The Big Picture

Generations X and Y: Facing Economic and Financial Challenges in the Shadow of the Baby Boom
NSA = J. Edgar Hoover On Steroids
USS John C. Stennis: BMW M4 Playground
10 Thursday PM Reads
Scotus / Potus Fail
What’s Behind the Global Stock Selloff?
Conditions Favorable for a Capex Comeback
10 Thursday AM Reads
What to Do in a Market Correction
Guest Hosting: Bloomberg Radio 8-10 am
Mebane Faber’s Talk at Google on Global Value

Generations X and Y: Facing Economic and Financial Challenges in the Shadow of the Baby Boom

Posted: 11 Jul 2014 02:00 AM PDT

Posted: 10 Jul 2014 10:30 PM PDT

Spying On – and Blackmailing – Politicians, Generals, Judges, Lawyers and Citizens

The newly-published revelations from Edward Snowden show that the NSA and FBI spied on an American citizen running for political office:

The NSA also surveilled a U.S. citizen while he ran for political office: https://t.co/UzFya8ltmj pic.twitter.com/3jZdsYxQRG

The Washington Post's report last week also shows that the NSA also collected information on President Obama, both as president-elect and as president:

A "minimized U.S. president-elect" begins to appear in the files in early 2009, and references to the current "minimized U.S. president" appear 1,227 times in the following four years.

While the particular NSA reports discussed by the Washington Post don't specifically mention Obama by name, the Post notes:

[These minimization attempts] border on the absurd, using titles that could apply to only one man.

Of course, the NSA has pretty much admitted to spying on Congress. And see this.

And even the raw data on American citizens collected by the NSA is shared with Israel. This likely includes Congress members and other politicians, as well.

But these new reports add some weight to the allegations of high-level NSA whistleblower Bill Binney, who told Washington's Blog that NSA surveillance allows the government to target:

"[CIA head] General Petraeus and General Allen and others like [New York State Attorney General] Elliot Spitzer"

"Supreme Court Judges, other judges, Senators, Representatives, law firms and lawyers, and just anybody you don't like … reporters included"

Binney also told us on Monday:

Bulk collection of everything gives law enforcement all the data they need on every citizen in the country. And, it gives NSA all that info on everyone too. Makes them akin to a J. Edgar Hoover on super steroids.

FBI head Hoover was famous for blackmailing everyone … including politicians. The New York Times reports:

J. Edgar Hoover compiled secret dossiers on the sexual peccadillos and private misbehavior of those he labeled as enemies — really dangerous people like … President John F. Kennedy, for example.

Alfred McCoy – Professor of history at the University of Wisconsin-Madison – provides details:

Upon taking office on Roosevelt's death in early 1945, Harry Truman soon learned the extraordinary extent of FBI surveillance. "We want no Gestapo or Secret Police," Truman wrote in his diary that May. "FBI is tending in that direction. They are dabbling in sex-life scandals and plain blackmail."

After a quarter of a century of warrantless wiretaps, Hoover built up a veritable archive of sexual preferences among America's powerful and used it to shape the direction of U.S. politics. He distributed a dossier on Democratic presidential candidate Adlai Stevenson's alleged homosexuality to assure his defeat in the 1952 presidential elections, circulated audio tapes of Martin Luther King, Jr.'s philandering, and monitored President Kennedy's affair with mafia mistress Judith Exner. And these are just a small sampling of Hoover's uses of scandal to keep the Washington power elite under his influence.

"The moment [Hoover] would get something on a senator," recalled William Sullivan, the FBI's chief of domestic intelligence during the 1960s, "he'd send one of the errand boys up and advise the senator that 'we're in the course of an investigation, and we by chance happened to come up with this data on your daughter…' From that time on, the senator's right in his pocket." After his death, an official tally found Hoover had 883 such files on senators and 722 more on congressmen.

***

With a few hundred cable probes and computerized decryption, the NSA can now capture the kind of gritty details of private life that J. Edgar Hoover so treasured and provide the sort of comprehensive coverage of populations once epitomized by secret police like East Germany's Stasi. And yet, such comparisons only go so far.

After all, once FBI agents had tapped thousands of phones, stenographers had typed up countless transcripts, and clerks had stored this salacious paper harvest in floor-to-ceiling filing cabinets, J. Edgar Hoover still only knew about the inner-workings of the elite in one city: Washington, D.C. To gain the same intimate detail for an entire country, the Stasi had to employ one police informer for every six East Germans — an unsustainable allocation of human resources. By contrast, the marriage of the NSA's technology to the Internet's data hubs now allows the agency's 37,000 employees a similarly close coverage of the entire globe with just one operative for every 200,000 people on the planet.

***

In the Obama years, the first signs have appeared that NSA surveillance will use the information gathered to traffic in scandal, much as Hoover's FBI once did. In September 2013, the New York Times reported that the NSA has, since 2010, applied sophisticated software to create "social network diagrams…, unlock as many secrets about individuals as possible…, and pick up sensitive information like regular calls to a psychiatrist's office, late-night messages to an extramarital partner."

***

By collecting knowledge — routine, intimate, or scandalous — about foreign leaders, imperial proconsuls from ancient Rome to modern America have gained both the intelligence and aura of authority necessary for dominion over alien societies. The importance, and challenge, of controlling these local elites cannot be overstated. During its pacification of the Philippines after 1898, for instance, the U.S. colonial regime subdued contentious Filipino leaders via pervasive policing that swept up both political intelligence and personal scandal. And that, of course, was just what J. Edgar Hoover was doing in Washington during the 1950s and 1960s.

