Financial Markets

Blowing the whistle on NASA over climate data

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Jo Nova has an excellent piece exposing the scams inside NASA with regards to their climate models and allegations of misappropriated taxpayer funds. She notes whistleblower Dr Duane Thresher who worked seven years at NASA GISS “describes a culture of self serving rent-seekers, mismanagement and incompetence. These are the top experts in the climate science field that we are supposed to accept without questioning. Those who say they are working to “save the planet” care more about their junckets than they do about the data or their “best” model…NASA GISS’s most advanced climate model is run from the Goddard Space Flight Center (GSFC). Thresher recounts a story from someone on the inside:“NASA GISS’s climate model — named Model E, an intentional play on the word “muddle” — is called the “jungle” because it is so badly coded.” I know this to be true from my own extensive experience programming it (I tried to fix as much as I could…)…”

Of course I can hear the alarmists cry  that Thresher is a ‘discredited’ scientist as they do for anyone who disagrees,. Much in the spirit of the Harvard piece I put out last week, venerable organizations like NASA (which has put humans into space) carry almost untouchable status. This is the problem. Do we just suck up aything we are told by these organizations or do we need to add an extra layer of skepticism because of the ‘reputation’?

It is truly hard to imagine that the brain’s trust that makes up an organization that can launch rockets and space shuttles can be guilty of such sloppiness. Such whistleblowing will  lead to a congressional testimony which will bring many things to light. It wasn’t long ago that NOAA was subpoenaed after a whistleblower said the group had rushed a report ahead of the Paris climate summit with obviously fiddled data that fit a narrative. NOAA refused to hand over the emails for months on the grounds of privacy  when the head of House Science Committee Chairman Lamar Smith explained the reality that they worked for the government and had no choice.

Smith noted, “According to Dr. John Bates, the recently retired principal scientist at NOAA’s National Climatic Data Center, the Karl study was used “to discredit the notion of a global warming hiatus and rush to time the publication of the paper to influence national and international deliberations on climate policy…I thank Dr. John Bates for courageously stepping forward to tell the truth about NOAA’s senior officials playing fast and loose with the data in order to meet a politically predetermined conclusion. In the summer of 2015, whistleblowers alerted the Committee that the Karl study was rushed to publication before underlying data issues were resolved to help influence public debate about the so-called Clean Power Plan and upcoming Paris climate conference. Since then, the Committee has attempted to obtain information that would shed further light on these allegations, but was obstructed at every turn by the previous administration’s officials. I repeatedly asked, ‘What does NOAA have to hide?’

Once again whenever people try to use the ‘credibility’ argument to sway debate, there is a treasure trove of evidence to show in this case that it is politics not science. With billions if not trillions at stake, such fraud has not resulted in any of these climate scientists being fined, deregistered or jailed for the very things that have happened to people in the financial sector. What is the difference I wonder? Maybe because the government has been in on the act…

Even Australia’s Bureau of Meteorology has been recently exposed for divisive behaviour in temperature measurement. Putting hard floors on cold temperatures with no such restrictions on warm weather. We’re supposed to trust these bodies? More on that tomorrow.

Well as the old adage goes, “there are lies, more lies and then there are statistics”

I’ll stick with my instincts rather than fall for a Harvard study because it is from Harvard

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Harvard University is without question one of the top schools globally. It has an enviable reputation and having that on one’s CV is hardly a hinderance. It is a status symbol.  In a discussion over global warming an individual was trying to legitimize climate alarmism by citing a Harvard University study. Harvard by the way is ranked top 5 worldwide in Environmental Science. The study as it turns out had been funded by the National Science Foundation (NSF), a US government agency responsible for allocating 24% of science funding that had been raked over the coals by the US Senate for gross mismanagement, fraud and waste. The National Science Foundation: Under the Microscope” paper from 2011 documented some of the misappropriation of funds as follows,

