Las Vegas

We can now add another to the list of government agencies out of control this month. In the latest example of abuse by the unaccountable feds, we learn that Pentagon employees have been caught using their government credit cards on gambling and escorts, amongst other things. Their punishment? A “stern warning.”

The one most interesting category was defense spending: a category despised by progressives even though at this rate spending on interest for the progressives' beloved government debt will soon eclipse defense. It is here that outlays actually dropped from a year ago, declining to just over $150 billion for the quarter. Which is surprising, because as Politico wrote overnight, among the items funded by general taxpayer revenue were such discretionary expenses as hookers and blackjack, after a defense department audit founds that Pentagon employees used their government credit cards to gamble and pay for “adult entertainment.”

"If you were to ask me, since we’re making forward-looking statements, what will the second quarter look like in Las Vegas? Weak. Do you hear me? Weak. So I’m trying to lower expectations here. This notion of a big recovery is a complete dream," Steve Wynn says, underscoring not only the weakness in gaming revenue from the Vegas strip to Macau, but also the fact that there simply is no economic recovery in the US.

Leak Mead is the largest reservoir in the country when at capacity. On May 2, the water level was down to 1,078.9 feet above sea level, the lowest since it was being filled in May 1937. If the water level is below 1,075 feet elevation – 4 feet below today’s level – by January 1, 2016, it will trigger a federal water emergency... and water rationing.

Despite the weather, home prices surge more than expected in February (as we presume those who braved the icy or heaty weather were desparate to buy). S&P/Case-Shiller 20-City index rose 0.93% MoM (vs 0.7% exp) and 5.03% YoY (vs 4.70% exp.). San Francisco led the way with a 2.0% MoM surge and Cleveland and Las Vegas were worst with home prices falling.

All over the southwest United States, we are seeing conditions that we have not witnessed since the days of the Dust Bowl in the 1930s. If anyone actually needed another reason to move out of the crazy state of California, now it is being reported that conditions in some areas of the state “are like a third-world country” due to the multi-year megadrought that has hit the state. Millions of Californians have fled the state in recent years, and this water crisis could soon spark the greatest migration out of the state that we have ever seen.

Late last year, Grexit "expert" Willem Buiter decided that he was a greater expert on the topic of monetary metals than on geopolitics by stating that "Gold Is A 6,000 Year Old Bubble." Now, he has decided that after gold, it is best to just do away with any physical currency altogether and the time to ban cash has arrived.

The last time we looked at Las Vegas water supply, the comments from professionals were "Vegas is screwed," and unless water levels in Lake Mead rise by 7%, "it's as bad as you can imagine." The bad news... Water levels in Lake Mead have never been lower for this time of year - and this is before the Summer heat seasonal plunge takes effect.

GM is halting production of the Chevrolet Volt electric car for the summer to whittle down about seven months of unsold inventory and smooth the way for the next generation of the plug-in hybrid sedan. Production of the current model, which costs $34,000 and up before federal tax credits, will halt early next month, the Detroit auto maker has said. It will be replaced by a 2016 model with a sleeker design and up to 50 miles range on an electric charge. That second generation Volt will go into production at the end of the summer.

Weather-crushed January saw seasonally-adjusted Case-Shiller home prices - and as a reminder Case-Shiller expressly warns not to use seasonal data but opts for raw, unadjusted reporting - rise 0.87% MoM (better than expected), slower than the revised 0.91% gain in December. However, away from the 'make-everything-feel-better' adjustments, home prices slipped in January following December's brief interlude, leaving the index down 4 of the last 5 months. Of course, it goes witghout sayiung that weather was blamed, as they suggest, "unusually cold and wet weather may have weakened activity in some cities." What is more worrisome however, and farcical, is Case-Shiller's ominous warning against rate hikes, "home prices are rising roughly twice as fast as wages, putting pressure on potential homebuyers and heightening the risk that any uptick in interest rates could be a major setback."

If there is one chart that most clearly captures the unsustainable US home price appreciation bubble, it is the following which was released overnight from RealtyTrac: home price appreciation nationwide has outpaced wage growth by a 13:1 ratio!

“Government can have no more than two legitimate purposes,” wrote the 18th-century English political philosopher William Godwin, “the suppression of injustice against individuals within the community and the common defense against external invasion.” But the US system of government – nourished by the almost unlimited credit that its money gives it – has swelled to a shape that would have been grotesque and unrecognizable to Godwin. To those who still maintain some romantic attachment to the ideals of the American Revolution, it is merely repulsive.

Put together our 1% elections, the privatization of our government, the de-legitimization of Congress and the presidency, as well as the empowerment of the national security state and the U.S. military, and add in the demobilization of the American public (in the name of protecting us from terrorism), and you have something like a new ballgame.

According to Austrian economists like Dr. Skousen, consumption and consumer spending are not the main drivers of economic growth. What really drives an economy are investments and innovation from businesses.

There is a much larger structural risk for markets and investors than HFT and the whole Flash Boys brouhaha, it’s just totally under the radar and hasn’t surfaced yet. Investors may not know better yet, but they will soon, one way or another. Tomorrow a handful of governments will influence aggregate political behaviors by triggering small communications that Big Data tells them will be voluntarily magnified by individual citizens, snowballing into outsized, long-lasting, and untraceable “popular” actions. Tomorrow a handful of hedge funds will influence aggregate market behaviors by triggering small trades that Big Data tells them will be voluntarily magnified by individual traders, snowballing into outsized, long-lasting, and untraceable “market” actions. Tomorrow Big Data will be primarily an instrument of social control, with a powerful and ubiquitous impact on all citizens and all investors.