Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 68 Page 69 Page 70 Page 71 Page 72 Page 73 Page 74 Page 75 Page 76 Page 77 Page 78 Page 79 Page 80 Page 81 Page 82 Page 83 Page 84 Page 85 Page 86 Page 87 Page 88 Page 89 Page 90 Page 91 Page 92 Page 93 Page 94 Page 95 Page 96 Page 97 Page 98 Page 99 Page 10041 Say farewell to kick the can, the slow burn, and corporate media fantasy. I In 2016, the veil came down. The US presi- dential election engaged the global audience directly in real time. A rice salesman in the Mekong Delta who watches his Twitter account knows what the US President-Elect is thinking and doing long before the enormous (and very expensive) bureaucracy at the CIA and their lay- ers of contractors, think tanks, and NGOs. After all, the rice salesman and the President-Elect have something in common. They are both entrepreneurs, schooled in the art of “lets make a deal.” They thrive in a world where dollars are dear and time is money. The message of 2016 was loud and clear: The party’s over, get ready to rock and roll! I. THE ECONOMY AND FINANCIAL MARKETS For many years I have predicted that the “slow burn” would continue. As we begin 2017, the heat has been turned up dramatically. The finan- cial coup d’état drained trillions of assets from sovereign governments, pension funds, munici- pal and community institutions, and households. Falling interest rates have compounded these losses. Now, the debt growth model is over and the cost of capital for these existing institutions is rising. It has become more difficult for some to “kick the can.” It is impossible for others. What remains in the existing institutions are liabilities. We are currently witnessing an acceleration of “controlled demolitions” of existing liabilities as pension funds, insurance companies, and businesses must renegotiate or abrogate their contracts. Sovereign governments – who have the capacity to print currency and to issue more debt – must engage in a deeper re-engineering of government assets and operations. The most important question before the United States is whether or not we will re-engineer the return on investment to taxpayers of government investment, credit, contracts, appropriations and regulations from a negative to a positive return. If we do, we will create explosive wealth. If we do not, we are in for a long, harsh financial squeeze at best…or civil war at worst; perhaps even a repeat of the “rape of Russia.” In our 2015 Annual Wrap Up (and in numerous recent quarterly and annual wrap ups), the Solari Report focused on the growth of a new, net- worked economy which we call Global 3.0 and the reinvestment of funds shifted out through the “financial coup d’état.” In this year’s report, we have chosen to focus on the traditional industrial economy of Global 2.0 and to ponder how the demolition of liabilities will be managed in 2017 and beyond. But much is happening, including continued growth, in Global 3.0, so we’ll mention some of the high- lights. Given Brexit, the change in the US adminis- tration and the upcoming European elections, 2017 will be a year of transition. Looking down the road over the next 5-10 years, we face a wide variation in what is possible. If we succeed in coming into balance with the environment and make a successful transition to a multipolar world — including the implementation of new technology in productive ways — investors will enjoy significant opportunities. If we do not, the risks will continue to rise. Will the Dow rise to 30,000 or fall to 10,000? Either scenario is a possibility. A. Global 2.0: From Slow Burn to Pressure Cooker 1. Controlled Demolitions Accelerate Pension Funds: • CalPERS Cuts Pension Benefits For First Time • Every Household in California Owes $93,000 to Pay for State Pensions • Two Decisions Could Make Big Changes in California’s Public Pension System • Dallas Police and Fireman Pension Fund Suspends Pension Withdrawals PLEASE NOTE: All the news articles listed in this section can be accessed by going to the online version of this Wrap Up at: www.Solari.com then use the search func- tion to locate the items. “The next time you encounter a difficult obstacle or problem, you should smile and say, ‘Here’s my chance to grow.’” – Zig Ziglar