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Bitcoin = Anti-Totalitarianism

The battle for financial freedom at the precipice of total government control hinges on our active engagement and collective commitment to protecting our…

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In the face of ongoing challenges to our cherished freedoms, it is imperative to critically examine the forces at play that threaten the very fabric of democracy. The ideals of freedom and open markets are at risk of being undermined by influential political forces seeking to impose oppressive order and control in the name of security. This article delves into the pressing need to fix our manipulated markets, protect Bitcoin and its inherent anti-totalitarian qualities, and inform US policymakers that democratic values are what’s at stake.

The Erosion of Free Markets and Capitalism

People who think we currently have capitalism and free and open markets haven’t been paying attention. The American economic landscape, once a paragon of capitalism, has undergone a seismic shift, particularly since the 2008 financial crisis when lawmakers selectively bailed out the bankers at the expense of the broader economy. The central banking system’s pervasive influence has led to a distortion of free markets, with quantitative easing (QE) being employed as a tool to manipulate the bond market, artificially lowering the cost of capital and thus distorting the prices of…everything. This manipulation has had far-reaching consequences, including the gutting of the middle class and the concentration of wealth in the hands of a few. In the wake of the Silicon Valley Bank failure this March, the deployment of tools such as the Bank Term Funding Program (BTFP) has further exacerbated these distortions, providing de facto yield curve control for banks, while leaving ordinary citizens to grapple with soaring interest rates and inflation. This divergence from naturally occurring economic markets and the suppression of a free and open cost of capital has pushed us closer to an economic model reminiscent of “you name it” communism regime, threatening the foundational principles of capitalism and democracy.

The Newest Assault on Financial Freedom and Bitcoin

In a recent letter from Senator Elizabeth Warren and numerous congressional members, they leverage international crises to further their own political agenda and curtail financial freedoms. Armed with a freshly published Wall Street Journal article that falsely suggests Hamas raised a significant sum of crypto funding to attack Israel - the truth couldn’t be more obscured. The irony of the claim is that the public Bitcoin blockchain provides evidence that anyone can dispute – which is exactly what happened the day following the Senator’s letter to the President. On October 18, blockchain analysis firm, Chainalysis, clarified that while some terrorist organizations, including Hamas, do leverage cryptocurrencies for funding, the scale is extremely small relative to traditional fiat banking means. They emphasized that the transparency of blockchain technology makes it a less suitable medium for illicit activities, including terrorism financing. Additionally, Chainalysis pointed out that government agencies and private sector organizations can collaborate using blockchain analysis solutions to trace and disrupt the flow of funds to these terrorist groups. They also highlighted the importance of understanding the role of service providers in these financial networks and cautioned against overestimating the scale of terrorism financing in cryptocurrency based on flawed analyses and misinterpretations. Delving deeper into the facts revealed by Chainalysis, it becomes increasingly evident how Senator Warren’s letter dramatically skewed the situation. The detailed analysis zeroes in on a specific address that conducted over 1,300 deposits and 1,200 withdrawals within a mere 7.5 months, with a total inflow of roughly $82 million in cryptocurrency. However, a mere fraction of this amount, approximately $450,000, can be linked back to a wallet associated with terrorist activities (source). This represents a mere 0.3461% of the purported $130 million claimed in the letter—a staggering discrepancy that lays bare the deceptive nature of the narrative being pushed to the White House. Not only has Business Insider reported on October 21 that Hamas operates with an annual budget of $300 million, but a significant portion of its funding also stems from taxing imports into Gaza, as well as international connections with Iran. A country to which the US government recently, and rather ambiguously, may have released $6 billion in fiat currency to in September, just a month prior to the attack on Israel. Unlike Bitcoin, which offers a publicly accessible audit trail, citizens are left in the dark about this substantial financial transaction. The narrative on what was actually released depends heavily on the news outlet or political interest one consults, often resulting in biased and self-serving points of view - the irony. This stark contrast between politically manipulated numbers and the transparent reality a public blockchain provides underscores the urgent need for thorough, factual analysis and the adoption of publicly verifiable monetary units like Bitcoin.

Why Is This So Concerning?

