Kids in Cages

I’m tired hearing about kids in cages. Frankly, it’s a very American thing to do. It’s so commonplace that folks just accept it as normal. Here’s some examples:

We separate kids from their parents and keep them in cages every Monday thru Friday from about 8 AM to 3 PM about nine months out of the year. It’s called school. Oh, you think that’s being harsh to say that? Ok, how do said children or parents gain access to the facility? They enter thru gates and checkpoints and while doing so may be subject to random inspections and metal detectors too. During school times many campuses have police present or on call to protect the site and civilian safety monitors patrol the grounds—especially at recess—to prevent unauthorized crossing of perimeter fencing.

For many parents, school is often just a government provided babysitter that warehouses children while parents are otherwise occupied. Many parents rejoice that the government requires that they are separated from their children on a regular basis. Parents who don’t agree are often visited by government agents if they don’t comply with this separation.

At my son’s school, the gates are locked and signs directing me to his location are frequently wrong. I often joke (lament might be a better word) with other parents that the school needs an app to locate your child. I can’t tell you how many times it’s taken me 10 to 15 minutes of running around from place to place to locate my youngster and extract him from his campus.

Kid Cage #1

Other examples of forced separation abound. Heck even the local health club has gotten in on the action. They don’t allow children to be with their parents, instead forcing them not to follow their folks healthy example but sit in a separate, guarded area with, yep, a fence around it—completed with barbed wire.

Kid Cage #2

Please note that the barbed wire in photo is to keep kids from escaping not directed to keep people out of the children’s area.

Caging children and separating them from their folks is not always a bad thing. Depending on the circumstances, many folks just consider it part of daily life. I submit for your consideration that if it weren’t for lawyers and criminals running free on our streets that there would be a lot less fences separating people from each other.

If you haven’t been out of state much, it might surprise you that in many neighborhoods, houses are not separated by any type of fencing. Whole blocks have backyards as one contiguous grass area with nothing but swing sets and play structures as far as the eye can see. Children have whole subdivisions as their play area.

When folks enter our country in violation of the law, they have committed a crime. This is no secret. They know it is wrong but purposefully do it anyways. When they get caught there can be consequences. It seems that many are willing to take that risk. Those arresting them will segregate people as they see fit, often for health and safety reasons. If children are separated then I have to believe there is a good reason.

FILE – In this June 18, 2014 file photo, two female detainees sleep in a holding cell, as the children are separated by age group and gender, as hundreds of mostly Central American immigrant children are being processed and held at the U.S. Customs and Border Protection Nogales Placement Center in Nogales, Ariz. President Donald Trump has seized on an error by liberal activists for tweeting photos of detainees at the U.S.-Mexico border in steel cages and blamed the current administration for separating immigrant children from their parents. The photos were taken by The Associated Press in 2014, when President Barack Obama was in office. (AP Photo/Ross D. Franklin, Pool)

The bottom line is that the current controversy about kids in cages is a contrived, emotional argument. It was perfectly fine when a Democrat President was in charge. I know of no photos of this alleged phenomenon since Trump took office. Not to say that one may not exist but the ones recently put out by Congressional Democrats to publicize their hearings on this issue were all removed from their websites and Twitter accounts as each was proven to be photographed when Obama was President. Congressional Democrats have yet to put forward one photo created after the current Administration took over. Funny how that works.

Introducing the Broad Squad

OAC and the gang think they are the political version of Charlie’s Angels but those of us in the Heartland think they’re nuts (or something worse). President Trump nailed them on Twitter a few days ago. Trump’s stock with average Americans has risen sharply since then. OAC says her gang is “The Squad” but clearly the name is missing an adjective to describe them further.

Reps. Alexandria Ocasio-Cortez, D-N.Y.; Ilhan Omar, D-Minn.; Ayanna Pressley, D-Mass.; and Rashida Tlaib, D-Mich., have collectively come to be known by that label since taking office in January. The four have found common cause on a number of issues, most recently by becoming the only Democrats to vote against the House version of a border funding bill that was backed by Speaker Nancy Pelosi.

‘The Squad’: These are the four congresswomen Trump told to ‘go back’ to other countries

You know there’s a dumpster fire in the Democrat Party when Donald Trump is defending Nancy Pelosi‘s character from these crazy chicks. But its been entertaining to watch.

While discussing these events at work earlier today, a female coworker made a suggestion that fits in so many ways. Her solution was to call them “The Broad Squad.

Botta Bing Botta Boom.

Yeh, that fits like a pair of cement shoes.

I Love Trump But…

I like Donald Trump and think he’s doing a good job despite encountering the strongest headwinds of any President in my lifetime. But the one thing he does that I fear will blow up in his face is taking credit for the great performance of the stock market. By taking credit for the highs in the market he also becomes the owner of the lows when they occur at some point in the future.

Trump doesn’t really get to decide how the market does. He can get the government out of the way of certain sectors by reducing regulation or imposing tariffs but that’s about it. He is more of a cheerleader for corporate growth but that’s about all he can do.

The good thing about this is at least Trump seems willing to own the things that happen while he is in office. In contrast, Obama blamed every bad thing on his predecessor, G.W. Bush, until after his reelection. Trump is a good man and I’m glad he is in our corner.

Tesla Games: It Must be Earnings Report Time

Elon Musk is in the news again with another distraction so it must be about time to report Tesla’s second quarter earning’s reports.

First, the distraction.

Neuralink, the secretive company bankrolled by Elon Musk to develop brain-computer interfaces, will provide its first public update later today in an event streamed over the internet.

“We’re having an event next Tuesday in San Francisco to share a bit about what we’ve been working on the last two years, and we’ve reserved a few seats for the internet.”

This could be the big reveal of what the mysterious company has been up to since Musk announced it two years ago, and hired a pack of leading university neuroscientists to pursue his goal of connecting human brains directly to artificial-intelligence software.

Elon Musk’s brain-interface company is promising big news. Here’s what it could be.

Elon wants to hook your brain to a computer for some unknown reason. MIT—authors of the above article—speculated that Elon would demo a monkey playing a video game. Based on what I know, it doesn’t take much brain power to play video games so Elon will have to do better than that to get my attention on this project.

Meanwhile, several pieces of Tesla news have surfaced in the last few days.


Tesla has been claiming that sales are up so of course to they announced another price cut. This is contrary to common sense but this is the company fathered by Elon Musk.