An $80,000 study on why the same teams always dominate March Madness”, a “$315,000 study suggesting playing FarmVille on Facebook helps adults develop and maintain relationships”, a study costing “$1 million for an analysis of how quickly parents respond to trendy baby names”, a study costing “$50,000 to produce and publicize amateur songs about science, including a rap called “Money 4 Drugz,” and a misleading song titled “Biogas is a Gas, Gas, Gas”;” a study costing”$2 million to figure out that people who often post pictures on the internet from the same location at the same time are usually friends”; and “$581,000 on whether online dating site users are racist”.Ineffective management examples, cited in the report, included “ineffective contracting”, “$1.7 billion in unspent funds sitting in expired, undisbursed grant accounts”, “at least $3 million in excessive travel funds”, “a lack of accountability or program metrics to evaluate expenditures” and “inappropriate staff behavior including porn surfing and Jello wrestling and skinny-dipping at NSF-operated facilities in Antarctica”.

It is often a tactic to cite supposedly credible bodies to legitimize and seek to win an argument. However at what point do we view Harvard’s stance on climate change as balanced? On Harvard’s own climate change page it is littered with a predetermined view. It is not to doubt the intelligence of the professors and scientists within the university but intelligence and ethics do not have to be mutually inclusive especially when it comes to procuring funds.

One has to wonder that the  NSF, which dispenses 24% of all university grants (some $7bn) is best positioned to fulfill this role given its past. As the Harvard climate page reveals there does not seem to be much attention paid to the alternate view. The offshoot of that is if the NSF wants to get ‘green policy’ outcomes, best pour funds into those schools that will help give the results they’re after.

In 2015 a claim was made against Harvard for not disclosing financial conflicts of interest. A press release entitled ‘Clean air and health benefits of clean power plan hinge on key policy decisions’ constituted a gushing praise of a commentary entitled ‘US power plant carbon standards and clean air and health co-benefits’ by Charles T. Driscoll, Jonathan J. Buonocore, Jonathan I. Levy, Kathleen F. Lambert, Dallas Burtraw, Stephen B. Reid, Habibollah Fakhraei & Joel Schwartz, published on May 4, 2015, in Nature Climate Change

The claim (a letter to the Dean) suggested that “two of the co-authors of the commentary, Buonocore and Schwartz, are researchers at the Harvard T.H. Chan School of Public Health. Your press release quotes Buonocore thus: “If EPA sets strong carbon standards, we can expect large public health benefits from cleaner air almost immediately after the standards are implemented.” Indeed, the commentary and the press release constitute little more than thinly-disguised partisan political advocacy for costly proposed EPA regulations supported by the “Democrat” administration but opposed by the Republicans. Harvard has apparently elected to adopt a narrowly partisan, anti-scientific stance…The commentary concludes with the words “Competing financial interests: The authors declare no competing financial interests”. Yet its co-authors have received these grants from the EPA: Driscoll $3,654,609; Levy $9,514,391; Burtraw $1,991,346; and Schwartz (Harvard) $31,176,575. The total is not far shy of $50 million…Would the School please explain why its press release described the commentary in Nature Climate Change by co-authors including these lavishly-funded four as “the first independent, peer-reviewed paper of its kind”? Would the School please explain why Mr Schwartz, a participant in projects grant-funded by the EPA in excess of $31 million, failed to disclose this material financial conflict of interest in the commentary?Would the School please explain the double standard by which Harvard institutions have joined a chorus of public condemnation of Dr Soon, a climate skeptic, for having failed to disclose a conflict of interest that he did not in fact possess, while not only indulging Mr Schwartz, a climate-extremist, when he fails to declare a direct and substantial conflict of interest but also stating that the commentary he co-authored was “independent”?”

While I do not pretend to be a climate scientist by trade or study, fraud is fraud. The supposed beacons of virtue such as NOAA, IPCC, the CRU of the UEA have all been busted for manipulation of data to fit an end cause. The lack of ethics in certain cases has been so profound that had many of these scientists been in financial services they’d have lost licenses, paid multi billion in fines and served jail time. One person commented that too few in financial services have been locked up. I replied name me one scientist busted for fraud and misuse of public funds has seen the inside of a jail cell, much less fined or barred from teaching? The answer – NONE