Kneejerk policy reactions, based on false information and poor reporting can have devastating long-term impacts to the US’s competitive economic position and more importantly the liberties and freedoms of the citizens. In what appears to be a coordinated policy response (one day after Senator Warren’s letter), The U.S. Financial Crimes Enforcement Network (FinCEN) came out with a proposal for special measures regarding convertible virtual currency mixing and labeled it a primary money laundering concern. Based on all the information contained in the FinCEN proposal, it opens the door for expansive policy to infringe on the rights of individuals. For example, the increased surveillance and potential loss of privacy could subject individuals running Bitcoin full nodes to unprecedented scrutiny. They might find themselves burdened with regulatory requirements that are not only onerous but also infringe upon their personal privacy, and the privacy of users transacting through their nodes. The uncertainty and legal risks associated with running a full node under these proposed measures could discourage individuals from auditing their property, thus increasing their risk and reliance on bad actors. Bitcoin holders that ran their own node and took custody of their property in 2022 were NOT impacted by fraudulent centralized gate-keepers, like Sam Bankman Fried, and third party custodians that acted maliciously. Additionally, a policy attack on node operators creates less financial freedom for US citizens and an incentive for businesses in this new sector of finance to move offshore. Developers might be discouraged from creating and implementing privacy-enhancing features, limiting the potential and the very essence of American citizens and builders within this country.

What is the essence of a Bitcoin Node and why is it important?

In the gold market, how would you know if someone gave you a pure bar of gold? Well, you can own an XRF (X-ray Fluorescence) device that emits energy waves into the metal to determine the elemental composition based on the frequency of energy that comes back to the device. In short, a purity audit ensures that you have purchased actual gold. Why is this device so important – because if you buy a million dollars of gold, you want to make sure it’s the real stuff, right? In Bitcoin, that purity test is conducted by running a full node. This test can be outsourced to a third party, or it can be conducted by the individual. This point is vital: if a person is NOT allowed to run their own node and audit delivery, it would be the same as saying a person accepting delivery of a billion dollars in gold is banned from conducting their own personal audit. Since bitcoin is a digital commodity, this right to audit delivery is essential to protect their liberties against foul play. Suggesting such a device be banned is a vote for autocratic control by government handlers at the expense of the individual’s rights to protect themselves from thieves. While we are on this important subject, Bitcoin is the only blockchain that has a code base small enough to allow for everyday citizens to afford and operate their own node and provide independent audits on their property – ensuring its legitimacy and overall security. In short, Bitcoin is different – Bitcoin promotes individual freedoms, sovereignty, and liberties at the individual level. An idea consistent with our Declaration of Independence: “Endowed by their Creator with certain unalienable Rights…That to secure these rights, Governments are instituted among men, deriving their just powers from the consent of the governed.”

A Call to Action

So what do totalitarian governments embrace? They embrace control. Such a control is often established through small and incremental changes that mask a deeper trend and direction that citizens don’t notice. This progression ultimately leads to absolute control. Now, what is the paramount lever to pull if a government was interested in absolute control? That’s right, the money. Because money is the energy that fuels every action and desire of the individual citizen. Therefore let me be very clear: You will not beat a totalitarian government by becoming more totalitarian. America was founded on the principle of individual rights and freedoms. Those freedoms in turn created the strongest economy and most powerful nation on the planet. It is those very freedoms that are at risk with knee jerk policy decisions to remove your individual rights in the name of security. In the face of the unstoppable tide that is Bitcoin and decentralized finance, it is paramount that we, as a society, and particularly as citizens of the United States, recognize the critical crossroads we find ourselves. The trajectory of Bitcoin’s innovation and adoption will continue, with or without the active participation or understanding of any single nation. The question that remains is whether we will be leaders or laggards in this inevitable financial evolution. Our cherished ideals of liberty and open markets are at stake. We must urgently commit ourselves to a deep and nuanced understanding of Bitcoin’s potential to secure financial freedom in an increasingly digital future. By actively choosing to educate ourselves, our communities, and engaging in meaningful dialogue with our elected representatives, we are taking essential steps towards protecting our position as a global financial leader. This is not just about maintaining economic dominance; it is about safeguarding the very liberties and freedoms that define us. The false sense of security provided by manipulated markets and snap policy decisions has eroded the foundation of capitalism—a system that, in its true form, no longer exists. We must recognize this distortion, challenge it, and champion the cause of financial freedom through Bitcoin. Supporting organizations dedicated to digital rights and financial freedom becomes not just a choice, but a duty. By contributing our time, resources, and voices, we are making a stand against the forces that seek to centralize control and diminish our economic sovereignty. On an individual level, embracing the tools that ensure our financial freedom—such as setting up Bitcoin wallets, running full nodes, and educating ourselves on the secure use of Bitcoin—is a powerful act of promoting freedom. We are fortifying the network, protecting our assets, and affirming our commitment to a future where financial freedom is accessible to all. The challenge is formidable, but the stakes are too high to remain passive. The United States has a choice: adapt and embrace the decentralized future of money, securing our liberties and financial leadership, or risk being left behind, tethered to outdated systems and eroding freedoms. The power of informed, engaged, and proactive citizens is our greatest asset in this pivotal moment. Together, we can shape a future that upholds the principles of freedom, innovation, and financial sovereignty. “Those who would give up essential liberty, to purchase a little temporary safety, deserve neither liberty nor safety” - Benjamin Franklin