Tesla delivered more electric cars in the second quarter than any three-month period in its history, alleviating concerns that demand is waning for its stylish vehicles as tax incentives in its main U.S. market begin to phase out.

Despite the heartening news Tuesday, Tesla still hasn’t proven it can consistently make money despite repeated promises from CEO Elon Musk to reverse the company’s long history of losses.

Musk himself has already acknowledged Tesla will post a loss for the past quarter, but forecast profits after that—something he also did last year, only to be proven wrong. Analysts polled by FactSet are predicting the company will absorb a loss of about $228 million for the second quarter. If those projections hold true, Tesla will have lost nearly $1 billion during the first half of this year.

Tesla’s car deliveries rebound, but challenges still abound
Latest Tesla pricing

Tesla cuts price of Model 3 and Model S, increases price of full self-driving option

Bricks without straw

Tesla workers have told CNBC that, in order to meet Elon Musk and Tesla’s delivery quota for the second quarter, that they were subjected to unfathomably harsh conditions and took numerous manufacturing shortcuts.

This “bombshell” should come as no surprise anyone who has followed the Tesla story.

However, Tesla operates its manufacturing business in what is called an “open-air tent factory,” and employees told CNBC that they were forced to work through freezing nighttime temperatures, excessively hot daytime temperatures, and even unhealthy air quality brought on by wildfire smoke.

Elon Musk doing his Captain Blith impersonation

Whereas most legitimate automobile manufacturers rely excessively on robots and other automatic means of production to meet delivery estimates, these employees said they themselves had to bypass the robots and put the cars and battery packs together themselves.

This included the use of electrical tape to fix some defects. Great. That should rival being able to trick an autopilot-enabled car with table salt.

The grander point about how Tesla is being run is a referendum on Elon Musk. If these same stories came out of any other legitimate car manufacturer, the entire industry would be in an uproar.

Managers would get fired, senior management would be forced to resign, the stock of that particular company would fall, and government regulators would be all over that company in less time than it takes a BMW to go from 0 to 60.

This isn’t even the first time we’ve heard about worker conditions. It’s been going on for two years.

But because this is Tesla and Elon Musk, everyone seems to turn a blind eye.

Mark my words: If vehicles were delivered in this quarter under the conditions that these employees describe, consumers should worry that they are going to suffer from higher-than-average mechanical and recall problems.

Tesla’s Corner-Cutting ‘Bombshell’ Shouldn’t Surprise You

Autopilot claims scaled way back amidst programmer mutiny

A day after Elon Musk suggested that auto-driving Tesla cars might not be sold to the public and could instead be hawked as robotaxis, a report dropped revealing that in recent weeks nearly a dozen Tesla Autopilot engineers had already hit the eject button.

You can’t make this stuff up.

Tesla Engineers: We’ll Drive Ourselves Home
As many as 11 individuals on Tesla’s software Autopilot team departed the company during the past few months, according to The Information, continuing a purge which began when Elon Musk booted the team’s leader in May.

The significance of these Autopilot departures cannot be overstated. One of the highest profile functions of future Tesla vehicles is its ability to drive itself.

While there are other competitors in this market, for 10% of this division’s workforce to get up and leave means that they do not believe the timeline that Elon Musk has set for the product is in any way realistic.

And that’s not the only problem: There has always been doubt regarding the safety of Tesla’s Autopilot system, not only in its supposed ability to reduce crashes, but also in the numerous crashes in which it has allegedly played a part.

Elon Musk’s Tesla Autopilot Engineers Mash the Eject Button

Cult of Elon Musk

The article above calls followers of Musk a “cult.”

This should tell investors and consumers a lot about company culture. It is a personality cult. The product itself has a cult-like following. Tesla is all about Elon Musk.

Musk certainly has cast a spell on the true believers of his utopian dreams. He has made an irrational and emotional connection with people that willingly follow where he leads. These folks are convinced that Musk is singlehandedly transforming the world and the cosmos. They can’t wait to follow him to Mars.

My problem with Musk is that he doesn’t risk his own money to do anything, he always manages to fund his ventures with tax dollars and gullible investors. He starts much and finishes nothing. He is the 21st Century P.T. Barnum.

P.T. Barnum

Musk claims economic miracle

Oh, if you thought Burger King and Bill Clinton had cornered the market on whoppers try this from Elon:

Tesla Inc.’s Elon Musk is standing by a claim that the company’s electric cars will be appreciating assets once they’re capable of driving themselves.

Musk, Tesla’s chief executive officer, first made the claim in a podcast interview in April that the company’s vehicles will gain in value because they’ll eventually be capable of fully autonomous driving. He stood by this in a reply to a follower who wrote Tuesday that he was unsure if the CEO was joking or making a “really dumb” statement.

Quinn Nelson, the owner of a media company that produces videos about tech products, kept engaging Musk in a debate over the claim, which Nelson said “makes no sense.” The CEO replied that Tesla is bundling full-self driving — or FSD — into all cars the company builds, and that Tesla will be unable to keep up with demand when the vehicles are capable of complete autonomy.

With the exception of collectors’ cars and other rare cases, depreciation has been a fact of life for automakers, dealers and rental-car companies for decades. While Kelley Blue Book has handed Tesla a best resale value award for its Model 3, for example, the car-shopping researcher estimates the sedan retains about 69% of its value after three years.

Musk Stands by His Tesla Appreciation Claim That Was Called ‘Really Dumb’

My take

The wheels are falling off the Tesla dream. Musk would rather be doing other things than running this company and it shows. His attention and passion are elsewhere. He is a butterfly searching for the next colorful flower to pollinate.

Insurance Fraud/Racketeering: Knights of Columbus Style

By: Jake the Snake–an occasional contributor

Back in August 2018, the Knights of Columbus (a Catholic Church volunteer group) was served a lawsuit by a vendor alleging insurance fraud and manipulation, essentially running a Ponzi scheme.

U.S. District Court in Denver against the Knights of Columbus, claiming the Catholic-charity behemoth is using “phantom” numbers to fraudulently inflate its 1.4 million insurance pool of mostly aging members.

The lawsuit, filed Tuesday by Greenwood Village attorney Jeffrey Vail on behalf of UKnight Interactive and manager Leonard Labriola, accuses the charity of artificially claiming that it has 1.9 million insureds worldwide by counting members who have dropped out. It also accuses the charity of stealing the company’s trade secrets.

