Las Vegas

"Ladies and gentlemen. A few weeks ago, in Riyadh, I was at a small, private function along with the British central bank governor, Mark Carney. Mr Carney asked me two questions. First, why did the oil price drop? And the second, where is the price heading? I will tell you today what I said to him then."

- Ibrahim Al-Muhanna, Advisor to the Minister of Petroleum and Mineral Resources for Saudi Arabia

At the Environmental Protection Agency (EPA), red tape is preventing the removal of a top level employee accused of viewing porn two to six hours a day while at work, since 2010. Even though investigators found 7,000 pornographic files on his computer and even caught him watching porn, he remains on the payroll.

A century of government meddling has turned the issue of water rights on its head, and further centralized control of waterways in local, state, and federal governments. Just as the residents of Los Angeles fought over water with local farmers, the residents of Las Vegas will soon find themselves fighting with surrounding states over what’s left of Lake Mead. None of the power players seem to care that the current population settlements of the southwestern United States cannot last. One day the water will run out. The sooner this reality is confronted, the better.

Home prices, according to Case-Shiller, rose 0.87% MoM in December (better than the expected 0.6% gain) for the biggest seasonally adjusted monthly gain since March, likely bringing the 'housing recovery is back on track' meme back into play (despite affordablity being a major driver of the slump in home sales). However, non-seasonally-adjusted the rise was a mere 0.1%, which nonetheless managed to snap the 3 consecutive months of sequential price declines.  And yet, despite all this, Case Shiller was anything but optimistic: “The housing recovery is faltering. While prices and sales of existing homes are close to normal, construction and new home sales remain weak. Before the current business cycle, any time housing starts were at their current level of about one million at annual rates, the economy was in a recession”

"Conditions in the global economy are clearly abnormal. The policymaker response to those conditions is extraordinary, with minimal focus on an all-out push for higher growth. Instead, the primary focus is on boosting “inflation” with repeated doses of bondbuying, stock-buying and super-low interest rates"

"A trait you'll see among the world's best investors is the willingness -- even desire -- to talk about their mistakes. They analyze what went wrong, why they were mistaken, and how they can learn from their errors so they don't repeat them. Everyone makes mistakes, but they seem to grasp what most of us have a hard time admitting: It's your (and my) fault."

• Falling Prices Spread Pain Far Across The Oil Patch (WSJ)
• ISIS Group Claims Responsibility for Attacks That Killed 27 in Egypt (NBC)
• Russia Unexpectedly Cuts Key Rate as Economy Eclipses Ruble (BBG)
• Greece’s Feisty Finance Minister Tries a More Moderate Message (NYT)
• U.S. homeownership hits 20-year low, but new households growing (Reuters)
• Indian Banks’ Shares Plunge as Bad-Loan Provisions Surge (BBG)
• Underground Terror Network Said to Benefit Would-Be Jihadists in Europe (WSJ)
• Russia warns West support for Kiev could lead to 'catastrophe' (Reuters)

• Who Doubts Yellen's Policies? Summers for One (BBG)
• Samsung, Apple Back in Dead Heat for Global Smartphone Dominance (WSJ)
• Islamic State purportedly sets new deadline for hostage swap (Reuters)
• Turkey's $7.9 Billion Mystery Money That's Simply Vanished (BBG)
• How a Two-Tier Economy Is Reshaping the U.S. Marketplace (WSJ)
• U.S. Prisons Grapple With Aging Population (WSJ)
• Hasenstab Sees $3 Billion Vanish in Ukraine as One Big Bet Sours (BBG) - maybe he should BTFD, pardon, "invest" in Belarus next?
• Belarus May Seek Debt Restructuring in 2015, President Says (BBG)

In what has been the most anticipated bankruptcy case in the past several years, hours ago Caesars Entertainment put its main operating unit under Chapter 11 bankruptcy protection in Northern Illinois bankruptcy court (case 15-01153) even as a splinter group of dissident creditors including Appaloosa and Oaktree, holders of about $41 million of Caesars debt and which allege the company has siphoned off billions in value from creditors, put the company into involuntary bankruptcy in Delaware bankruptcy court on January 12. As a reminder, Caesars was one of the sterling LBOs of the last credit bubble, when in 2008 Apollo and TPG decided to take the company private. The problem, as is always the case: too much debt, especially when combined with a broken business model, as Caesars has lost money every year since 2009.

Yesterday was a bad day for the HFT lobby, after not one but two incidents which exposed the high frequency parasites doing what they do best, and perhaps only: rigging markets.  And since it would be laughable if its wan't tragic, we decided to make it even more laughable, by noting that none other than intellectual titan in the House of Representatives, Maxine Waters, had a few choice words to say about the latest HFT rigging busts. That's right: Maxine Waters now opines on market microstructure issues.

The person who risks nothing, does nothing, has nothing, is nothing, and becomes nothing.

The Long/Short Strategy for the New Reality
1. Go long companies that cater to the 1%.
2. Short companies that cater to the middle class.
3. Go long companies that cater to the poor.

The short answer is in parts of Seattle, Charlotte, Phoenix, Atlanta, Tampa, Cincinnati, Raleigh, N.C., Houston, Denver, Columbus, Ohio, Sarasota-Bradenton, Fla., Raleigh, N.C., Chicago, and Winston-Salem, N.C. Among the 2,490 zip codes nationwide with at least one single family purchase by the top four institutional investors between January 2012 and October 2014, the top 50 zip codes with the highest percentage of purchases by the four largest institutional investors were in those metro areas. “The institutional investors kick-started the housing recovery by buying homes in bulk at the lowest point and holding them as rentals,” said Chris Pollinger, senior vice president of sales at First Team Real Estate, covering the Southern California market. Los Angeles County was among the top 10 for most purchases by institutional investors over the past three years, with 6,152. “As the market continues to climb, we expect these investors to start to sell off their inventory to capture the gains made in the past couple of years.”

If we review the events of 2014, it seems the situation has intensified: governments are still overwhelmed with debt, our fiat money system is unsupported, our central banks insist on accumulating debt and making money valueless. Will someone realize we have to pull the plug? And when we do, because it will happen whether we want it or not, how can we hedge against the damage that we will all be exposed to? Owning physical precious metals stored outside the banking system is a proven and essential form of monetary insurance against the uncertainties and negative surprises we see in our world today.

Make no mistake: the Internet of Things is just Big Brother in a more appealing disguise. Even so, we're not suggesting we all become Luddites. However, we need to be aware of how quickly a helpful device that makes our lives easier can become a harmful weapon that enslaves us.

Will we never learn? "Helping more folks in Phoenix realize the American Dream and own their own home."

Welcome to the new old normal 'Murica... buy those homes... lever up... spend the HELOC... die a debt serf...