those devices can be turned into bots, for example, and you can have a massive botnet that can be used to attack different parts of the network.’….In February, Senator Richard Blumenthal, a Democrat from Connecticut, took both the F.C.C. and F.D.A. to task for pushing ahead with 5G without assessing its health risks. ‘We’re kind of flying blind here,’ he concluded. A system built on millions of cell relays, antennas, and sensors also offers previously unthinkable surveillance potential….’What is existential to democracy is allowing totalitarian regimes – or any government – full knowledge of everything you do at all times,’ says Spalding. ‘Because the tendency is always going to be to want to regulate how you think, how you act, what you do.'”

Brace Yourself: The Next Epic Collapse Could Be Weeks Away

Source: Giambruno/Casey Research

“There wasn’t a group of people more wrong about the 2008 financial crisis than those at the Federal Reserve. Mere months before the disaster hit in earnest, the nation’s highest economic and financial officials were vocal that there was nothing to worry about…Today there are clear indicators of a coming crisis… in the auto sector… the housing sector… and in the economy as a whole. Despite this, Fed Chairman Jerome Powell recently said, ‘I don’t see a recession [in 2019].’….Some people think the Fed saved the day by pushing pause on its rate hikes. After all, it claims it’s doing this as a precaution ‘in light of global economic and financial developments.’ But I don’t buy it. In fact, this whole charade proves to me that a crash is already underway – as the Fed inadvertently admitted we’re on the cusp of big problems. After all, why would the Fed stop tightening monetary policy if it thinks there’s no chance of a recession?….After nearly six years of 0% interest rates, the U.S. economy is hooked on easy money. It can’t even tolerate a modest reduction in the Fed’s balance sheet and 2.25% interest rates, which are still far below historical averages….In the weeks ahead, we will see shockwaves spread out, not only through the car and housing industries, but the economy overall. That’s why now is a good time to take a close look at your portfolio. Look at every position you own, and ask yourself: Would I be comfortable holding this through a recession… or even a crisis?”

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