Denver lawsuit calls Knights of Columbus life insurance pool a racketeering scheme

Another Catholic organization facing serious lawsuits stemming from misleading its members…heard that before? Sadly, as a member of said group, the lawsuit is wholly WITH merit, and not a baseless claim, as some may have you believe. See I work in the business and I can say there is manipulation and cooking the books taking place and has been for some time. I am here to tell you the insurance arm of this organization is a Ponzi scheme and will fail by 2033 if things don’t change rapidly. I will lay out my thesis and reasoning below.

First basic insurance 101: The company charges you a premium, and if nothing happens the insurance company gets to keep it, if something happens, they must pay out for a covered loss. One reason this line of work is very profitable is you pay them in today’s dollars, they pay out as long as 30 days after the incident, pocketing the difference. The monies collected can be invested, but a reserve enough to cover a certain threshold of claims must be kept liquid in order to meet obligations should they arise!

In the case of the Knights of Columbus (KOC) they only sell life insurance, annuities, retirement, and long-term care policies to members and their spouses. As a result, they have a very small pool from which to choose since members must not only be Catholics but a member of the organization! In the case of all these products, claims are not anticipated for years after buying the product; in many cases, life insurance never will pay out! However, the organization is aging and has not been able to attract younger members to backfill the monies now being paid out to dying members. Worse yet, every major player in California has ceased selling long term care as it is very underpriced and most companies with policies remaining are doubling prices annually just to tread water! Even worse, the Knight’s products are not priced adequately, many far below the premium of far more reputable companies such as the carrier I represent! Problem is, in recent years, the amount of money paid out, has far exceeded monies paid in, resulting in an operating loss.

“Indeed, the KC Supreme insurance program is only one step removed from a classic Ponzi scheme,” the lawsuit says. “This case involves an elaborate scheme of racketeering, fraud, deception, theft, and broken promises by the Knights of Columbus Supreme Council (KC Supreme) and two of their senior executives, Thomas Smith and Matthew St. John.”

The problem lies in a couple of areas, like many groups and organizations not involving drinking or trips to a gentlemen’s clubs, the membership skews older. KOC is no different. Over 30% are over the age of 70. Most of the Knights in this age group own multiple policies totaling several hundred thousand or possibly a million dollars. But that’s ok because what about the other 70% right? Well here’s the issue, they are inactive. They only joined because their parent/grandparent made them and has been paying their dues. (Think CRA but not as far down the drain.). The reality is that this group has not bought the insurance, thus saddling the KOC with an aging membership controlling most of the insurance liability to be paid upon death!

Most phantom members are younger men who quit because of the demands of raising children and families, the lawsuit says. Aging and retiring members tend to remain active, it says.

For example, KC Supreme advertised on its website that it had 45,000 new members in 2010, while counting phantom members and omitting the fact that with the numbers of members who died or withdrew, net membership numbers actually shrank, the lawsuit says.

This creates a reserve issue and here is where the racketeering comes into play, and this part of the fraud leads all the way to New Haven, Connecticut where the HQ is located.

Knights HQ in New Haven

A directive came out, saying we are not to drop a member for any reason if he has attained the highest degree of rank…the only way to drop a member is if he has not paid dues for over 5 years! Think about that; 5 years plus of non-payment! (again, very reminiscent of CRA.)

The charity props its membership rolls by forcing 15,392 local Knights of Columbus councils to continue paying nominal dues for former phantom members after they drop out, the lawsuit says. The charity requires councils to recruit a new member before allowing them to drop an old one, the lawsuit says.

Based on such rules, one local council in New Jersey reports that it has 316 members when it actually has 54 members, the lawsuit says. When a Dallas council asked to remove more than 80 “long-delinquent” members from its rolls, KC Supreme only allowed eight to be removed, the lawsuit says.

I say the only way, because the other ways to drop someone are automatic…felony…no longer a Catholic…those things. The root issue is the younger members aren’t buying policies and have no intention to do so in the future, and since many members aren’t paying dues for themselves, they are being kept around to artificially inflate the membership rolls. This is where the racketeering scheme comes into play, as the KOC can lie to credit rating agencies about how solvent they are. KOC Insurance company can hide behind “…well we have 1.9 million members we can sell our products too…so we can be solvent if given an opportunity.”

While local councils do volunteer and charitable work, KC Supreme, generates billions of dollars tax-free every year selling life insurance, the lawsuit says. The Knights of Columbus’ KC Supreme website falsely advertises that its membership of “brother knights” grew for the 44th consecutive year and will soon top 2 million men, the lawsuit says.

“In fact, the true membership of the Knights of Columbus without these ‘phantom’ members is only about 1.4 million — their published number represents an approximate 36% overstatement!” the lawsuit says.

The insurance is pushed very hard by the organization. It’s mentioned at all 4 degrees (steps) you go through to full knighthood. You are required to meet with the agent after joining the knighthood, and insurance is pushed at every meeting. The agents are similar to your neighborhood AMWAY sales guy, essentially programmed to take a “No” as a “Yes”, and to keep pushing for the sale, it’s a turn off. These insurance reps are paid a slave wage and become commission only after about a year, and only get 4 councils to sell to, many having aging populations who won’t be eligible for the products. Turnover is high, and usually you buy a handful of policies on yourself to advance the scheme in the sense of putting food on your own plate. Isn’t this taking advantage of someone which runs contrary to the church’s values? Think that is odd, try the “retirement” of Chief Investment Officer Tom Smith, who stepped down just after the lawsuit was served…. let me guess impeccable and unrelated timing, right? Probably said he needed to spend more time with his family. I think Smith knows this Ponzi is about to hit the fan. Why else would he resign from a job paying him $900K a year?

Tom Smith

The fraternal order has $105 billion of insurance in force written against only $22 billion in assets, the lawsuit says. It says the Knights of Columbus organization “may very well be on the verge of financial collapse.”

I can say firsthand that the issues here are very real and true, heads are going to roll, and Pharisees and tax collectors described in the Bible will be shown in real modern form. I can say our council has 17 non-payers, and likely has at least that amount in next of kin whose dues are paid for by poppa.

A District Deputy (think regional manager) in Illinois has a council, that lists 300 members, but none have paid dues in years, and the council has not had a meeting in years. This narrative plays out everywhere leading me to believe the 1.9 million is closer to 1.1, making the “insurance pool” far less than advertised. A very heavy emphasis is put on recruiting, almost unhealthy emphasis, we just want a warm body capable of fogging a mirror, because they can buy a policy, thus buying time for the order.