I don’t need to possess a degree in astrophysics or science to determine poor ethics generally mean the science papers put forward should be viewed with deep skepticism. Yet we’re constantly told that the science is settled. How so? If one has to lie and deceive in order to scare us into action, how can one say that it is legitimate work? In fact I have been at pains to mention that the scrupulous acts of a few only ends up undermining potentially credible work conducted by others. Yet climate change has become a purely political issue and there is no question that sourcing funding dollars is easiest met when supporting alarmism. After all why would people want to throw dollars at skeptics who may come out with an alternative view? Don’t debate it. Some have suggested sceptics are like pedophiles and even more extreme views have suggested jail sentences. When people think that the only way to win the argument is to jail non believers you can be absolutely sure that the data is completely flawed in that it can’t stand on its own as an argument. Hence the manipulation to try to bully the movement onwards. Some Aussie universities (state funded mind you) are refusing a climate think tank being established on their campus for possessing an alternative view. You have to worry if universities, the bedrock of free thinking, are trying to ban it. Then again if kindergarten schools are being taught they are gender fluid and cross dressing is acceptable then you know there is a more sinister movement at work.

It was no surprise that Hurricane Irma has become Trump’s fault. Alarmists drew any data possible to connect Global Warming and hurricane activity despite the IPCC claiming several years back it  has little supportive data to prove it. So expediency is put before principle. Hopefully if no one has seen the IPCC climb down perhaps we can still convince them we can save the planet. All the meantime the IATA forecasts air travel will double in terms of passenger numbers between now and 2030 and SUVs top most vehicle sales in major markets.

To add to the farcical care factor for climate change by the masses The Australian noted, “On June 30 2017, after 12 years of “advancing climate change solutions”, the Climate Institute is closing its doors in Australia, a victim of the “I’ll ride with you but won’t pay” industry. You would think that Cate Blanchett, so happy to appear in the institute’s ads, could have taken the hat around her Hollywood A-list mates, such as Leonardo DiCaprio, Bono, Emma Watson and Brad Pitt, to tip in a few hundred thousand a year for the cause….But alas, the caravan has moved on and the greatest moral challenge of our time is now the Trump White House. For celebrities who fly eyebrow groomers to the Oscars, climate change is kinda yesterday. Still, to humour the faithful and to keep the dream alive, the 10th anniversary of Earth Hour was celebrated last Saturday night. You didn’t notice?”

When I was a staunch opponent of Greenspan’s reckless monetary policy in 2001 and said his actions would lead to a financial calamity in 6-7 years, many laughed at me. I bought gold at under $300. People thought I was mad as did the Bank of England. Barbs were frequent – “how could you possibly possess the intelligence of Greenspan? Back in your box!” I was told. Of course as a contrarian by nature, speaking out against pervading group think was met with a constant wave of ever increasing vitriolic criticism. Of course the simplest thing would have been to roll over and join the band wagon but I stuck to my guns. GFC was the result. In all that time, people used to shame my thinking by citing Harvard or other Ivy League studies on new paradigms. Indeed many of the brains behind the CDOs which eventually brought the financial sector to its knees were brainiacs from the Ivy League. In the end my instincts were bang on. Nothing to do with education levels.

The same arguments were hurled at me during Trump’s presidential campaign. Many people defriended me because my data kept showing to me he’d win. I am not American, I can’t vote but casting my own instincts ended up being a no brainer. Not once were credible arguments made to counter why Trump could win. People would post NY Times polls, CNN polls and so forth to legitimize the argument. Then say I was blind, stupid, bigoted, racist and the usual leftist identikit used to demonise a view. Group think is so dangerous. What it is doing is suppressing real views which show up in the polling booth.

Everywhere I read, the media wants to throw Trump to the wolves and run the lunatic, racist white nationalist card. For 9 months now. To be honest I think he will comfortably do two terms because the media has learned nothing and anything he does is vilified. Most Americans aren’t looking to him for spiritual guidance. He is vulgar and his manner is far from conventional and sometimes not very fitting of the office he serves. However he gets no credit for anything. The latest UN sanctions on North Korea are in large part because Trump has told China to get on with it. Trump said on national TV that he wants “China to sort it out and to stop delaying otherwise we’ll do it for you”. Yet the media is drumming WW3 rhetoric.

