Big Brother is Coming…To Your Brokerage Account

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In the midst of the financial crisis, our “leaders” had a choice. They could’ve done what most Americans wanted, which was allow failing firms to fail and permit the chips to fall where they may. In contrast, our “leaders” settled on trillion dollar bailouts with zero strings attached for the criminals who destroyed the nation’s economy. At that point, the American people would’ve been at least somewhat satisfied if the rule of law was applied to the banksters, and those who deserved to go to jail were locked up. As we all know by now, the Justice Department decided to create a special “Too Big To Jail” untouchable class, and nobody was held accountable for anything. Once again, our “leadership” could’ve look at the situation honestly and responded appropriately. Rather, they doubled down on corruption and criminality and now nobody trusts anything. We don’t trust the Presidency, the Congress, the intelligence agencies, the banks, the financial system, the courts, the Federal Reserve, or any institutions at all. We certainly don’t trust Democrats and Republicans. In fact, millennials in particular have given up all trust in everything. They don’t even trust Jay-z anymore, which I suppose is what happens when you prance around with Warren Buffett and flash illuminati signs 24/7. This is how society breaks down.

Moving along, with confidence in “the system” already in the gutter by summer 2013, Edward Snowden released a bombshell of information on illegal government spying. It confirmed what so many of us had been saying for years, but had been dismissed pejoratively by the mainstream as “conspiracy theorists.” Once again, our “leaders” had a choice. Take the difficult steps and offer real reform, or merely pretend nothing really happened and defend the practices at all costs. Once again, they chose the latter. Just as no bankers were jailed for the financial crisis, no intelligence operatives were jailed for illegal spying. In fact, nothing at all has happened to James Clapper for perjuring himself in front of Congress.

Even more worrisome, we are now seeing a counter-attack consisting of expanded efforts to further remove privacy from the lives of Americans. Once again, rather than reforming the system, the status quo is doubling down. I have recently highlighted several such efforts with regard to the internet, which can be read below:

Say Goodbye to “Net Neutrality” – New FCC Proposal Will Permit Discrimination of Web Content

Obama Administration Launches Plan to Make an “Internet ID” a Reality

It now appears the status quo is moving to destroy any last semblance of privacy with regard to your personal brokerage accounts. Yep, in the name of “stopping fraud” and the practices of unscrupulous brokers, the Financial Industry Regulatory Authority (FINRA) wants to launch a program called Cards, or the Comprehensive Automated Risk Data System. This electronic system sounds a lot like the so-called metadata the NSA is collecting on everyone’s internet usage. This “robocop” would collect a weekly “record of activity at all of the more than 4,100 brokerage firms nationwide.”

For your own good of course. Oh, and yeah, to stop terrorists or something…

From the Wall Street Journal:

In December, the Financial Industry Regulatory Authority, which oversees how investments are sold, proposed what it calls Cards, an electronic system that would regularly collect data on balances and transactions in brokerage accounts.

If adopted, Cards would revolutionize how regulators do their jobs and could make it harder for unscrupulous brokers to bilk customers.

Give me a fucking break. The last thing the establishment cares about is stopping fraud. Fraud is the number one driver of American GDP at the moment. It is institutionalized, protected and endorsed. This is about nothing more than destroying your financial privacy.

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Leaked Documents Show How Blackstone Fleeces Taxpayers via Public Pension Funds

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The following story by David Sirota at PandoDaily is simply excellent. It zeros in on the secretive and rapidly expanding relationship between private equity firms and the public pensions that invest in them. It shows a crony capitalist love affair greased by lobbyist influence peddlers known as “placement agents,” as well as non-public agreements between PE firms and public pensions chock full of conflicts of interest, extremely high fees and underperformance. Unbelievably, in many instances the trustees of the public pensions are not allowed to know what funds the “fund of funds” invest in. This makes due diligence impossible, and in one particularly egregious example it led the Kentucky Retirement Systems to unknowingly invest in SAC Capital despite the fact it was under SEC investigation at the time.

Furthermore, with the Wall Street Journal reporting back in 2011 that $37 of every $100 dollars invested in Blackstone’s investment pool coming from state and local pension plans, it appears that taxpayers are once again being fleeced by the financial oligarch class. Additionally, it appears to answer a recent question I posed in my piece: Is the Credit Bubble Popping? Carlyle Group Warns on Frothiness and Junk Bond Deals Get Pulled. After reading about a growing pool of insane “dividend deals” and payment-in-kind” notes being issued, I wondered who in their right mind was buying these deals. Well, based on the complete lack of competence and due diligence happening at public pension funds, I think we have solved part of the mystery. 