My advice: Stay away from this group and if you have an insurance policy make sure the KOC belongs to the National Association of Insurance Commissioners, which in layman’s terms means if something were to happen and the insurance arm goes bankrupt, other companies step in to pay the claims/absorb the policies.

This is actually a very big deal, as many members have been misled about the insurance program and its long-term viability. The Chief Insurance Officer retiring, is likely more of a sign of a rat scurrying off the ship. Tom Smith is a coward of a human, yet no one is able to call him out. This story does not end well, and hopefully no one has any retirement monies invested in this scheme. Sit back and watch the dominoes fall boys and girls….and the Catholic Church wonders why it’s dying off.

Jake the Snake
Knight of Columbus

Subprime Feeding Frenzy

The sequel to Jaw has the tag line, “Just when you thought it was safe…

They’re back. Yep. Subprime loans are back and more prevalent than ever. If you thought Bush, Obama, and “too big to fail” were relics of history, you’d be as clueless as the 90-Day Guy or the naïve written about by other bloggers on this site. The truth is that subprime lending and non-traditional (non-bank) loans are even more prevalent than ever. This is true for both corporate and consumer lending.

Below are some articles outlining the threat that subprime lending poses to the financial system.

Definition: Subprime Credit

Subprime credit is typically composed of subprime borrowers with low credit ratings, high debt levels, a record of delinquency, defaults or bankruptcy, no property or assets that can be used as a collateral. Lenders use a credit scoring system, like FICO scores, to classify subprime borrowers based on the probability of repayment. Different creditors use different rules for what constitutes a subprime loan, but FICO scores below 600 have typically been classified as subprime in the past.

Subprime credit is financed by repackaging subprime credit card debt, auto loans, business loans and mortgage into pools and selling them investors as asset-backed securities, like collateralized debt obligations and mortgage-backed securities.

During the housing boom in the early 2000s, lending standards on subprime mortgages were relaxed, with NINJA loans being made to borrowers with no income, no job and no assets. When the bubble burst in 2007, the quantity of subprime credit in the financial markets contributed to the subprime meltdown and the subprime crisis, which triggered the Great Recession.

Consumer advocates say subprime credit is a social good and provides finance to low-income households. Yet it increases the risk of credit booms and busts. In the U.S., banks tightened lending standards after the financial crisis. However, auto finance companies have since used low interest rates to fuel a boom in subprime auto loans. This helped the economy to recover. However, auto loan delinquencies hit crisis levels in 2017, even as subprime auto-lending continued to boom, leading to speculation that this another credit bubble that is set to burst.

Subprime Credit

Subprime Loans to Consumers

The article that I saw today has political as well as economic implications. Read these excerpts and then see if you agree with me.

Lower-income U.S. consumers are showing signs of weakness despite the strong market, and if the economy enters a recession, any possible credit crunch could be “material,” according to UBS.

Strategists led by Matthew Mish and Eric Wasserstrom wrote in a note Thursday that they’re worried about lower-income consumers who have seen little net worth improvement since the financial crisis. Debt burdens for many of those households have grown as credit card interest rates hit record highs and student loan borrowings surged. UBS expects that the consumer credit cycle can extend but a future downturn could be worse than the one seen in 2001 and 2002 thanks to subprime consumers’ growing debt loads, higher losses and the growth of “fragile” non-bank lenders.

A UBS survey found that households reporting credit problems like loan application rejections matched a survey high of 40%, up 4 percentage points from a year earlier. Consumers’ likelihood of missing a loan payment in the next year increased 1 percentage point to 13% …

Even though the Treasury rally has sent U.S. interest rates sinking, the strategists say many U.S. households are still seeing their interest burdens rise, similar to what occurred in the years before the crisis. The higher rates may come from a shift in what kind of debts consumers have: household debt was a record $13.7 trillion in the first three months of 2019, and most of the post-crisis growth in obligations has come from non-mortgage debts like student loans that carry higher interest rates.

UBS’s consumer credit analysts expect some deterioration in delinquency rates, but say positive wage growth should help most consumers stay current on their obligations. They’re more concerned about long-term trends because consumers’ finances aren’t recovering as well as their credit scores might indicate. They estimate some $2.6 trillion of U.S. household debt is subprime, and any future downturn would likely affect lower-tier U.S. consumers, instead of a more systemic problem like 2008-2009.

Bottom 50% of Consumers Are Showing Signs of Weakness, UBS Says

The article seems to indicate that in the next economic downturn that the rich will do fine and the poor will get hammered. The poor are living on borrowed money and when the economy goes down, the credit tap will be shutoff while interest on existing debt will go up. This will cause poor folks to default on their debt and due to the amount of debt, it will send shockwaves thru the economy. In the end, the rich will stay rich and the poor will be even poorer.

This in turn, will feed into the socialist narrative that is being propagated by much of the Democrat Party. Poor folks will once again vote to relinquish their freedom for security, and as a bonus, they can hope to screw the fat cats in the process.

Non-Bank Lenders

Another soft spot in the financial world is the rapid rise of non-bank lenders. These guys exist to make money via loans that traditional banks won’t touch. They loan to both businesses and individuals. Many of these loans would be viewed by traditional metrics as subprime. Please note in the articles quoted below that half of all mortgages are controlled by these non-bank entities. They are not subject to regulation by banking or securities laws. They exist… in the shadows.

When the dotcom bubble burst, Chuck Doyle smelt an opportunity — arranging loans for companies shunned by big banks and too small to tap the bond market. It proved very fertile ground.

His company, San Francisco-based Business Capital, says it has since helped hundreds of smaller companies raise money to keep afloat, finance their inventory or expand. But Mr Doyle, an avuncular former fibre-optic salesman, says conditions in the non-bank, non-bond “private debt” market have never been more frenzied.

Chuck Doyle

“We’ve been through a few cycles, but this one is crazy,” he says. “We’ve seen unbelievably explosive growth. We’ve seen deals that banks wouldn’t have done even before the financial crisis.”

The post-crisis explosion of the US corporate bond market, and more recently the leveraged loans industry, have hogged the attention of analysts, investors and regulators. But it is arguably the underbelly of the American debt market that has seen most change in recent years.