***

According to James Bamford, author of two authoritative books on the agency, "The NSA's operation is eerily similar to the FBI's operations under J. Edgar Hoover in the 1960s where the bureau used wiretapping to discover vulnerabilities, such as sexual activity, to 'neutralize' their targets."

The ACLU's Jameel Jaffer has warned that a president might "ask the NSA to use the fruits of surveillance to discredit a political opponent, journalist, or human rights activist. The NSA has used its power that way in the past and it would be naïve to think it couldn't use its power that way in the future." Even President Obama's recently convened executive review of the NSA admitted: "[I]n light of the lessons of our own history… at some point in the future, high-level government officials will decide that this massive database of extraordinarily sensitive private information is there for the plucking."

Indeed, whistleblower Edward Snowden has accused the NSA of actually conducting such surveillance. In a December 2013 letter to the Brazilian people, he wrote, "They even keep track of who is having an affair or looking at pornography, in case they need to damage their target's reputation." If Snowden is right, then one key goal of NSA surveillance of world leaders is not U.S. national security but political blackmail — as it has been since 1898.

Postscript: NSA whistleblower Russell Tice (a key source in the 2005 New York Times report that blew the lid off the Bush administration's use of warrantless wiretapping), also says:

The NSA is spying on and blackmailing its overseers in Washington, as well as Supreme Court judges, generals and others

The agency started spying on Barack Obama when he was just a candidate for the Senate

USS John C. Stennis: BMW M4 Playground

Posted: 10 Jul 2014 05:00 PM PDT

I can’t figure out why I love this so much, but I do!

Never mind something as pedestrian as an actual racetrack on land. In its new promo video, BMW digitally turns the flight deck of the USS John C. Stennis (CVN 74) into an imaginary at-sea playground for the M4.

10 Thursday PM Reads

Posted: 10 Jul 2014 02:30 PM PDT

My afternoon train reads :

• Too many professional pessimists? (FT Alphaville)
• America Is Pumping More Oil Than Ever — and Using It More Intelligently (Slate)
• Achieving Greater Long-Term Wealth Through Index Funds (AAII)
• Only Dummies Ignore Foreign Brainpower (Bloomberg View) see also It’s A Big World Out There (Al Hambra Partners)
• 3 Reasons Today’s Environment is not like the 1970′s (Pragmatic Capitalism)
• Samsung has peaked. Apple’s holding steady. (Fortune) see also Late late majority (Asymco)
• Radio Address to the Nation on the Proposed Legislation for a Highway and Bridge Repair Program (University of Texas)
• Why Germany Crushed Brazil (Bloomberg View) see also The Front Pages of Brazil’s Newspapers Are Brutal (Business Insider)
• Bird decline linked to pesticide use (BBC)
• The Scientific Debate On Global Warming In One Chart (Business Insider)

What are you reading?

Further Capex Weakness? These numbers say ‘neigh’

Source: Real Time Economics

Scotus / Potus Fail

Posted: 10 Jul 2014 12:30 PM PDT

Source: Gallup

Last month, we noted how Congress reached a record low in confidence from the American people. (I blamed you, the non-voting public for allowing the inmates to take over the asylum and turning this into the worst. congress. ever.)

As it turns out, it’s not just Congress: Confidence hit a six-year low for the presidency and an all-time record low for the U.S. Supreme Court.

What is behind this?

Continues here

What’s Behind the Global Stock Selloff?

Posted: 10 Jul 2014 11:00 AM PDT

Bloomberg View Columnist Barry Ritholtz and Bloomberg's Jonathan Ferro discuss what's behind the global equities selloff on "Market Makers."

Source: Bloomberg July 10 2014

Conditions Favorable for a Capex Comeback

Posted: 10 Jul 2014 08:30 AM PDT

Source: Bloomberg Visual Data

10 Thursday AM Reads

Posted: 10 Jul 2014 06:00 AM PDT

My morning reads (continues here):

• Companies selling stocks at record pace this year (WSJ)
• Irrational exuberance and neural crash warning signals during endogenous experimental market bubbles (National Academy of Sciences) see also They discovered something in the brains of great investors that makes them do so much better (Business Insider)
• Ray Dalio Is Back (Forbes)
• Fixing the Shiller CAPE: Accounting, Dividends, and the Permanently High Plateau (Philosophical Economics)

continues here

What to Do in a Market Correction

Posted: 10 Jul 2014 05:26 AM PDT

Things to try in a market correction:

• Respond emotionally, giving in to your lizard brain. It does a good job of keeping you alive, so you might as well hand over management of your portfolio to it.

• Rely on your gut instinct to lead you out of trouble. After all, your instincts helped you buy gold at $400 and sell Apple at $700, right?

• Deviate from your plan, because really, what's the point of having a plan if you can’t change it on a whim?

• Aggressively overtrade, because all of those capital gains taxes are helpful in reducing the federal deficit.

• Rely on the pundits' market calls, because their sole interest is making sure you are comfortable in retirement.

• Flail aimlessly, and with any luck, something you do will turn out well.

• Hope is good. Hoping that things turn out for the best never did anyone any harm.

• Panic is always an option, because that always works out so well for people.

Continues here