Same goes for the Paris Accord. What a stroke of genius. Let France, Germany and other nations pick up the tab for their ‘green policy’ madness and make up America’s renewable shortfall. It is kind of ironic that none of these nations ever pick on China, India or Russia which make up 50% of CO2 emissions for their lack of adherence to actually doing meaningful things to abate climate change albeit signatories to the UN accord. I argue it is like NATO in reverse. US pays a way bigger share into NATO, why not collect a refund via other nation’s virtue signalling which actually helps America First by making other nations less competitive. Brilliant.

DACA – many Americans, including 41mn on food stamps, will welcome the removal of illegal immigrants from their country who in their view are siphoning their ability to get out of poverty. DACA to them isn’t about not being compassionate but realizing that a $20 trillion deficit and loading more onto an overcrowded system isn’t helping. Once again regardless of what people think of Trump he had the fewest white voters and largest share of black and Hispanic voters than Romney or McCain. Hardly the result for a white nationalist, racist bigot. At the current rate if the Democrats run Michelle Obama, Oprah Winfrey, Hilary Clinton, Elizabeth Warren or any other identity politician against him in 2020 they’ll lose. The mid terms won’t be as bad as many calling. The one midterm already returned a Republican despite massive Hollywood support even ferrying voters to booths.

Transgender in the military. I spoke to two dozen US military personnel last month to ask their opinions. The 100% response was, “we think it is inappropriate for the taxpayer to fund sexual reassignment surgery while serving including several years of rehab and ongoing drug therapy…it is taking the p*ss…we serve our country because we love it and we don’t have room to support social experiments to protect freedom!” There was no real issue of transgender per se rather a problem of providing funds in n already tightly allocated budget for such medical expenditure. Several even spoke of the stupidity of LGBT pride day in the armed forces. What has the ability to fight got to do with what goes on in the bedroom? One said “if we had a heterosexual pride day” we’d never hear the end of it.

So when you communicate with the real people you find the truth if you are prepared to listen. The beauty of social media and indeed Google (which happily acts as a Big Brother on what it considers acceptable) is that many people reach for articles they probably haven’t read properly and use them as ways to ram home an argument because they carry a brand name. Harvard is a wonderful institution but as we’ve seen it has run into questions of conflicts of interest.

I happen to think that social media is having the opposite effect on brainwashing to tell the truth. 99.9% of what I see posted has little thought to it. The more people I speak to the more they are ignoring noise. Many people share articles without putting some basis of why they post it. In many cases people are too afraid to face a doxxing or backlash. Bring it on. To me if you post things in the public domain then be prepared to invite criticism. On my site I do not censor, cut off or delete readers. They are free to come and go as they please. I only request they keep profanity to a minimum.

So in summary, the idea that we bow down to venerable institutions to seek guidance is as flawed today as it ever was. I’ll gladly stick to gut instincts because to date they have worked so far. Having said that I should put a disclaimer that was always plastered on financial services product, “Past results are no guarantee of future performance”

Why MiFID2 is like Spectre and why 007 needs Q more than ever

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Risk is a great leveler. Everyone has different thresholds of it. Of course when you’re young, risk is easier to take. Have a family, take on a mortgage, private tuition and heaven forbid you get wiped out in a divorce – the risk reward equation is constantly swinging. Catching up with an old client last night put a smirk on my face. In 2018 MiFID2 comes to life. For financial markets people it is the latest EU regulations which has many service providers in a blind panic. Investment clients will have to select “research” He spoke of the current equity broker market being a bit like a huge buffet. Lots of selection but hardly a Michelin star in sight. He said he’d met with many bulge bracket brokers who are all tinkering at the edges. Never before has the dangers of not taking risk been greater. While Musk might be tearing up the EV world, MiFID2 is a massive disruptor for financial services and the collective might of the alpha egos inside it can’t summon a slither of courage to be different.

It is easy to hide behind compliance. If I had my way I’d staff compliance with lawyers rather than those with a penchant for saying “no”. MIFID2 is such a huge chance yet all brokers are like rabbits in a headlight. A lawyer will tell you how far you can go. A compliance officer is more worried about protecting his own hide so maximum risk off is the safest option. So worried about compliance are finance companies in some circumstances they outnumber the people they’re assigned to police. Name me one prison where guards outnumber inmates?