“It’s a wild west space, where everyone competes for every deal,” says Oleg Melentyev, head of high-yield credit strategy at Bank of America Merrill Lynch. “The whole thing has exploded in size, and everyone is getting into it.”

There is no clear definition for so-called private debt, which is often also called direct lending or mid-market lending. It broadly consists of bespoke loans made by specialised lenders such as fund managers, insurers and tax-advantaged vehicles known as “business development companies.”

Borrowers can range from sizeable international groups to small companies seeking money for a new store — or just a shot of cash to keep trading for another quarter. Unlike leveraged loans, private debt is typically not widely traded, and unlike bonds, the market is largely unregulated and opaque.

“Direct lending has been the strategy du jour — when we see stresses we’ll probably see it there first,” says Jim Smigiel, head of portfolio strategies group at SEI Investments, near Philadelphia. He doubts the market is extensive enough to cause systemic problems, but “a lot of people will lose a lot of money”, he predicts.

Private debt investors admit that the flood of money has dramatically eroded both standards and returns. KKR estimates that the average private debt yield has now fallen to about 6-8 per cent, down from the low teens a few years ago. That is only slightly higher than in the mainstream junk bond market, which is actively traded and far more transparent.

Non-bank lenders thrive in the shadows

“What’s the biggest risk to the system right now? After listening to Fed Chief Jay Powell, who made a lot of sense today, I’d say it’s non-bank lending,” Cramer said Wednesday on “Mad Money.”

In the speech, Powell characterized non-bank lenders as imprudent and a potential problem for the credit markets and the broader financial system.

Fed Chief Jay Powell

Even so, Cramer thought the rapid-fire rise of institutions like Quicken Loans, PennyMac and LoanDepot, three of the largest non-bank lenders, posed a near-term threat.

“There are many non-bank institutions making home loans that could collapse in value,” Cramer warned. “These companies came out of nowhere. They now control about half of the current mortgage market — that’s a trillion dollars’ worth of mortgages a year.”

Worse, if those lenders can skirt regulations meant for big banks with similar lines of business and make loans without enough documentation or money down, “that could be a serious problem,” the “Mad Money” host warned.

Non-bank lenders like Quicken Loans are ‘the biggest risk to the system’ right now, Jim Cramer warns

Parallels between leveraged loans and subprime

It’s not surprising that people are drawing parallels. The leveraged loan market is just shy of $1.3 trillion, the size of the subprime market at its peak. As did subprime, it has experienced rapid growth and even more rapid deterioration in underwriting standards, with the most highly leveraged companies accounting for a growing share of the market. Also like subprime, it relies on an “originate to distribute” model meaning the lender originating the loan does not retain major risk if the borrower defaults, but rather passes that risk on to investors, frequently by pooling them and selling securities backed by their cash flows in a “collateralized loan obligation (CLO).”

Like subprime, which catalyzed distress in the broader mortgage market, leveraged loans could also precipitate problems in the broader corporate debt market. Non-financial corporate debt as a percentage of GDP is at an all-time high. A record number of companies are rated just above junk and thus are exposed to system-wide downgrades to sub-investment grade status if the ratings agencies get spooked by a high profile default.

And the risk of that happening is not inconsequential. Leveraged borrowers are not obscure companies but include such household names as American Airlines (AAL), Hilton Hotels (HLT), and Burger King (QSR), according to the trade association that represents leveraged loan lenders.

How regulators can stop leveraged lending from becoming the new subprime

Folks, I hope reading this will cause you concern that everything is not peachy keen in the financial world. I think the availability of these alternative funding sources in a quest for higher returns, might be part of the reason that the 90-day cycle is so important. People want to know their risky investments are paying off or they might be tempted to cut their losses and pull their support.

Utopia Impossible: EV Fleet

You know the drill. A man retrieves a small recording device from an unexpected place. He hits play and is given a seemingly impossible task—usually to save the world or prevent an international incident. The recorder finishes delivering its message and self-destructs. A match lights an old fashioned fuse which starts to burn as the Lalo Schifrin theme song begins. You know the next hour will be full of twists, turns, and deceit. Buckle-up and let the intrigue begin.

Oh, the message for today’s episode goes something like this:

Message delivery

Greetings Mr. Newsom, your mission as passed on from your predecessors, Schwarzenegger and Brown, is to outlaw the internal combustion engine within the boundaries of California by 2030 2040. Know that you have the full support of Democratic state Assemblyman Phil Ting of San Francisco, state Air Resources Board Chairman Mary Nichols, and a large block of the Legislature. Your mission, should you decide to continue this quest, is to secure the necessary legislation and resources to make all vehicles in your State electric powered by this deadline. The fate of the planet is in your hands.

Air Resources Board Chairman Mary Nichols

As mentioned above, the recorder vaporizes and the credits roll. When the story continues, we find the Governor assembling his team. The team is commissioned with implementing a plan to force people into electric vehicles. After consulting with Warren Buffett, Elon Musk, Alexandria Ocasio-Cortez, the Sierra Club, Green Peace, and a host of interested parties, the team presents the Governor with a list of proposals.

  • Increasing gasoline taxes
  • Raising the vehicle emission standards
  • Denying new permits for gas stations
  • Increasing regulation of refineries
  • Tax incentives for electric vehicles and charging stations
  • Increased DMV registration fees
  • Allowing electric vehicles to use HOV lanes
  • Subsidize even more public transportation
  • Tax all vehicles per mile driven
  • Outlaw barbeques and fire places
  • Outlaw gas powered lawn movers, blowers, and trimmers
  • Outlaw privately owned fuel storage tanks after 2040
  • Ban privately owned aircraft and tax the crap out of commercial air travel

Anyway, you get the idea. Use the power of government to force people to change their behavior. It sounds so good, what could possible go wrong?

While California seems on the cusp of making this self-imposed dream a political reality, the bigger issue is can an all-electric vehicle mandate be done?

While Sacramento, used to issuing orders, believes it can simply command a fully electric automobile fleet through votes and the stroke of a governor’s pen, the same way it believes it can decree that the entire state must switch to renewable sources for electricity, it can’t escape the reality, which says it can’t be done. There aren’t enough raw materials available.

This answer many surprise you. In England, a similar mandate has been adopted with a date further into the future, 2050 as opposed to the preliminary date of 2040 in California. The United Kingdom (i.e. England, Scotland, Ireland, etc.) has 38.2 million vehicles as opposed to 25.6 million in California. Doing the math, California has 2/3 as many vehicles as the U.K.