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Will Resurgent Inflation Savage The Tech Trade

Will Resurgent Inflation Savage The Tech Trade

By Simon White, Bloomberg Markets Live reporter and strategist

Equity markets are facing mounting…

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Will Resurgent Inflation Savage The Tech Trade

By Simon White, Bloomberg Markets Live reporter and strategist

Equity markets are facing mounting concentration risks as just a handful of stocks drive returns. Not only that, the mainly tech-related names dominating the move are highly exposed to inflation which is on the precipice of re-accelerating. Investors face potentially steep downside, but it is possible to build a portfolio of companies well placed to weather a resurgence in price growth.

When one company’s earnings have the ability to influence the macro narrative and materially affect the $43 trillion S&P, it’s clear the threats from narrow breadth are elevated. Nvidia’s results, released on Wednesday evening, may have exceeded expectations and are on the cusp of taking the index to new highs, but that only underscores the reality the tech-heavy market leaves portfolios acutely exposed to inflation. This should be a clarion call that it’s time to act. What better time to fix the diversification roof than when the disinflation sun is still shining?

Concentration risks are at 50-year highs. The top five stocks in the in the S&P 500 now account for over a quarter of its market cap, from only about an eighth a decade ago. You have to go back to the time of the Nifty Fifty in the late 1960s and early 70s to see leadership as narrow as it is today.

Back then, it was the tech titans of the day — Xerox, IBM, Polaroid – that were among the few stocks disproportionately powering the advance. And in what could prove to be an omen for the current cycle, the Nifty Fifty’s fate was sealed by rising inflation, which triggered the most brutal bear market seen since the Great Depression.

It’s even more of a problem today as tech companies have high duration, leaving them singularly vulnerable to a revival in price growth. A greater proportion of cash flows in the future leaves a stock’s total present value at risk from higher real rates.

The benefits of avoiding high-duration stocks when inflation is elevated can be seen in the chart below. The blue line shows a rebalancing strategy that goes long low-duration stocks when US CPI is over its 10-year moving average, and high-duration stocks when inflation is under it (using the inverse of the dividend yield as an approximation for an equity’s duration).

As we can see, the strategy cleanly outperforms the S&P in real terms.

But we can do better than that. It’s possible to build a portfolio of stocks resilient to inflation that’s not just dependent on their duration. After all, it’s a pretty blunt instrument. Ideally we want to find stocks that should do well if inflation re-accelerates (as I expect it will – see below), but is not fully reliant on that outcome.

Companies that are capital light and have strong pricing power should be well-placed to weather – if not prosper in – elevated inflation. The companies should also have demonstrated real growth over the long term.

More specifically, screen for companies with:

  • over $1 billion market cap
  • real dividend growth and sales growth
  • low fixed costs
  • strong pricing power
  • reasonable valuations

That gives us a portfolio of about 15-20 names which is rebalanced monthly. The real return of the portfolio is shown in the chart below, along with the real returns of the S&P and the 60/40 equity-bond portfolio.

The portfolio is designed to be forward looking — the coming years are unlikely to look like the previous decades given we are now in an inflationary regime — seeking stocks that are robust to price growth that is above its long-term average and prone to lurching higher.

It is nevertheless reassuring to see that the portfolio does well on its backtest. It has outpaced the S&P in real terms over the last quarter century. It also outperformed in the rising inflation period during the pandemic. More generally, a strategy that went long the Inflation Portfolio when inflation was elevated, and long the market otherwise, fared better than the S&P over the last 25 years.

The current portfolio contains 16 names. All are good quality companies with most having reasonable valuations, the average P/E ratio being equal to the market’s. Only two are tech companies.

The most common grouping is industrials. Again, this is reassuring as in inflation regimes over the last five decades, the top performing sectors were steel, mining and chemicals.

Through the life of the portfolio (2000-2023), industrials has had the largest average weight, followed by financials.

Banks are generally not a good holding when inflation is high as they typically lend long and borrow short, and see the real value of their assets decline more than their real liabilities. But there are several non-bank financials, such as the CBOE (in the portfolio now) and MSCI, which are quality firms with strong pricing power who stand in good stead when price growth is elevated.