The latest trend is to hire product managers. Enlightened ones who are entrusted to revolutionize the research offering. One asked what makes a good product manager? I replied one that is prepared to completely blow up the old model. More importantly one whose management will give him or her carte blanche to start a revolution and to act decisively on hiring analysts with true out of the box vision. Yet time and time again these senior managerial risk experts turn into complete novices and hire conservative group thinkers who have no desire to rock the boat. Throw on top the outsourcing to aggregators like SmartKarma and all you have is an even bigger buffet of substandard gourmet. The aggregator model will not be a success unless it reforms to have serious quality control of which it claims it has but in reality hasn’t.

MiFID2 is a bit like Spectre in a Bond film. The baddie Bond girl is like the client. The equity broker is Bond. If it wasn’t for 007’s array of gadgets from Q-branch (research) he’d be toast. The new breed of product managers (Q) are not creative enough to give equity salespeople (007) the upper hand to woo the baddie Bond girl. The problem is even worse because under MiFID 007 will be unable to use carefully rehearsed lines, expensive meals or fancy sports cars to catch his prey. So without a creative Q, brokers will end up being annihilated by the baddie Bond girl without even so much as a kiss in her death grip. Sadly baddie Bond girl needs to justify her actions to Spectre. Too. She won’t waste time in meeting M to plead her conversion. Quite frankly if 007 can’t deliver the goods she has every right to feel no emotion if he dies.

Q has always been the innovator. The one trying to stay well ahead of the curve. Let’s face it. Every Bond film we see comes out with something new to dazzle. Baddie Bond girl is never easily impressed so without properly engaging, well thought out, reasoned and in depth balanced research, 007 will die a slow death chewing on his high calorie low quality buffet which Q unimaginatively sprinkled Tabasco on.

Baddie Bond girl wants to be charmed. Like Pussy Galore ditching the poison gas canisters for a mild sleeping agent over Fort Knox, Baddie Bond girl will be only too happy to oblige switching broker repellent for commission dollars if Q makes the difference.

So to me MiFID 2 is an absolute bounty for the Michelin star research providers. Ones who give clients such a gustation experience that they can’t wait to book another opportunity to pay for another culinary experience.

In closing perhaps the biggest schadenfreude in all of this is three realization of how internal politics which have driven sell side bonuses gets exposed when next to no clients want to dine at their smorgasbord.

I’m no fan of MiFID2 but now that it is coming I see it as a huge opportunity rather than a sign to wave the white flag. Bring on January 2018.

 

Why China will effectively annex North Korea

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PDF REPORT HERE

I’ve been saying this for months. Think through the logic. China doesn’t want to lose the strategic buffer North Korea provides.. Beijing doesn’t want US friendly forces on its border. How to make a bad situation work for China? Bite the bullet and annex North Korea. Kim Jong Un has been brazenly telling the world to shove its diplomacy thinking the decades old practice of threats will keep on working. He’s wrong.

China must realize that the West is against Trump taking action for no other reason than he’s Trump. It is a strange world where many of America’s long term allies are backing the other side. Trump is merely filling the geopolitical  vacuum left by his predecessor. Trump is absolutely right to consider taking an increasingly dangerous threat off the table and China knows it is no longer dealing with a political powderpuff.

Still China wins in many ways by turning North Korea into its own administration. First, it isn’t Trump. Second, China will not be condemned for removing the threat and installing its own puppet. Third, China keeps the strategic geographical buffer and fourth China gets to show itself a proper force to be reckoned with in the Asia Pacific region by taking a credible threat off the table.

While no credit will be given to Trump for forcing China’s hand, be sure that an effective annexation by China will be a major win for him. Sure North Korea most likely retains the name and the sovereignty but China’s military becomes a form of blue helmets administering PyongYang’s every move. Kim Jong Un is on borrowed time. Sometimes long used strategy outstays it’s welcome.

How will financial markets react? While they may sell off initially expect them to rally hard if China pulls off regime change with precision. Surely Kim will soon get the ‘horse’s head in the bed’ scenario handed to him anytime soon from Beijing. It is the only viable solution which actually works remarkably well for China.