The chief villain in this article will be no stranger to readers of this site. It is Blackstone, the private equity giant who I have criticized many times on these pages for buying up homes all across America in “all cash” deals, making homes unaffordable to average American peasants. Of course, Blackstone is just one of many, but given its size and influence, highlighting its practices is probably quite representative.

Here are some excerpts from the article. Read it and weep:

When you think of the term “public pension fund,” you probably imagine hyper-cautious investment strategies kept in check by no-nonsense fiduciary laws.

But you probably shouldn’t.

An increasing number of those pension funds are being stealthily diverted into high-fee, high-risk “alternative investments” that deliver spectacular rewards for the Wall Street firms paid to manage them – but not such great returns for pensioners and taxpayers.

And yet… despite the fact that they deal with the expenditure of taxpayer money, the agreements between public pension systems and alternative investment firms are almost entirely secret.

Until now.

Thanks to confidential documents exclusively obtained by Pando, we can now see some of the language and fee structures in the agreements between the “alternative investment” industry and major public pension funds. Taken together, the documents raise serious questions about whether the government employees, trustees and politicians overseeing major public pension funds are shirking their fiduciary responsibilities under the law when they are cementing “alternative” investment deals.

The documents, which were involved in a recent SEC inquiry into the $14.5 billion Kentucky Retirement Systems (KRS), were handed to us by SEC whistleblower Chris Tobe, an investment consultant and former trustee of the KRS. Tobe has also written a book — “Kentucky Fried Pensions” — about the scandalous state of the Kentucky public pensions system. 

The documents provided by Tobe (embedded below) specifically detail Kentucky’s dealings with Blackstone – a giant Wall Street investment firm which has deployed a platoon of registered lobbyists in Kentucky and whose employees are major financial backers of Kentucky U.S. Sen. Mitch McConnell (R).

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Obama Administration Launches Plan to Make an “Internet ID” a Reality

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It appears the status quo may be finally making its moves to getting control over the heretofore free and open internet. As I and many others have noted previously, the internet is one of the most powerful tools humanity has ever devised. It frees information in a way that was simply unimaginable decades ago and empowers each of us to be as informed or uninformed as we desire.

Just last week in my post, Say Goodbye to “Net Neutrality” – New FCC Proposal Will Permit Discrimination of Web Content, I mused that in so-called “first world” countries like the U.S. the illusion of freedom must be maintained even as civil liberties are eroded. Thus censorship must be administered surreptitiously and slowly. The following plan to implement an “Internet ID” will initially only be rolled out as a pilot program in two states (Michigan and Pennsylvania), and will only deal with government services. That said, we can see where all of this is ultimately headed, and the program, called the National Strategy for Trusted Identities in Cyberspace, should be monitored closely going forward.

Vice reported on this a few days ago:

A few years back, the White House had a brilliant idea: Why not create a single, secure online ID that Americans could use to verify their identity across multiple websites, starting with local government services. The New York Times described it at the time as a “driver’s license for the internet.”

Sound convenient? It is. Sound scary? It is.

The vision is to use a system that works similarly to how we conduct the most sensitive forms of online transactions, like applying for a mortgage. It will utilize two-step authentication, say, some combination of an encrypted chip in your phone, a biometric ID, and question about the name of your first cat. 

But instead of going through a different combination of steps for each agency website, the same process and ID token would work across all government services: from food stamps and welfare to registering for a fishing license.

The original proposal was quick to point out that this isn’t a federally mandated national ID. But if successful, it could pave the way for an interoperable authentication protocol that works for any website, from your Facebook account to your health insurance company.

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Comedian Rob Schneider – “America is Sliding Very Fast Towards Fascism”

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The writing on the wall is there for anyone willing to take a look and be honest with themselves. I always try to highlight when public figures have the courage to state what is really happening in this country (such as rapper Lupe Fiasco), rather than cower in a corner from fear of repercussions. Most … Read more

Is the Credit Bubble Popping? Carlyle Group Warns on Frothiness and Junk Bond Deals Get Pulled

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Given recent geopolitical and macroeconomic events we are surprised at how well credit markets have been in 2014. The world continues to be awash in liquidity and investors are chasing yield seemingly regardless of risk. Leverage levels in the United States are increasing and rose by almost a full third over the past year while spreads between IG and HY are ~250 basis points below the 20 year average. Thus, the market is not assigning a significant premium to riskier assets. We continually ask whether the fundamentals in the global credit markets are healthy and sustainable. Frankly, we don’t think so. 