None of this would be necessary if inflation was going the way Team Transitory think it already has. But there is a mounting body of forward-looking indicators that expect inflation should soon re-accelerate. We may have already got a glimpse of this with the most recent hotter-than-expected CPI and PPI reports.

Still, with any portfolio screening strategy there are caveats. There are turnover and price-slippage costs that could materially affect the realized return. There is also, of course, no reason why the backtested past should look like the future.

Nonetheless, the deep concentration of high-duration stocks leaves the market as exposed to inflation as it has been since the early 1970s. The potential downside justifies a different approach that tries to mitigate inflation risks without becoming overly dependent on them. After all, we may soon find that the Magnificent Seven’s name sounds just as ironic as the Nifty Fifty’s.

Tyler Durden Thu, 02/22/2024 - 15:45

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All Of The Elements Are In Place For An Economic Crisis Of Staggering Proportions

All Of The Elements Are In Place For An Economic Crisis Of Staggering Proportions

Authored by Michael Snyder via The Economic Collapse blog,

They…

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All Of The Elements Are In Place For An Economic Crisis Of Staggering Proportions

Authored by Michael Snyder via The Economic Collapse blog,

They were able to delay the U.S. economy’s day of reckoning, but they were not able to put it off indefinitely.  During the pandemic, the Federal Reserve pumped trillions of dollars into the financial system and our politicians borrowed and spent trillions of dollars that we did not have.  All of that money caused quite a bit of inflation, but it also created a “sugar rush” for the economy.  In other words, economic conditions were substantially better than they would have been otherwise.  Unfortunately, there will be a great price to be paid for such short-term thinking. 

From the federal government on down, our entire society is absolutely drowning in debt, and now it appears that our economic problems are about to go to the next level.

In early 2024, there are all sorts of signs that economic activity in the U.S. is really starting to slow down.

For example, we just learned that consumer spending “fell sharply” during the month of January…

Consumer spending fell sharply in January, presenting a potential early danger sign for the economy, the Commerce Department reported Thursday.

Advance retail sales declined 0.8% for the month following a downwardly revised 0.4% gain in December, according to the Census Bureau. A decrease had been expected: Economists surveyed by Dow Jones were looking for a drop of 0.3%, in part to make up for seasonal distortions that probably boosted December’s number.

However, the pullback was considerably more than anticipated. Even excluding autos, sales dropped 0.6%, well below the estimate for a 0.2% gain.

Sadly, the truth is that U.S. consumers just don’t have as much money to spend these days.

They are up to their eyeballs in debt, and delinquency rates have been spiking.

Many consumers are tightening up on their finances, and so it shouldn’t be a surprise that Disney+ lost more than a million subscribers during the fourth quarter of last year…

Disney+ Core subscribers (which include U.S. and Canada customers, as well as international users, excluding the India-based Disney+ Hotstar) dropped to 111.3 million from the 112.6 million reported in the previous quarter, according to Disney’s quarterly earnings results released Wednesday.

In early 2024, we have also seen large employers ruthlessly slash payrolls all over the nation.

The following summary of some of the most shocking layoffs that we have seen recently comes from Zero Hedge

1. Twitch: 35% of workforce
2. Roomba: 31% of workforce
3. Hasbro: 20% of workforce
4. LA Times: 20% of workforce
5. Spotify: 17% of workforce
6. Levi's: 15% of workforce
7. Xerox: 15% of workforce
8. Qualtrics: 14% of workforce
9. Wayfair: 13% of workforce
10. Duolingo: 10% of workforce
11. Washington Post: 10% of workforce
12: Snap: 10% of workforce
13. eBay: 9% of workforce
14. Business Insider: 8% of workforce
15. Paypal: 7% of workforce
16. Okta: 7% of workforce
17. Charles Schwab: 6% of workforce
18. Docusign: 6% of workforce
19: CISCO: 5% of workforce
20. UPS: 2% of workforce
21. Nike: 2% of workforce
22. Blackrock: 3% of workforce
23. Paramount: 3% of workforce
24. Citigroup: 20,000 employees
25. Pixar: 1,300 employees

During the pandemic we witnessed a lot of temporary layoffs, but the last time we saw large corporations conducting permanent mass layoffs on such a widespread basis was in 2008 and 2009.

And we all remember what happened back then.

Meanwhile, the cost of living continues to rise faster than paychecks.

For example, it is being reported that the cost of auto insurance has been increasing at “the fastest annual rate on record”

The cost of auto insurance jumped 1.4% in January, bringing the total annual gain to 20.6% – the fastest annual rate on record. When compared with early 2019, motor vehicle insurance is nearly 40% more expensive. Experts say the problem could soon get worse before it begins to improve.

