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Forget CYNK, Here's The Newest Scam From The Pump-And-Dumpers

Tyler Durden's picture




 

Submitted by Simon Black via Sovereign Man blog,

Roughly a month ago, my colleague Tim Price wrote an article exposing CYNK Technology Corp.

The day we published, the stock (OTC: CYNK) had a market cap in excess of $1 billion; it rose to more than $6 billion at its peak.

All this with one employee, no assets, no revenue, no website, and no product… What could possibly go wrong?

The CYNK bubble was, of course, the result of carefully planned deceit and clever promotion by a handful of people who stood to make a lot of money on the trade.

CYNK’s overvaluation was so outrageous that at one point the company was worth more than US Steel, the 13th largest steel producer in the world with 42,000 employees, $17 billion in revenue, and $414 million in operating cashflow.

Needless to say, CYNK was a complete and total scam. And it’s appalling that anyone actually believed it.

But when you think about it, CYNK’s stock wasn’t really any dumber than owning US Treasuries.

Across the entire global financial system, US government debt is considered the global “risk-free” benchmark against which other assets are measured.

Yet every shred of objective evidence suggests that the US is one of the LEAST creditworthy borrowers in the world.

The US government’s own numbers show they have net worth of NEGATIVE $16.9 trillion. And the Congressional Budget Office projects this figure getting far worse.

But still, the golden tale is spun: the US can never default on its debt.

People are told that US government can always raise taxes in order to pay back the debt.

But the numbers show a completely different story.

Since the end of World War II, ALL tax rates in the US have varied wildly. Individual income tax rates, for example, have been as high as 90%.
Yet the government’s total tax revenue has always hovered at around 17.7% of GDP.

It’s never mattered how much they raise tax rates; so this assertion that the government can simply raise tax rates to pay back the debt is a total farce.

Even worse, investors somehow take comfort that the United States can just print more dollars, as if hyperinflation is a credible debt management strategy.

But truth be damned, investors keep buying US Treasuries.

It doesn’t matter that inflation-adjusted, tax-adjusted interest rates GUARANTEE that you will lose money.

 

It doesn’t matter that the US is the largest debtor in the history of the world.

 

It doesn’t matter that they cannot raise tax revenues to pay back the debt.

 

It doesn’t matter how close they’ve come so many times to default.

 

It doesn’t matter that the economy is supposedly so great that the Fed cannot possibly bring itself to raise interest rates by even 0.25%.

 

And it doesn’t matter that they have yet another looming crisis in six months when the debt ceiling suspension ends.

 

(Congress even required, by law, that the Treasury Department NOT build up a cash reserve in the event of a government shutdown. It’s sheer lunacy…)

Somehow this is still considered “risk free”. But just as they did with CYNK, reality always catches up.

In the case of CYNK, it only took about a month for the bubble to inflate and burst.

The Treasury bubble, on the other hand, was built on credibility earned over decades by previous generations.

They defeated the Nazis. They stood up to the Soviet Empire. They designed magnificent infrastructure. And they went out and built it with their bare hands.

They celebrated Jonas Salk and Albert Einstein, not some self-absorbed reality TV starlets.

And they didn’t have safety nets or expect to be taken care of at taxpayer expense.

It was far from perfect. But previous generations earned the world’s trust. Modern day politicians have blown through it.

Now all they have left is their snake oil sales pitch. And a mountain of obligations that closed July 2014 at a record high $17.69 trillion.

 

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Tue, 08/05/2014 - 17:24 | 5051126 Chippewa Partners
Chippewa Partners's picture

Trouble ahead?   The Campaigner-in-Chief will fix it with some hope and what little change you have left.   

Tue, 08/05/2014 - 17:27 | 5051137 NotApplicable
NotApplicable's picture

What risk?

"Got Nukes?"

Tue, 08/05/2014 - 18:30 | 5051370 ugmug
ugmug's picture

Bloomberg is fixated on the world's feces excrement habits that show how everyone in the 3rd world still craps in lush fields of growing crops, prime Ebola incubators. Ebola is a biological nuke.....

Wed, 08/06/2014 - 03:08 | 5052908 AbbeBrel
AbbeBrel's picture

Long feces extruders!

Tue, 08/05/2014 - 17:27 | 5051141 gcjohns1971
gcjohns1971's picture

Hey buddy!

I got a 'thing'.  Lots of zeros.  Man!  I can't say enough about it.  It's ALL ZEROS!

Some of those zeros could be yours.

Want in?

Tue, 08/05/2014 - 17:28 | 5051143 infiniti
infiniti's picture

This is easily the dumbest article to ever appear on ZH.

Tue, 08/05/2014 - 17:36 | 5051182 NOTaREALmerican
NOTaREALmerican's picture

THOSE are some pretty big shoes to fill there pardner... 