– From Carlyle Group’s 1Q14 Earnings Conference Call yesterday

Over the weekend, I published a Guest Post on the bubble in the junk bond market titled: Is There a Massive High Yield Credit Bubble? If you haven’t read it already, I suggest doing so before reading the rest of this post.

The following piece builds on that prior one by highlighting some of the most absurd practices currently going on in the less creditworthy areas of the bond market. Signs that prove without question there is some sort of dangerous bubble already percolating throughout the credit markets.

The first of these are known as “dividend deals.” For those of you who are unfamiliar with them, you might not believe what they actually are. Basically, dividend deals are when companies owned by private equity firms tap the credit markets, and then a sizable percentage of the money borrowed is used to cut a check to the private equity owners themselves. Often times, the remainder of the debt is used to refinance existing debt.

Yes, you heard that right. The money earned from credit issuance isn’t used to expand operations, it isn’t spend on R&D, or anything productive whatsoever. Rather, funds are used to pay money directly to the private equity owners. From a private equity owner perspective, this is free money and of course they will take it. The insane thing is that creditors are willing to buy this garbage, and buying it they are. By the billions. In fact, you might own some in your mutual fund or pension fund. Who fucking knows, but this is insane.

The second sign of insanity is the increase in “payment-in-kind” notes. What this means is that interest on the debt can be paid back in, wait this is no joke, more debt! Even crazier, we are seeing examples of “payment-in-kind” notes being issued for the purpose of paying out dividends to private equity owners. I want to know which fund managers are buying these notes, and you should too.

Bloomberg recently covered the credit insanity in their piece: Dividend Deal ‘Epidemic’ Intensifies Junk Alarm. Here are some excerpts:

Companies owned by private-equity firms are borrowing money to pay dividends like it’s 2007, adding to concern among regulators that excesses are emerging in the riskier parts of the debt markets.

Borrowers including Madison Dearborn Partners LLC’s mobile-phone insurer Asurion LLC obtained almost $21 billion in junk-rated loans this year to enrich their owners, the most in seven years, according to Standard & Poor’s Capital IQ LCD. Some of the least-creditworthy companies are even selling notes that may pay interest with more debt, which BMC Software Inc. did for its $750 million payout to a group led by Bain Capital LLC.

“It’s kind of like an epidemic,” Martin Fridson, a New York-based money manager at Lehmann, Livian, Fridson Advisors LLC, who started his career as a corporate-debt trader in 1976, said in a telephone interview. “Once an investment banker sees that, he’s going to go to his clients and say, ‘Here’s a window of opportunity, you can take a dividend and get away with it.’”

That says it all right there. Why is private equity rushing to do these deals? Well, why does a dog lick its balls? Because it can.

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With 1 in 3 Homes Unaffordable, Freddie Mac Prepares to Enter the Trailer Home Loan Market

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I can’t say this is surprising. After all, with average peasants, I mean citizens, now priced out of the domestic housing market (Zillow recently showed 1 in 3 homes are unaffordable) due to billionaire financiers and foreign oligarchs buying up all real estate in cash purchases, American serfs now will find out where the “elites” … Read more

Can Police Search Your Cell Phone Without a Warrant? The Supreme Court is About to Decide

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Two very important cases related to the 4th Amendment protection of cellphone data went before the Supreme Court yesterday. At issue here is whether or not police can search someone’s cellphone upon arrest. As usual, the Obama administration’s Justice Department is arguing against the citizenry, and in favor of the (police) state. Let’s not forget that the “Justice” Department also argued in favor of the police being able to place GPS tracking devices on people’s cars without a warrant back in 2011. Fortunately, the Supreme Court ruled against it.

Naturally, the feds in the current case will discuss all of the criminals they were able to bring to justice as a result of these privacy violations, but they will certainly not point out America’s current epidemic of unlawful arrests, as well as arrests for petty non-violent crimes that happen each and every day. For instance, let’s not forget statistics that came out last fall from the FBI that showed police make an arrest every two seconds in the USA. I covered this in detail in my post: Land of the Free: American Police Make an Arrest Every 2 Seconds in 2012.

That translates to 12.2 million arrests in 2012, only 521,196 of which were for violent crimes. So should cops be able to search cellphones of millions of Americans being arrested for non-violent crimes such as drug possession? Or what about the street artist in NYC who was unlawfully arrested for putting on a puppet show? Or the guy who’s house was raided by police for a parody Twitter account. Allowing cops to search cellphones upon arrest in a trigger happy police state seems barbaric, immoral and downright stupid to me.