Full interview on Bolt Report on Japan’s regional security conundrum

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The full interview can be found on the August 30 podcast from 21:17-34:30  where I discuss Japan’s Constitution Article 9 and 96 and the changing face of Japan’s Self Defense Force moving from “static deterrence” to “dynamic deterrence”  The wheels to defend herself are already well under way

 

The concern is the risk of Kim Jong Un missing the target

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At 6am this morning North Korea conducted a missile test which flew between Hokkaido and Japan’s main island Honshu. The real question is not so much the capability of his missiles but their short comings. The reality is a reasonable failure rate (c.33% in the past 3 years alone) has a high level of risk attached to it, especially when sending them over Japanese land. While most failures have been at the launch pad stage, the risk is that should the tracking and guidance systems fail mid flight over Japan even without warheads, considerable damage could be inflicted. Japan said it would shoot down such test missiles when Trump was threatening to intervene several months back but clearly swerved first in this game of chicken.

While Kim Jong Un’s technology is undoubtedly improving, the risk is that eventually it will reach a stage where he can be a belligerent imp with real capability. Up til now his armaments have been relatively crude. The sanctions put on the $12bn economy, mostly China, are biting. These missile tests would undoubtedly be costing Kim a relative bomb (no pun intended) to conduct. Still allowing his people to suffer isn’t a priority. The saber rattling is no different to his father and grandfather before him. Fire a few missiles, threaten others and get a cash injection to shut up and then go away.

Unfortunately this game of geopolitical chess gets worse as his capability gets better. He has nothing to lose whereas his neighbours stand to suffer relatively catastrophic downside. Tokyo is 125x larger in GDP terms than NK. Seoul 68x.

Does he intend to point one at Tokyo, Seoul, Guam or even Washington DC when he has the capability? This argument that a pre-emotive strike on North Korea won’t happen is getting weaker. China knows its strategic value as a buffer to the US. Bribing Pyongyang by buying its ginseng and coal is a cheap form of diplomacy. Beijing’s stance last month was telling. If the US preemptively strikes China will defend Kim. If Kim does anything stupid then he’s on his own.

Still if you know your enemy will eventually get to the stage it can physically harm you and threatens to do so it makes perfect sense militarily to eliminate the threat before it eventuates. After the capability is reached  the risks are factorfold higher. So for every argument that says conflict won’t happen (odds favor it not) the smarter bets will begin to ponder the growing chance something does.

Korean 5yr CDS have jumped 4bps to 62 today, still below the 70 during last month and well below Kim Jong Un’s first missile test at 120bps. GFC was around 700bps. So markets aren’t panicked just yet but gold back over $1300/oz is pricing it gets worse.

Don’t rule out a modern day Gulf of Tonkin incident. With each of these tests, electronic interference (cyber attack) could be a factor. To justify a retaliatory attack, guiding these missiles to hit a remote paddyfield in Aomori or inside Japan’s territorial waters is possible. China must be concerned about this. Electronic warfare is getting seriously capable. Remember when the Iranian centrifuges mysteriously blew up due to the Stuxnet virus? The virus told the centrifuge computers to spin the motors well above design tolerance such that they exploded.

Conspiracy theory maybe but geopolitics is a dirty game with huge long term implications and the rules are that there are none. Kim’s preemptive strike might not start with his finger on the button.

Oh Canada!

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Canadian Conservative MP Candice Bergen wrote today,

Earlier this year, I sent a letter to every household in my riding asking them to share their thoughts with me about the Liberal’s Carbon Tax. I received over 2,300 responses back, 96% saying they disagree. A carbon tax would do virtually nothing to help the environment, and would only make life more difficult for everyday Canadian families.”

This smells so familiar. People clearly seeing these taxes for what they are. All pain for no gain. We need not go back very far when Canadian Conservative politician Pierre Poilievre said that Canadian tomato farmers were already feeling the pinch of uncompetitive regulation with regards environmental taxation. It was revealed that the increase in Mexican tomato exports to Canada were having a bigger impact on CO2 emissions than Trudeau’s proposals to halt them.