Tue, 08/05/2014 - 17:38 | 5051199 buzzsaw99
buzzsaw99's picture

9 of the top 10 are black

Tue, 08/05/2014 - 17:59 | 5051275 Dr. Engali
Dr. Engali's picture

That's racysssssssst.

Tue, 08/05/2014 - 17:45 | 5051230 BandGap
BandGap's picture

Written for the 8th grade crowd.

Tue, 08/05/2014 - 18:52 | 5051464 max2205
max2205's picture

Where's the fucking bonus chart!

Tue, 08/05/2014 - 18:31 | 5051373 syntaxterror
syntaxterror's picture

The only reason it's "dumb" is become some bigger fool (an algo) will come along and buy your 0.7% bond for twice what you paid for it as the flood of printed money sloshes around and finds it's way to your "cash cow" bond that's oh so fucking valuable because rates are now 0.35% on the same bond term. All of this is fucking peachy until it all implodes. So when that happens, this article is no longer "dumb."

Tue, 08/05/2014 - 17:28 | 5051147 himaroid
himaroid's picture

Well said, but equities blow first along with euro/asian sovereigns, flee to "safety" of treasuries ensues, fed goes zimbabwe, THEN treasuries go poof. Jack be nimble indeed.

Tue, 08/05/2014 - 17:29 | 5051149 monopoly
monopoly's picture

And yet so many still believe this is a mighty nation and all will be right with the world. The absolute ignorance of citizens is appalling. 

Tue, 08/05/2014 - 17:34 | 5051170 NOTaREALmerican
NOTaREALmerican's picture

We might be an oligarchy, but we've got the BEST oligarchy in the world !

Love it or leave it, hippy!   

Tue, 08/05/2014 - 17:30 | 5051156 tempo
tempo's picture

69 years ago, the atomic bomb was dropped (8/6/45) and the US dominance as the world's super power was guaranteed. Our supreme position will be gone in a few years and will never return. It was a blimp on the radar screen of history.

Tue, 08/05/2014 - 17:30 | 5051157 gcjohns1971
gcjohns1971's picture

"Hope and Change"  was a misprint.

The phrase that was sent to the printers was, "Hope for Some Change".  It was a slogan for the Chicago beggar community.   After the misprint, he adopted it as a usefully ambiguous phrase.

Tue, 08/05/2014 - 17:32 | 5051165 Dr. Engali
Dr. Engali's picture

"But still, the golden tale is spun: the US can never default on its debt."

Uhmmmm. Helloooo.... McFly...... The U.S is in default via the printing press.

Tue, 08/05/2014 - 17:36 | 5051176 NOTaREALmerican
NOTaREALmerican's picture

You're only bankrupt when you can't borrow more. 

Tue, 08/05/2014 - 17:43 | 5051209 Dr. Engali
Dr. Engali's picture

Wrong, you're bankrupt when you can no longer service or pay the debt. The U.S is currently rolling the debt and funding the shortfall with the printing press....... In other words defaulting by devaluing.

Tue, 08/05/2014 - 17:43 | 5051227 NOTaREALmerican
NOTaREALmerican's picture

That's, like, so old-school, dude.     If they let you borrow more you aren't bankrupt. 

Tue, 08/05/2014 - 18:32 | 5051384 syntaxterror
syntaxterror's picture

Don't cry for me Arrrrr Gen Teeeeee Nuuuuhhhhhhh

Tue, 08/05/2014 - 18:12 | 5051320 game theory
game theory's picture

Meh...the default by devaluing is old news. The real story is figuring out why all the foreign lenders and corporations sat on their USD reserves for so long while those dollars became more worthless. It's not as if the Fed kept its plan a secret. Some countries *still* want to take dollars and send us stuff even after QE. It is amazing that the dollar is not weaker.

Tue, 08/05/2014 - 19:42 | 5051253 JuliaS
JuliaS's picture

Countries do not default on fiat debts denominated in their own currencies. They simply print as much as the obligations are worth.

US defaulted in 70's when France demanded gold payment for money lent to finance the failure in Vietnam.

But even then, US simply took us off gold and that was it. All that remained was fiat against fiat.

When you indebt a country to foreign currency, eventual default is guaranteed. That is the whole strategy - to get the victim to pledge assets as collateral and orderly surrender them when the money runs out. IMF operates solely on the principle of asset acquisition, seeking out non-Euro states, for instance, and lending them Euros. In return they ask for land, control over utilities, transit companies and anything else representing the actual economy.

They're typicaly willing to sponsor as much as a decade of euthoria before the rug is pulled and collections begin. Trans-national banks and corporations use structured IMF loans as a gateway for getting into struggling economies in order to rape them further.

The FED via the petrodollar rapes the entire world... but it's taking more and more resources to maintain the hegemony. Eventually the game will conclude. US won't default. Everything will be repaid in worthless money, and since US is careful not to pledge assets in its transactions, it'll actually come out a winner, having already consumed what was worth consuming.