A statistical study was published to see just what it would take for the U.K. to achieve their goal. The study was quoted by Steve Milloy on the website Junk Science.

British researchers say that if the United Kingdom is to meet its electric car targets for 2050 it “would need to produce just under two times the current total annual world cobalt production, nearly the entire world production of neodymium, three-quarters the world’s lithium production and at least half of the world’s copper production.”

Adjusting other statistics for California’s market yields:

  • 134% of current global cobalt production
  • 67% of current global neodymium production
  • 50% of current global production of lithium
  • And 34% of current global production of copper

With governments all over the world scrambling for the same scarce resources, it’s just “not possible,” Milloy concludes, for California to go all-electric. Have policymakers even considered this in their haste to outlaw conventional cars and trucks?

The article I’m quoting concludes:

Lawmakers can legislate, expect, wish, hope, and mandate until they collapse from exhaustion onto the capitol’s marbled floors. But they are bound by the pace of technological advancement. They can no more decree an EV fleet to be so than they can change the color of the sky.

Here’s Why an All-Electric Vehicle Fleet Can’t Happen in California … Or Elsewhere

The statistics in the U.K. study are mind blowing.

Again, as is my habit, I will quote extensively in case the URL I’m citing should be deleted, moved, or placed behind a pay firewall at some point in the future. Remember that this study assumes only the U.K. is implementing this goal. The economic reality of other actors–be they California, China, or whoever–places even more demand on these resources.

The metal resource needed to make all cars and vans electric by 2050 and all sales to be purely battery electric by 2035. To replace all UK-based vehicles today with electric vehicles (not including the LGV and HGV fleets), assuming they use the most resource-frugal next-generation NMC 811 batteries, would take 207,900 tonnes cobalt, 264,600 tonnes of lithium carbonate (LCE), at least 7,200 tonnes of neodymium and dysprosium, in addition to 2,362,500 tonnes copper. This represents, just under two times the total annual world cobalt production, nearly the entire world production of neodymium, three quarters the world’s lithium production and at least half of the world’s copper production during 2018. Even ensuring the annual supply of electric vehicles only, from 2035 as pledged, will require the UK to annually import the equivalent of the entire annual cobalt needs of European industry.

The worldwide impact: If this analysis is extrapolated to the currently projected estimate of two billion cars worldwide, based on 2018 figures, annual production would have to increase for neodymium and dysprosium by 70%, copper output would need to more than double and cobalt output would need to increase at least three and a half times for the entire period from now until 2050 to satisfy the demand.

Energy cost of metal production: This choice of vehicle comes with an energy cost too. Energy costs for cobalt production are estimated at 7000-8000 kWh for every tonne of metal produced and for copper 9000 kWh/t. The rare-earth energy costs are at least 3350 kWh/t, so for the target of all 31.5 million cars that requires 22.5 TWh of power to produce the new metals for the UK fleet, amounting to 6% of the UK’s current annual electrical usage. Extrapolated to 2 billion cars worldwide, the energy demand for extracting and processing the metals is almost 4 times the total annual UK electrical output.

Energy cost of charging electric cars: There are serious implications for the electrical power generation in the UK needed to recharge these vehicles. Using figures published for current EVs (Nissan Leaf, Renault Zoe), driving 252.5 billion miles uses at least 63 TWh of power. This will demand a 20% increase in UK generated electricity.

Challenges of using ‘green energy’ to power electric cars: If wind farms are chosen to generate the power for the projected two billion cars at UK average usage, this requires the equivalent of a further years’ worth of total global copper supply and 10 years’ worth of global neodymium and dysprosium production to build the windfarms.

Solar power is also problematic – it is also resource hungry; all the photovoltaic systems currently on the market are reliant on one or more raw materials classed as “critical” or “near critical” by the EU and/ or US Department of Energy (high purity silicon, indium, tellurium, gallium) because of their natural scarcity or their recovery as minor-by-products of other commodities. With a capacity factor of only ~10%, the UK would require ~72GW of photovoltaic input to fuel the EV fleet; over five times the current installed capacity. If CdTe-type photovoltaic power is used, that would consume over thirty years of current annual tellurium supply.

Pedal to the Metal: Why California can’t ban gasoline-powered cars

Please note that many of these rare-earth metals are mined by poor people in third world nations that are slaves or politically oppressed. The workers’ pay with their blood while the ruling class line their pockets with the proceeds.

Apple Spanked Repeatedly as Tim Cook Leads from Behind

Here are seven recent stories (in no particular order) that all agree that Apple is rotting.

Waterproof My ***

Samsung is being taken to task in Australia for deceptive advertising.

Samsung was one of the first companies to make water resistance a regular feature of their flagship smartphones, but it turns out the confidence this gave consumers to use their handsets around bodies of water is false, as, according to the Australian Competition and Consumer Commission (ACCC), the company regularly “denied warranty claims from consumers whose phones were damaged when used in water.”

Samsung in hot water Down Under for misleading ads about water resistance
Samsung & Apple lied about water resistance

Buried in the bottom paragraph of this story is this nugget.

Samsung is not the only company who advertises their phones as water resistant and who then refuses claims based on water damage, with Apple guilty of the same practice, using weasel words in their warranty documentation.

Crumby Earphones

If you are looking to replace your awful Apple AirPods, here’s the good news. Sony WF-1000XM3 is the latest noise canceling truly wireless earbuds that has arrived in the market. According to the early reviews from various tech blogs, it may be the best truly wireless earbuds that money can buy.

Sony’s new wireless noise-canceling earbuds can replace your awful Apple AirPods

5G Vaporware

5G technology is expected to change the way users interact with each other. Undoubtedly, 5G will open more opportunities than what 4G roll-out did. And now that we are on the verge of getting a commercial roll-out of 5G, almost all smartphone manufacturers are trying to bring it in their upcoming flagship.

Although there isn’t plenty of 5G-enabled smartphones available at the moment, technology market analyst firm Canalys says the shipping of 5G-enabled smartphones will reach nearly 1.5 billion by the end of 2023, while the shipment will reach 800 million in 2023 alone, which accounts for 51.4 percent of all smartphone shipments, surpassing the number of 4G smartphones shipped.

Local Chinese brands, such as Huawei, Oppo, Xiaomi and ZTE, are 5G handset launch partners for the three operators, while Samsung will also use this window of opportunity to fight back in China. Yet Apple will miss out, leaving loyal iPhone users waiting another year, which might risk them switching to aggressive competitors,” said Canalys analyst Mo Jia.