Needless to say, most Americans have not seen their paychecks increase by 20.6 percent over the past year.

Of course just about everything else has been rapidly getting more expensive too, and that isn’t going to change any time soon.

On top of everything else, we are also facing an unprecedented commercial real estate crisis.

Our financial institutions are sitting on mountains of bad commercial real estate loans, and Kevin O’Leary is warning that “thousands more” will fail within the next three to five years

Regional banks are doomed.

That’s not necessarily a bad thing… if you’re prepared for it.

It’s been almost a year since Silicon Valley Bank (SVB) collapsed in March – the victim of idiotic management. But the sobering reality is the small banking crisis is far from over.

In the next three to five years, thousands more regional institutions will fail. That’s why I don’t have a dime saved or invested in a single one.

Is Kevin O’Leary right about this?

I don’t know.

We will just have to wait and see what happens.

But without a doubt, things certainly do not look good at this moment.

Needless to say, it isn’t just the U.S. that is experiencing economic turbulence these days.

Last week, we learned that the Japanese economy has officially entered a recession

Japan has lost its spot as the world’s third-largest economy to Germany, as the Asian giant unexpectedly slipped into recession.

Once the second-largest economy in the world, Japan reported two consecutive quarters of contraction on Thursday — falling 0.4% on an annualized basis in the fourth quarter after a revised 3.3% contraction in the third quarter. Fourth-quarter GDP sharply missed forecasts for 1.4% growth in a Reuters poll of economists.

The Germans are facing big problems too.

In fact, Germany is being called the “sick man of Europe” right now.

Interestingly, it is at this time that Jeff Bezos has decided to sell off billions of dollars worth of Amazon stock

Amazon’s billionaire founder Jeff Bezos has sold another $2bn worth of the company’s stock, bringing the total value of shares he has offloaded in the past week to $4bn, according to regulatory filings.

An Amazon filing on Tuesday showed that Bezos, who stepped down as the Seattle-based company’s chief executive in 2021 but remains executive chair, sold 12mn shares for about $2bn between Friday and Monday.

He certainly doesn’t need the cash.

So why is he doing this?

Does he know something that the rest of us do not?

I don’t think so.

Instead, I think that he can see what the rest of us can see.

Stock prices have risen to record highs even as the overall economy is clearly heading into a major downturn.

That makes this the perfect time to sell.

Jeff Bezos didn’t get to where he is by being stupid.  He can see what is coming and he is getting out while the getting is still good.

*  *  *

Michael’s new book entitled “Chaos” is available in paperback and for the Kindle on Amazon.com, and you can check out his new Substack newsletter right here.

Tyler Durden Thu, 02/22/2024 - 16:20

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Realtor.com Reports Active Inventory UP 15.7% YoY; New Listings up 10.9% YoY

What this means: On a weekly basis, Realtor.com reports the year-over-year change in active inventory and new listings. On a monthly basis, they report total inventory. For January, Realtor.com reported inventory was up 7.9% YoY, and down 40% compare…

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What this means: On a weekly basis, Realtor.com reports the year-over-year change in active inventory and new listings. On a monthly basis, they report total inventory. For January, Realtor.com reported inventory was up 7.9% YoY, and down 40% compared to January 2019. Now - on a weekly basis - inventory is up 15.7% YoY, and that would put inventory still down about 39% compared to February 2019.

Realtor.com has monthly and weekly data on the existing home market. Here is their weekly report: Weekly Housing Trends View — Data Week Ending February 17, 2024
Active inventory increased, with for-sale homes 15.7% above year ago levels.

For a 15th consecutive week, active listings registered above prior year level, which means that today’s home shoppers have more homes to choose from that aren’t already in the process of being sold. So far this season, the increase in newly listed homes has resulted in a boost to overall inventory, but while the added inventory has certainly improved conditions from this time in 2021 through 2023, overall inventory is still low compared to the same time in February 2020 and years prior to the COVID-19 Pandemic.

New listings–a measure of sellers putting homes up for sale–were up this week, by 10.9% from one year ago.

Newly listed homes were above last year’s levels for the 17th week in a row, which could further contribute to a recovery in active listings meaning more options for home shoppers. This past week, newly listed homes were up 10.9% from a year ago, accelerating slightly from the 9.5% growth rate seen in the previous week.
Here is a graph of the year-over-year change in inventory according to realtor.com

Inventory was up year-over-year for the 154th consecutive week following 20 consecutive weeks with a YoY decrease in inventory.  

Inventory is still historically very low.

Although new listings remain well below "typical pre-pandemic levels", new listings are now up YoY for the 17th consecutive week.

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