Wed, 08/06/2014 - 03:34 | 5052923 AbbeBrel
AbbeBrel's picture

Humm love that word!!!

"Euthoria"

Maybe it was a typo, maybe it was intentional. But in any case, the equation :

IMF = Euphoria + Euthanasia = "EUTHORIA"

seems like a valid axiom!!

"Q.E.D." Quite Easily Derived, Lather, Rinse, Repeat

After doing a bit of Googling - it appears that Grace Hopper is credited with being the first to run out of shampoo doing the "Lather Rinse Repeat" endless loop. But she also said:

Humans are allergic to change. They love to say, "We've always done it this way." I try to fight that. That's why I have a clock on my wall that runs counter-clockwise.

Governments love to borrow, spend and default, and repeat. Maybe they should run counter-clockwise too!! Thanks Grace H.

Wed, 08/06/2014 - 16:34 | 5055747 MeelionDollerBogus
MeelionDollerBogus's picture

Argentina.

Tue, 08/05/2014 - 18:12 | 5051314 Simplifiedfrisbee
Simplifiedfrisbee's picture

Julia, where does debt come into play? Everyone knows that paying off debts is deflationary. If all debts are repaid, the economy contracts. Your base for reason is bordering on illogical fallacy. You seem to have am interesting view but patch up the holes. So explain how the US dollar comes out ahead after utilizing the resources of other nations?

Wed, 08/06/2014 - 15:08 | 5055284 MeelionDollerBogus
MeelionDollerBogus's picture

Actually no: every creation of debt with interest adds cash, inflationary, every repayment is already priced in. It's the default of a debt that's deflationary whereupon a re-calculation is required to account that goods moved for alleged cash then the cash needed to repay simply never is returned (principal).
A loan at 3% for 10k adds the 3% to the money supply, inflationary, with repayment included.
A default on that loan loses 10k which means goods moved & cash didn't. Were it illegal it would be theft. Since it's legal, it's not theft.

Tue, 08/05/2014 - 18:33 | 5051321 notquantumdum
notquantumdum's picture

Don't forget the unfunded liabilities [the estimated net present value of the future stream of US government obligations, such as Medicare and Social Security payments, for which there is no known source of funding]!

This site says this amount is already $118 TRILLION (actually, closer to 119), and counting, or approximately 7 times the US GDP [apparently even with royalties, research and development, and patent licensing being counted as part of the GDP . . . 'not sure how this would be affected by counting hookers, blow, and illegal gambling]:

http://usdebtclock.org/

That adds up to more than $1 MILLION of unfunded liabilities per taxpayer!  [And, many of the politicians say these (cough, cough, entitlement) programs are totally solvent and anyone complaining about needed reforms is just fear-mongering . . . yeah, right.]

Plus, I have seen other estimates for the unfunded liabilities which are closer to (even substantially more than) $200 TRILLION instead of $100 TRILLION.  That is starting to sound like real money, to me, even for the Feds.  How can one seriously expect them NOT to merely print and borrow their way out of this?

Got hyperinflation [eventually]?

But, there is nothing to see here.  Move along.  All is well.  Kick the can.  Borrowing and printing to fund insolvency always works out well in the long run.  [\sarcasm off]

Tue, 08/05/2014 - 18:27 | 5051358 syntaxterror
syntaxterror's picture

Unabashed
Squandering
Assholes 

Tue, 08/05/2014 - 19:28 | 5051580 WTFUD
WTFUD's picture

PUMP = To fuck someone up the ass
DUMP = To shit it out

MESSY to say the least.

Tue, 08/05/2014 - 21:56 | 5052179 logicalman
logicalman's picture

A mule and his funny are soon parted, or something like that.

Tue, 08/05/2014 - 22:30 | 5052353 armageddon addahere
armageddon addahere's picture

A fool and his money are popular everywhere

Wed, 08/06/2014 - 02:08 | 5052858 Global Observer
Global Observer's picture

Institutional investors like pension funds have to invest in income generating assets so that they don't have to liquidate assets to pay for the pensions. Amongst all income generating assets available in the US market, US treasuries carry the least risk. It is not that it carries no risk, but that it carries the least risk. Yes, there is a risk of hyperinflation, but there is no risk of default and hyperinflation affects all other investment options available as well.

If investors like pension funds were not looking for income generating assets, but have a policy of liquidating assets to pay for pensions, they would look at assets which have a potential for retaining/increasing their value over time and treasuries would be a poor choice.

Wed, 08/06/2014 - 15:04 | 5055264 MeelionDollerBogus
MeelionDollerBogus's picture

Except there's a huge risk of default & no one's willing to admit it because it's a question of timing.
Hyperinflation is just another kind of default.

Wed, 08/06/2014 - 14:36 | 5055107 MeelionDollerBogus
MeelionDollerBogus's picture

Throw in everything, even the kitchen CYNK!

Just call it a cryptoshare & CYNKoin & that will re-up the "value" :-)

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