5G smartphones to surpass 4G ones in 2023, says analyst firm Canalys

China more or less?

For Apple it’s both, which makes no sense.

June 28, 2019

Apple Inc. is manufacturing its new Mac Pro computer in China, according to people familiar with its plans, shifting abroad production of what had been its only major device assembled in the U.S. as trade tensions escalate between the Trump administration and Beijing.

The tech giant has tapped Taiwanese contractor Quanta Computer Inc. to manufacture the $6,000 desktop computer and is ramping up production at a factory near shanghai, the people said.

Apple Moves Mac Pro Production to China
–Wall Street Journal

July 3, 2019

Microsoft, Google, HP are planning to follow Apple to cut hardware production in China to avoid tariffs in the US-China trade war.

Nikkei also reported that these companies have been planning to move out of China for many months, well before Apple. Apple is really the very last and the slowest to start formulating plans, while everyone else out there is much more aggressive,” an unnamed supply chain executive said.
However, we haven’t heard anything official from these companies. Neither Apple nor most of the companies in the Nikkei report have commented( via AppleInsider).

Microsoft, HP, Google join Apple to move hardware production out of China

iPhone designer quits Apple

Apple’s chief design officer Jony Ive is leaving the company later this year to form an independent design firm. And Apple will be one of his first primary clients.

Ive’s move may not be as tectonic a shift as a possible retirement or leaving Apple completely. But it does mark a dramatic shift for the tech behemoth.

Ive, after all, has been credited with helping power Apple’s resurgence after co-founder Steve Jobs took over as its head in 1997. He helped create the iMac, the MacBook line and the iPod music player. It was the iPhone, though, that would prove to be his biggest hit, turning Apple from merely a computer company into one of the world’s largest and most profitable.

iPhone designer Jony Ive is leaving Apple

Apple subscription News App not living up to promised revenue

Citing publishing sources in contact with Apple, Business Insider reports the tech giant is actively seeking input from publishers as it tweaks Apple News+ to address concerns from partners.

One pressing issue is money. Apple is said to have estimated publishers would in their first year on News+ rake in 10 times the revenue they made from Texture, the digital magazine subscription service Apple acquired in 2018 to build its premium news product.

It’s one twentieth of what they said,” the publishing executive said. “It isn’t coming true.”

Apple looks to rejigger Apple News+ as publishers carp over low revenues, ‘unfinished’ product

Measured by the simple metric of right or wrong direction, the verdict is clearly that Apple is going the wrong way.

Amazon Burns Books Again while California Goes to War with Biblical Christianity

Another story has surfaced about burning books. In a previous installment, it was documented that Amazon had deleted books warning of the existential threat of Islam and its incompatibility with Western Culture (i.e. Christianity).

On January 7 of this year, I published an article at PJ Media about Amazon removing doormats featuring Qur’an verses from sale because the Council on American-Islamic Relations (CAIR) found them offensive. In that article, I asked:

“How long will it be before Hamas-linked CAIR starts demanding that books that criticize jihad terror and Sharia oppression of women, gays, and others also be dropped by Amazon? “

The answer turned out to be 51 days.

It’s the British government and the BBC, rather than CAIR, that are likely behind this, but Amazon has just dropped the book Mohammed’s Koran by the renowned British activist Tommy Robinson and Peter McLoughlin — and apparently only because its censors dislike Robinson. In the last two weeks, Robinson spectacularly embarrassed the BBC by exposing the bias and dishonesty of its reporter John Sweeney. The retaliation has been swift and severe: Robinson has been banned from YouTube and Facebook, and now his book has been withdrawn from sale.

Amazon Bans Tommy Robinson’s Book, ‘Mohammed’s Koran’

The article above then goes on to say:

This is an extremely ominous development. Amazon and Barnes and Noble — which is also not carrying this book — have a virtual monopoly on book sales. When these two giants refuse to carry a book, that book effectively does not exist.

This time Amazon has banned books that say homosexuals can be cured of their sinful lifestyle (my words).

Amazon has removed English-language books by a man largely considered “the father of conversion therapy” from its site following mounting pressure from LGBTQ activists.

Dr. Joseph Nicolosi, founder of the now-shuttered Thomas Aquinas Psychological Clinic, as well as the National Association for Research and Therapy of Homosexuality (NARTH), authored several how-to guides directed to parents of LGBTQ youth, including “A Parent’s Guide to Preventing Homosexuality.” His books are some of the most well-known works about conversion therapy, the pseudoscientific practice of trying to change a person’s sexual orientation or gender identity.

Amazon removes controversial books by ‘father of conversion therapy’

Coincidently, the Bible also talks about some first century Christians being former homosexuals. (The Greek word for homosexual is highlighted in blue below.)

Know ye not that the unrighteous shall not inherit the kingdom of God? Be not deceived: neither fornicators, nor idolaters, nor adulterers, nor effeminate, nor abusers of themselves with mankind, nor thieves, nor covetous, nor drunkards, nor revilers, nor extortioners, shall inherit the kingdom of God. And such were some of you: but ye are washed, but ye are sanctified, but ye are justified in the name of the Lord Jesus, and by the Spirit of our God.

I Corinthians 6: 9-11

So, is the Bible next? Actually, yes; but not by Amazon. Enter the State of California. Specifically, ACR-99. Oh, before I get to the specifics of this little gem, consider this. ACR-99 is sponsored by three assembly members and 56 co-sponsors out of 80 members. So, 59/80 is 74 percent support. Yep. This baby is a done deal with bipartisan support and a veto proof majority.

Those of you that are naive enough to think government doesn’t legislate morality, here is clear proof to the contrary.

So, what is it?

This measure would call upon all Californians to embrace the individual and social benefits of family and community acceptance, upon religious leaders to counsel on LGBTQ matters from a place of love, compassion, and knowledge of the psychological and other harms of conversion therapy, and upon the people of California and the institutions of California with great moral influence to model equitable treatment of all people of the state.

You can read the whole thing here

The bottom line is that the government is telling your pastor, among others, that trying to convince a homosexual that living that lifestyle is sinful and they should repent because God’s model is heterosexuality is against the beliefs of the people of California. Public policy in this state is now to oppose anyone that teaches beliefs contrary to the government’s position.