Furthermore, isn’t it interesting that the feds appear so obsessed with taking away your civil liberties to catch petty criminals, yet they couldn’t put a single banker behind bars for the far more egregious crime of destroying the U.S. economy and ruining millions of lives?

Here are some excerpts from a The New York Times article to help you get up to speed on what’s at stake:

WASHINGTON — In a major test of how to interpret the Fourth Amendment in the digital age, the Supreme Court on Tuesday will consider two cases about whether the police need warrants to search the cellphones of the people they arrest.

“The implications of these cases are huge,” said Orin S. Kerr, a law professor at George Washington University, noting that about 12 million people are arrested every year, often for minor offenses, and that about 90 percent of Americans have cellphones.

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Stunning Quote – Larry Summers to Elizabeth Warren in 2009: “Insiders Don’t Criticize Other Insiders”

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A couple of weeks ago, Princeton and Northwestern released a very important study that proved statistically what many of us already knew about the American political process. It is nothing more than an oligarchy.  It’s one thing to read an academic study showing how cancerous the political system is, it’s quite another to hear a … Read more

Hacker “Weev” is Released from Prison, Starts Hedge Fund Called TRO LLC, Appears on CNBC

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CNBC just got very surreal. I have been following the release from prison of well known hacker and troll “Weev” for several weeks now. What has really captured my attention is his effort to get the world’s smartest hackers to find vulnerabilities in companies, short the shit out of them, and then release the vulnerability to … Read more

Vermont Becomes the First State in the U.S. to Require GMO Labeling – Why This is a Very Big Deal

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I don’t spend too much time on GMO labeling here at Liberty Blitzkrieg, but that doesn’t mean I don’t hold a strong opinion on the matter. I completely and without question think that consumers have a right to know whether or not the food they put into their bodies has been engineered with biotechnology, and I certainly think it’s beyond ridiculous that genetically modified foods can still be labeled “natural,” as is the case currently. Apparently, I am not alone, as a New York Times poll late last year showed that a stunning 93% of respondents support such labeling.

Despite such support, GMO labeling bills have been tried and failed in several states in recent years, most notably in California and Washington state. However, Vermont just made history with the passage of H.112. The bill, which requires all GMO foods sold in Vermont to be labeled by July 1, 2016, will now head to the desk of Governor Peter Shumlin who has said he will sign it into law.

At this point, I want to congratulate the great state of Vermont for what they have just done. The passage of this bill is a huge deal on multiple levels, and not just when it comes to food choice and GMO labeling. While it is hugely significant that Vermont will now become the first state in America to require labeling (Maine and Connecticut already passed such bills, but they do not go into effect until a certain number of surrounding states pass similar laws), its significance is even more important when it comes to the states rights movement.

People who say things can’t be changed are fighting on the wrong battlefield. Fuck the feds and fuck Washington D.C. Use the state legislatures to get things done. Already in the past year, two states have ended marijuana prohibition and now the states approach is taking the lead on GMO labeling. The states are doing what the feds never could or would. This fits in with the overall macro trend of decentralization taking over as a means of societal interaction away from centralization. We have the power, it’s time to exercise it. Go Vermont.

Meanwhile, you know this movement is scaring the living shit out of Monsanto, which is why Rep. Mike Pompeo of Kansas just introduced a desperate bill, which activists are referring to as the DARK Act, that would ban states from requiring labeling. That’s Congress for you. Criminals on the Potomac.

The Wall Street Journal covered the story well last week. Here are some excerpts:

The movement against genetically modified crops scored a signal victory Wednesday, as the Vermont legislature passed a bill that would make it the first state to require food makers to label products made with the technology.

The Vermont House voted 114-30 to adopt a state Senate labeling bill. Gov. Peter Shumlin has said he plans to sign the bill, whose requirements would take effect in July 2016.

While Vermont is one of the smallest U.S. states, the legislation marks a victory for activists who have campaigned for GMO labeling, saying consumers have a right to transparency over the widely used technology. Food and agriculture industry groups, which have lobbied aggressively to block similar measures in other states, blasted the Vermont decision, saying it was driven by faulty science and would hurt consumers.

The vast majority of corn and soybeans grown in the U.S. are GMOs, and food companies estimate that about 80% of U.S. packaged-food products contain GMO ingredients in some form.

GMO advocates note that the U.S. Food and Drug Administration has approved their use, and argue that the technology has no proven human health threats and has increased crop yields and helped lower food prices.

For those of you somehow still under the impression the FDA has consumer interests in mind, I suggest you read the following: Fraud Alert: FDA Allowed Drugs with Fraudulent Testing to Remain on the Market

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