So, your pastor is now being told that he must accept homosexuals as normal and affirm their lifestyle…or else. The flipside is that telling them to repent is harmful. Sorry but I think letting someone go to Hell is harmful and not warning them is wrong.

You saw already what the Bible had to say but the government knows better.

WHEREAS, The California State Legislature has found that being lesbian, gay, bisexual, or transgender (LGBTQ) is not a disease, disorder, illness, deficiency, or shortcoming; and

i.e. homosexuality is not a sin

WHEREAS, Practices or therapies that attempt to create a change in a person’s sexual orientation or gender identity are often referred to as conversion therapy; and

This included pastoral counseling.

WHEREAS, Some family, caregivers, and communities promote conversion therapy when a person is known or thought to be LGBTQ; and California law recognizes that performing conversion therapy on young persons is ineffective, unethical, and harmful; and

Such pastoral counseling is declared as “ineffective, unethical, and harmful”

WHEREAS, The stigma associated with being LGBTQ often created by groups in society, including therapists and religious groups, has caused disproportionately high rates of suicide, attempted suicide, depression, rejection, and isolation amongst LGBTQ and questioning individuals; and

The State’s declaration is not that homosexuality is a mental and spiritual illness but the opposite. Calling homosexuality wrong, sinful, or deviant—all things declared in the Bible about those that practice such behavior—is now and forevermore to be anathema in California.

Don’t believe me, read the next clause:

WHEREAS, The State of California has a compelling interest in protecting the physical and psychological well-being of minors, including LGBTQ youth, and in protecting its minors against exposure to serious harms caused by family rejection and attempts to change sexual orientation or gender identity; and

This is the same rational that is used in Canada to prosecute Christians and discriminate against them for believing God instead of man. This is not hypothetical and tin foil hat nonsense, but stuff already done to Christian families, churches, and colleges and upheld by Canadian courts.

Resolved, That in addressing the stigma often associated with persons who identify as LGBTQ, we call on the people of California–especially its counselors, pastors, religious workers, educators, and legislators–and the institutions of California with great moral influence–especially its churches, universities, colleges, and other schools, counseling centers, activist groups, and religious centers–to model equitable treatment of all people of the state.

There’s the game plan in a short paragraph. Conform or else. As much as they can, this resolution is presenting a public policy framework to stamp-out opposition to homosexuality anywhere it is found.

Like all things Liberals do, this is a beginning and not the end. Look for this new foundation to be rapidly built upon.

If you want to know where this leads then look to Canada. They are a few years ahead of where California is now. Students of private colleges can’t get government loans. Degrees grant by said colleges are not recognized for government employment or professional licensing. Parents opposed to government positions on morality have their children taken away by child protective services never to be returned. The goal is to use the power of the state to stop the propagation of Christianity. You will find similar tactics in places ruled by totalitarian governments.

Today is July 4th. We should be celebrating freedom but beware the future. We are one generation from losing it.

Chevy’s is Broken

Johnnie Does had a coupon for a free appetizer if he bought an adult entrée so he decided to visit a Chevy’s location near his office for some good ole American Tex-Mex cuisine. Chevy’s is a chain that has been in and out of bankruptcy for what seems like the last decade. They have a mix of great locations such as the one on the Sacramento River, average places like the now closed one in Gold River, and the one by my office. Here is the review.

Ambiance: It’s a chain, but in reality it has a lot going for it. The bar or “cantina” had festive decorations, a countdown clock for Cinco de Mayo next year, and lots of drink selections. The actual restaurant area also looked fast paced, and they had an area with lots of vegetables on display….I’m not sure why? Perhaps to buttress their claim of “Fresh Mex.” The servers were flying around, and it seemed like more of a fast casual place than a sit down place. I took a seat at the “Cantina” since it was just me….big mistake. 4.4/5 on the ambiance (I’ll explain more later on).

Chevy’s full stocked bar (at another location)

Food: I was greeted with a pile of chips, and a small bowl of salsa, which had to have been the mildest salsa since Pace Picante….no other options here. The chips were for certain Tostitos and not homemade, but oh well. The bar tender seemed friendly…however he set down a bunch of fruit in front of me and started cutting it up….then he disappeared with said fruit still in front of me. This would be a recurring theme, him disappearing, which was bizarre since the bar area was vacant sans myself. Finally at 1pm he took my order; keep in mind I have an hour for lunch and must be back at 1:30. I ordered the pick 2 chicken quesadillas and the wings as my free appetizer. Again the disappearing act ensued for 15 minutes, finally at 1:20 he emerged with my quesadillas, no wings. At 1:30 the wings were still MIA, I guess they were still trying to catch a fresh chicken near Florin Road. The bill came and well, the chicken wings showed up there! The manager said he would only remove the charge if I presented the coupon, so I did, couldn’t fight it, but he should have taken a hint since no plate other than the one holding my quesadillas was in front of me. The quesadillas…also missing chicken, but oh well. 1.1/5

Chevy’s quesadillas as found at another location

Overall: This place is busted and busted badly. They appear to be trying to take a page from Dos Coyotes, but they are not fast casual, they are a chain, and a sit down one at that. Embrace what you are and stay in your lane. Your menu is way overpriced for the food to be missing ingredients, or entire items. All I want is to get what I ordered in a reasonable time and have it look like the picture when it arrives on my plate. Chevy’s need to find a happy medium between what’s on their menu and what comes out of the kitchen. Also, make the chips in house, or at least not from a crappy bag from a grocery store.

In addition, the birthday song being sung what seems like every 5 minutes is very annoying. Chevy’s is not a great place to visit on your own or with co-workers… (see Farrell’s demise and their similar birthday song charades.) Given the advanced age of many of their customers, maybe frequent birthdays, slow service, and bland food are passable but for us working stiffs, this place is not the highlight of your 9 to 5 workday existence.

Chevy’s, you are not fast casual. Lower your prices, improve quality where you can, offer add-on’s for additional $$$ and see where it takes you. Also, if you don’t want to give out the perks of a coupon, just exempt yourself from it. Nothing should be more embarrassing for a manager than the service that I received. The fact that I was never served my wings, but the manager only agreed to remove it from the bill once a coupon was produced encapsulated much of what is wrong with this dining experience. 1.3/5 overall

I would avoid this place. Seems like this location is franchisee run and the management has checkout too. I can hear the company circling the drain now. Maybe the 90-day calendar will euthanize this location soon.

Johnnie Does